UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~

2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38485

Amneal Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

(908) 947-3120

(Registrant’s telephone number, including area code)

~~Not applicable~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	AMRX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, ~~2020,~~2021, there were ~~147,314,497~~148,720,537 shares of Class A common stock outstanding and 152,116,890 shares of Class B common stock outstanding, both with a par value of $0.01.

Amneal Pharmaceuticals, Inc.

Table of Contents








Cautionary Note Regarding Forward-Looking Statements	13

PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)	25
		Consolidated Statements of Operations	25
		Consolidated Statements of Comprehensive Income ~~(Loss)~~	36
		Consolidated Balance Sheets	47
		Consolidated Statements of Cash Flows	58
		Consolidated Statements of Chan ges in Stockholders' Equity	69
		Notes to Consolidated Financial Statements	710
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4236
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5244
	Item 4.	Controls and Procedures	5244

PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	5345
	Item 1A.	Risk Factors	5345
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5345
	Item 3.	Defaults Upon Senior Securities	5445
	Item 4.	Mine Safety Disclosures	5445
	Item 5.	Other Information	5445
	Item 6.	Exhibits	5546

Signatures			5647

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and Amneal Pharmaceuticals, Inc.'s other publicly available documents contain ~~"forward-looking statements"~~“forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Management and representatives of Amneal Pharmaceuticals, Inc. and its subsidiaries (the ~~"Company"~~“Company”) also may from time to time make forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates” and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; impact of planned acquisitions and dispositions; the Company’s strategy for growth; product development; regulatory approvals; market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company's control. Investors should realize that if underlying assumptions prove inaccurate, known or unknown risks or uncertainties materialize, or other factors or circumstances change, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements.

~~Such risks~~

Summary of Material Risks

Risks and uncertainties that make an investment in the Company speculative or risky or that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to:

•

~~the impact of global economic conditions;~~

•

~~the anticipated impact of the COVID-19 pandemic on our business, manufacturing, supply chain, financial results, financial condition, and planned capital expenditures.~~

•the impact of the COVID-19 pandemic;

~~our ability to successfully develop, license, acquire and commercialize new products on a timely basis;~~

•the impact of global economic conditions;

~~our ability to obtain exclusive marketing rights for our products;~~

•our ability to successfully develop, license, acquire and commercialize new products on a timely basis;

~~the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices;~~

•our ability to obtain exclusive marketing rights for our products;

~~our ability to manage our growth through acquisitions and otherwise;~~

•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 dependence on the sales of a limited number of products for a substantial portion of our total revenues;~~

•our ability to manage our growth through acquisitions and otherwise;

~~the risk of product liability and other claims against us by consumers and other third parties;~~

•our dependence on the sales of a limited number of products for a substantial portion of our total revenues;

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;

•the risk of product liability and other claims against us by consumers and other third parties;

~~changes to FDA product approval requirements;~~

•risks related to changes in the regulatory environment, including U.S. federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws;

~~risks related to federal regulation of arrangements between manufacturers of branded and generic products;~~

•changes to FDA product approval requirements;

~~the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers;~~

•risks related to federal regulation of arrangements between manufacturers of branded and generic products;

~~the continuing trend of consolidation of certain customer groups;~~

•the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers;

~~our reliance on certain licenses to proprietary technologies from time to time;~~

•the continuing trend of consolidation of certain customer groups;

~~our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods;~~

•our reliance on certain licenses to proprietary technologies from time to time;

~~our dependence on third-party agreements for a portion of our product offerings;~~

•our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods;

~~our ability to identify and make acquisitions of or investments in complementary businesses and products on advantageous terms;~~

•our dependence on third-party agreements for a portion of our product offerings;

~~legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives;~~

•our ability to identify, make and integrate acquisitions or investments in complementary businesses and products on advantageous terms;

~~the significant amount of resources we expend on research and development;~~

•legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives;

~~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 significant amount of resources we expend on research and development;

~~the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group.~~

•our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness;

•the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group; and

•such other factors as may be set forth elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, particularly in the section entitled 1A. Risk Factors and our public filings with the SEC.

Investors ~~also~~ should carefully read our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, including the section captioned “1A. Risk Factors”, for a description of certain risks that could, among other things, cause our actual results to differ materially from those expressed in our forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described ~~above~~herein and in our Annual Report to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(unaudited; in thousands, except per share amounts)

Three Months Ended March 31,

2020

2019

Net revenue
$
498,533

$
446,120

Cost of goods sold

313,578

309,743

Cost of goods sold impairment charges

1,456

53,297

Gross profit

183,499

83,080

Selling, general and administrative

77,976

84,436

Research and development

36,379

53,858

In-process research and development impairment charges

960

22,787

Intellectual property legal development expenses

1,270

4,166

Acquisition, transaction-related and integration expenses

2,575

6,032

Charges related to legal matters

4,500

—

Restructuring and other charges

2,048

6,161

Operating income (loss)

57,791

(94,360
)
Other (expense) income:

Interest expense, net

(39,899
)

(43,281
)
Foreign exchange loss, net

(5,181
)

(5,464
)
Gain on sale of international business

—

8,818

Other income, net

633

1,107

Total other expense, net

(44,447
)

(38,820
)
Income (loss) before income taxes

13,344

(133,180
)
Benefit from income taxes

(108,173
)

(8,428
)
Net income (loss)

121,517

(124,752
)
Less: Net (income) loss attributable to non-controlling interests

(6,450
)

76,871

Net income (loss) attributable to Amneal Pharmaceuticals, Inc.
$
115,067

$
(47,881
)
Net income (loss) per share attributable to Amneal
Pharmaceuticals, Inc.'s common stockholders:

Class A and Class B-1 basic
$
0.78

$
(0.37
)
Class A and Class B-1 diluted
$
0.78

$
(0.37
)
Weighted-average common shares outstanding:

Class A and Class B-1 basic

147,180

127,687

Class A and Class B-1 diluted

147,956

127,687


	Three Months Ended March 31,
	2021		2020
Net revenue	$	493,105	$	498,533
Cost of goods sold	301,543		313,578
Cost of goods sold impairment charges	0		1,456
Gross profit	191,562		183,499
Selling, general and administrative	90,726		77,976
Research and development	48,182		36,379
In-process research and development impairment charges	0		960
Intellectual property legal development expenses	3,582		1,270
Acquisition, transaction-related and integration expenses	2,802		2,575
Charges related to legal matters, net	0		4,500
Restructuring and other charges	363		2,048
Operating income	45,907		57,791
Other (expense) income:
Interest expense, net	(33,885)		(39,899)
Foreign exchange gain (loss), net	2,088		(5,181)

Other income, net	794		633
Total other expense, net	(31,003)		(44,447)
Income before income taxes	14,904		13,344
Provision for (benefit from) income taxes	359		(108,173)
Net income	14,545		121,517
Less: Net income attributable to non-controlling interests	(7,839)		(6,450)
Net income attributable to Amneal Pharmaceuticals, Inc.	$	6,706	$	115,067
Net income per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:
Basic	$	0.05	$	0.78
Diluted	$	0.04	$	0.78
Weighted-average common shares outstanding:
Basic	148,013		147,180
Diluted	151,220		147,956

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Income ~~(Loss)~~

(unaudited; in thousands)

Three Months Ended March 31,

2020

2019

Net income (loss)
$
121,517

$
(124,752
)
Less: Net (income) loss attributable to non-controlling interests

(6,450
)

76,871

Net income (loss) attributable to Amneal Pharmaceuticals, Inc.

115,067

(47,881
)
Other comprehensive income (loss):

Foreign currency translation adjustments:

Foreign currency translation adjustments arising during the period

(5,135
)

5,236

Less: Reclassification of foreign currency translation adjustment
   included in net loss

—

3,373

Foreign currency translation adjustments, net

(5,135
)

8,609

Unrealized loss on cash flow hedge, net of tax

(62,658
)

—

Less: Other comprehensive income (loss) attributable to non-controlling
   interests

34,456

(4,927
)
Other comprehensive (loss) income attributable to Amneal
   Pharmaceuticals, Inc.

(33,337
)

3,682

Comprehensive income (loss) attributable to Amneal
   Pharmaceuticals, Inc.
$
81,730

$
(44,199
)


	Three Months Ended March 31,
	2021		2020
Net income	$	14,545	$	121,517
Less: Net income attributable to non-controlling interests	(7,839)		(6,450)
Net income attributable to Amneal Pharmaceuticals, Inc.	6,706		115,067
Other comprehensive income (loss):
Foreign currency translation adjustments arising during the period	(6,366)		(5,135)
Unrealized gain (loss) on cash flow hedge, net of tax	20,772		(62,658)
Less: Other comprehensive (income) loss attributable to non-controlling interests	(7,302)		34,456
Other comprehensive income (loss) attributable to Amneal Pharmaceuticals, Inc.	7,104		(33,337)
Comprehensive income attributable to Amneal Pharmaceuticals, Inc.	$	13,810	$	81,730

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Balance Sheets

(unaudited; in thousands)


	March 31, 2020			December 31, 2019				March 31, 2021		December 31, 2020
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	405,238		$	151,197		Cash and cash equivalents	$	452,097	$	341,378
Restricted cash		1,687			1,625		Restricted cash	3,717		5,743
Trade accounts receivable, net		722,682			604,390		Trade accounts receivable, net	530,600		638,895
Inventories		437,959			381,067		Inventories	497,008		490,649
Prepaid expenses and other current assets		204,409			70,164		Prepaid expenses and other current assets	75,137		73,467
Related party receivables		1,725			1,767		Related party receivables	1,102		1,407
Total current assets		1,773,700			1,210,210		Total current assets	1,559,661		1,551,539
Property, plant and equipment, net		467,559			477,997		Property, plant and equipment, net	471,165		477,754
Goodwill		514,733			419,504		Goodwill	522,758		522,814
Intangible assets, net		1,475,161			1,382,753		Intangible assets, net	1,262,954		1,304,626
Operating lease right-of-use assets		50,943			53,344		Operating lease right-of-use assets	32,396		33,947
Operating lease right-of-use assets - related party		21,616			16,528		Operating lease right-of-use assets - related party	24,110		24,792
Financing lease right-of-use assets							Financing lease right-of-use assets	67,465		9,541
Financing lease right-of-use assets - related party		60,632			61,284		Financing lease right-of-use assets - related party	0		58,676
Other assets		26,456			44,270		Other assets	19,561		22,344
Total assets	$	4,390,800		$	3,665,890		Total assets	$	3,960,070	$	4,006,033
Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:							Current liabilities:
Accounts payable and accrued expenses	$	606,925		$	507,483		Accounts payable and accrued expenses	$	574,322	$	611,867
Current portion of long-term debt, net		29,736			21,479		Current portion of long-term debt, net	29,817		44,228
Revolving credit facility		300,000			—
Current portion of operating lease liabilities		12,125			11,874		Current portion of operating lease liabilities	6,637		6,474
Current portion of operating and financing lease liabilities - related party		4,084			3,601		Current portion of operating and financing lease liabilities - related party	2,883		3,978
Current portion of note payable- related party		1,000			—
Related party payable		11,195			5,969
Current portion of financing lease liabilities							Current portion of financing lease liabilities	3,020		1,794
Current portion of note payable - related party							Current portion of note payable - related party	0		1,000
Related party payable - short term							Related party payable - short term	20,100		7,561
Total current liabilities		965,065			550,406		Total current liabilities	636,779		676,902
Long-term debt, net		2,772,029			2,609,046		Long-term debt, net	2,728,212		2,735,264
Note payable - related party		35,281			—		Note payable - related party	36,828		36,440
Operating lease liabilities		40,615			43,135		Operating lease liabilities	28,435		30,182
Operating lease liabilities - related party		19,874			15,469		Operating lease liabilities - related party	22,308		23,049
Financing lease liabilities							Financing lease liabilities	61,871		2,318
Financing lease liabilities - related party		61,069			61,463		Financing lease liabilities - related party	0		60,193
Related party payable - long term							Related party payable - long term	2,061		1,584
Other long-term liabilities		80,846			39,583		Other long-term liabilities	63,789		83,365
Total long-term liabilities		3,009,714			2,768,696		Total long-term liabilities	2,943,504		2,972,395
Commitments and contingencies (Notes 5 and 17)
Commitments and contingencies (Notes 5 and 14)							Commitments and contingencies (Notes 5 and 14)	0		0
Redeemable non-controlling interests		12,563			—		Redeemable non-controlling interests	13,079		11,804
Stockholders' Equity							Stockholders' Equity
Preferred stock, $0.01 par value, 2,000 shares authorized; NaN issued at both March 31, 2020 and December 31, 2019		—			—
Class A common stock, $0.01 par value, 900,000 shares authorized at both March 31, 2020 and December 31, 2019; 147,311 and 147,070 shares issued at March 31, 2020 and December 31, 2019, respectively		1,472			1,470
Class B common stock, $0.01 par value, 300,000 shares authorized at both March 31, 2020 and December 31, 2019; 152,117 issued at both March 31, 2020 and December 31, 2019		1,522			1,522
Preferred stock, $0.01 par value, 2,000 shares authorized; NaN issued at both March 31, 2021 and December 31, 2020							Preferred stock, $0.01 par value, 2,000 shares authorized; NaN issued at both March 31, 2021 and December 31, 2020	0		0
Class A common stock, $0.01 par value, 900,000 shares authorized at both March 31, 2021 and December 31, 2020; 148,715 and 147,674 shares issued at March 31, 2021 and December 31, 2020, respectively							Class A common stock, $0.01 par value, 900,000 shares authorized at both March 31, 2021 and December 31, 2020; 148,715 and 147,674 shares issued at March 31, 2021 and December 31, 2020, respectively	1,485		1,475
Class B common stock, $0.01 par value, 300,000 shares authorized at both March 31, 2021 and December 31, 2020; 152,117 shares issued at both March 31, 2021 and December 31, 2020							Class B common stock, $0.01 par value, 300,000 shares authorized at both March 31, 2021 and December 31, 2020; 152,117 shares issued at both March 31, 2021 and December 31, 2020	1,522		1,522
Additional paid-in capital		611,600			606,966		Additional paid-in capital	634,484		628,413
Stockholders' accumulated deficit		(262,813	)		(377,880	)	Stockholders' accumulated deficit	(280,115)		(286,821)
Accumulated other comprehensive loss		(33,405	)		(68	)	Accumulated other comprehensive loss	(34,361)		(41,318)
Total Amneal Pharmaceuticals, Inc. stockholders' equity		318,376			232,010		Total Amneal Pharmaceuticals, Inc. stockholders' equity	323,015		303,271
Non-controlling interests		85,082			114,778		Non-controlling interests	43,693		41,661
Total stockholders' equity		403,458			346,788		Total stockholders' equity	366,708		344,932
Total liabilities and stockholders' equity	$	4,390,800		$	3,665,890		Total liabilities and stockholders' equity	$	3,960,070	$	4,006,033

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(unaudited; in thousands)


	Three Months Ended March 31,							Three Months Ended March 31,
	2020			2019				2021		2020
Cash flows from operating activities:							Cash flows from operating activities:
Net income (loss)	$	121,517		$	(124,752	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income							Net income	$	14,545	$	121,517
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		58,083			48,868		Depreciation and amortization	55,549		58,083
Amortization of Levothyroxine Transition Agreement asset		—			36,393
Unrealized foreign currency loss		5,514			6,490
Unrealized foreign currency (gain) loss							Unrealized foreign currency (gain) loss	(1,970)		5,514
Amortization of debt issuance costs and discount		2,004			1,601		Amortization of debt issuance costs and discount	2,183		2,004
Gain on sale of international business		—			(8,818	)

Intangible asset impairment charges		2,416			76,084		Intangible asset impairment charges	0		2,416
Deferred tax benefit		—			(9,884	)

Stock-based compensation		4,539			4,347		Stock-based compensation	5,330		4,539
Inventory provision		15,200			15,650		Inventory provision	16,021		15,200
Other operating charges and credits, net		1,266			1,109		Other operating charges and credits, net	1,431		1,266
Changes in assets and liabilities:							Changes in assets and liabilities:
Trade accounts receivable, net		(60,893	)		(165,012	)	Trade accounts receivable, net	108,385		(60,893)
Inventories		(2,778	)		(14,180	)	Inventories	(20,283)		(2,778)
Income taxes receivable associated with the CARES Act		(110,069	)		—		Income taxes receivable associated with the CARES Act	0		(110,069)
Prepaid expenses, other current assets and other assets		(26,383	)		22,657		Prepaid expenses, other current assets and other assets	602		(26,383)
Related party receivables		76			(314	)	Related party receivables	301		76
Accounts payable, accrued expenses and other liabilities		34,839			695		Accounts payable, accrued expenses and other liabilities	(37,226)		34,839
Related party payables		3,695			656		Related party payables	3,260		3,695
Net cash provided by (used in) operating activities		49,026			(108,410	)
Net cash provided by operating activities							Net cash provided by operating activities	148,128		49,026
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property, plant and equipment		(7,367	)		(17,988	)	Purchases of property, plant and equipment	(11,776)		(7,367)
Deposits for future acquisition of property, plant, and equipment							Deposits for future acquisition of property, plant, and equipment	(917)		0
Acquisition of intangible assets		(1,050	)		—		Acquisition of intangible assets	0		(1,050)
Acquisitions, net of cash acquired		(253,625	)		—		Acquisitions, net of cash acquired	0		(253,625)
Cash sold with international business		—			(3,478	)

Net cash used in investing activities		(262,042	)		(21,466	)	Net cash used in investing activities	(12,693)		(262,042)
Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from issuance of debt		180,000			—		Proceeds from issuance of debt	0		180,000
Payments of principal on debt and financing leases		(7,158	)		(6,750	)
Payments of principal on debt, financing leases and other							Payments of principal on debt, financing leases and other	(23,630)		(7,158)
Net borrowings on revolving credit facility		300,000			—		Net borrowings on revolving credit facility	0		300,000
Payments of deferred financing costs		(4,102	)		—		Payments of deferred financing costs	0		(4,102)
Proceeds from exercise of stock options		5			1,010		Proceeds from exercise of stock options	676		5
Employee payroll tax withholding on restricted stock unit vesting		(503	)		—		Employee payroll tax withholding on restricted stock unit vesting	(2,102)		(503)
Acquisition of non-controlling interest		—			(2,011	)
Tax distribution to non-controlling interest		—			(13,494	)

Payments of principal on financing lease - related party		(263	)		(619	)	Payments of principal on financing lease - related party	(93)		(263)
Net cash provided by (used in) financing activities		467,979			(21,864	)
Repayment of related party note							Repayment of related party note	(1,000)		0
Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(26,149)		467,979
Effect of foreign exchange rate on cash		(860	)		(296	)	Effect of foreign exchange rate on cash	(593)		(860)
Net increase (decrease) in cash, cash equivalents, and restricted cash		254,103			(152,036	)
Net increase in cash, cash equivalents, and restricted cash							Net increase in cash, cash equivalents, and restricted cash	108,693		254,103
Cash, cash equivalents, and restricted cash - beginning of period		152,822			218,779		Cash, cash equivalents, and restricted cash - beginning of period	347,121		152,822
Cash, cash equivalents, and restricted cash - end of period	$	406,925		$	66,743		Cash, cash equivalents, and restricted cash - end of period	$	455,814	$	406,925
Cash and cash equivalents - end of period	$	405,238		$	63,946		Cash and cash equivalents - end of period	$	452,097	$	405,238
Restricted cash - end of period		1,687			2,797		Restricted cash - end of period	3,717		1,687
Cash, cash equivalents, and restricted cash - end of period	$	406,925		$	66,743		Cash, cash equivalents, and restricted cash - end of period	$	455,814	$	406,925
Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Cash paid for interest	$	35,386		$	40,032		Cash paid for interest	$	29,917	$	35,386
Cash (paid) received for income taxes, net	$	(3,430	)	$	9,713
Cash paid for income taxes, net							Cash paid for income taxes, net	$	733	$	3,430
Supplemental disclosure of non-cash investing and financing activity:							Supplemental disclosure of non-cash investing and financing activity:
Notes payable for acquisitions - related party	$	36,033		$	—		Notes payable for acquisitions - related party	$	0	$	36,033
Receivable from the sale of international business	$	—		$	35,837
Payable for acquisition of product rights and licenses	$	—		$	50,000
Tax distribution to non-controlling interests							Tax distribution to non-controlling interests	$	9,757	$	0

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated ~~Statement~~Statements of Changes in Stockholders' Equity

(unaudited; in thousands)

Class A Common
Stock

Class B Common
Stock

Additional
Paid-in

Stockholders'
Accumulated

Accumulated
Other
Comprehensive

Non-
Controlling

Total

Redeemable Non-Controlling

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Interests

Equity

Interests

Balance at January 1, 2020

147,070

$
1,470

152,117

$
1,522

$
606,966

$
(377,880
)

$
(68
)

$
114,778

$
346,788

$
—

Net income

—

—

—

—

—

115,067

—

5,362

120,429

1,088

Foreign currency translation adjustment

—

—

—

—

—

—

(2,525
)

(2,610
)

(5,135
)

—

Stock-based compensation

—

—

—

—

4,539

—

—

—

4,539

—

Exercise of stock options

1

—

—

—

5

—

—

—

5

—

Restricted stock unit vesting, net of shares withheld to cover payroll taxes

240

2

—

—

90

—

—

(602
)

(510
)

—

Unrealized loss on cash flow hedge, net of tax

—

—

—

—

—

—

(30,812
)

(31,846
)

(62,658
)

—

Redeemable non-controlling interests issued for acquisitions

—

—

—

—

—

—

—

—

—

11,475

Balance at March 31, 2020

147,311

$
1,472

152,117

$
1,522

$
611,600

$
(262,813
)

$
(33,405
)

$
85,082

$
403,458

$
12,563

Class A Common
Stock

Class B Common
Stock

Class B-1
Common Stock

Additional
Paid-in

Stockholders'
Accumulated

Accumulated
Other
Comprehensive

Non-
Controlling

Total

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

(Loss) Income

Interests

Equity

Balance at January 1, 2019

115,047

$
1,151

171,261

$
1,713

12,329

$
123

$
530,438

$
(20,920
)

$
(7,755
)

$
391,613

$
896,363

Net loss

—

—

—

—

—

—

—

(47,881
)

—

(76,871
)

(124,752
)
Cumulative-effective adjustment from adoption of Topic 842, net of tax

—

—

—

—

—

—

—

4,957

—

8,604

13,561

Foreign currency translation adjustment

—

—

—

—

—

—

—

—

2,238

2,998

5,236

Stock-based compensation

—

—

—

—

—

—

4,347

—

—

—

4,347

Exercise of stock options

197

2

—

—

—

—

748

—

(7
)

267

1,010

Redemption of Class B Common Stock

320

3

(320
)

(3
)

—

—

1,124

—

(19
)

(882
)

223

Reclassification of foreign currency translation adjustment included in net loss

—

—

—

—

—

—

—

—

1,444

1,929

3,373

Tax distribution

—

—

—

—

—

—

—

—

—

(82
)

(82
)
Other

—

—

—

—

—

—

502

—

—

—

502

Balance at March 31, 2019

115,564

$
1,156

170,941

$
1,710

12,329

$
123

$
537,159

$
(63,844
)

$
(4,099
)

$
327,576

$
799,781


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interests		Total Equity		Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at January 1, 2021	147,674	$	1,475	152,117	$	1,522	$	628,413	$	(286,821)	$	(41,318)	$	41,661	$	344,932	$	11,804
Net income	—	—		—	—		—		6,706		—		6,043		12,749		1,796
Foreign currency translation adjustment	—	—		—	—		—		—		(3,139)		(3,227)		(6,366)		—
Stock-based compensation	—	—		—	—		5,330		—		—		—		5,330		—
Exercise of stock options	244	2		—	—		677		—		(34)		31		676		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	797	8		—	—		64		—		(113)		(2,108)		(2,149)		—
Unrealized gain on cash flow hedge, net of tax	—	—		—	—		—		—		10,243		10,529		20,772		—
Tax distribution	—	—		—	—		—		—		—		(9,236)		(9,236)		(521)

Balance at March 31, 2021	148,715	$	1,485	152,117	$	1,522	$	634,484	$	(280,115)	$	(34,361)	$	43,693	$	366,708	$	13,079


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interests		Total Equity		Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at January 1, 2020	147,070	$	1,470	152,117	$	1,522	$	606,966	$	(377,880)	$	(68)	$	114,778	$	346,788	$	0
Net income	—	—		—	—		—		115,067		—		5,362		120,429		1,088
Foreign currency translation adjustment	—	—		—	—		—		—		(2,525)		(2,610)		(5,135)		—
Stock-based compensation	—	—		—	—		4,539		—		—		—		4,539		—
Exercise of stock options	1	—		—	—		5		—		—		—		5		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	240	2		—	—		90		—		—		(602)		(510)		—
Unrealized loss on cash flow hedge, net of tax	—	—		—	—		—		—		(30,812)		(31,846)		(62,658)		—

Non-controlling interests from Rondo transaction	—	—		—	—		—		—		—		—		—		11,475

Balance at March 31, 2020	147,311	$	1,472	152,117	$	1,522	$	611,600	$	(262,813)	$	(33,405)	$	85,082	$	403,458	$	12,563

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1. Nature of Operations

Amneal Pharmaceuticals, Inc.~~, formerly known as Atlas Holdings, Inc.~~ (the ~~"Company"~~“Company”), was formed along with its wholly owned subsidiary, K2 Merger Sub Corporation, a Delaware corporation ("Merger Sub"), on October 4, 2017, for the purpose of facilitating the combination of Impax Laboratories, Inc. (now Impax Laboratories, LLC), a Delaware corporation then listed on the Nasdaq Stock Market ("Impax") and Amneal Pharmaceuticals LLC, a Delaware limited liability company ("Amneal"). The Company is a ~~holding~~pharmaceutical company ~~whose principal assets are Amneal Common Units.~~

~~Amneal was formed~~specializing in ~~2002~~developing, manufacturing, marketing and ~~operates through various subsidiaries. Amneal is~~distributing high-value generic and branded specialty pharmaceutical products across a ~~vertically integrated developer, manufacturer,~~broad array of dosage forms and ~~seller of generic pharmaceutical products. Amneal’s pharmaceutical research includes analytical and formulation development and stability. Amneal~~therapeutic areas. The Company operates principally in the United States, India, and ~~Ireland. Amneal~~Ireland, and sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly.

~~On October 17, 2017,~~ The Company is a holding company, whose principal assets are common units (“Amneal ~~Impax, the Company and Merger Sub entered into the Business Combination Agreement, as amended on November 21, 2017 and December 16, 2017 (the "BCA"~~Common Units”) of Amneal Pharmaceuticals, LLC (“Amneal”).

On May 4, 2018, ~~pursuant to~~Amneal completed the ~~BCA,~~acquisition of Impax ~~and Amneal combined the generics~~Laboratories, Inc. (“Impax”), a generic and specialty pharmaceutical ~~business of Impax~~company.

The group, together with ~~the generic drug development~~their affiliates and ~~manufacturing business of~~certain assignees, who owned Amneal ~~to create the Company as~~when it was a ~~new generics and specialty pharmaceutical~~private company ~~through the following transactions (together, the "Combination", and the closing of the Combination, the "Closing"~~(the “Amneal Group”): (i) Merger Sub merged with and into Impax, with Impax surviving as a wholly owned subsidiary of the Company, (ii) each share of Impax’s common stock, par value $0.01 per share ("Impax Common Stock"), issued and outstanding immediately prior to the Closing, other than Impax Common Stock held by Impax in treasury, by the Company or by any of their respective subsidiaries, was converted into the right to receive 1 fully paid and non-assessable share of Class A common stock of the Company, par value $0.01 per share ("Class A Common Stock"), (iii) Impax converted to a Delaware limited liability company, (iv) the Company contributed to Amneal all of the Company’s equity interests in Impax, in exchange for Amneal common units ("Amneal Common Units"), (v) the Company issued an aggregate number of shares of Class B common stock of the Company, par value $0.01 per share ("Class B Common Stock", and collectively, with the Class A Common Stock and Class B-1 common stock of the Company, par value $0.01 , ("Class B-1 Common Stock"), the "Company Common Stock") to APHC Holdings, LLC, (formerly Amneal Holdings, LLC), the parent entity of Amneal as of the Closing ("Holdings"), and (vi) the Company became the managing member of Amneal.

Immediately upon the Closing, holders of Impax Common Stock prior to the Closing collectively held approximately 25% of the Company and Holdings held a majority interest in the Company with an effective voting interest of approximately 75% on a fully diluted and as converted basis through its ownership of Class B Common Stock. Holdings also held a corresponding number50.6% of Amneal Common Units ~~which entitled it to approximately 75% of~~and the ~~economic interests in the combined businesses of Impax and Amneal. The~~ Company held ~~an interest in Amneal of approximately 25% and became its managing member.~~

~~In connection with~~ the Combination, on May 4, 2018, Holdings entered into definitive purchase agreements which provided for a private placement of certain shares of Class A Common Stock and Class B-1 Common Stock (the "PIPE Investment") with select institutional investors (the "PIPE Investors"). Pursuant to the terms of the purchase agreements, upon the Closing, Holdings exercised its right to cause the Company to redeem approximately 15% of its ownership interests in the Company in exchange for 34.5 million shares of Class A Common Stock and 12.3 million unregistered shares of Class B-1 Common Stock (the "Redemption"). The shares of Class A Common Stock and Class B-1 Common Stock received in the Redemption were sold immediately following the Closing by Holdings to the PIPE Investors at a per share purchase price of $18.25 for gross proceeds of $855 million. Following the PIPE Investment, the PIPE Investors owned collectively approximately 15% of the Company Common Stock on a fully diluted and as converted basis. On May 4, 2018, Holdings also caused Amneal to redeem (the "Closing Date Redemption") 6.9 million of Amneal Common Units held by Holdings for a like number of shares of Class A Common Stock, for future distribution to certain direct and indirect members of Holdings who were or are employees of the Company and to whom were previously issued (prior to the Closing) profit participation units ("PPUs") in Amneal. As a result of the PIPE Investment and Closing Date Redemption, the voting and economic interest of approximately 75% held by Holdings immediately upon Closing was reduced by approximately 18%. The overall interest percentage held by non-controlling interest holders (the "Amneal Group") upon the consummation of the Combination, PIPE Investment and Closing Date Redemption was approximately 57%. As of both March 31, 2020 and December 31, 2019, the overall interest percentage held by non-controlling interest holders was approximately 51%.

~~On July 5, 2018, Holdings distributed to its members all Amneal Common Units and shares of Class B Common Stock held by Holdings. As a result,~~remaining 49.4% as of March 31, ~~2020, Holdings did not hold any equity~~2021. Although the Company has a minority economic interest in Amneal, orit is Amneal’s sole managing member, having the ~~Company.~~

~~During the year ended December 31, 2019, pursuant~~sole voting power to ~~the Company's certificate~~make all of ~~incorporation,~~Amneal’s business decisions and control its management. Therefore, the Company ~~converted all (12.3 million)~~consolidates the financial statements of Amneal and its ~~issued and outstanding shares~~subsidiaries. The Company records non-controlling interests for the portion of ~~Class B-1 Common Stock to Class A Common Stock and such shares of Class B-1 Common Stock have been retired and may~~Amneal’s economic interests that it does not be reissued by the Company. The rights of Class A Common Stock and Class B-1 Common Stock were identical, except that the Class B-1 Common Stock had certain director appointment rights and the Class B-1 Common Stock had no voting rights (other than with respect to its director appointment right and as otherwise required by law).

hold.

2. 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, ~~2019~~2020 included in the Company’s ~~2019~~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 March 31, ~~2020,~~2021, cash flows for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 and the results of its operations, its comprehensive income ~~(loss)~~ and its changes in stockholders' equity for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. The consolidated balance sheet data at December 31, ~~2019~~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.

The accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies contained in the Company’s ~~2019~~2020 Annual Report on Form ~~10-K, except for the impact of the adoption of new accounting standards discussed under~~ ~~Recently Adopted Accounting Pronouncements~~.10-K. The following ~~new~~ significant accounting policy ~~relates~~has been updated to include the ~~acquisitions~~Company's accounting for foreign currency transactions that are of ~~AvKARE, Inc.~~a long-term investment in nature.

Foreign Currencies

The Company has operations in the U.S., India, Ireland, and ~~Dixon-Shane, LLC d/b/a R&S Northeast LLC~~ ~~(refer to~~ ~~Note 3. Acquisitions and Divestitures~~).

~~Chargebacks Receivable~~

~~When a sale occurs on a contracted item,~~other international jurisdictions. Generally, foreign subsidiaries’ functional currency is the ~~difference between the cost the Company pays to the manufacturer~~local currency of ~~that item~~operations and the ~~contract price~~net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that ~~the end customer has with the manufacturer is rebated to the Company by the manufacturer. The Company establishes~~arise from such translation, as well as exchange gains and losses on intercompany balances of a ~~chargeback (rebate) receivable and a reduction to cost of goods sold~~long-term investment nature, are included in the ~~same period as the related sale. At March 31, 2020, chargebacks receivable was $24 million, net of an immaterial allowance for doubtful accounts.~~

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, ~~distribution fees,~~valuation of intangible and other assets acquired in business combinations, allowances for accounts receivable, accrued liabilities, ~~chargeback receivables,~~ stock-based compensation, valuation of inventory balances, the determination of useful lives for product rights ~~allowances for deferred tax assets,~~ ~~measurement of assets acquired and liabilities assumed in business combinations at fair value~~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 ~~Adopted~~Issued Accounting Pronouncements

In ~~August 2018,~~March 2020, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~2018-13,~~ ~~Fair Value Measurement (Topic 82): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,~~ which modifies the disclosure requirements on fair value measurement. The Company adopted ASU 2018-13 effective January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, guidance that changes the impairment model for most financial assets including trade receivables and certain other instruments that are not measured at fair value through net income. The standard will replace today’s "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. Entities will apply the standard’s provisions as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company adopted ASU 2016-13 effective January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In March 2020, the FASB issued ASU~~ 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which ~~provided~~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. ~~The~~These amendments are effective immediately and may be applied prospectively to ~~impacted contracts~~contract modifications made and ~~hedges prospectively through~~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.

3. Acquisitions and Divestitures

Kashiv Specialty Pharmaceuticals, LLC Acquisition

On January 11, 2021, the Company and Kashiv Biosciences, LLC (a related party, see Note 16. 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 acquisition was funded with cash on hand and closed on April 2, 2021.

Under the terms of the transaction, which will be accounted for as a business combination, Amneal paid an upfront purchase price of $70 million with cash on hand at the closing, which is subject to certain customary purchase price adjustments, and will make a cash payment of $30 million on January 11, 2022. Kashiv is also 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 net sales amount, of aggregate annual net sales for certain future pharmaceutical products.

Due to the timing of the acquisition, the initial accounting for the acquisition, including the valuation of the intangible assets acquired, is incomplete. As such, the Company is not able to disclose certain information relating to the acquisition including the preliminary fair value of assets acquired and liabilities assumed.

AvKARE and R&S Acquisitions

On December 10, 2019, the Company, through its investment in Rondo Partners, LLC (“Rondo”), entered into an equity purchase and operating agreements 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 “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 Acquisitions. The purchase price of ~~$295~~$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~~

$178 million of proceeds from a $180 million term loan. The remaining $2 million consisted of working capital ~~costs (refer~~costs. The Company is not party to ~~Note 13. Debt~~).or a guarantor of the term loan, Sellers Notes or Short-Term Sellers Note. For further detail of the ~~preliminary~~ purchase price, refer to the table below.

For the three months ended March 31, 2020, there were $1 million of transaction costs associated with the Acquisitions recorded in acquisition, transaction-related and integration expenses (NaN for the three months ended March 31, 2021).

The Acquisitions were accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer of AvKARE, LLC and R&S.

The ~~preliminary~~ purchase price iswas calculated as follows (in thousands):

Cash

$
254,000

Sellers Notes ⁽¹⁾

35,033

Settlement of Amneal trade accounts receivable from R&S ⁽²⁾

7,440

Short-Term Seller Note ⁽³⁾

1,000

Working capital adjustment ⁽⁴⁾

(2,640
)
Fair value consideration transferred

$
294,833

	~~(1)~~
~~In accordance with ASC 805,~~ Cash		~~Business Combinations,~~$ ~~all consideration transferred was measured at its acquisition-date fair value.~~	~~The~~ 254,000
Sellers Notes ~~are stated at the preliminary fair value estimate~~(1)		35,033
Settlement 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~~Amneal trade accounts receivable from R&S ~~that was effectively settled upon closing of the Acquisitions.~~

(2)

6,855

	~~(3)~~	~~Represents the principal amount due on the~~ Short-Term Seller Note ~~which approximates fair value.~~ (3)	1,000
Working capital adjustment (4)	(2,640)
Fair value consideration transferred	$	294,248

~~(4)~~(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.

~~Represents estimated working capital adjustment pursuant to the terms of the purchase agreement.~~

(2)Represents trade accounts receivable from R&S that was effectively settled upon closing of the 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 ~~preliminary~~ purchase price allocation for the Acquisitions (in thousands):

Preliminary Fair Values
As of March 31,
2020

Restricted cash

$
375

Trade accounts receivable, net

52,223

Inventories

72,615

Prepaid expenses and other current assets

33,525

Related party receivables

61

Property, plant and equipment

5,278

Goodwill

95,955

Intangible assets, net

137,400

Operating lease right-of-use assets - related party

5,544

Total assets acquired

402,976

Accounts payable and accrued expenses

89,592

Related party payables

1,532

Operating lease liabilities - related party

5,544

Total liabilities assumed

96,668

Redeemable non-controlling interests

11,475

Fair value of consideration transferred

$
294,833


	Final Fair Values as of January 31, 2020

Trade accounts receivable, net	$	46,702
Inventories	71,908
Prepaid expenses and other current assets	11,316
Related party receivables	61
Property, plant and equipment	5,278
Goodwill	103,679
Intangible assets, net	130,800
Operating lease right-of-use assets - related party	5,544
Total assets acquired	375,288
Accounts payable and accrued expenses	62,489
Related party payables	1,532
Operating lease liabilities - related party	5,544
Total liabilities assumed	69,565
Redeemable non-controlling interests	11,475
Fair value of consideration transferred	$	294,248

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

Preliminary
Fair Values

Weighted-Average
Useful Life
Government licenses

$
66,700

7 years
Government contracts

28,600

4 years
National contracts

28,600

5 years
Customer relationships

13,000

10 years
Trade name

500

6 years

$
137,400


	Fair Values		Weighted-Average Useful Life
Government licenses	$	66,700	7 years
Government contracts	22,000		4 years
National contracts	28,600		5 years
Customer relationships	13,000		10 years
Trade name	500		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 ~~customer relationships,~~ government contracts, ~~and~~ 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 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 assumptions, including the expected projected cash flows, utilized in the ~~preliminary~~ purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing date of the Acquisitions on January 31, 2020.

Some of the more significant assumptions inherent in the development of those asset valuations ~~include~~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. ~~No assurances can be given that the~~The underlying assumptions used to prepare the discounted cash flow analysis ~~will not change. For~~may change; accordingly, for these and other reasons, actual results may vary significantly from estimated results.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets, assumed liabilities and redeemable non-controlling interests. The Company obtains this information during due diligence and through other sources. In the months after closing, as the Company obtains additional information about these assets and liabilities and learns more about the newly acquired businesses, it is able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company is continuing to evaluate the acquired assets, assumed liabilities and redeemable non-controlling interests associated with the Acquisitions. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

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 and Amneal. The fair value of the redeemable non-controlling interests considers these redemption rights.

Of the ~~$96~~$104 million of goodwill acquired in connection with the Acquisitions, approximately ~~$65~~$70 million was allocated to the Company’s AvKARE segment (refer to Note ~~18.~~ 15.Segment Information) and approximately ~~$31~~$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 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.

For the three months ended March 31, 2020, the Acquisitions contributed total net revenue of approximately $65 million and operating loss of $1 million, which included approximately $6 million of amortization expense from intangible assets acquired in the Acquisitions, to the Company’s consolidated results of operations.

Unaudited Pro Forma Information

The unaudited pro forma combined results of operations for the three months ended March 31, 2020 ~~and 2019~~ (assuming the closing of the Acquisitions occurred on January 1, ~~2019)~~2020) are as follows (in thousands):

Three Months Ended March 31,

2020

2019

Net revenue

$
525,303

$
511,205

Net income (loss)

$
122,521

$
(133,410
)
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.

$
115,388

$
(50,463
)


Net revenue	$	525,303
Net income	$	122,521
Net income attributable to Amneal Pharmaceuticals, Inc.	$	115,388

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 Acquisitions taken place on January 1, ~~2019. Furthermore, the pro forma results do not purport to project the future results of operations of the Company.~~

2020. Adjustments to arrive at the unaudited pro forma information primarily related to increases in selling, general and administrative expenses for amortization of acquired intangible assets, net of the applicable tax impact.

~~U.K. Divestiture~~

On March 30, 2019, the Company sold 100% of the stock of its Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom, to AI Sirona (Luxembourg) Acquisition S.a.r.l ("AI Sirona") for net cash consideration of approximately $32 million which was received in April 2019. The carrying value of the net assets sold was $22 million, including intangible assets of $7 million and goodwill of $5 million. As a result of the sale, the Company recognized a pre-tax gain of $9 million, inclusive of transaction costs and the recognition of accumulated foreign currency translation adjustment losses of $3 million, within gain on sale of international business for the three months ended March 31, 2019. As part of the disposition, the Company entered into a supply and license agreement with AI Sirona to supply certain products for a period of up to two years.

4. Revenue Recognition

~~Performance Obligations~~

The Company’s performance obligation is the supply of finished pharmaceutical and related products to its customers. The Company’s customers consist primarily of major wholesalers, retail pharmacies, managed care organizations, purchasing co-ops, hospitals, government agencies, institutions, and pharmaceutical companies. The Company’s customer contracts generally consist of both a master agreement, which is signed by the Company ~~and its customer, and/or a customer submitted purchase order, which is governed by the terms and conditions of the master agreement. Customers purchase product by direct channel sales~~recognizes revenue in accordance with ASC 606, Revenue from ~~the Company or by indirect channel sales through various distribution channels.~~

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.

The Company offers standard payment terms to its customers and has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing, since the period between when the Company transfers the product to the customer and when the customer pays for that product is one year or less. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The consideration amounts due from customers as a result of product sales are subject to variable consideration, as described further below.

The Company offers standard product warranties which provide assurance that the product will function as expected and in accordance with specifications. Customers cannot purchase warranties separately and these warranties do not give rise to a separate performance obligation.

The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping errors or where product is damaged in transit. The Company accrues for the customer’s right to return as part of its variable consideration. See below for further details.

~~Variable Consideration~~

The Company includes an estimate of variable consideration in its transaction price at the time of sale, when control of the product transfers to the customer. Variable consideration includes but is not limited to: chargebacks, distribution fees, rebates, group purchasing organization ("GPO") fees, prompt payment (cash) discounts, consideration payable to the customer, billbacks, Medicaid and other government pricing programs, price protection and shelf stock adjustments, sales returns, and profit shares.

The Company assesses whether or not an estimate of its variable consideration is constrained and has determined that the constraint does not apply, since it is probable that a significant reversal in the amount of cumulative revenue will not occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. The Company’s estimates for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change in the amount of total consideration it expects to receive.

~~Chargebacks~~

In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and the contract price charged to the indirect customer is lower than the wholesaler pricing, the Company pays the direct customer (wholesaler) a chargeback for the price differential. The Company estimates its chargeback accrual based on its estimates of the level of inventory of its products in the distribution

~~channel that remain subject to chargebacks and historical chargeback rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.~~

~~Rebates~~

The Company pays fixed or volume-based rebates to its customers based on a fixed amount, fixed percentage of product sales or based on the achievement of a specified level of purchases. The Company’s rebate accruals are based on actual net sales, contractual rebate rates negotiated with customers, and expected purchase volumes / corresponding tiers based on actual sales to date and forecasted amounts.

~~Group Purchasing Organization Fees~~

The Company pays fees to GPOs for administrative services that the GPOs perform in connection with the purchases of product by the GPO participants who are the Company’s customers. The Company’s GPO fee accruals are based on actual net sales, contractual fee rates negotiated with GPOs and the mix of the products in the distribution channel that remain subject to GPO fees.

~~Prompt Payment (Cash) Discounts~~

The Company provides customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. The Company’s prompt payment discount accruals are based on actual net sales and contractual discount rates.

~~Consideration Payable to the Customer~~

The Company pays administrative and service fees to its customers based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. The Company accrues for these fees based on actual net sales, contractual fee rates negotiated with the customer and the mix of the products in the distribution channel that remain subject to fees.

~~Billbacks~~

In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and the contract price charged to the indirect customer is higher than contractual pricing, the Company pays the indirect customer a billback for the price differential. The Company estimates its billback accrual based on its estimates of the level of inventory of its products in the distribution channel that remain subject to billbacks and historical billback rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

~~Medicaid and Other Government Pricing Programs~~

The Company complies with required rebates mandated by law under Medicaid and other government pricing programs. The Company estimates its government pricing accruals based on monthly sales, historical experience of claims submitted by the various states and jurisdictions, historical rates and estimated lag time of the rebate invoices.

~~Price Protection and Shelf Stock Adjustments~~

The Company provides customers with price protection and shelf stock adjustments which may result in an adjustment to the price charged for the product transferred, based on differences between old and new prices which may be applied to the customer’s on-hand inventory at the time of the price change. The Company accrues for these adjustments when its expected value of an adjustment is greater than zero, based on contractual pricing, actual net sales, accrual rates based on historical average rates, and estimates of the level of inventory of its products in the distribution channel that remain subject to these adjustments. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

~~Sales Returns~~

The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping errors or where product is damaged in transit, and occurrences of product recalls. The Company’s product returns accrual is primarily based on estimates of future product returns based generally on actual net sales, estimates of the level of inventory of its products in the distribution channel that remain subject to returns, estimated lag time of returns and historical return rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

~~Profit Shares~~

For certain product sale arrangements, the Company earns a profit share upon the customer’s sell-through of the product purchased from the Company. The Company estimates its profit shares based on actual net sales, estimates of the level of inventory of its products in the distribution channel that remain subject to profit shares, and historical rates of profit shares earned. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Concentration of Revenue

The Company's 3 largest customers accounted for approximately ~~81%~~82% and ~~79%~~81% of total gross sales of products for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively.

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 months ended March 31, ~~2020~~2021 and ~~2019~~2020 are set forth below (in thousands):


		Three Months Ended March 31,						Three Months Ended March 31,
		2020		2019				2021		2020
Generics						Generics
	Anti-Infective	$	13,253	$	5,942		Anti-Infective	$	5,913	$	13,253
	Hormonal/Allergy		87,481		102,725		Hormonal	106,703		87,481
	Antiviral		15,824		14,456		Antiviral (1)	(7,941)		15,824
	Central Nervous System ⁽¹⁾		101,575		124,775		Central Nervous System	96,291		101,575
	Cardiovascular System		29,679		36,217		Cardiovascular System	35,311		29,679
	Gastroenterology		23,536		9,556		Gastroenterology	19,458		23,536
	Oncology		15,966		14,959		Oncology	19,030		15,966
	Metabolic Disease/Endocrine		17,229		17,847		Metabolic Disease/Endocrine	6,557		17,229
	Respiratory		10,067		9,218		Respiratory	8,178		10,067
	Dermatology		15,245		12,973		Dermatology	12,878		15,245
	Other therapeutic classes		21,746		18,177		Other therapeutic classes	9,731		21,746
	International and other		985		15,632		International and other	399		985
	Total Generics net revenue		352,586		382,477		Total Generics net revenue	312,508		352,586
Specialty						Specialty
	Hormonal/Allergy		13,954		10,899		Hormonal/Metabolic	16,796		14,227
	Central Nervous System ⁽¹⁾		68,311		42,899		Central Nervous System	67,711		68,311
	Gastroenterology		48		481
	Metabolic Disease/Endocrine		273		541
	Other therapeutic classes		5,391		8,823		Other therapeutic classes	11,424		5,439
	Total Specialty net revenue		87,977		63,643		Total Specialty net revenue	95,931		87,977
AvKARE
AvKARE (2)						AvKARE (2)
	Distribution		31,586		—		Distribution	45,499		31,586
	Government Label		21,378		—		Government Label	31,072		21,378
	Institutional		3,413		—		Institutional	5,179		3,413
	Other		1,593		—		Other	2,916		1,593
	Total AvKARE net revenue		57,970		—		Total AvKARE net revenue	84,666		57,970
	Total net revenue	$	498,533	$	446,120		Total net revenue	$	493,105	$	498,533

(1)Antiviral revenue for the three months ended March 31, 2021 decreased from the prior year, primarily due to a $23 million 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.

During the three months ended September 30, 2019, operating results for Oxymorphone were reclassified from Generics to Specialty, where it is sold as a non-promoted product. Prior period results have not been restated to reflect the reclassification.

(2) The AvKARE segment consists of the businesses acquired in the Acquisitions on January 31, 2020. Net revenue for the three months ended March 31, 2020 represent two months of activity.

A rollforward of the major categories of sales-related deductions for the three months ended March 31, ~~2020~~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, 2019

$
829,807

$
34,308

$
150,361

$
114,960

Impact from the Acquisitions

15,292

944

15,229

10

Provision related to sales recorded in the period

1,080,290

32,947

47,163

36,472

Credits/payments issued during the period

(1,244,302
)

(35,371
)

(26,301
)

(40,067
)
Balance at March 31, 2020

$
681,087

$
32,828

$
186,452

$
111,375


	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 period	727,258		25,048		24,786		28,770
Credits/payments issued during the period	(838,304)		(25,402)		(25,758)		(26,852)
Balance at March 31, 2021	$	517,758	$	22,336	$	174,012	$	133,006

5. 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.

~~Levothyroxine License and Supply Agreement; Transition Agreement~~

On August 16, 2018, the Company entered into a license and supply agreement with Jerome Stevens Pharmaceuticals, Inc. ("JSP") for levothyroxine sodium tablets ("Levothyroxine"). This agreement designated the Company as JSP's exclusive commercial partner for Levothyroxine in the U.S. market for a 10-year term commencing on March 22, 2019. Additionally, under this license and supply agreement, the Company accrued the up-front license payment of $50 million on March 22, 2019, which was paid in April 2019. The agreement also provides for the Company to pay a profit share to JSP based on net profits of the Company's sales of Levothyroxine, after considering product costs.

On November 9, 2018, the Company entered into a transition agreement ("Transition Agreement") with Lannett Company (“Lannett”) and JSP. Under the terms of the Transition Agreement, the Company assumed the distribution and marketing of Levothyroxine from Lannett beginning December 1, 2018 through March 22, 2019, ahead of the commencement date of the license and supply agreement with JSP described above.

In accordance with the terms of the Transition Agreement, the Company made $47 million of non-refundable payments to Lannett. For the three months ended March 31, 2019, $37 million, was expensed to cost of goods sold, as the Company sold Levothyroxine (NaN in the three months ended March 31, 2020). As of December 31, 2018, the Company had a $4 million transition contract liability, which was fully settled in February 2019.

Additionally, during the year ended December 31, 2019, the Company recorded $1 million in cost of sales related to reimbursement due to Lannett for certain of its unsold inventory at the end of the transition period, which was fully settled in March 2020.

~~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 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 $72 million. For the three months ended March 31, 2019 the Company expensed a milestone payment of $1 million, to research and development (NaN in the three months ended March 31, 2020).

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~~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 provides 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 .~~2021. 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 will be 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 may be 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 is 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 $4 million for ~~both~~ the three months ended March 31, 2021 and 2020, respectively.

Biosimilar Licensing and ~~2019.~~

~~During~~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 licensing agreement was subsequently amended on March 4, 2021 and the supply agreement was subsequently amended on March 2, 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 three months ended March 31, ~~2020, AstraZeneca and~~2021, the Company ~~agreed~~recognized $2 million of research and development expense related to ~~terminate~~ the ~~AZ Agreement and subsequent AZ Amendment effective January 2021.~~

agreement (NaN for the three months ended March 31, 2020).

Agreements with Kashiv Biosciences, LLC

For detail on the Company’s related party agreements with Kashiv Biosciences, LLC, refer to Note ~~19.~~16. Related Party Transactions.

6. Restructuring and Other Charges

During the three months ended June 30, 2018, in connection with the Combination, the Company committed to a restructuring plan to achieve cost savings. The Company expected to integrate its operations and reduce its combined cost structure through workforce reductions that eliminated duplicative positions and consolidated certain administrative, manufacturing and research and development facilities. In connection with this plan, the Company announced on May 10, 2018 that it intended to close its Hayward, California-based operations.

On July 10, 2019, the Company announced a plan to restructure its operations that ~~was~~is intended to reduce costs and optimize its organizational and manufacturing infrastructure. Pursuant to the restructuring plan as revised, the Company expects to reduce its headcount over the course of this multi-year program by approximately 300 to 350 employees through December 31, 2021, primarily by ~~ceasing~~closing its manufacturing ~~at its~~facility located in Hauppauge, ~~NY facility. Collectively these actions comprise~~NY. Through March 31, 2021, the ~~"Plans".~~

Company had reduced headcount by 280 employees under this plan.

For the three months ended March 31, 2021, there were no employee restructuring separation charges. For the three months ended March 31, 2020, employee restructuring charges were immaterial. The ~~following table sets forth the components of the Company's restructuring and other charges (in thousands):~~

Three Months Ended
March 31,

2020

2019

Employee restructuring separation charges⁽¹⁾
$
46

$
2,318

Other employee severance charges ⁽²⁾

2,002

3,843

Total restructuring and other charges
$
2,048

$
6,161

⁽¹⁾	Employee restructuring separation charges include the cost of benefits provided pursuant to the Company's severance programs for employees impacted by the Plans at the Company's Hauppauge, NY, Hayward, CA and other facilities.

⁽²⁾	~~Other employee severance charges are primarily associated with the cost of benefits for former senior executives.~~

~~The charges related to restructuring impacted segment earnings as follows (in thousands):~~

Three Months Ended
March 31,

2020

2019

Generics
$
46

$
996

Specialty

—

178

Corporate

—

1,144

Total employee restructuring charges
$
46

$
2,318

~~The following table shows the change in the~~total employee separation-related liability ~~associated with the Plans, which is~~as of both March 31, 2021 and December 31, 2020 was $1.6 million and included inwithin accounts payable and accrued ~~expenses (in thousands):~~

expenses. There were no payments made or adjustments to the liability during the three months ended March 31, 2021.

Employee
Restructuring

Balance at December 31, 2019

$
3,900

Charges to income

46

Payments

(2,077
)
Balance at March 31, 2020

$
1,869

Other employee severance charges were $0.4 million and $2 million during the three months ended March 31, 2021 and 2020, respectively. Severance charges primarily consisted of the cost of benefits provided pursuant to our severance programs for former senior executives and management employees.

7. Earnings ~~(Loss)~~ per Share

Basic earnings ~~(loss)~~ per share of ~~Class~~the Company’s class A ~~Common Stock and Class B-1 Common Stock~~common stock is computed by dividing net ~~loss~~income attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of ~~Class~~class A ~~Common Stock and Class B-1 Common Stock~~common stock outstanding during the period. Diluted earnings ~~(loss)~~ per share of ~~Class~~class A ~~Common Stock and Class B-1 Common Stock~~common stock is computed by dividing net income ~~(loss)~~ attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of ~~Class~~class A ~~Common Stock and Class B-1 Common Stock~~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 earnings ~~(loss)~~ per share of ~~Class~~class A ~~Common Stock and Class B-1 Common Stock~~common stock (in thousands, except per share amounts):

Three Months Ended
March 31,

2020

2019

Numerator:

Net income (loss) attributable to Amneal Pharmaceuticals, Inc.
$
115,067

$
(47,881
)
Denominator:

Weighted-average shares of Class A Common Stock and Class B-1 Common Stock outstanding - basic ⁽¹⁾

147,180

127,687

Effect of dilutive securities:

Stock options

230

—

Restricted stock units

546

—

Weighted-average shares of Class A Common Stock and Class B-1 Common Stock outstanding - diluted

147,956

127,687

Net earnings (loss) per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:

Class A and Class B-1 basic
$
0.78

$
(0.37
)
Class A and Class B-1 diluted
$
0.78

$
(0.37
)


	Three Months Ended March 31,
	2021		2020
Numerator:
Net income attributable to Amneal Pharmaceuticals, Inc.	$	6,706	$	115,067
Denominator:
Weighted-average shares outstanding - basic	148,013		147,180
Effect of dilutive securities:
Stock options	792		230
Restricted stock units	2,415		546
Weighted-average shares outstanding - diluted	151,220		147,956
Net earnings per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:
Basic	$	0.05	$	0.78
Diluted	$	0.04	$	0.78

⁽¹⁾

During the three months ended June 30, 2019, pursuant to the Company’s certificate of incorporation, the Company converted all 12.3 million of its issued and outstanding shares of Class B-1 Common Stock and such shares of Class B-1 Common Stock have been retired and may not be reissued by the Company. The weighted-average shares for the three months ended March 31, 2020 do not include Class B-1 Common Stock.

Shares of the Company's ~~Class~~class B ~~Common Stock~~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 earnings per share of ~~Class~~class B ~~Common Stock~~common stock under the two-class method has not been presented.

The following table presents potentially dilutive securities excluded from the computations of diluted earnings per share of ~~Class~~class A ~~Common Stock and Class B-1 Common Stock~~common stock (in thousands):


	Three Months Ended March 31,							Three Months Ended March 31,
	2020			2019				2021		2020
Stock options		683	⁽¹⁾		8,400	⁽⁴⁾	Stock options	347	(1)	683	(1)
Restricted stock units		—			3,282	⁽⁴⁾

Performance stock units		3,054	⁽²⁾		520	⁽⁴⁾	Performance stock units	5,124	(2)	3,054	(2)
Shares of Class B Common Stock		152,117	⁽³⁾		171,041	⁽³⁾
Shares of class B common stock							Shares of class B common stock	152,117	(3)	152,117	(3)

⁽¹⁾

~~Excluded from the computation of diluted earnings per share of Class A Common Stock~~(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 ~~options exceeded the average market price of the Class A Common Stock~~ during the period (out-of-the-money).

⁽²⁾(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 three months ended March 31, 2021 and 2020.

~~Excluded from the computation of diluted earnings per share of Class A Common Stock because the performance vesting conditions were not met for the three months ended March 31, 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. ³⁾

Shares of Class B Common Stock are considered potentially dilutive shares of Class A Common Stock and Class B-1 Common Stock. Shares of Class B Common Stock have been excluded from the computations of diluted earnings per share of Class A Common Stock and Class B-1 Common Stock because the effect of their inclusion would have been anti-dilutive under the if-converted method. As noted above, the weighted-average shares for the three months ended March 31, 2020 do not include Class B-1 Common Stock.

⁽ ⁴⁾	Excluded from the computation of diluted loss per share of Class A Common Stock and Class B-1 Common Stock because the effect of their inclusion would have been anti-dilutive since there was a net loss attributable to the Company for the three months ended March 31, 2019.

8. Income Taxes

For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company's ~~benefit from~~provision for (benefit from) income taxes and effective tax rates were ~~$108~~$0.4 million and ~~(810.6%)~~2.4% and $8$(108) million and ~~6.3%~~(810.6)%, respectively. The ~~year over year change in~~ benefit from income taxes for the three months ended March 31, 2020was primarily ~~related to~~impacted by a $110 million discrete income tax benefit from the ~~Company’s full valuation allowance and the effects~~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.”~~Act”)

As of September 30, 2019, the Company established a valuation ~~allowanced~~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, ~~2019.~~2020. As a result of the initial September 30, 2019 and December 31, ~~2019~~2020 analyses, the Company determined that it remained more likely than not that it ~~will~~would not realize the benefits of its gross DTAs and therefore ~~recorded an additional~~maintained its valuation allowance. As of December 31, 2020, this valuation allowance ~~of $428~~was $423 million, ~~for the year ended December 31, 2019 to reduce~~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 March 31, ~~2020,~~2021, based on its evaluation of available positive and negative evidence, the Company has maintained its position with respect to the valuation allowance.

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act is an emergency economic stimulus package in response to the ~~coronavirus outbreak~~COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. Some of the key income tax-related provisions include net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Some of these tax provisions are effective retroactively for years ending before the date of enactment. Other non-income-based tax provisions include deferral of the employer share of Social Security payroll taxes due from the CARES Act date of enactment through December 31, ~~2020,~~2021, and a potential 50% credit on qualified wages against employment taxes each quarter with any excess credits eligible for refunds. ~~The Company continues to carefully analyze eligibility and application of both the income tax and non-income-based tax provisions.~~

The CARES Act permits ~~net operating loss (“NOL”)~~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, the Company ~~expects to carry~~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 ~~new~~ 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 ~~tax~~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 three months ended March 31, 2020.

~~In connection~~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, with the ~~Combination,~~remainder of the NOL carryback expected to be received before December 31, 2021.

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 (including imputed interest).~~TRA. In conjunction with the valuation allowance recorded on the DTAs at September 30, 2019, the Company reversed the TRA ~~liability, which had been recorded at the time of the Combination.~~

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 March 31, 2021, the Company has not ~~accrued~~recognized the contingent liability under the TRA related to the tax savings it may realize from common units sold or ~~exchanged through March 31, 2020.~~exchanged. If utilization of these DTAs becomes ~~more-likely- than-not~~more likely than not in the future, at such time, Amneal will ~~record liabilities~~recognize a liability under the TRA ~~which amounts to approximately $202 million as of March 31, 2020~~ as a result of basis adjustments under Internal Revenue Code Section 754. As of both March 31, 2021 and December 31, 2020, the contingent liability, if recognized, amounts to $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 March 31, 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 March 31, 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 we 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.

9. Trade Accounts Receivable, Net

Trade accounts receivable, net is comprised of the following (in thousands):


	March 31, 2020			December 31, 2019				March 31, 2021		December 31, 2020
Gross accounts receivable	$	1,437,336		$	1,470,706		Gross accounts receivable	$	1,072,138	$	1,291,785
Allowance for doubtful accounts		(739	)		(2,201	)
Allowance for credit losses							Allowance for credit losses	(1,444)		(1,396)
Contract charge-backs and sales volume allowances		(681,087	)		(829,807	)	Contract charge-backs and sales volume allowances	(517,758)		(628,804)
Cash discount allowances		(32,828	)		(34,308	)	Cash discount allowances	(22,336)		(22,690)
Subtotal		(714,654	)		(866,316	)	Subtotal	(541,538)		(652,890)
Trade accounts receivable, net	$	722,682		$	604,390		Trade accounts receivable, net	$	530,600	$	638,895

Receivables from customers representing 10% or more of the Company’s gross trade accounts receivable reflected 3 customers at March 31, ~~2020,~~2021, equal to ~~38%~~34%, ~~24%~~28%, and ~~21%~~22%, respectively.

Receivables from customers representing 10% or more of the Company’s gross trade accounts receivable reflected 3 customers at December 31, ~~2019,~~2020, equal to 39%, ~~25%~~26%, and ~~25%~~20%, respectively.

10. Inventories

Inventories ~~net of reserves,~~ are comprised of the following (in thousands):

March 31,
2020

December 31,
2019

Raw materials

$
162,725

$
172,159

Work in process

53,071

58,188

Finished goods

222,163

150,720

Total inventories

$
437,959

$
381,067

~~11. Prepaid and Other Current Assets~~

~~Prepaid expenses and other current assets are comprised of the following (in thousands):~~

March 31,
2020

December 31,
2019

Deposits and advances

$
373

$
1,123

Prepaid insurance

2,648

3,858

Prepaid regulatory fees

2,330

4,016

Income and other tax receivables ⁽¹⁾

124,527

13,740

Prepaid taxes

3,200

3,255

Other current receivables

16,364

15,996

Other prepaid assets

30,575

28,176

Chargebacks receivable ⁽²⁾

24,392

—

Total prepaid expenses and other current assets

$
204,409

$
70,164

~~(1)~~

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, includes provisions relating to income and non-income-based tax laws. Amneal recorded a U.S. federal income tax receivable of $110 million related to benefits associated with the CARES Act. For further details, refer to ~~Note 8.Income Taxes.~~

~~(2)~~

When a sale occurs on a contract item, the difference between the cost paid to the manufacturer by the Company and the contract cost that the end customer has with the manufacturer is rebated back to the Company by the manufacturer. The Company establishes a chargeback (rebate) receivable and a reduction to cost of goods sold in the same period as the related sale.

~~12. Other Assets~~

~~Other assets are comprised of the following (in thousands):~~


	March 31, 2021		December 31, 2020
Raw materials	$	205,874	$	209,180
Work in process	51,633		40,937
Finished goods	239,501		240,532
Total inventories	$	497,008	$	490,649

March 31,
2020

December 31,
2019

Deferred revolving credit facility costs

$
3,434

$
3,099

Security deposits

1,730

1,938

Long-term prepaid expenses

5,875

6,438

Interest rate swap

—

16,373

Financing lease right-of-use assets

10,703

11,442

Other long-term assets

4,714

4,980

Total other assets

$
26,456

$
44,270

~~13. Debt~~

~~The following is a summary of the Company's long-term debt (in thousands):~~

March 31, 2020

December 31, 2019

Term Loan due May 2025

$
2,652,126

$
2,658,876

Rondo Term Loan due January 2025

180,000

—

Other

624

624

Total long-term debt

2,832,750

2,659,500

Less: debt issuance costs

(30,985
)

(28,975
)
Total debt, net of debt issuance costs

2,801,765

2,630,525

Less: current portion of long-term debt

(29,736
)

(21,479
)
Total long-term debt, net

$
2,772,029

$
2,609,046

~~Senior Secured Credit Facilities~~

On May 4, 2018 the Company entered into a senior credit agreement that provided a term loan ("Term Loan") with a principal amount of $2.7 billion and an asset backed revolving credit facility ("Revolving Credit Facility") under which loans and letters of credit up to a principal amount of $500 million, of which $194 million were available at March 31, 2020 (principal amount of up to $25 million is available for letters of credit) (collectively, the "Senior Secured Credit Facilities"). The Term Loan is repayable in equal quarterly installments at a rate of 1.00% of the original principal amount annually, with the balance payable at maturity on May 4, 2025. The Term Loan bears a variable annual interest rate, which is one-month LIBOR plus 3.5% at March 31, 2020. The Revolving Credit Facility bears an annual interest rate of one-month LIBOR plus 1.25% at March 31, 2020 and matures on May 4, 2023. The annual interest rate for the Revolving Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the average historical excess availability.

The proceeds of any loans made under the Senior Secured Credit Facilities can be used for capital expenditures, acquisitions, working capital needs and other general purposes, subject to covenants as described below. The Company pays a commitment fee based on the average daily unused amount of the Revolving Credit Facility at a rate based on average historical excess availability, between 0.25% and 0.375% per annum. At March 31, 2020, the Revolving Credit Facility commitment fee rate is 0.375% per annum.

During March 2020, as a precautionary measure to mitigate the uncertainty surrounding overall market liquidity due to COVID-19, the Company borrowed $300 million on the Revolving Credit Facility, all of which is outstanding at March 31, 2020. As the financial markets stabilized following a period of high volatility due to the COVID-19 pandemic, the Company repaid $200 million of borrowings under the Revolving Credit Facility in May 2020.

The Company incurred costs associated with the Term Loan due May 2025 of $38 million and the Revolving Credit Facility of $5 million, which have been capitalized and are being amortized over the life of the applicable debt agreement to interest expense using the effective interest method. The Term Loan has been recorded in the balance sheet net of issuance costs. Costs associated with the Revolving Credit Facility have been recorded in other assets because there were no borrowings outstanding on the effective date of the Revolving Credit Facility. For both the three months ended March 31, 2020 and 2019, amortization of deferred financing costs related to the Term Loan and the Revolving Credit Facility was $2 million.

The Senior Secured Credit Facilities contain a number of covenants that, among other things, create liens on Amneal's and its subsidiaries' assets. The Senior Secured Credit Facilities contain certain negative covenants that, among other things and subject to certain exceptions, restrict Amneal’s and its subsidiaries' ability to incur additional debt or guarantees, grant liens, make loans, acquisitions or other investments, dispose of assets, merge, dissolve, liquidate or consolidate, pay dividends or other payments on capital stock, make optional payments or modify certain debt instruments, modify certain organizational documents, enter into arrangements that restrict the ability to pay dividends or grant liens, or enter into or consummate transactions with affiliates. The Revolving Credit Facility also includes a financial covenant whereby Amneal must maintain a minimum fixed charge coverage ratio if certain borrowing conditions are met. The Senior Secured Credit Facilities contain customary events of

default, subject to certain exceptions. Upon the occurrence of certain events of default, the obligations under the Senior Secured Credit Facilities may be accelerated and the commitments may be terminated. At March 31, 2020, Amneal was in compliance with all covenants.

~~Acquisition Financing - Revolving Credit and Term Loan Agreement~~

On January 31, 2020, in connection with the Acquisitions, Rondo Intermediate Holdings, LLC (“Rondo Holdings”), a wholly-owned subsidiary of Rondo, entered into a revolving credit and term loan agreement (“Rondo Credit Facility”) that provided a term loan ("Rondo Term Loan") with a principal amount of $180 million and a revolving credit facility (“Rondo Revolving Credit Facility”) which loans up to a principal amount of $30 million. The Rondo Term Loan is repayable in equal quarterly installments at a rate of 5.0% of the original principal amount annually, with the balance payable at maturity on January 31, 2025. The Rondo Credit Facility bears a variable annual interest rate, which is one-month LIBOR plus 3.0% at March 31, 2020 and matures on January 31, 2025. The annual interest rate for borrowings under the Rondo Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the total net leverage ratio, as defined in that agreement. At March 31, 2020, the Company had 0 outstanding borrowings under the Rondo Revolving Credit Facility.

A commitment fee based on the average daily unused amount of the Rondo Credit Facility is assessed at a rate based on total net leverage ratio, between 0.25% and 0.50% per annum. At March 31, 2020, the Rondo Credit Facility commitment fee rate is 0.4% per annum.

Costs associated with the Rondo Term Loan of $3 million and the Rondo Credit Facility of $1 million, which have been capitalized and are being amortized over the life of the applicable debt instrument to interest expense using the effective interest method. The Rondo Term Loan has been recorded in the balance sheet net of issuance costs. Costs associated with the Rondo Revolving Credit Facility have been recorded in other assets. For the three months ended March 31, 2020, amortization of deferred financing costs associated with the Rondo Credit Facility were less than $1 million.

The Rondo Credit Facility contains a number of covenants that, among other things, create liens on the equity securities and assets of Rondo Holdings, Rondo, AvKARE, LLC and R&S. The Rondo Credit Facility contains certain negative, affirmative and financial covenants that, among other things, restrict the ability to incur additional debt, grant liens, transact in mergers and acquisitions, make certain investments and payments or engage in certain transactions with affiliates. The Rondo Credit Facility also contains customary events of default. Upon the occurrence of certain events of default, the obligations under the Rondo Credit Facility may be accelerated and/ or the interest rate may be increased. At March 31, 2020, Rondo was in compliance with all covenants. The Company is not party to the Rondo Credit Facility and is not a guarantor of any debt incurred thereunder.

~~The Term Loan and Rondo Term Loan require payments of $27 million and $9 million, respectively, per year for the next five years and the balance thereafter.~~

~~Acquisition Financing – Notes Payable-Related Party~~

The Sellers Notes with a stated aggregate principal amount of $44 million and the Short-Term Sellers Note with a stated principal amount of $1 million were issued by Rondo or its subsidiary, Rondo Top Holdings, LLC, on January 31, 2020, the closing date of the Acquisitions. The Sellers Notes are unsecured and accrue interest at a rate of 5% per annum, not compounded, until June 30, 2025. The Sellers Notes are subject to prepayment at the option of Rondo, as the obligor, without premium or penalty. Mandatory payment of the outstanding principal and interest is due on June 30, 2025 if certain financial targets are achieved, the borrowers’ cash flows are sufficient (as defined in the Sellers Notes) and repayment is not prohibited by senior debt. If repayment of all outstanding principal and accrued interest on the Sellers Notes is not made on June 30, 2025, the requirements for repayment are revisited on June 30 of each subsequent year until all principal and accrued interest are satisfied no later than January 31, 2030 or earlier, upon a change in control. The Short-Term Sellers Note is also unsecured and accrues interest at a rate of 1.6% and is due on January 31, 2020.

~~In accordance with ASC 805,~~ ~~Business Combinations,~~ ~~all consideration transferred was measured at its acquisition-date fair value.~~ The Sellers Notes were stated at the preliminary fair value estimate of $35 million, which was estimated using the Monte-Carlo simulation approach under the option pricing framework. The Short-Term Sellers Note of $1 million was recorded at the stated principal amount of $1 million, which approximates fair value. The $9 million discount on the Sellers Notes will be amortized to interest expense using the effective interest method from January 31, 2020 to June 30, 2025 and the carrying value of the Sellers Notes will accrete to the stated principal amount of $44 million.

~~The Sellers Notes and the Short-Term Sellers Note are recorded in notes payable-related party within long-term liabilities and notes payable-related party within current liabilities, respectively.~~

~~14. Other Long-Term Liabilities~~

~~Other long-term liabilities are comprised of the following (in thousands):~~

March 31,
2020

December 31,
2019

Interest rate swap ⁽¹⁾

$
46,285

$
—

Uncertain tax positions

3,601

5,088

Long-term compensation ⁽²⁾

19,484

22,735

Financing lease liabilities

3,584

3,869

Other long-term liabilities

7,892

7,891

Total other long-term liabilities

$
80,846

$
39,583

~~(1)~~

~~Refer to~~ ~~Notes 15. Fair Value Measurement of Financial Instruments~~ ~~and~~ 16. ~~Financial Instruments~~ ~~for information about the Company’s interest rate swap.~~

~~(2)~~

~~Includes $12 million of long-term deferred compensation plan liabilities (refer to~~ ~~Note 15. Fair Value Measurements of Financial Instruments), $6 million of long-term employee benefits for the Company’s international employees and $2 million of long-term severance liabilities (refer to~~ ~~Note 6. Restructuring and Other Charges~~).

~~15.~~11. Fair Value Measurements ~~of Financial Instruments~~

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 March 31, ~~2020~~2021 and December 31, ~~2019~~2020 (in thousands):

Fair Value Measurement Based on

March 31, 2020

Total

Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Liabilities

Interest rate swap ⁽¹⁾

$
46,285

$
—

$
46,285

$
—

Deferred compensation plan liabilities ⁽²⁾

13,854

—

13,854

—

December 31, 2019

Assets

Interest rate swap ⁽¹⁾

$
16,373

$
—

$
16,373

$
—

Liabilities

Deferred compensation plan liabilities ⁽²⁾

$
18,396

$
—

$
18,396

$
—

⁽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.

⁽²⁾

As of March 31, 2020, deferred compensation plan liabilities of $2million and $12million were recorded in current and non-current liabilities, respectively. As of December 31, 2019, deferred compensation plan liabilities of $4 million and $14 million were recorded in current and non-current liabilities, respectively. They 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.


			Fair Value Measurement Based on
March 31, 2021	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap (1)	$	33,131	$	0	$	33,131	$	0
Deferred compensation plan liabilities (2)	$	14,500	$	0	$	14,500	$	0

December 31, 2020
Liabilities
Interest rate swap (1)	$	53,903	0		$	53,903	0
Deferred compensation plan liabilities (2)	$	14,007	0		$	14,007	0

(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 12. Financial Instruments for information on the Company's interest rate swap.

(2)As of March 31, 2021, deferred compensation plan liabilities of $2 million and $13 million were recorded in current and non-current liabilities, respectively. As of 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.

There were 0no transfers between levels in the fair value hierarchy during the three months ended March 31, ~~2020.~~

2021.

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 ~~$2.7 billion~~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 atas of both March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was approximately ~~$2.3 billion and $2.4 billion, respectively.~~

$2.6 billion.

The ~~$180 million~~ Rondo Term Loan entered into on January 31, 2020 falls into the Level 2 category within the fair value level hierarchy. The ~~carrying~~fair value of ~~$180 million~~the Rondo Term Loan at March 31, 2021 and December 31, 2020 ~~approximates fair value.~~

was approximately $170 million and $172 million, respectively.

The Sellers Notes ~~and the Short-Term Sellers Note fall~~falls into the Level 2 category within the fair value level hierarchy. ~~At March 31, 2020, the~~The carrying value of the Sellers Notes at March 31, 2021 and ~~the Short-Term Sellers Note of $35~~December 31, 2020 was $37 million and $1$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 0no non-recurring fair value measurements during the three months ended March 31, ~~2020~~2021 and ~~2019.~~

~~16.~~2020.

12. 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. ~~The Company's debt obligations consist of variable-rate and fixed-rate debt instruments (for further details, refer to~~ ~~Note 13. Debt~~). 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 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 March 31, ~~2020,~~ 2021, the total loss, net of income taxes, related to the Company’s cash flow hedge was ~~$46~~$33 million, inof which ~~$23~~$16 million was recognized in accumulated other comprehensive loss and ~~$23~~$17 million was recognized in non-controlling ~~interests (NaN as of March 31, 2019).~~interests.

A summary of the fair values of derivative instruments in the consolidated balance sheets was as follows (in thousands):

March 31, 2020

December 31, 2019

March 31, 2021

December 31, 2020

Derivatives Designated as Hedging Instruments

Balance Sheet

Classification

Fair Value

Balance Sheet

Classification

Fair Value

Derivatives Designated as Hedging Instruments

Balance Sheet
Classification

Fair Value

Balance Sheet
Classification

Fair Value

Variable-to-fixed interest rate swap

Other long-term liabilities

46,285

Other assets

16,373

Variable-to-fixed interest rate swap

Other long-term liabilities

33,131

Other long-term liabilities

53,903

~~17.~~

13. Goodwill and Intangible Assets

The changes in goodwill for the three months ended March 31, 2021 and for the year ended December 31, 2020 were as follows (in thousands):


	March 31, 2021		December 31, 2020
Balance, beginning of period	$	522,814	$	419,504

Goodwill acquired during the period	0		103,679

Currency translation	(56)		(369)
Balance, end of period	$	522,758	$	522,814

As of both March 31, 2021 and 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 and Divestitures for additional information about the Acquisitions.

Intangible assets at March 31, 2021 and December 31, 2020 were comprised of the following (in thousands):


	March 31, 2021							December 31, 2020
	Weighted-Average Amortization Period (in years)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Amortizing intangible assets:
Product rights	8.8	$	1,149,245	$	(360,174)	$	789,071	$	1,153,096	$	(328,587)	$	824,509
Other intangible assets	5.5	133,800		(39,312)		94,488		133,800		(33,078)		100,722
Subtotal		$	1,283,045	$	(399,486)	$	883,559	$	1,286,896	$	(361,665)	$	925,231
In-process research and development		379,395		0		379,395		379,395		0		379,395
Total intangible assets		$	1,662,440	$	(399,486)	$	1,262,954	$	1,666,291	$	(361,665)	$	1,304,626

The impairment charges for the three months ended March 31, 2020 were primarily related to 2 currently marketed products and 2 in-process research and development (“IPR&D”) products. For the currently marketed products, 2 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. The IPR&D charges are associated with 2 products, 1 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.

During the three months ended March 31, 2020, the Company recognized $131 million of intangible assets associated with the 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 and Divestitures for additional information.

Amortization expense related to intangible assets recognized is as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Amortization	$	41,672	$	42,576

The following table presents future amortization expense for the next five years and thereafter, excluding $379 million of IPR&D intangible assets (in thousands):


	Future Amortization
Remainder of 2021	$	125,091
2022	155,162
2023	143,395
2024	136,910
2025	97,937
Thereafter	225,064
Total	$	883,559

14. Commitments and Contingencies

Commitments

Commercial Manufacturing, Collaboration, License, and Distribution Agreements

The Company continues to seek to enhance its product line and develop a balanced portfolio of differentiated products through product acquisitions and in-licensing. Accordingly, the Company, in certain instances, may be contractually obligated to make potential future development, regulatory, and commercial milestone, royalty and/or profit sharing payments in conjunction with collaborative agreements or acquisitions that the Company has entered into with third parties. The Company has also licensed certain technologies or intellectual property from various third parties. The Company is generally required to make upfront payments as well as other payments upon successful completion of regulatory or sales milestones. The agreements generally permit the Company to terminate the agreement with no significant continuing obligation. The Company could be required to make significant payments pursuant to these arrangements. These payments are contingent upon the occurrence of certain future events and, given the nature of these events, it is unclear when, if ever, the Company may be required to pay such amounts. Further, the timing of any future payment is not reasonably estimable.

Certain of these arrangements are with related parties (refer to Note 16. Related Party Transactions).

Contingencies

Legal Proceedings

The Company's legal proceedings are complex, constantly evolving and subject to uncertainty. As such, the Company cannot predict the outcome or impact of the legal proceedings set forth below. Additionally, the Company is subject to legal proceedings that are not set forth below. While the Company believes it has valid claims and/or defenses to the matters described below, the nature of litigation is unpredictable, and the outcome of the following proceedings could include damages, fines, penalties and injunctive or administrative remedies. For any proceedings where losses are probable and reasonably capable of estimation, the Company accrues for a potential loss. When the Company has a probable loss for which a reasonable estimate of the liability is a range of losses and no amount within that range is a better estimate than any other amount, the Company records the loss at the low end of the range. While these accruals have been deemed reasonable by the Company’s management, the assessment process relies heavily on estimates and assumptions that may ultimately prove inaccurate or incomplete. Additionally, unforeseen circumstances or events may lead the Company to subsequently change its estimates and assumptions. Unless otherwise indicated below, the Company is unable at this time ~~unable~~ to estimate the possible loss or the range of loss, if any, associated with such ~~litigation.~~

legal proceedings and claims.

The Company currently intends to vigorously prosecute and/or defend these proceedings as appropriate. From time to time, however, the Company may settle or otherwise resolve these matters on terms and conditions that it believes to be in its best interest. For the three months ended March 31, 2020, the Company recorded ~~a charge~~net charges of ~~approximately~~ $5 million (NaN for the three months ended March 31, 2021) for commercial legal proceedings and claims. The Company had total liabilities for legal proceedings as of both March 31, 2021 and December 31, 2020 of $11 million. The ultimate resolution of any or all claims, legal proceedings or investigations could differ materially from our estimate and have a material adverse effect on the Company's results of operations and/or cash ~~flow~~flows in any given accounting period, or on the Company's overall financial condition. ~~As of March 31, 2020 and December 31, 2019, the Company had liabilities for commercial and governmental legal proceedings and claims of $15 million and $17 million, respectively.~~

Additionally, the Company manufactures and derives a portion of its revenue from the sale of pharmaceutical products in the opioid class of drugs and may therefore face claims arising from the regulation and/or consumption of such products.

~~Although~~

The Company believes it has meritorious claims and defenses in these matters and intends to vigorously prosecute and defend them. However, because the ultimate outcome and costs ~~of the asserted~~associated with litigation are inherently uncertain and ~~unasserted claims is~~ difficult to predict, ~~based on the information presently known to management,~~except as otherwise stated, the Company ~~does~~is not ~~currently expect~~in a position to predict the ~~ultimate liability, if~~likelihood of an unfavorable outcome or provide an estimate of the amount or range of potential loss in the event of an unfavorable outcome in any ~~for such~~of these matters, toand any adverse outcome could negatively affect the Company and could have a material adverse effect on ~~its business, financial condition,~~the Company's results of operations, cash flows and/or ~~cash flows.~~

overall financial condition.

Medicaid Reimbursement and Price Reporting Matters

The Company is required to provide pricing information to state agencies, including agencies that administer federal Medicaid programs. Certain state agencies have alleged that manufacturers have reported improper pricing information, which allegedly caused them to overpay reimbursement costs. Other agencies have alleged that manufacturers have failed to timely file required

reports concerning pricing information. Reserves are periodically established by the Company for any potential claims or settlements of overpayment.The Company intends to vigorously defend against any such claims. The ultimate settlement of any potential liability for such claims may be higher or lower than estimated.

Patent Litigation

There is substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products which are the subject of conflicting patent and intellectual property claims. One or more patents often cover the brand name products for which the Company is developing generic versions and the Company typically has patent rights covering the Company’s branded products.

Under federal law, when a drug developer files an Abbreviated New Drug Application ("ANDA") for a generic drug seeking approval before expiration of a patent which has been listed with the FDA as covering the brand name product, the developer must certify its product will not infringe the listed patent(s) and/or the listed patent is invalid or unenforceable (commonly referred to as a "Paragraph IV" certification). Notices of such certification must be provided to the patent holder, who may file a suit for patent infringement within 45 days of the patent holder’s receipt of such notice. If the patent holder files suit within the 45-day period, the FDA can review and tentatively approve the ANDA, but generally is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered in favor of the generic drug developer, or 30 months from the date the notice was received, whichever is sooner. The Company’s Generics segment is typically subject to patent infringement litigation brought by branded pharmaceutical manufacturers in connection with the Company’s Paragraph IV certifications seeking an order delaying the approval of the Company’s ANDA until expiration of the patent(s) at issue in the litigation. Likewise, the Company’s Specialty segment is currently involved in patent infringement litigation against generic drug manufacturers that have filed Paragraph IV certifications to market their generic drugs prior to expiration of the Company’s patents at issue in the litigation.

The uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict. For the Company’s Generics segment, the potential consequences in the event of an unfavorable outcome in such litigation include delaying launch of its generic products until patent expiration. If the Company were to launch its generic product prior to successful resolution of a patent litigation, the Company could be liable for potential damages measured by the profits lost by the branded product manufacturer rather than the profits earned by the Company if it is found to infringe a valid, enforceable patent, or enhanced treble damages in cases of willful infringement. For the Company’s Specialty segment, an unfavorable outcome may significantly accelerate generic competition ahead of expiration of the patents covering the Company’s branded products. All such litigation typically involves significant expense.

The Company is generally responsible for all of the patent litigation fees and costs associated with current and future products not covered by its alliance and collaboration agreements. The Company has agreed to share legal expenses with respect to third-party and Company products under the terms of certain of the alliance and collaboration agreements. The Company records the costs of patent litigation as expense in the period when incurred for products it has developed, as well as for products which are the subject of an alliance or collaboration agreement with a third-party.

Patent ~~Infringement~~Defense Matter

~~Impax Laboratories, LLC.~~

Biogen International GMBH, et al. v. ~~Zydus~~Amneal Pharmaceuticals ~~USA, Inc. and Cadila Healthcare Ltd. (Rytary~~LLC, et al. (Dimethyl Fumarate)

®)

~~On December 21,~~

In June 2017, ~~Impax~~Biogen International GMBH (“Biogen”) filed suit against ~~Zydus Pharmaceuticals USA, Inc.~~Amneal and ~~Cadila Healthcare Ltd. (collectively, "Zydus")~~various other generic manufacturers in the United States District Court for the District of ~~New Jersey,~~Delaware (“D. Del.”) alleging patent infringement ~~of U.S. Patent No. 9,089,608,~~ based on the filing of ~~Zydus’s ANDA~~ANDAs by Amneal and others for generic alternatives to Biogen’s Tecfidera® (dimethyl fumarate) capsules product (Biogen International GMBH, et al. v. Amneal Pharmaceuticals LLC, et al., No. 1:17-cv-00823-MN). Biogen also filed suit in June 2017 against Mylan Pharmaceuticals Inc. (“Mylan”) in the United States District Court for the Northern District of West Virginia (“N.D. W. Va.”) relating to ~~carbidopa and levodopa extended release capsules, generic~~Mylan’s own ANDA for Tecfidera®. On June 18, 2020, the N.D. W. Va. court issued an order finding the sole Biogen patent at issue invalid. Biogen has appealed the order to ~~Rytary~~ ®~~. Zydus answered~~ the ~~complaint on April 27, 2018, asserting counterclaims~~United States Court of ~~non-infringement and~~Appeals for the Federal Circuit. On September 22, 2020, the D. Del. court entered judgment in favor of defendants (including Amneal), adopting the finding of invalidity ~~of U.S. Pat. Nos. 7,094,427; 8,377,474; 8,454,998; 8,557,283; and 9,089,607. Impax answered Zydus’s counterclaims on June 1, 2018. Zydus filed a motion for judgment~~made by the N.D. W. Va. court but ordering that claims could be reinstated based on the ~~pleadings regarding~~result of the appeal of the N.D. W. Va. court’s order. Amneal, like Mylan and a number of other generic manufacturers, has now launched its ~~counterclaims. On November 29, 2018,~~generic dimethyl fumarate capsules product “at-risk,” pending the ~~Court granted Zydus’s motion for judgment as to its counterclaims. A case schedule had been set with trial anticipated in April 2020, but that has been postponed indefinitely due to~~outcome of Biogen’s appeal of the ~~COVID-19 pandemic.~~

N.D. W. Va. court’s order before the Federal Circuit.

Other Litigation Related to the Company’s Business

Opana ER® FTC ~~Antitrust Litigation~~

Matters

On February 25, 2014, Impax received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (“FTC”) concerning its investigation into the drug Opana® ER and its generic equivalents. On March 30, 2016, the FTC filed a complaint against Impax, Endo Pharmaceuticals Inc. ("Endo"), and others in the United States District Court for the Eastern District of Pennsylvania, alleging that Impax and Endo violated antitrust laws when they entered into a June 2010 ~~co-promotion and development agreement and a June 2010~~ settlement agreement that resolved patent litigation in connection with the submission of Impax’s ANDA for generic original Opana® ER. In July 2016, the defendants filed a motion to dismiss the complaint, and a motion to sever the claims regarding Opana® ER from claims with respect to a separate settlement agreement that was challenged by the FTC. On October ~~20,~~ 2016, the Court granted ~~the~~Impax’s motion to sever, formally terminating the suit against ~~Impax, with an order that the FTC re-file no later than November 3, 2016 and dismissed the motion to dismiss as moot. On October 25, 2016, the FTC filed a notice of voluntary dismissal. On~~Impax. In January ~~19,~~ 2017, the FTC filed a Part 3 Administrative ~~complaint~~Complaint against Impax with similar allegations regarding ~~Impax’s June~~the 2010 ~~settlement agreement with Endo that resolved patent litigation~~settlement. Following trial, in ~~connection with the submission of Impax’s ANDA for generic original Opana® ER. Impax filed its answer to the Administrative Complaint on February 7, 2017. Trial concluded on November 15, 2017. On~~ May ~~11,~~ 2018, the Administrative Law Judge ruled in favor of Impax and dismissed the ~~case~~Complaint in its entirety. ~~The government appealed this ruling to the FTC. On~~In March ~~28,~~ 2019, the FTC issued an Opinion & Order reversing the Administrative Law Judge’s ~~initial dismissal decision. The FTC found that Impax had violated Section 5 of the FTC Act by engaging~~decision, and in an unfair method of competition, and accordingly entered an order enjoining Impax from entering into anticompetitive reverse patent settlements (or agreements with other generic original Opana® ER manufacturers) and requiring Impax to maintain an antitrust compliance program. On June 6, 2019, Impax filed a Petition for Review of the FTC’s Opinion & Order with the United States Court of Appeals for the Fifth Circuit. The Opinion & Order did not contain any monetary damages but enjoined Impax ~~filed its opening appellate brief with~~from entering into similar future agreements. On April 13, 2021, the Fifth Circuit ~~on October 3, 2019;~~issued a decision affirming the FTC filed its brief in response on December 9, 2019 and Impax filed a reply brief on December 30, 2019. Oral argument before the Fifth Circuit had been scheduled for April 27, 2020, but has been postponed indefinitely due to the COVID-19 pandemic.FTC’s Opinion & Order.

On July 12, 2019, the Company received a CID from the FTC concerning an August 2017 settlement agreement between Impax and Endo, which resolved a subsequent patent infringement and breach of contract dispute between the parties regarding ~~and amended,~~ the above-referenced June 2010 settlement agreement related to Opana® ER. The

Company ~~has been cooperating and intends to continue cooperating~~cooperated with the FTC regarding the CID. ~~However, no assurance can be given as~~On January 25, 2021, the FTC filed a complaint against Endo, Impax and Amneal in the United States District Court for the District of Columbia, alleging that the 2017 settlement violated antitrust laws. Impax and Amneal believe that they have strong defenses to the ~~timing or outcome of~~FTC’s allegations and intend to vigorously defend the ~~FTC’s underlying investigation.~~action.

Opana ER® Antitrust Litigation

From June 2014 to April 2015, 14a number of complaints styled as class actions on behalf of direct purchasers and indirect purchasers ~~(also known as~~(or end-payors) and several separate individual complaints on behalf of certain direct purchasers (the “opt-out plaintiffs”) of Opana ER® were filed against ~~the manufacturer of the brand drug Opana ER®~~Endo and Impax.

The direct purchaser plaintiffs comprise Value Drug Company and Meijer Inc. The end-payor plaintiffs comprise the Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund; Wisconsin Masons’ Health Care Fund; Massachusetts Bricklayers; Pennsylvania Employees Benefit Trust Fund; International Union of Operating Engineers, Local 138 Welfare Fund; Louisiana Health Service & Indemnity Company d/b/a Blue Cross and Blue Shield of Louisiana; Kim Mahaffay; and Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund. The opt-out plaintiffs comprise Walgreen Co.; The Kroger Co.; Safeway, Inc.; HEB Grocery Company L.P.; Albertson’s LLC; Rite Aid Corporation; Rite Aid Hdqtrs. Corp.; and CVS Pharmacy, Inc.

In December ~~12,~~ 2014, the United States Judicial Panel on Multidistrict Litigation (the "JPML") ~~ordered~~transferred the ~~pending class~~ actions ~~transferred~~ to the United States District Court for the Northern District of Illinois (“N.D. Ill.”) for coordinated pretrial proceedings, as In Re: Opana ER Antitrust Litigation (MDL No. 2580). (Actions subsequently filed in other jurisdictions also were transferred by the JPML to the N.D. Ill. to be coordinated or consolidated with the coordinated proceedings, and the District Court likewise has consolidated the opt-out plaintiffs’ actions with the direct purchaser class actions for pretrial purposes.)

In each case, the complaints allege that Endo engaged in an anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with Impax to delay generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. ~~Discovery, including expert discovery, is ongoing.~~ On March 25, 2019, plaintiffs filed motions for class certification and served ~~opening~~ expert reports. Defendants’ oppositions to class certification and ~~rebuttal~~ expert reports were filed and served on August 29, 2019. On November 5, 2019, plaintiffs filed reply briefs in further support of their motions for class certification. On January 17, 2020, defendants filed a motion for leave to file joint surreply briefs in response thereto; plaintiffs filed responses on January 24, 2020. On February 5, 2020, the court ~~granted defendants’ motion for leave, and~~ entered a case schedule ~~to which the parties jointly stipulated,~~ setting a trial date of March 15, 2021, ~~though it will likely be delayed due to the COVID-19 pandemic.~~which subsequently was re-set for November 1, 2021. On April 15, 2020, defendants filed motions for summary ~~judgement.~~

~~The Company believes it has substantial meritorious defenses~~judgment and each side moved to the claims asserted with respect to the litigation. However, any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.

exclude certain opposing experts. These various motions remain pending.

Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum

On July 14, 2014, Impax received a subpoena ~~and interrogatories (the "Subpoena")~~ from the State of Connecticut Attorney General ("Connecticut AG") concerning its investigation into sales of Impax's generic product, digoxin. According to the Connecticut AG, the investigation ~~is to determine~~concerned whether anyone engaged in a contract, combination or conspiracy in restraint of trade or commerce which ~~has~~had the effect of (i) fixing, controlling or maintaining prices or (ii) allocating or dividing customers or territories relating to the sale of ~~digoxin~~digoxin. Impax cooperated in ~~violation of Connecticut state antitrust law. The Company has~~the investigation and produced documents and information in response to the ~~Subpoena.~~Subpoena in 2014 and 2015. However, no assurance can be given as to the timing or outcome of this investigation.

United States Department of Justice Investigations

On November 6, 2014, Impax disclosed that ~~one~~1 of its sales representatives received a grand jury subpoena from the Antitrust Division of the United States Department of Justice (the "DOJ"). ~~In connection with this same investigation, on~~On March 13, 2015, Impax received a grand jury subpoena from the DOJ requesting the production of information and documents regarding the sales, marketing, and pricing of ~~certain~~4 generic prescription medications. ~~In particular,~~Impax has cooperated in the ~~DOJ’s~~ investigation ~~currently focuses on 4 generic medications: digoxin tablets, terbutaline sulfate tablets, prilocaine/lidocaine cream,~~ and ~~calcipotriene topical solution. The Company has been cooperating~~produced documents and ~~intends~~information in response to ~~continue cooperating with~~ the ~~investigation.~~subpoenas from 2014 to 2016. However, no assurance can be given as to the timing or outcome of the investigation.

On April 30, 2018, Impax received a CID from the Civil Division of the DOJ (the "Civil Division"). The CID requests the production of information and documents regarding the pricing and sale of Impax’s pharmaceuticals and ~~Impax’s~~ interactions with other generic pharmaceutical ~~manufacturers. According to the CID, the investigation concerns allegations that~~manufacturers regarding whether generic pharmaceutical manufacturers ~~including Impax,~~ engaged in market allocation and price-fixing agreements, paid illegal remuneration, and caused false claims to be submitted to the Federal government. ~~The Company~~Impax has ~~been cooperating and intends to continue cooperating~~cooperated with the Civil Division’s investigation. However, no assurance can be given as to the timing or outcome of the investigation.

~~Texas State Attorney General Civil Investigative Demand~~

On May 27, 2014, a CID was served on Amneal by the Office of the Attorney General for the state of Texas (the "Texas AG") relating to products distributed by Amneal under a specific Amneal labeler code. Shortly thereafter, Amneal received a second CID with respect to the same products sold by Interpharm Holding, Inc. ("Interpharm"), the assets of which had been acquired by Amneal in June 2008. Amneal completed its production of the direct and indirect sales transaction data in connection with the products at issue and provided this information to the Texas AG in November 2015. In May 2016, the Texas AG delivered 2 settlement demands to Amneal in connection with alleged overpayments made by the State of Texas for such products under its Medicaid programs. For the Amneal and Interpharm products at issue, the Texas AG’s initial demand was for an aggregate total of $36 million based on $16 million in alleged overpayments. After analyzing the Texas AG’s demand, Amneal raised certain questions regarding the methodology used in the Texas AG’s overpayment calculations, including the fact that the calculations treated all pharmacy claims after 2012 for the products at issue as claims for over-the-counter ("OTC") drugs, even though the products were prescription pharmaceuticals. This had the effect of increasing the alleged overpayment because the dispensing fee for OTC drugs was lower than that for prescription drugs. Therefore, the Texas AG’s calculations were derived by subtracting a lower (and incorrect) OTC dispensing fee from the higher (and correct) prescription dispensing fee. The Texas AG later acknowledged this discrepancy. In March 2019, the Texas AG provided Amneal with a re-calculation of the alleged overpayment. In October 2019, Amneal reached an agreement in principle with the Texas AG to settle the matter. The parties executed a Settlement Agreement and Release as of March 5, 2020, and save for certain administrative obligations, the matter is now closed.

In Re Generic Pharmaceuticals Pricing Antitrust Litigation

~~Beginning in~~Since March 2016, ~~numerous complaints styled as~~multiple putative antitrust class ~~actions~~action complaints have been filed on behalf of direct purchasers, ~~and~~ indirect purchasers (or end-payors), and ~~several separate~~indirect resellers, as well as individual complaints on behalf of certain direct and indirect purchasers, and municipalities (the “opt-out plaintiffs”) ~~have been filed~~ against manufacturers of generic ~~digoxin, lidocaine/prilocaine, glyburide-metformin,~~drugs, including Impax and ~~metronidazole, including Impax.~~

The end-payor plaintiffs comprised Plaintiff International Union of Operating Engineers Local 30 Benefits Fund; Tulsa Firefighters Health and Welfare Trust; NECA-IBEW Welfare Trust Fund; Pipe Trade Services MN; Edward Carpinelli; Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund; Nina Diamond; UFCW Local 1500 Welfare Fund; Minnesota Laborers Health and Welfare Fund; The City of Providence, Rhode Island; Philadelphia Federation of Teachers Health and Welfare Fund; United Food & Commercial Workers and Employers Arizona Health and Welfare Trust; Ottis McCrary; Plumbers & Pipefitters Local 33 Health and Welfare Fund; Plumbers & Pipefitters Local 178 Health and Welfare Trust Fund; Unite Here Health; Valerie Velardi; and Louisiana Health Service Indemnitythe Company. The direct purchaser plaintiffs comprised KPH Healthcare Services, Inc. a/k/a Kinney Drugs, Inc.; Rochester Drug Co-Operative, Inc.; César Castillo, Inc.; Ahold USA, Inc.; and FWK Holdings, L.L.C. The opt-out plaintiffs comprised The Kroger Co.; Albertsons Companies, LLC; H.E. Butt Grocery Company L.P.; Humana Inc.; and United Healthcare Services, Inc.

On April 6, 2017, the JPML ordered the consolidation of all civil actions involving allegations of antitrust conspiracies in the generic pharmaceutical industry regarding 18 generic drugs in the United States District Court for the Eastern District of Pennsylvania (“E.D. Pa.”), as In Re: Generic Pharmaceuticals Pricing Antitrust Litigation (MDL No. 2724). Consolidated class action complaints were filed on August 15, 2017 for each of the 18 drugs; Impax is named as a defendant in the 2 complaints respecting digoxin and lidocaine-prilocaine. Impax also is a defendant in the class action complaint filed with the MDL court on June 22, 2018 by certain direct purchasers of glyburide-metformin and metronidazole.

~~Each of the various complaints alleges~~allege a conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for the particular drug products at issue. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On October 16, 2018, the Court denied Impax and its co-defendants’ motion to dismiss the digoxin complaint. On February 15, 2019, the Court granted in part and denied in part defendants’ motions to dismiss various ~~state antitrust, consumer protection, and unjust enrichment claims brought by two classes of indirect purchasers in the digoxin action. The Court dismissed~~ 7 state law claims in the end-payor plaintiffs’ complaint and 6 state law claims in the indirect reseller plaintiffs’ complaint. Motions to dismiss the glyburide-metformin and metronidazole complaint, as well as 2 of the complaints filed by certain opt-out plaintiffs, were filed February 21, 2019. On March 11, 2019, the Court issued an order approving a stipulation withdrawing the direct purchaser plaintiffs’ glyburide-metformin claims against Impax.

~~On May 10, 2019, the Company was named in a civil lawsuit filed by the Attorneys General of 43~~ ~~States and the Commonwealth of Puerto Rico in the United States District Court for the District of Connecticut against numerous~~ generic pharmaceutical manufacturers, as well as certain of their current or former sales and marketing executives, regarding an alleged conspiracy to fix prices and allocate or divide customers or markets for various products, including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, and ranitidine HCL tablets, in violation of federal and state antitrust and consumer protection laws. Plaintiff States seek, among other things, unspecified monetary damages (including treble damages and civil penalties), as well as equitable relief, including disgorgement and restitution. On June 4, 2019, the JPML transferred the lawsuit to the E.D. Pa. for coordination and consolidation with MDL No. 2724. On November 1, 2019, the State Attorneys General filed an Amended Complaint in their lawsuit, bringing claims on behalf of 9 additional states and territories against several defendants; the relief sought and allegations concerning the Company (including the products allegedly at issue) are unchanged from the original complaint.

~~On July 31, 2019, the Company and Impax were served with a Praecipe to Issue Writ of Summons and Writ of Summons filed in the Philadelphia County Court of Common Pleas by~~ 87 ~~health insurance companies and managed health care providers (America’s 1~~^st Choice of South Carolina, Inc., et al. v. Actavis Elizabeth, LLC, et al., No. 190702094), naming as defendants in the putative action the same generic pharmaceutical manufacturers and individuals named in the above-referenced State Attorneys General lawsuit. However, to date, no complaint has been filed or

~~served in this action. On December 12, 2019, the court entered an Order placing the case in deferred status pending further developments in MDL No. 2724.~~

On October 11, 2019, opt-out plaintiff United Healthcare Services, Inc. filed a second complaint, in the United States District Court for the District of Minnesota (United Healthcare Services, Inc. v. Teva Pharmaceuticals USA, Inc., et al., No. 0:19-cv-02696), following on and supplementing its original action, asserting antitrust claims against the Company and other generic pharmaceutical manufacturers arising from the facts alleged in the above-referenced State Attorneys General lawsuit. Plaintiff seeks, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. The parties anticipate that the lawsuit will be transferred by the JPML to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On October 18, 2019, opt-out plaintiff Humana, Inc. also filed a second complaint, likewise following on supplementing its original action to assert antitrust claims against the Company and other generic pharmaceuticals manufacturers arising from the facts alleged in the above-referenced State Attorneys General lawsuit, and similarly seeking, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuit was filed in the E.D. Pa. (Humana Inc. v. Actavis Elizabeth, LLC, et al., No. 2:19-cv 04862), and likely will be incorporated into MDL No. 2724 for coordinated pretrial proceedings.

On November 14, 2019, the Company was named in a complaint filed in the Supreme Court of the State of New York, Nassau County, on behalf of 14 counties in the state of New York, who allege to be both direct and end-payor purchasers of generic pharmaceutical drugs (County of Nassau, et al., v. Actavis Holdco U.S., Inc., et al., No. 616029/2019). The complaint asserts antitrust claims against the Company and other generic pharmaceutical manufacturers arising from the facts alleged in the above-referenced State Attorneys General lawsuit. Plaintiff Counties seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On December 17, 2019, defendants removed the case to the United States District Court for the Eastern District of New York (No. 2:19-cv-07071) and, on January 3, 2020, the case was transferred by the JPML to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On December 11, 2019, the Company and Impax were named in a complaint filed in E.D. Pa. by Health Care Service Corp., a customer-owned health insurer opting out of the end-payor plaintiff class (Health Care Service Corp. v. Actavis Elizabeth, LLC, et al., No. 2:19-cv-05819-CMR). Plaintiff alleges a conspiracy among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, and ranitidine HCL tablets; and with respect to Impax, digoxin, lidocaine-prilocaine, and metronidazole) in violation of federal and state antitrust and consumer protection laws. Plaintiff seeks, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuit likely will be incorporated into MDL No. 2724 for coordinated pretrial proceedings.

On December 16, 2019, a complaint was filed in the United States District Court for the District of Connecticut against Impax and against numerous generic pharmaceutical manufacturers on behalf of assignees of claims from third-party health benefit plans, opting out of the end-payor plaintiff class (MSP Recovery Claims, Series LLC, et al. v. Actavis Elizabeth, LLC, et al., No. 3:19-cv-01972-SRU), and alleging a conspiracy to fix prices and allocate or divide customers or markets for various products (including, with respect to Impax, digoxin and lidocaine-prilocaine) in violation of federal and state antitrust and consumer protection laws. Plaintiffs seek ~~among other things,~~ unspecified monetary damages and equitable relief, including disgorgement and restitution. ~~On January 10, 2020, the case was transferred by the JPML to the E.D. Pa. for coordination and consolidation with~~The lawsuits have been consolidated in an MDL ~~No. 2724.~~

On December 19, 2019, the end-payor plaintiffs filed a new complaint, following on and supplementing their putative class action lawsuit pending in MDL No. 2724. Plaintiffs’ new complaint, which names as defendants the Company, Amneal, Impax, and numerous generic pharmaceutical manufacturers, alleges a conspiracy to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company/Amneal, bethanechol chloride tablets, norethindrone acetate tablets, ranitidine HCL tablets, naproxen sodium tablets, oxycodone/acetaminophen tablets, phenytoin sodium capsules, and warfarin sodium tablets; and with respect to Impax, metronidazole, amphetamine salts tablets, dextroamphetamine sulfate ER capsules, cyproheptadine HCL tablets, methylphenidate tablets, and pilocarpine HCL tablets) in violation of federal and state antitrust and consumer protection laws. Plaintiffs continue to seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

On December 20, 2019, the indirect-reseller plaintiffs filed a new complaint naming the Company, following on and supplementing their putative class action lawsuit pending in MDL No. 2724. The new complaint is brought on behalf of both independent pharmacies and hospitals, and asserts antitrust claims against the Company and other generic pharmaceutical manufacturers (as well as distributors of generic pharmaceuticals, including AmerisourceBergen Corp., Cardinal Health Inc., and McKesson Corporation) arising from the facts alleged in the above-referenced State Attorneys General lawsuit. Plaintiffs continue to seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

~~On December 27, 2019, the Company and Impax were named in a complaint filed~~ in the United States District Court for the ~~Northern~~Eastern District of ~~California by Molina Healthcare, Inc., a publicly traded healthcare management organization opting out~~Pennsylvania (In re Generic Pharmaceuticals Pricing Antitrust Litigation, No. 2724, (E.D. Pa.)).

On May 10, 2019, Attorneys General of 43 States and the end-payor plaintiff class (Molina Healthcare, Inc. v. Actavis Elizabeth, LLC, et al., No. 3:19-cv-08438). Plaintiff alleges a conspiracy among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, and ranitidine HCL tablets; and with respect to Impax, digoxin, lidocaine-prilocaine, and metronidazole) in violationCommonwealth of ~~federal and state antitrust and consumer protection laws. Plaintiff seeks, among other things, unspecified monetary~~

~~damages and equitable relief, including disgorgement and restitution. On February 5, 2020, the case was transferred by the JPML, to the E.D. Pa. for coordination and consolidation with MDL No. 2724.~~

~~On February 7, 2020, the direct purchaser plaintiffs~~Puerto Rico filed a ~~new~~ complaint following on and supplementing their putative class action lawsuit pending in MDL No. 2724. Plaintiffs’ new complaint, which names as defendants the Company, Amneal, Impax, and numerous generic pharmaceutical manufacturers, alleges a conspiracy to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company/Amneal, bethanechol chloride tablets, ranitidine HCL tablets, naproxen sodium tablets, oxycodone/acetaminophen tablets, hydrocodone/acetaminophen tablets, phenytoin sodium capsules, and warfarin sodium tablets; and with respect to Impax, amphetamine salts tablets, dextroamphetamine sulfate ER capsules, methylphenidate tablets, and pilocarpine HCL tablets) in violation of federal and state antitrust and consumer protection laws. Plaintiffs continue to seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

~~On March 2, 2020, the Company, Amneal, and Amneal Pharmaceuticals of NY, LLC, were named in a complaint filed~~ in the United States District Court for the ~~Southern~~ District of ~~Texas by Harris County, Texas, which is~~Connecticut against various manufacturers and individuals, including the ~~primary county for the Houston Metropolitan Area (Harris County, Texas v. Teva Pharmaceuticals USA, Inc., et al., No. 4:20-cv-00733). Plaintiff alleges~~Company, alleging a conspiracy ~~among~~to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for multiple generic ~~pharmaceutical~~drugs. On November 1, 2019, the State Attorneys General filed an Amended Complaint on behalf of 9 additional states and territories. On June 10, 2020, Attorneys General of 46 States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Territory of Guam, the U.S. Virgin Islands, and the District of Columbia filed a new complaint against various manufacturers and individuals, including the Company, alleging a conspiracy to fix prices, rig bids, and allocate markets or ~~divide~~ customers ~~or markets~~ for ~~various products in violation of federal~~additional generic drugs. Plaintiff States seek unspecified monetary damages and ~~state antitrust~~penalties and consumer protection laws; specifically, plaintiff alleges that it has paid approximately $3.86 million since 2013 for products attributable to Amneal entities. On March 30, 2020, the JPML issued a conditional transfer order tagging the case for transfer to the E.D. Pa. for coordinationequitable relief, including disgorgement and ~~consolidation with~~restitution. These lawsuits have been incorporated into MDL No. 2724.

Fact and document discovery in MDL No. 2724 are proceeding. On December 26, 2019, the MDL court entered a case management order extending by stipulation certain pretrial discovery deadlines, including leaving open-ended the date by which, after consultation with MDL court's appointed Special Master, the parties are to agree upon bellwether claims or cases for, inter alia, class certification and/or trials. On February 20,In July 2020, the ~~Special Master~~Court ordered certain plaintiffs’ complaints regarding 3 generic drug products to proceed as bellwether cases, along with the Plaintiff States’ November 2019 amended complaint. In February 2021, the Court vacated the prior order regarding bellwether cases. Revised bellwether cases are under consideration and no scheduling order has yet been issued ~~a Report & Recommendation and Proposed Order providing~~ for the establishment of two bellwether trial tracks; Track One would involve a jury trial of the overarching conspiracy claims presented in the States Attorneys General’s May 10, 2019 complaint (in which the Company and Amneal are defendants), and Track Two would consist of a second round of trials on one of three different individual drug conspiracy complaints (none of which involve the Company or any Amneal entities). Briefing in support of and in opposition to the Special Master’s proposal is underway.

The Company believes it has substantial meritorious defenses to the claims asserted with respect to the litigation. However, any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.

this matter.

Prescription Opioid Litigation

The Company and certain of its affiliates have been named as defendants in various matters filed in state and federal courts relating to the ~~promotion and~~ sale of prescription opioid pain relievers. ~~The~~Plaintiffs in these actions include state Attorneys General, county and municipal governments, hospitals, Indian tribes, pension funds, third-party payors and individuals. Plaintiffs seek unspecified monetary damages and other forms of relief based on various causes of action, including negligence, public nuisance, unjust enrichment, and civil conspiracy, as well as alleged violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state and federal controlled substances laws and other statutes. All cases involving the Company ~~is aware that~~also name other ~~individuals~~manufacturers, distributors and ~~states~~retail pharmacies as defendants, and ~~political subdivisions~~there are ~~filing comparable actions against, among others, manufacturers and parties that have promoted and sold~~numerous other cases involving allegations relating to prescription opioid pain relievers against other manufacturers, distributors and ~~additional suits may be filed.~~

~~The complaints, asserting claims under provisions of different state and Federal law, generally contend that~~retail pharmacies in which the defendants allegedly engaged in improper marketing of opioids, and seek a variety of remedies, including restitution, civil penalties, disgorgement of profits, treble damages, attorneys’ fees and injunctive relief. None of the complaints specifies the exact amount of damages at issue. The Company and its affiliates ~~that~~ are ~~defendants~~not named.

Nearly all cases pending in ~~the various lawsuits deny all allegations asserted~~federal district courts have been consolidated for pre-trial proceedings in ~~these complaints and have filed or intend to file motions to dismiss where possible. Each of the opioid-related matters described below is~~an MDL in its early stages. The Company intends to continue to vigorously defend these cases. In light of the inherent uncertainties of civil litigation, the Company is not in a position to predict the likelihood of an unfavorable outcome or provide an estimate of the amount or range of potential loss in the event of an unfavorable outcome in any of these matters.

On August 17, 2017, plaintiff Linda Hughes, as the mother of Nathan Hughes, decedent, filed a complaint in Missouri state court naming Amneal Pharmaceuticals of New York LLC, Impax, 5 other pharmaceutical company defendants, and 3 healthcare provider defendants. Plaintiff alleges that use of defendants’ opioid medications caused the death of her son, Nathan Hughes. The complaint alleges causes of action against Amneal and Impax for strict product liability, negligent product liability, violation of Missouri Merchandising Practices Act and fraudulent misrepresentation. The case was removed to federal court on September 18, 2017. It was transferred to the United States District Court for the Northern District of Ohio ~~on February 2, 2018 and is part of the multidistrict litigation pending as In Re~~(In re: National Prescription Opiate Litigation, ~~MDL~~Case No. ~~2804 (the “MDL”)~~17-mdl-2804). ~~Plaintiff has filed a motion to remand the case to Missouri state court. That motion remains pending before the MDL court. All activity in the case is stayed by order of the MDL court.~~

~~On March 15, 2018, plaintiff Scott Ellington, purporting to represent the State of Arkansas, more than 60 counties and a~~ ~~dozen~~ cities, filed a complaint in Arkansas state court naming Gemini Laboratories, LLC and NaN other pharmaceutical companies as defendants. Plaintiffs allege that Gemini and the other pharmaceutical company defendants improperly marketed, sold, and distributed opioid medications and failed to adequately warn about the risks of those medications. Plaintiffs allege causes of actions against Gemini and the other pharmaceutical company defendants for negligence and nuisance and alleged violations of multiple Arkansas statutes. Plaintiffs request past damages and restitution for monies allegedly spent by the State of Arkansas and the county and city plaintiffs for “extraordinary and additional services” for responding to

what plaintiffs term the “Arkansas Opioid Epidemic.” Plaintiffs also seek prospective damages to allow them to “comprehensively intervene in the Arkansas Opioid Epidemic,” punitive and treble damages as provided by law, and their costs and fees. The complaint does not include any specific damage amounts. Gemini filed a general denial and, on June 28, 2018, it joined the other pharmaceutical company defendants in moving to dismiss plaintiffs’ complaint. On January 29, 2019, the Court granted without prejudice Gemini’s motion to dismiss and dismissed Gemini from the litigation on March 22, 2019.

On March 27, 2018, plaintiff American Resources Insurance Company, Inc. filed a complaint in the United States District Court for the Southern District of Alabama against Amneal, Amneal Pharmaceuticals of New York, LLC, Impax, and NaN other pharmaceutical company defendants. Plaintiff seeks certification of a class of insurers that since January 1, 2010, allegedly have been wrongfully required to: (i) reimburse for prescription opioids that allegedly were promoted, sold, and distributed illegally and improperly by the pharmaceutical company defendants; and (ii) incur costs for treatment of overdoses of opioid medications, misuse of those medications, or addiction to them. The complaint seeks compensatory and punitive damages, but plaintiff’s complaint does not include any allegation of specific damage amounts. On or about May 2, 2018, the case was transferred to the MDL. All activity in the case is stayed by order of the MDL court.

~~On May 30, 2018, plaintiff William J. Comstock filed a complaint in Washington state court against Amneal Pharmaceuticals of New York, LLC, and 4~~ other pharmaceutical company defendants. Plaintiff alleges he became addicted to opioid medications manufactured and sold by the pharmaceutical company defendants, which plaintiff contends caused him to experience opioid-induced psychosis, prolonged hospitalizations, pain, and suffering. Plaintiff asserts causes of action against Amneal and the other pharmaceutical company defendants for negligence, fraudulent misrepresentation, and violations of the Washington Consumer Protection Act. On July 12, 2018, Amneal and other defendants removed the case to the United States District Court for the Eastern District of Washington. On August 17, 2018, the case was transferred to the MDL. All activity in the case is stayed by order of the MDL court.

On June 18, 2018, a Subpoena and CID issued by the Office of the Attorney General of Kentucky, Office of Consumer Protection was served on Amneal. The CID contains 11 requests for production of documents pertaining to opioid medicationsmanufactured and/or sold by Amneal, or for which Amneal holds an Abbreviated New Drug Application. The Company is evaluating the CID and has been in communication with the Office of the Attorney General about the scope of the CID, the response to the CID, and the timing of the response. It is unknown if the Office of the Attorney General will pursue any claim or file a lawsuit against Amneal.

~~On July 9, 2018, the Muscogee (Creek) Nation filed a First Amended Complaint in its case pending~~There are approximately 880 cases in the MDL against the Company and 55 other defendants consisting of pharmaceutical companies, wholesalers, distributors, and pharmacies. Plaintiff alleges it has been damaged by the Company and the other pharmaceutical company defendants as a result of alleged improper marketing, including off-label marketing, failure to adequately warn of the risks of opioid medications, and failure to properly monitor and control diversion of opioid medications within the Nation. The case has been designated as a bellwether motion to dismiss case for the MDL, meaning it is a test case for arguments directed at the complaints filed by Indian tribes in the MDL cases. On August 31, 2018, the Company moved to dismiss the First Amended Complaint, and also joined in separate motions to dismiss filed by different defense subgroups. Plaintiff opposed these motions. Additionally, on September 28, 2018, plaintiff filed a motion to add Amneal and Amneal Pharmaceuticals of New York, LLC, and to dismiss the Company from the complaint. The Company opposed that motion, and plaintiff filed a reply on October 19, 2018. On April 1, 2019, the MDL court's designated magistrate judge issued a Report and Recommendation as to the Company’s motion to dismiss, recommending dismissal of plaintiff’s Lanham Act claims and state-law claims based on an alleged duty to correct alleged misrepresentations of brand-name manufacturers, but recommending denial of relief as to all other claims. On April 12, 2019, the magistrate judge overruled the Company’s objection to adding Amneal and Amneal Pharmaceuticals of New York, LLC, but dismissed the Company. Amneal and Amneal Pharmaceuticals of New York, LLC, filed an objection to the magistrate’s Report and Recommendation as to the Company’s motion to dismiss on April 29, 2019. On June 13, 2019, the MDL court denied the objections and subsequently ordered the defendants to file Answers to the First Amended Complaint. On August 16, 2019, Amneal and Amneal Pharmaceuticals of New York, LLC filed their respective answers. Further activity in the case is stayed by order of the MDL court.

On July 18, 2018, the County of Webb, Texas requested waivers of service from Amneal and Amneal Pharmaceuticals of New York, LLC, in its case pending in the MDL. Plaintiff’s Amended Complaint, filed against Amneal and NaN other defendants consisting of pharmaceutical companies, wholesalers, distributors, and pharmacy benefit managers, alleges damages as a result of Amneal’s and the pharmaceutical company defendants’ improper marketing, failure to adequately warn of the risks of opioid medications, and failure to properly monitor and control diversion of opioid medications in or affecting Webb County. Amneal and Amneal Pharmaceuticals of New York, LLC have returned the requested waivers. All activity in the case is stayed by order of the MDL court.

~~On August 24, 2018, the Tucson Medical Center filed a complaint against the Company and 18~~ other defendants consisting of pharmaceutical companies, distributors, and unidentified John Doe defendants, in the Superior Court of the State of Arizona, Pima County. Plaintiff alleges damages as a result of Amneal’s and the pharmaceutical company defendants’ improper marketing, failure to adequately warn of the risks of opioid medications, and failure to properly monitor and control diversion of opioid medications. Plaintiff seeks economic damages related to its purchase of opioid medications and for the costs of unreimbursed healthcare it has provided as a result of the opioid epidemic over and above ordinary healthcare services. In addition, plaintiff seeks compensatory damages, treble damages, punitive damages, awards of attorney’s fees, and abatement of the alleged public nuisance, as provided by law. On September 24, 2018, the distributor defendants removed the case to the United States District Court for the District of Arizona. Plaintiff filed a motion to remand on September 25, 2018, which the distributor defendants opposed. The Company filed a motion to dismiss on October 1, 2018. On October 8, 2018, following the Court’s denial of its remand motion, plaintiff voluntarily dismissed its Complaint without prejudice. Plaintiff re-filed its Complaint on October 9, 2018, in the Superior Court of the

State of Arizona, Pima County, along with a motion to designate the case as “complex.” The distributor defendants filed a notice of removal on October 29, 2018. Plaintiff filed an Emergency Motion to Remand on October 30, 2018. On December 19, 2018, the Court granted plaintiff’s motion and remanded the case to the Superior Court of Pima County, Arizona. On February 13, 2019, the Company again filed a motion to dismiss the complaint. The defendants (including the Company) also moved for a discovery stay pending resolution of their motions to dismiss. The Court entered an order on April 8, 2019 staying discovery until the earlier of June 25, 2019 or when the Court rules on the defendants’ separate motions to dismiss. On June 12, 13, and 14, 2019, the Court held hearings on all pending motions to dismiss. Immediately prior to the hearing on Amneal’s Motion to Dismiss, plaintiff agreed to a voluntary dismissal without prejudice of Amneal, which the parties then entered on the record. The co-defendants removed the case to federal court, but the federal court re-remanded the case to state court. Plaintiff initially amended its complaint in state court and attempted to name Amneal as a defendant; however, plaintiff did not serve that complaint on Amneal. On February 7, 2020, plaintiff filed a second amended complaint that did not name Amneal as a defendant. Accordingly, Amneal is not presently a defendant in this lawsuit.

~~On October 4, 2018, the City of Martinsville, Virginia, filed a complaint in Virginia state court, naming the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, Impax, and 45~~ other pharmaceutical companies and other entities as defendants. Plaintiff alleges that the defendants are liable for the economic and non-economic injuries allegedly suffered by resident doctors, health care payors, and opioid-addicted individuals, as well as for the costs incurred in addressing the opioid epidemic. Plaintiff requests an unspecified amount of damages against the defendants. The case was removed to federal court on December 13, 2018and was conditionally transferred to the MDL on December 27, 2018. Plaintiff opposed the transfer to the MDL and moved to remand the case to Virginia state court. On February 14, 2019, the United States District Court for the Western District of Virginia, Roanoke Division, remanded the case to the Martinsville Circuit Court in Martinsville, Virginia. Nine other Virginia municipalities have filed identical complaints naming the same defendants, but none have been served on the Company or its affiliates. The unserved Virginia cases were removed to federal court and subsequently transferred to the MDL. On April 24, 2019, the Martinsville Circuit Court stayed this case until it is determined whether the other Virginia cases that were removed to federal court will be remanded, or until the parties or the court may determine whether consolidation of this case with others is possible in Virginia state court. The removed cases were transferred to the MDL, but this case remains stayed in state court.

In October and November 2018, the SouthEast Alaska Regional Health Consortium, the Kodiak Area Native Association, and the Norton Sound Health Corporation requested that the Company execute waivers of service in their cases pending in the MDL. Plaintiffs’ complaints name the Company and 37 other entities as defendants. Plaintiffs allege damages and seek injunctive relief, compensatory and statutory damages, “as well as the means to abate the epidemic” that they allege was “created by Defendants’ wrongful and/or unlawful conduct.” All activity in these cases is stayed by order of the MDL court.

On December 3, 2018, Appalachian Regional Healthcare, Inc., filed a complaint in Kentucky state court, naming Amneal and 32 other pharmaceutical companies and other entities as defendants. Plaintiff alleges that the defendants are liable for the economic and non-economic injuries allegedly suffered by Kentucky’s hospitals and others. Plaintiff requested an unspecified amount of damages against the defendants. The case has now been removed to federal court, and all activity in these cases is stayed by order of the MDL court.

~~On January 23, 2019, Indian Health Council, Inc., requested that the Company execute a waiver of service in its case pending in the MDL. Plaintiff’s complaint names the Company and 18~~ other pharmaceutical companies and other entities as defendants. Plaintiff, an intertribal health organization which provides healthcare services to its consortium’s member tribes, alleges that the defendants are liable for the economic injuries it allegedly suffered as a result of its role in responding to an alleged “epidemic of opioid abuse”. Plaintiff requests an unspecified amount of damages against the defendants. The case has been transferred to the MDL. All activity in the case is stayed by order of the MDL court.

On February 7, 2019, Kentucky River District Health Department requested that the Company execute a waiver of service in its case pending in the MDL. Plaintiff’s putative class action complaint names Amneal and 20 other pharmaceutical companies and other entities as defendants. Plaintiff alleges that the defendants are liable for the economic injuries it suffered, on behalf of itself and similarly situated Kentucky health departments, as a result of their role in responding to an alleged “opioid epidemic.” Plaintiff requests an unspecified amount of damages against the defendants. All activity in the case is stayed by order of the MDL court.

In February and March 2019, the Aleutian Pribilof Islands Association and Alaska Native Tribal Health Consortium requested that the Company execute waivers of service in their cases pending in the MDL. Plaintiffs’ complaints name the Company and 37 other entities as defendants. Plaintiffs allege damages and seek injunctive relief, compensatory and statutory damages, “as well as the means to abate the epidemic” that they allege was “created by Defendants’ wrongful and/or unlawful conduct.” All activity in these cases is stayed by order of the MDL court.

In March 2019, Glynn County, Georgia, requested waivers of service from the Company and Amneal in its case pending in the MDL. Plaintiff’s second amended short-form complaint, filed against Amneal and 39 other defendants consisting of pharmaceutical companies, wholesalers, retailers, and distributors, alleges damages as a result of defendants’ alleged improper marketing, fraud, including RICO violations, failure to adequately warn of the risks of opioid medications, failure to properly monitor and control diversion of opioid medications in or affecting Glynn County, negligence, public nuisance, and unjust enrichment. All activity in the case is stayed by order of the MDL court.

~~On March 14, 2019, the City of Concord, New Hampshire, filed a short-form amendment to its Second Amended Complaint in the MDL court adding the Company, Amneal, and Impax, to 31~~ other defendants, including pharmaceutical companies, corporate officers of certain brand manufacturer pharmaceutical companies, and distributors. As to the Company, Amneal, and Impax, plaintiff asserts claims for violation of the New Hampshire Consumer Protection Act, public nuisance, unjust enrichment, and violation of RICO. Plaintiff alleges that defendants are liable

for economic injuries experienced by plaintiff, including unspecified restitution, civil penalties, disgorgement of unjust enrichment and attorneys’ fees, as well as for injunctive relief as to defendants’ further false or misleading statements as to opioids, and for exemplary damages. Amneal was served on April 25, 2019. All activity in the case is stayed by order of the MDL court.

On March 15, 2019, the International Union of Painters and Allied Trades, District Council No. 21 Welfare Fund, and, separately, the International Brotherhood of Electrical Workers Local 98 Health & Welfare Fund, and International Brotherhood of Electrical Workers Local 98 Sound and Communications Health and Welfare Fund, filed complaints in the Philadelphia County Common Pleas Court, naming Amneal, Impax, Amneal Pharmaceuticals of New York, LLC, and 29 other pharmaceutical companies as defendants. In each, plaintiffs allege that the defendants are liable for economic injuries allegedly suffered by the respective funds to the extent those funds paid for long term treatment of their benefit members with opioids, and for the costs incurred in addressing an alleged “opioid epidemic.” Plaintiffs request an unspecified amount of damages against the defendants. On April 17, 2019, Amneal and Amneal Pharmaceuticals of New York, LLC were served with both complaints. On January 7, 2020, Karen Davidson, individually and as administratrix of the estate of John C. Davidson, filed a complaint in the Philadelphia County Common Pleas Court, naming the Company and Amneal, among other parties, as defendants. All three cases have been transferred to Delaware County, Pennsylvania, where numerous other opioid cases currently are pending. The cases are now stayed by order of the Delaware County court.

In March 2019, the State of New Mexico filed a Second Amended Complaint in its case pending against numerous generic drug manufacturers and distributors in the First District Court of Santa Fe County, naming as defendants Amneal and Amneal Pharmaceuticals of New York, LLC. Plaintiff seeks unspecified damages, and injunctive relief, “to eliminate the hazard to public health and safety caused by the opioid epidemic, to abate the nuisance, and to recoup State monies that have been spent” on account of defendants’ alleged “false, deceptive and unfair marketing and/or unlawful diversion of prescription opioids.” On July 17, 2019, the Amneal entities moved to dismiss for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. On October 15, 2019, the court entered an order dismissing the plaintiff’s negligence per se claims, but declining to dismiss the Amneal entities for lack of personal jurisdiction. The Amneal entities timely filed answers and moved for reconsideration of their jurisdictional motion on January 21, 2020. On March 27, 2020, the court held oral argument and denied the motion for reconsideration from the bench. The court entered an order denying the motion for reconsideration, without explanation, on April 6, 2020. The parties are now engaged in discovery.

In April 2019, several Virginia municipalities (the County Board of Arlington, Dinwiddie County, and Mecklenburg County) filed Complaints in their respective local circuit courts against the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax along with numerous additional generic drug manufacturers, distributors, and pharmacies. In each Complaint, plaintiffs seek unspecified damages and equitable relief, alleging that defendants were negligent and/or grossly negligent in flooding the relevant municipalities with prescription opioid medications and engaged in civil conspiracies to do so. Each case had been removed to the United States District Court for the Eastern District of Virginia, but all three since have been remanded back to Virginia state court. The Company was nonsuited (dismissed) from the Arlington case. Amended Complaints were filed in the Dinwiddie and Mecklenburg cases at the end of November 2019, but they did not include the Amneal entities as defendants.

On June 10, 2019, in their cases currently pending in the MDL, West Virginia municipal-entity plaintiffs Cabell County Commission and the City of Huntington were granted leave to file, then filed, a Joint and Third Amended Complaint naming approximately 20 additional defendants, including the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax. The plaintiff municipalities, seek unspecified actual, treble, and punitive damages and disgorgement “to eliminate the hazard to public health and safety, to abate the public nuisance caused by the opioid epidemic in the City and County and to compensate both for abatement measures undertaken or underway and damages sustained as a result of the opioid epidemic” they allege the defendants “proximately caused.” These actions have been designated “Track Two” bellwether cases by the MDL court (intended to be adjudicated following the “Track One” cases for which bellwether trials had been scheduled for October 2019). ~~On December 31, 2018,~~ the MDL court entered an Order directing the then-parties in these Track Two actions to work with one of the MDL court's appointed Special Masters to prepare case management deadlines. On May 12, 2019, the Special Master entered an Order acknowledging that the press of issues surrounding ongoing litigation of the Track One cases had prevented both the parties and the MDL court from acting on the directives of the prior Track Two Order, and setting deadlines of June 10, 2019 for plaintiffs to amend their complaints, and June 14, 2019 for the submission of proposals for case management by the then-parties to the cases (the Amneal entities were not served with plaintiffs’ Third Amended Complaints until June 25, 2019). On December 16, 2019, the MDL court granted plaintiffs’ motion to sever all defendants from the Track Two cases except certain distributor defendants (AmerisourceBergen Drug Corporation, Cardinal Health, Inc., and McKesson Corporation). On January 3, 2020, the MDL court ordered that plaintiffs cannot take discovery of any severed Track Two defendant. On January 14, 2020, the Track Two cases were remanded to the United States District Court for the Southern District of West Virginia, without the severed defendants. To the extent Amneal entities were defendants in the Track Two cases but have been severed, the cases are now stayed by order of the MDL court.

In October 2019, the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax were served with a putative class action complaint, which also names as defendants numerous manufacturers of opioid products (and certain corporate officers thereof), filed in the United States District Court for the Middle District of Tennessee by several individuals who allegedly purchased prescription opioid medication in cash and/or with an insurance co-payment (Rhodes, et al., v. Rhodes Technologies, Inc., et al., No. 3:19-cv-00885). Plaintiffs claim that they would not have purchased these prescription opioid products had defendants not allegedly misrepresented the products’ “addiction propensities,” and thereby suffered economic loss. Plaintiffs purport to represent a nationwide class of all individuals who directly or indirectly purchased prescription opioid medication from January 2008 to the present in 31 different states, allege causes of action for violations of those states’

antitrust laws and consumer protection statutes (and unjust enrichment), and seek, in addition to class certification, unspecified monetary damages (including actual, statutory, and punitive or treble damages) and equitable relief, including declaratory judgment and restitution.

There are currently 26 cases brought by various West Virginia and Kentucky hospitals that have been consolidated in the state-court West Virginia Opioid Litigation Multi-Litigation Panel (the “MLP”). On November 20, 2019, the manufacturer defendants collectively filed a motion to dismiss, in which Amneal joined, and the Company filed its own individual motion to dismiss. The MLP has denied the manufacturer defendants’ motion to dismiss, but has not yet ruled on the Company’s separate motion. There also are 5 additional cases brought by West Virginia municipalities against the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax which have been transferred to the MLP. The Amneal entities’ responsive pleading deadline is May 18, 2020, and we intend to file motions to dismiss in those cases. The MLP also ordered an early mediation on February 26 and 27, 2020, during which plaintiffs did not make a settlement demand. The MLP has ordered a public nuisance bench trial to occur beginning on March 22, 2021. Defendants have filed a motion for reconsideration of the order denying a jury trial.

Including the above-referenced cases, the Company and certain of its affiliates recently have been named in approximately 915 cases now pending in the MDL court or in various state and territorial courts, including cases brought by:

•

Political subdivision / municipal entity plaintiffs from the states of Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming;

•

~~Third-party payor plaintiffs;~~

•

~~Individual plaintiffs;~~

•

~~Indian tribe plaintiffs; and~~

•

~~Hospital / healthcare provider plaintiffs.~~

Requests for waivers for service of process have been transmitted by plaintiffs’ counsel to defense counsel in relation to the Company and certain of its affiliates in most of these cases. In each case where service on the Company or its affiliates have been named as defendants. The Company also is named in approximately 120 state court cases pending in 11 states. The Company has filed motions to dismiss

in many of these cases. No trial dates have been ~~perfected,~~set except in New Mexico (September 2022), Alabama (July 2022) and ~~the case~~West Virginia (November 2021); it is not ~~stayed, responsive pleadings or pre-answer motions have been filed.~~

~~The Company believes it has substantial meritorious defenses to the claims asserted with respect to the litigation. However, any adverse outcome could negatively affect~~known at this time if the Company ~~and could have a material adverse effect on~~will be involved in the ~~Company's results of operations, cash flows and/or overall financial condition.~~

West Virginia case trial.

Securities Class ~~Action~~

Actions

On April 17, 2017, ~~lead plaintiff~~ New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund filed an amended putative class action complaint in the United States District Court for the Northern District of California ~~on behalf of itself and others similarly situated~~ against Impax and ~~four current or~~4 former Impax officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 ~~(Fleming~~(Fleming v. Impax Laboratories ~~Inc.~~Inc., et al., No. 4:~~16-cv-06557-HSG)~~16-cv-6557-HSG). Plaintiff ~~asserts claims regarding alleged misrepresentations about three generic drugs. Its principal claim~~ alleges that Impax (1) concealed ~~that it colluded~~collusion with a competitor ~~Lannett Corp.~~ to fix the price of the generic drug ~~digoxin, and that its digoxin profits stemmed from this collusive pricing. Plaintiff also alleges that Impax~~digoxin; (2) concealed ~~from the market~~ anticipated erosion in the price of generic drug ~~diclofenac~~diclofenac; and ~~that Impax~~(3) overstated the value of ~~budesonide, a~~the generic drug ~~that it acquired from Teva. On June 1, 2017, Impax filed its motion to dismiss the amended complaint. On September 7, 2018,~~budesonide. In August 2019, the Court granted Impax’s motion ~~dismissing plaintiff’s claims without prejudice and with leave~~ to ~~amend the complaint. Plaintiff filed a~~dismiss Plaintiff’s subsequent second amended complaint ~~October 26, 2018. Impax filed a motion~~in its entirety. Plaintiff appealed to dismiss the second amended complaint on December 6, 2018; plaintiffs’ opposition thereto was filed on January 17, 2019; and Impax’s reply in support of its motion to dismiss was filed on February 7, 2019. A hearing before the Court on the motion to dismiss took place on May 2, 2019. On August 12, 2019, the Court entered an order granting Impax’s motion, dismissing plaintiff’s second amended complaint with prejudice. On September 5, 2019, plaintiff filed a notice of appeal from both dismissal orders with the United States Court of Appeals for the Ninth ~~Circuit. By order of~~Circuit, and on January 11, 2021, the Ninth Circuit ~~dated November 26, 2019, plaintiff’s opening brief presently~~issued an unpublished opinion affirming in part and reversing in part the District Court’s decision. Impax subsequently filed a motion for rehearing with the Ninth Circuit, and Plaintiff filed a motion to intervene seeking to add Sheet Metal Workers’ Pension Fund of Southern California, Arizona and Nevada (“Sheet Metal Workers”) as an additional named Plaintiff The Ninth Circuit denied the motions, and on April 1, 2021, the case was remanded to the District Court. On April 19, 2021, the Company filed ~~on February 14, 2020, with Impax’s answering brief due on May 15, 2020.~~a motion to dismiss the remaining claims and an opposition to Sheet Metal Workers’ renewed motion to intervene.

On December 18, 2019, Cambridge Retirement System filed a putative class action complaint in the Superior Court of New Jersey, Somerset County ~~on behalf of itself and others similarly situated~~ against the Company and ~~fourteen~~certain current or former officers alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 ~~(Cambridge~~(Cambridge Retirement System v. Amneal Pharmaceuticals, Inc., et al., No. ~~SOM-L-001701-19)~~SOM-L-1701-19). ~~Plaintiff principally alleges~~Plaintiffs allege that the May 7, 2018 amended registration statement and prospectus issued ~~on May 7, 2018~~ in connection with the Amneal/Impax business combination was materially false and/or misleading ~~insofar as~~because it ~~purportedly~~ failed to disclose that Amneal ~~was an active participant~~allegedly engaged in ~~an alleged antitrust conspiracy with several other pharmaceutical manufacturers~~anticompetitive conduct to fix generic drug ~~prices,~~prices. Plaintiff filed a motion for class certification on October 30, 2020, and ~~that this secret collusion improperly bolstered~~in response to Amneal’s ~~financial results reflected in the~~opposition, Plaintiffs amended their complaint to include similar allegations with regard to a November, 2017 registration ~~statement. Plaintiff seeks, among other things, certification of~~statement issued by an Impax-related entity. The Court has set a ~~class and unspecified compensatory and/or recessionary damages. On March 31, 2020, the Company filed a~~briefing schedule for Amneal’s motion to dismiss the ~~complaint.~~Amended Complaint.

United States Department of Justice / Drug Enforcement Administration Subpoenas

On July 7, 2017, Amneal Pharmaceuticals of New York, LLC received an administrative subpoena issued by the Long Island, NY District Office of the Drug Enforcement Administration (the “DEA”) requesting information related to compliance with certain recordkeeping and reporting ~~requirements pursuant to regulations promulgated by~~requirements. On or about April 12, 2019 and May 28, 2019, the ~~DEA. The~~ Company ~~is cooperating with this request for information and has provided relevant information responsive to the request. The Company and~~received grand jury subpoenas from the U.S. ~~Attorney~~Attorney’s Office for the Eastern District of New York ~~(“E.D.N.Y.”~~(the "USAO”) ~~have entered into a tolling agreement (and several amendments thereto)~~relating to similar topics concerning the Company’s suspicious order monitoring program and its compliance with ~~respect~~the Controlled Substances Act. The Company is cooperating with the USAO in responding to the ~~investigation. The material provisions~~subpoenas and has entered tolling agreements with the USAO through approximately May 12, 2021. It is not possible to determine the exact outcome of the tolling agreement (as amended) provide that the investigation is ongoing, that the U.S. Attorney will not file a claim against the Company on or before November 11, 2020, and requests that the Company agree that the applicable statute(s) of limitations be tolled during the period from January 19, 2018 through November 12, 2020. The Company cannot predictthese investigations at this ~~time whether the U.S. Attorney will file a lawsuit or other claims against the Company with respect to the investigation.~~time.

On March 14, 2019, Amneal received a subpoena (the “Subpoena”) from an Assistant U.S. Attorney (“AUSA”) for the Southern District of Florida. The Subpoena requests information and documents generally related to the marketing, sale, and distribution of oxymorphone. The Company ~~has been cooperating and~~ intends ~~to continue~~ to cooperate with the AUSA regarding the Subpoena. However, no assurance can be given as to the timing or outcome of its underlying investigation.

Ranitidine Litigation

On May 28, 2019, Amneal received a subpoena (the “Subpoena”) from an AUSA for the E.D.N.Y. requesting information and documents generally related to the Company’s compliance with Controlled Substances Act regulations. The Company intends to cooperate with the AUSA regarding the Subpoena.

The Company and its affiliates have been named as defendants, along with numerous other pharmaceutical manufacturers, wholesale distributors, and retail pharmacy chains, in In re Zantac/Ranitidine NDMA Litigation (MDL No. 2924), pending in the ~~U.S. Attorney for~~Southern District of Florida. Plaintiffs allege that defendants failed to disclose and/or concealed the ~~E.D.N.Y.~~alleged inherent presence of N-Nitrosodimethylamine (or “NDMA”) in brand-name Zantac® or generic ranitidine and the alleged associated risk of cancer. Consolidated groups of (a) personal injury plaintiffs, (b) economic loss/medical monitoring class action plaintiffs, and (c) third-party payor plaintiffs have ~~entered into a tolling agreement (and several amendments thereto)~~each filed master complaints against brand and generic pharmaceutical manufacturers, distributors, retailers, and repackagers of ranitidine-containing products. The Company or its affiliates have been named in the 3 master complaints and approximately 190 personal injury short form complaints. On December 31, 2020, the Court dismissed in full the 3 master complaints against the generic manufacturers, including the Company and its affiliates, with ~~respect~~leave to file amended complaints on certain claims relating to manufacturing, storage and transportation. Plaintiffs filed amended complaints on February 8 and February 22, 2021, and Defendants have filed various motions to dismiss the investigation. The material provisions of the tolling agreement (as amended) provide that the E.D.N.Y. has made no decision as yet as to the appropriate resolution of its pending investigation, that the Company’s time to present evidence and arguments to the E.D.N.Y. concerning the investigation is extended toamended complaints. Discovery remains ongoing.

On November 12, 2020, and that the Company agrees that the applicable statute(s) of limitations are tolled during the period from April 12, 2019 through November 12, 2020. The Company cannot predict at this time whether the U.S. Attorney will file a lawsuit or other claims against the Company with respect to the investigation.

~~Ranitidine Lawsuits~~

~~On January 27, 2020, the Company and~~ Amneal ~~were~~Pharmaceuticals LLC was named in a lawsuit filed in state court in Baltimore, Maryland, on behalf of the Mayor and City Council of Baltimore, alleging claims of public nuisance, negligence, and violations of state consumer protection laws against brand and generic manufacturers and store-brand distributors of Zantac®/ranitidine. Plaintiffs seek unspecified compensatory and punitive damages, as well as civil penalties and injunctive relief. Defendants removed the case to federal court, and on January 6, 2021, a conditional transfer order to the MDL was issued. On April 2, 2021, the MDL Court remanded the case to state court. On February 5, 2021, the MDL similarly remanded a New Mexico state case that also had been removed to federal court.

Metformin Litigation

Amneal and AvKARE, Inc. were named as defendants, along with numerous other manufacturers, retail pharmacies, and wholesalers, in several putative class action lawsuits pending in the United States District Court for the District of New Jersey (“D.N.J.”), consolidated as In Re Metformin Marketing and Sales Practices Litigation (No. 2:20-cv-02324-MCA-MAH). The lawsuits all allege that defendants made and sold to putative class members generic metformin products that were “adulterated” or “contaminated” with NDMA.

An economic loss complaint filed on behalf of consumers and third-party payors who purchased or paid or made reimbursements for metformin alleges that plaintiffs suffered economic losses in connection with their purchases or reimbursements due to the purported contamination. Medical monitoring class action complaints filed on behalf of consumers who consumed allegedly contaminated metformin allege “cellular damage, genetic harm, and/or are at an increased risk of developing cancer", and seek medical monitoring, including evaluation and treatment.

Xyrem® (sodium oxybate) Antitrust Litigation

Amneal has been named as a defendant, along with Jazz Pharmaceuticals, Inc. (“Jazz”) and numerous other manufacturers of generic versions of Jazz’s Xyrem® (sodium oxybate), in several putative class action lawsuits filed in the United States District Court for the Northern District of ~~Illinois by several named plaintiffs on behalf of consumers who purchased Zantac® (ranitidine)~~California and have not been diagnosed with, but “live in constant fear of developing,” cancer, alleging that the defendants, comprising various entities alleged to have manufactured or sold brand-name Zantac® or generic ranitidine, failed to disclose and/or concealed the product’s “dangerous propensities” in respect of the alleged presence in the product of N-Nitrosodimethylamine (or NDMA) (White, et al., v. GlaxoSmithKline plc, et al., No. 1:19-cv-07773). The complaint purports to state claims for violations of state consumer protection acts, breaches of implied warranties, negligence/gross negligence, and fraudulent concealment (and seeks the certification of corresponding nationwide classes and subclasses). In addition to class certification, plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including the implementation and funding of a medical monitoring program. The complaint is one of hundreds of similar putative class actions and personal injury/product liability lawsuits filed in federal courts nationwide. In November 2019, the JPML established In re Zantac/Ranitidine NDMA Litigation (MDL No. 2924) for coordinated or consolidated pretrial proceedings and, on February 6, 2020, ordered the MDL centralized in the Southern District of Florida. On February 24, 2020 this lawsuit was transferred to and consolidated with MDL No. 2924. On March 2, 2020, plaintiffs voluntarily dismissed their claims without prejudice against the generic ranitidine manufacturers named as defendants (including the Company and Amneal).

~~On March 6, 2020, plaintiff Kathy McMillian filed a personal injury / products liability complaint in~~ the United States District Court for the Southern District of ~~Alabama against brand~~New York, alleging that the generic manufacturers entered into anticompetitive agreements with Jazz in connection with settling patent litigation related to Xyrem®. Plaintiffs seek unspecified monetary damages and ~~generic ranitidine product manufacturers (including Amneal),~~penalties as well as ~~Walmart, Inc., alleging that she developed kidney cancer as a result of her use of Zantac®, Equate®, and/or generic ranitidine,~~equitable relief, including disgorgement and that defendants knew about but failed to warn regarding an alleged “NDMA defect” in those products (McMillian v. Sanofi-Aventis U.S. LLC, et al., No. 1:20-cv-00141-N). Plaintiff seeks unspecified amounts of both compensatory and punitive damages, as well as attorneys’ fees and other costs.restitution. On ~~March 31,~~December 16, 2020, the ~~case was~~JPML transferred ~~to and consolidated with MDL No. 2924 and, accordingly, responsive pleading deadlines are stayed.~~

~~On March 13, 2020, plaintiff Walter Jones, on behalf of decedent Sue Jones, filed an amended complaint naming~~ the ~~Company, Amneal, and Amneal Pharmaceuticals of New York, LLC, in his personal injury / products liability lawsuit against brand and generic ranitidine product manufacturers pending in~~actions to the United States District Court for the ~~Western~~Northern District of Tennessee (Jones v. Boehringer Ingelheim Pharmaceuticals, Inc., et al., No. 1:20-cv-2157-JDB-JAY). Plaintiff alleges that his decedent spouse developed liver cancer and died as a result of six years of use with Zantac®, and that defendants knew about but failedCalifornia for consolidated pretrial proceedings. On April 22, 2021, Defendants moved to warn regarding an alleged “NDMA defect” in their ranitidine products. Plaintiff seeks unspecified amounts of both compensatory and punitive damages, as well as attorneys’ fees and other costs. On March 31, 2020, the case was transferred to and consolidated with MDL No. 2924 and, accordingly, responsive pleading deadlines are stayed.

dismiss Plaintiffs' claims.

15. Segment Information

The Company ~~believes it~~ has ~~substantial meritorious defenses to the claims asserted with respect to these lawsuits. However, any adverse outcome could negatively affect the Company~~3 reportable segments: Generics, Specialty, and ~~could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.~~

~~Metformin Notice & Demand Letter~~

On April 14, 2020, Amneal received a letter from counsel on behalf of Mohammed Rahman and a putative class of purchasers of prescription metformin, providing notice of alleged breaches of express and implied warranties and violations of state consumer protection laws regarding the quality and safety of the metformin allegedly purchased. Specifically, the letter alleges that because the metformin Mr. Rahman and the putative class purchased “contain[ed] NDMA,” the product is “worthless,” “unusable and unfit for human consumption.” The letter demands that Amneal cease and desist from selling “defective metformin” and make full restitution to all purchasers of “defective metformin.” The Company anticipates that it will be served with the putative class action lawsuit that was filed by Mr. Rahman and his counsel on April 7, 2020 in the United States District Court for the District of New Jersey (Rahman v. Amneal Pharmaceuticals LLC, No. 2:20-cv-03757-BRM-JAD).

The Company believes it has substantial meritorious defenses to the claims asserted with respect to this matter. However, any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.

~~18. Segment Information~~

~~As a result of the Acquisitions, the Company added a third reportable segment, AvKARE, to its existing reportable segments,~~ AvKARE.

Generics ~~and Specialty.~~

Generics develops, manufactures and commercializes complex oral solids, injectables, ophthalmics, liquids, topicals, softgels, inhalation products and transdermals across a broad range of therapeutic categories. Generics’ retail and institutional portfolio contains approximately 250 product families, many of which represent difficult-to-manufacture products or products that have a high barrier-to-entry, such as oncologics, anti-infectives and supportive care products for healthcare providers.

Specialty

Specialty delivers proprietary medicines to the U.S. market. The Company offers a growing portfolio in core therapeutic categories including central nervous system disorders, endocrinology, parasitic infections and other therapeutic areas. The Company's specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists, movement disorder specialists, endocrinologists and primary care physicians in key markets throughout the U.S. Specialty also has a number of product candidates that are in varying stages of development.

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 wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and surgical products. 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.

The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment operating income (loss). Items below operating income (loss) ~~from operations~~ are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in "Corporate and Other." The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker.

The tables below present segment information reconciled to total Company financial results, with segment operating income ~~or loss~~(loss) including gross profit less direct selling, general and administrative expenses, research and development expenses, and other operating expenses to the extent specifically identified by segment (in thousands):

Three Months Ended March 31, 2020

Generics ^{(1) (2)}

Specialty ⁽²⁾

AvKARE ⁽¹⁾

Corporate
and Other

Total
Company

Net revenue

$
352,586

$
87,977

$
57,970

$
—

$
498,533

Cost of goods sold

218,865

47,818

46,895

—

313,578

Cost of goods sold impairment charges

1,456

—

—

—

1,456

Gross profit

132,265

40,159

11,075

—

183,499

Selling, general and administrative

16,623

20,942

10,788

29,623

77,976

Research and development

29,034

7,345

—

—

36,379

In-process research and development impairment charges

960

—

—

—

960

Intellectual property legal development expenses

1,265

5

—

—

1,270

Charges related to legal matters

2,500

2,000

—

—

4,500

Other operating expenses

46

—

—

4,577

4,623

Operating income (loss)

$
81,837

$
9,867

$
287

$
(34,200
)

$
57,791

⁽¹⁾

~~Operating results for the sale of Amneal products by AvKARE are included in Generics.~~

⁽²⁾


Three Months Ended March 31, 2021	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	312,508	$	95,931	$	84,666	$	0	$	493,105
Cost of goods sold	185,298		48,198		68,047		0		301,543

Gross profit	127,210		47,733		16,619		0		191,562
Selling, general and administrative	18,762		19,881		13,704		38,379		90,726
Research and development	36,117		12,065		0		0		48,182

Intellectual property legal development expenses	3,582		0		0		0		3,582
Acquisition, transaction-related and integration expenses	0		0		931		1,871		2,802

Restructuring and other charges	80		0		0		283		363
Operating income (loss)	$	68,669	$	15,787	$	1,984	$	(40,533)	$	45,907

Three Months Ended March 31, 2019

Generics

Specialty

Corporate
and Other

Total
Company

Net revenue

$
382,477

$
63,643

$
—

$
446,120

Cost of goods sold

278,878

30,865

—

309,743

Cost of goods sold impairment charges

53,297

—

—

53,297

Gross profit

50,302

32,778

—

83,080

Selling, general and administrative

24,148

21,327

38,961

84,436

Research and development

50,151

3,707

—

53,858

In-process research and development impairment charges

22,787

—

—

22,787

Intellectual property legal development expenses

3,121

1,045

—

4,166

Other operating expenses

4,678

2,062

5,453

12,193

Operating (loss) income

$
(54,583
)

$
4,637

$
(44,414
)

$
(94,360
)

~~19.~~


Three Months Ended March 31, 2020	Generics (1)		Specialty		AvKARE (1,2)		Corporate and Other		Total Company
Net revenue	$	352,586	$	87,977	$	57,970	$	0	$	498,533
Cost of goods sold	218,865		47,818		46,895		0		313,578
Cost of goods sold impairment charges	1,456		0		0		0		1,456
Gross profit	132,265		40,159		11,075		0		183,499
Selling, general and administrative	16,623		20,942		10,788		29,623		77,976
Research and development	29,034		7,345		0		0		36,379
In-process research and development impairment charges	960		0		0		0		960
Intellectual property legal development expenses	1,265		5		0		0		1,270
Acquisition, transaction-related and integration expenses	0		0		0		2,575		2,575
Charges related to legal matters, net	2,500		2,000		0		0		4,500
Restructuring and other charges	46		0		0		2,002		2,048
Operating income (loss)	$	81,837	$	9,867	$	287	$	(34,200)	$	57,791

(1)Operating results for the sale of Amneal products by AvKARE are included in Generics.

(2)The AvKARE segment consists of the businesses acquired in the Acquisitions on January 31, 2020. Operating results for the three months ended March 31, 2020 represent two months of activity.

16. Related Party Transactions

The Company has various business agreements with certain third-party companies in which there is some common ownership and/or management between those entities, on the one hand, and the Company, on the other hand. The Company has no direct ownership or management in any of such related party companies. The related party relationships that generated income and/ or expense in the respective reporting periods are described below.

Financing Lease - Related Party

The Company has a financing lease for 2 buildings located in Long Island, New York, ~~that~~which are used as an integrated manufacturing and office facility. The Company leased these buildings from LAX Hotel, LLC from 2012 until January 2021. During 2020, LAX Hotel, LLC was controlled by a member of the Amneal Group, who also serves as observer on the Company's Board of Directors. As a result, this lease had been historically accounted for as a related party financing lease.

During January 2021, LAX Hotel, LLC sold its interests in the leased buildings to an unrelated third party. Therefore, this lease is no longer a related party transaction, and the corresponding financing lease right-of-use asset and liability have been reclassified in the consolidated balance sheet as of March 31, 2021 to reflect this change. For the three months ended March 31, 2021, lease costs and interest expense related to this lease were $0.2 million and $0.4 million, respectively. For the three months ended March 31, 2020, lease costs and interest expense were each approximately $1 million.

For annual payments required under the terms of the non-cancelable lease agreement over the next five years and thereafter, refer to Note 12. Leasesin the Company’s ~~2019~~2020 Annual Report on Form 10-K.

Lease costs and interest expense related to this lease were each approximately $1 million for the three months ended March 31, 2020. Lease costs and interest expense related to this lease were each approximately $1 million for the three months ended March 31, 2019.

Kanan, LLC

Kanan, LLC ("Kanan") is ~~an independent~~a real estate company which owns Amneal’s manufacturing facilities located at 65 Readington Road, Branchburg, New Jersey, 131 Chambers Brook Road, Branchburg, New Jersey and 1 New England Avenue, Piscataway, New Jersey. Certain executive officers of the Company beneficially own, through certain revocable trusts, equity securities of Kanan. In addition, they serve on the management team of Kanan. Amneal leases these facilities from Kanan under 2 separate triple-net lease agreements that expire in 2027 and 2031, respectively, at an annual rental cost of approximately $2 million combined, subject to CPI rent escalation adjustments as provided in the lease agreements. Rent expense paid to ~~the related party~~Kanan for both of the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was $0.5 million.

Asana Biosciences, LLC

Asana Biosciences, LLC (“Asana”) is an early stage drug discovery and research and development company focusing on several therapeutic areas, including oncology, pain and inflammation. Certain executive officers of the Company beneficially own, directly and through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity securities of Asana. In addition, they serve on the management team of Asana. From time to time, Amneal ~~provided~~provides research and development services to Asana under a development and manufacturing agreement. ~~The total amount of~~There was no income ~~earned from this arrangement~~ for the three months ended March 31, ~~2019 was $0.3 million (NaN in 2020). At both~~2021 or 2020. As of March 31, ~~2020~~2021 and December 31, ~~2019 receivables of approximately $1 million were~~2020, there was no amount due from ~~the related party~~Asana for research and development related services.

~~Industrial Real Estate Holdings NY, LLC~~

Industrial Real Estate Holdings NY, LLC and Sutaria Family Realty, LLC

Industrial Real Estate Holdings NY, LLC ("IRE") is ~~an independent~~a real estate management entity, which iswas the ~~landlord~~sub-landlord of Amneal’s leased manufacturing facility located at 75 Adams Avenue, Hauppauge, New York. ~~The~~IRE is controlled by a member of the Amneal Group, who also serves as an observer on the Company's Board of Directors. Effective June 1, 2020, the lease ~~expires in~~was assigned to the Company with the consent of the landlord, Sutaria Family Realty, LLC, which is also a related party because a member of Company management is a beneficial owner. Concurrently with the assignment of the lease, the Company exercised a renewal option for $0.1 million to extend the lease by 5 years until March 31, 2026. Monthly rent payments are $0.1 million and increase by 3% annually. Rent paid to the related ~~party~~parties for both of the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was $0.3 million.

Kashiv BioSciences, LLC

Kashiv ~~BioSciences, LLC ("Kashiv")~~ is an independent contract development organization focused primarily on the development of 505(b)(2) NDA products. Amneal has various business agreements with Kashiv.

Certain executive officers of the Company beneficially own, directly and

through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity securities of Kashiv. In addition, they serve as managers of Kashiv.

On January 11, 2021, the Company and 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 complex generics, innovative drug delivery platforms and novel 505(b)(2) drugs. The acquisition closed on April 2, 2021. Certain of the contracts between Amneal and Kashiv were acquired in this transaction and have become transactions among Amneal's consolidated subsidiaries subsequent to the transaction closing. Refer to Note 3. Acquisitions and Divestitures for further details on the KSP acquisition.

Agreements with Kashiv Not Affected by the Acquisition of KSP

The parties entered into a lease for parking spaces in Piscataway, NJ. The total amount of expense paid to Kashiv from this agreement for each of the three months ended March 31, 2021 and 2020 was less than $0.1 ~~million (NaN in 2019).~~

million.

Amneal also has ~~also entered into~~ various ~~development and commercialization~~consulting arrangements with Kashiv to collaborate on the development and commercialization of certain generic pharmaceutical products. The total ~~reimbursable~~ expenses associated with these arrangements for the three months ended March 31, ~~2020 and 2019 were $0.2~~2021 was less than $0.1 million ~~and $0.8 million, respectively. Kashiv receives a percentage of net profits with respect to Amneal’s sales of these products. The total profit share~~(NaN for the three months ended March 31, ~~2020~~2020).

The table below includes the terms and ~~2019 was $3 million and $0.7 million, respectively.~~

Pursuant to a product development agreement, Amneal and Kashiv agreed to collaborate on the development and commercialization of Levothyroxine Sodium. Under the agreement, the intellectual property and ANDAexpenses recognized for ~~this product is owned by Amneal and Kashiv is to receive a profit share for all sales~~each of the product ~~made by Amneal. Amneal is precluded from selling the product made by Kashiv during the term of the license and supply agreement~~specific contracts with ~~JSP. Under the terms of the amended agreement with Kashiv, Amneal paid $2 million in July 2019 and may be required to pay up to an additional $18 million upon certain regulatory milestones being met.~~

In November 2019, Amneal and Kashiv entered into a licensing agreement for the development and commercialization of Kashiv’s orphan drug K127 (pyridostigmine) for the treatment of Myasthenia Gravis. Under the terms of the agreement, Kashiv will be responsible for all development and clinical work required to secure Food and Drug Administration approval and Amneal will be responsible for filing the NDA and commercializing the product. The Company made an upfront payment of approximately $2 million to Kashiv in December 2019, which was recorded in research and development, and Kashiv is eligible to receive development and regulatory milestones totaling approximately $17 million. Kashiv is also eligible to receive tiered royalties from the low double-digits to mid-teens on net sales of K127. For the three months ended March 31, 2020, the Company recorded a $2 million (NaN in 2019), as research and development expense to compensate Kashiv for costs incurred to develop the product.

On February 20, 2020, the Company and Kashiv entered into a master services agreement covering certain services that Kashiv provides the Company for commercial product support for EluRyng and other products, including ranitidine and nitrofurantoin. For the three months ended March 31, 2020, the Company recorded $1 million (NaN in 2019), as cost of goods sold to compensate Kashiv for services performed.

At March 31, 2020 and December 31, 2019 payables of approximately $10 million and $6 million, respectively, were due to the related party for the aforementioned transactions. Additionally, at both March 31, 2020 and December 31, 2019 a receivable of $0.1 million was due from the related party.

~~On October 1, 2017, Amneal and Kashiv, entered into a license and commercialization agreement.~~ Kashiv.


		Amounts in millions
		Research and development expenses for three months ended March 31,
Products	Agreement Date	2021		2020
Filgrastim and PEG-Filgrastim (1)	October 2017	$	0	$	0
Ganirelix Acetate and Cetrorelix acetate (2)	August 2020	$	1	$	0

(1) Kashiv granted Amneal an exclusive license, under its New Drug Application, to distribute and sell ~~two~~2 bio-similar products in the U.S. Kashiv is responsible for development, regulatory

filings, obtaining FDA approval, and manufacturing, and Amneal is responsible for marketing, selling and pricing activities. The term of the agreement is 10 - years from the respective product’s launch date.

~~In connection with the agreement, Amneal paid an upfront amount of $2 million in October 2017 for execution of the agreement which was expensed in research and development.~~ The agreement ~~also~~ provides for potential future milestone payments to Kashiv of (i) up to $21 million relating to regulatory approval, (ii) up to $43 million for successful delivery of commercial launch inventory, (iii) between $20 million and $50 million relating to number of competitors at launch for one product, and (iv) between $15 million and $68 million for the achievement of cumulative net sales for both products. The milestones are subject to certain performance conditions which may or may not be achieved, including FDA filing, FDA approval, launch activities and commercial sales volume objectives. In addition, the agreement provides for Amneal to pay a profit share equal to 50% of net profits, after considering manufacturing and marketing costs.

(2) Amneal and Kashiv entered into a product development agreement for the development and commercialization of 2 generic peptide products, Ganirelix Acetate and Cetrorelix Acetate. Under the agreement, the intellectual property and ANDA for these products are owned by Amneal, and Kashiv is to receive a profit share for all sales of the products made by Amneal. In connection with the agreement, Amneal made an upfront payment for $1 million during August 2020. The ~~research~~agreement also provides for potential future milestone payments to Kashiv of (i) up to $2 million relating to development milestones, and (ii) up to $0.3 million relating to regulatory filings. The milestones are subject to certain performance conditions which may or may not be achieved, including FDA filings. In addition, Amneal is to pay $3 million of development fees to Kashiv as the development work is completed.

Agreements with Kashiv Included in the Acquisition of KSP

The following contracts previously between Amneal and Kashiv were acquired with KSP and have become transactions among Amneal's consolidated subsidiaries subsequent to the transaction closing on April 2, 2021. The disclosures below relate to the historical agreements as related party transactions through March 31, 2021.

Amneal has various development and commercialization arrangements with Kashiv to collaborate on the development and commercialization of certain generic pharmaceutical products. The total reimbursable expenses ~~under this agreement~~associated with these arrangements for the three months ended March 31, 2021 and 2020, respectively, was $0.1 million and $0.2 million. Kashiv receives a percentage of net profits with respect to Amneal’s sales of these products. The total profit share paid to Kashiv for each of the three months ended March 31, 2021 and 2020 was $3 million.

On February 20, 2020, the Company and Kashiv entered into a master services agreement covering certain services that Kashiv provides the Company for commercial product support related to EluRyng and other products, including Ranitidine and Nitrofurantoin. For each of the three months ended March 31, 2021 and 2020, the Company recorded $1 million to cost of goods sold to compensate Kashiv for services performed.

The following table includes the expenses recognized for each of the product specific contracts with Kashiv prior to the acquisition of these contracts as part of the KSP transaction.


		Amounts in millions
		Research and development expenses for three months ended March 31,
Products	Agreement Date	2021		2020
Levothyroxine Sodium(1)	June 2019	$	0	$	0
K127 (2)	November 2019	$	3	$	2
Posaconazole (3)	May 2020	$	0	$	0

(1) Pursuant to a product development agreement, Amneal and Kashiv agreed to collaborate on the development and commercialization of Levothyroxine Sodium. Under the agreement, the intellectual property and ANDA for this product is owned by Amneal, and Kashiv is to receive a profit share for all sales of the product made by Amneal. Amneal is precluded from selling the product made by Kashiv during the term of the license and supply agreement with Jerome Stevens Pharmaceuticals (refer to Note 5. Alliance and Collaboration, in the Company's 2020 Annual Report on Form 10-K for additional details). Under the terms of the amended agreement with Kashiv, Amneal paid $2 million in July 2019 and may be required to pay up to an additional $18 million upon certain regulatory milestones being met.

(2) Amneal and Kashiv have a licensing agreement for the development and commercialization of Kashiv’s orphan drug K127 (Pyridostigmine) for the treatment of Myasthenia Gravis. Under the terms of the agreement, Kashiv will be responsible for all development and clinical work required to secure Food and Drug Administration approval, and Amneal will be responsible for filing the NDA and commercializing the product. The Company made an upfront payment of approximately $2 million to Kashiv in December 2019, and Kashiv is eligible to receive development and regulatory milestones totaling approximately $17 million. Kashiv is also eligible to receive tiered royalties from the low double-digits to mid-teens on net sales of K127.

(3) Amneal and Kashiv have a product development agreement for the development and commercialization of Posaconazole. In connection with the agreement, Amneal paid an upfront amount of $0.3 million in May 2020 for execution of the agreement. The agreement also provides for potential future milestone payments to Kashiv of (i) up to $0.8 million relating to development milestones, (ii) up to $0.3 million relating to regulatory approval, and (iii) up to $1 million for the achievement of cumulative net sales. The milestones are subject to certain performance conditions which may or may not be achieved, including FDA filing, FDA approval and commercial sales volume objectives.

At March 31, 2021 and December 31, 2020, payables of approximately $8 million and $5 million, respectively, were ~~immaterial.~~

due to Kashiv. Additionally, as of December 31, 2020 a receivable of $0.1 million was due from Kashiv.

PharmaSophia, LLC

PharmaSophia, LLC ("PharmaSophia") is a joint venture formed by Nava Pharma, LLC ("Nava") and Oakwood Laboratories, LLC for the purpose of developing certain products. Certain executive officers of the Company beneficially own, directly and through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity securities of Nava. Nava beneficially owns 50% of the outstanding equity securities of PharmaSophia. In addition, these executive officers also serve on the management team of Nava. Currently PharmaSophia is actively developing ~~two~~one injectable ~~products.~~product. PharmaSophia and Nava are parties to a research and development agreement pursuant to which Nava provides research and development

services to PharmaSophia. Nava subcontracted this obligation to Amneal, entering into a subcontract research and development services agreement pursuant to which Amneal provides research and development services to Nava in connection with the products being developed by PharmaSophia. The total amount of income earned from these agreements for the three months ended March 31, 2021 and 2020 ~~and 2019~~ was ~~$0.2~~$0.3 million and ~~$0.3~~$0.2 million, respectively. At March 31, ~~2020~~2021 and December 31, ~~2019~~2020 receivables of ~~$0.6~~$1 million and ~~$0.7~~$0.8 million, respectively, were due from the related party. ~~Additionally, as of December 31, 2019 a payable of less than $0.1 million was due to the related party, which was settled in February 2020.~~

Fosun International Limited

Fosun International Limited (“Fosun”) is a Chinese international conglomerate and investment company that is a shareholder of the Company. On June 6, 2019, the Company entered into a license and supply agreement with a subsidiary of Fosun, which is a Chinese pharmaceutical company. Under the terms of the agreement, the Company will hold the imported drug license required for pharmaceutical products manufactured outside of China and will supply Fosun with finished, packaged products for Fosun to then sell in the China market. Fosun will be responsible for obtaining regulatory approval in China and for shipping the product from Amneal’s facility to Fosun’s customers in China. In consideration for access to the Company's U.S. regulatory filings to support its China regulatory filings ~~in China~~ and for the supply of product, Fosun paid the Company a $1 million non-refundable fee, net of tax, in July 2019 and will be required to pay the Company $0.3 million for each of 8 products upon the first commercial sale of each in China in addition to a supply price and a profit share. ~~For the three months ended March 31, 2020, the~~The Company has 0tnot recognized any revenue from this agreement.

Apace KY, LLC d/b/a Apace Packaging LLC

Apace KY, LLC d/b/a Apace Packaging LLC (“Apace”) provides packaging solutions pursuant to an exclusive packaging agreement. Apace markets its services which include bottling and blistering for the pharmaceutical industry. A member of Company management beneficially owns outstanding equity securities of Apace. The total amount of expenses from this arrangement for each of the three months ended March 31, 2021 and 2020 was $2 ~~million (NaN in 2019).~~million. At both March 31, 2021 and December 31, 2020, payables of ~~approximately $1~~$1.0 million were due to the related party for packaging services.

Additionally, at March 31, 2021 and December 31, 2020, receivables of $0.1 million and $0.5 million, respectively, was due from the related party for a product recall.

Tracy Properties LLC

R&S leases operating facilities, office and warehouse space from Tracy Properties ~~LLC.~~ LLC ("Tracy"). A member of Company management beneficially owns outstanding equity securities of Tracy. The total amount of expenses from this arrangement for both of the three months ended March 31, 2021 and 2020 was $0.1 million.

AzaTech Pharma LLC

R&S purchases inventory from AzaTech Pharma LLC ("AzaTech") for resale. A member of Company management beneficially owns outstanding equity securities of AzaTech. The total amount of purchases from this arrangement for the three months ended March 31, 2021 and 2020 was ~~$0.1~~$1 million ~~(NaN in 2019).~~and $0.8 million, respectively. At March 31, 2021 and December 31, 2020, payables of approximately ~~less than $0.1~~$0.7 million and $1 million, respectively, were due to ~~the related party for lease expenses.~~

AzaTech ~~Pharma LLC~~

R&S purchases inventory from AzaTech Pharma LLC for resale. The total amount of expenses from this arrangement for the three months ended March 31, 2020 was $0.8 million (NaN in 2019). At March 31, 2020, payables of approximately less than $0.5 million were due to the related party for inventory purchases.

AvPROP, LLC

AvKARE LLC leases its operating facilities from AvPROP, ~~LLC.~~LLC ("AvPROP"). A member of Company management beneficially owns outstanding equity securities of AvPROP. Rent expense from this arrangement for both of the three months ended March 31, 2021 and 2020 was $0.1 million.

Tarsadia Investments, LLC

Tarsadia Investments, LLC (“Tarsadia”) is a private investment firm that provides financial services and is a significant shareholder of the Company. A member of Amneal Group, and an observer to the Board, is the Chairman and Founder of Tarsadia Investments. Another member of the Amneal Group, and a member of the Board, is a Managing Director of Tarsadia Investments. Tarsadia offers capital and strategic support for companies with substantial growth potential primarily in the healthcare, financial services, real estate, and clean technology sectors. The Company entered into an agreement in which Tarsadia will provide financial consulting services. The services are not expected to have a material impact to the Company’s financial statements.

Avtar Investments, LLC

Avtar Investments, LLC ("Avtar") is a private investment firm. Members of Company management beneficially own, directly and through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity securities of Avtar. During April 2020, the Company entered into an agreement in which Avtar will provide consulting services. The total amount of consulting expense incurred for the three months ended March 31, 2021 was $0.1 million (NaN in the three months ended March 31, 2020). As of both March 31, 2021 and December 31, 2020, less than $0.1 million was due to Avtar.

Zep Inc.

Zep Inc. ("Zep") is a producer, and distributor of maintenance and cleaning solutions for retail, food & beverage, industrial & institutional, and vehicle care customers. An executive officer of the Company serves as a director of Zep. During May 2020, AvKARE entered into an agreement to supply cleaning products to Zep. There was no revenue derived from this related party agreement for three months ended March 31, 2021 or 2020. As of December 31, 2020, $0.1 million was recorded in related party receivables (0 related party receivable as of March 31, 2021).

Tax Distributions

Under the terms of ~~the Limited Liability Company Agreement,~~its limited liability company agreement, Amneal is obligated to make tax distributions to its members, which are also holders of non-controlling interests in the Company. For further details, refer to Note ~~21.~~17. Stockholders' Equity and Redeemable Non-Controlling Interests.

Additionally, under the terms of the limited liability company agreement between the Company and the holders of the Rondo Class B Units, Rondo is obligated to make tax distributions to those holders, subject to certain limitations as defined in the ~~Company’s 2019 Annual Report on Form 10-K.~~

Rondo Credit Facility. For further details, refer to Note 17. Stockholders' Equity and Redeemable Non-Controlling Interests.

Notes Payable – Related Party

The sellers of AvKARE, LLC and R&S hold the remaining 34.9% interest in Rondo (“Rondo Class B Units”). Certain holders of the Rondo Class B Units are also holders of the Sellers Notes and the Short-Term Sellers Note. For additional information, refer to ~~Note 13. Debt~~.

~~20. Goodwill and Intangible Assets~~

~~The changes in goodwill for the three months ended March 31, 2020 and for the year ended December 31, 2019 were as follows (in thousands):~~

March 31,
2020

December 31,
2019

Balance, beginning of period

$
419,504

$
426,226

Impax acquisition adjustment

—

(1,255
)
Goodwill acquired during the period

95,955

—

Goodwill divested during the period

—

(5,175
)
Currency translation

(726
)

(292
)
Balance, end of period

$
514,733

$
419,504

As of March 31, 2020, $361 million, $89 million, and $65 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. As of December 31, 2019, $361 million and $59 million of goodwill was allocated to the Specialty and Generics segment, respectively. For the year ended December 31, 2019, goodwill divested was associated with the sale of the Company's operations in the United Kingdom. For the year ended December 31, 2019, the adjustment to goodwill was associated with the Combination. Refer to ~~Note 3. Acquisitions and Divestitures~~ ~~for additional information about the Acquisitions and the divestiture of the Company's operations in the United Kingdom.~~

~~Intangible assets at March 31, 2020 and December 31, 2019 are comprised of the following (in thousands):~~

March 31, 2020

December 31, 2019

Weighted-Average
Amortization Period
(in years)

Cost

Accumulated
Amortization

Net

Cost

Accumulated
Amortization

Net

Amortizing intangible assets:

Product rights

9.7

$
1,191,135

$
(229,959
)

$
961,176

$
1,197,535

$
(198,857
)

$
998,678

Other intangible assets

6.1

140,400

(7,530
)

132,870

3,000

(1,000
)

2,000

Total

$
1,331,535

$
(237,489
)

$
1,094,046

$
1,200,535

$
(199,857
)

$
1,000,678

In-process research and development

381,115

—

381,115

382,075

—

382,075

Total intangible assets

$
1,712,650

$
(237,489
)

$
1,475,161

$
1,582,610

$
(199,857
)

$
1,382,753

The Company evaluated assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. For the three months ended March 31, 2020, the Company recognized a total of $2 million of intangible asset impairment charges, of which $1 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 charges for the three months ended March 31, 2020 are primarily related to 2 currently marketed products and 2 in-process research and development (“IPR&D”) products, all acquired as part of the Combination. For the currently marketed products, ~~2 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.~~ ~~The IPR&D~~ ~~charges are associated with two products, one of which experienced a delay in its estimated launch date and the other was canceled due to the withdrawal of our development partner.~~

During the three months ended March 31, 2020, the Company recognized $137 million of intangible assets associated with the 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 and Divestitures ~~for additional information.~~.

During the three months ended March 31, 2019, the Company recognized a $50 million product rights intangible asset for the exclusive rights to sell Levothyroxine in the U.S. market under a license and supply agreement with JSP. Refer to ~~Note 5. Alliance and Collaboration~~ ~~for additional information.~~

For the three months ended March 31, 2019, included in the Company's divested United Kingdom operations were a net customer relationship intangible asset and a net trade name intangible asset of $5 million and $2 million, respectively. Refer to ~~Note 3. Acquisitions and Divestitures~~ ~~for additional information.~~

~~Amortization expense related to intangible assets recognized is as follows (in thousands):~~

Three Months Ended March 31,

2020

2019

Amortization
$
42,576

$
30,963

~~The following table presents future amortization expense for the next five years and thereafter, excluding $381 million of IPR&D intangible assets (in thousands):~~

Future
Amortization

Remainder of 2020

$
137,058

2021

174,569

2022

159,512

2023

148,090

2024

140,704

Thereafter

334,113

Total

$
1,094,046

~~21.~~17. Stockholders’ Equity and Redeemable Non-Controlling Interests

Non-Controlling Interests

Under the terms of ~~the Limited Liability Company Agreement,~~Amneal's limited liability company agreement, as amended, Amneal is obligated to make tax distributions to its members. For the three months ended March 31, ~~2020 and 2019, 0~~ 2021, a tax distribution of $9 million was recorded ~~due to tax losses incurred. As~~as a reduction of non-controlling interests (NaN for the three months ended March 31, 2020), and included as related-party payables as of March 31, ~~2019, 0 liability was included in related-party payables for the tax distribution.~~

During December 2018, the Company acquired the non-controlling interests in 1 of Amneal's non-public subsidiaries for approximately $3 million. As of December 31, 2018, the Company recorded a $3 million related party payable for this transaction2021, which was paid in full ~~in 2019.~~

during April 2021.

Redeemable Non-Controlling Interests

As discussed in Note 3. Acquisitions and Divestitures, the Company acquired a 65.1% interest in Rondo on January 31, 2020. The sellers of AvKARE, LLC and R&S hold the remaining 34.9% interest as Rondo Class B Units. Beginning on January 1, 2026, the holders of the Rondo Class B Units have the right (“Put Right”) to require the Company to acquire the Rondo Class B Units for a purchase price that is based on a multiple of Rondo’s earnings before income taxes, depreciation, and amortization (EBITDA) if certain financial targets and other conditions are met. Additionally, beginning on January 31, 2020, the Company has the right to acquire the Rondo Class B Units based on the same value and conditions as the Put Right. The Rondo Class B Units are also redeemable by the holders upon a change in control.

Since the redemption of the Rondo Class B Units is outside of the Company's control, the units have been presented outside of stockholders' equity as redeemable non-controlling interests. Upon closing of the Acquisitions on January 31, 2020, thethe redeemable non-controlling interests were recorded as a component of the fair value of consideration transferred at an estimated preliminary fair value of $11 million. The fair value of the redeemable non-controlling interests was estimated using the Monte-Carlo simulation approach under the option pricing framework, which considers the redemption rights of both the Company and the holders of the Rondo Class B Units.

The Company will attribute 34.9% of the net income of Rondo to the redeemable non-controlling interests. The Company will also accrete the redeemable non-controlling interests to redemption value upon an event that makes redemption probable.

For the three months ended March 31, 2021, a tax distribution of $0.5 million was recorded as a reduction of redeemable non-controlling interests (NaN for the three months ended March 31, 2020) and included as a related-party payable as of March 31, 2021.

Changes in Accumulated Other Comprehensive Loss by Component (in thousands):

	Foreign currency translation adjustment			Unrealized gain (loss) on cash flow hedge, net of tax			Accumulated other comprehensive loss
Balance December 31, 2018	$	(7,755	)	$	—		$	(7,755	)
Other comprehensive (loss) income before reclassification		(729	)		7,764			7,035
Amounts reclassified from accumulated other comprehensive loss		1,461			—			1,461
Reallocation of ownership interests		(809	)		—			(809	)
											Foreign currency translation adjustment		Unrealized gain (loss) on cash flow hedge, net of tax		Accumulated other comprehensive loss
Balance December 31, 2019		(7,832	)		7,764			(68	)	Balance December 31, 2019	$	(7,832)	$	7,764	$	(68)
Other comprehensive loss before reclassification		(2,525	)		(30,812	)		(33,337	)	Other comprehensive loss before reclassification	(6,643)		(34,560)		(41,203)

Reallocation of ownership interests		(7	)		7			—		Reallocation of ownership interests	(22)		(25)		(47)
Balance March 31, 2020	$	(10,364	)	$	(23,041	)	$	(33,405	)
Balance December 31, 2020										Balance December 31, 2020	(14,497)		(26,821)		(41,318)
Other comprehensive loss before reclassification										Other comprehensive loss before reclassification	(3,139)		10,243		7,104
Reallocation of ownership interests										Reallocation of ownership interests	(52)		(95)		(147)
Balance March 31, 2021										Balance March 31, 2021	$	(17,688)	$	(16,673)	$	(34,361)

~~22.~~

18. Subsequent ~~Event~~Events

Kashiv Specialty Pharmaceuticals Acquisition

~~As the financial markets stabilized following a period of high volatility due to the COVID-19 pandemic,~~On January 11, 2021, the Company ~~repaid $200 million~~and Kashiv (a related party, see Note 16. Related Party Transactions) entered into a definitive agreement for Amneal to acquire a 98% interest in KSP, a subsidiary of Kashiv focused on the development of innovative drug delivery platforms, novel 505(b)(2) drugs, and complex generics. Refer to Note 3. Acquisitions and Divestitures for additional information.

Class B-1 Common Stock

On May 5, 2021, the shareholders of the ~~$300 million~~Company approved an amended and restated certificate of ~~borrowings under the Revolving Credit Facility in May 2020.~~

incorporation which retired shares of class B-1 common stock.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Amneal Pharmaceuticals, Inc. (the "Company," "we," "us," or "our") is a pharmaceutical company specializing in developing, manufacturing, marketing and distributing high-value generic pharmaceutical products across a broad array of dosage forms and therapeutic areas, as well as branded products. We ~~were formed~~operate principally in the United States, India, and Ireland, and sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly.

The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Item 1A. Risk Factors in our 2020 Annual Report on ~~October 4, 2017,~~Form 10-K and under the ~~name Atlas Holdings, Inc. for the purpose of facilitating the combination (the "Combination") of Impax Laboratories, Inc. ("Impax") and Amneal Pharmaceuticals LLC ("Amneal"), which closed~~heading Cautionary Note Regarding Forward-Looking Statements included elsewhere in this Quarterly Report on ~~May 4, 2018.~~

Form 10-Q.

The following discussion and analysis for the three months ended March 31, ~~2020~~2021 should also be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements for the year ended December 31, ~~2019~~2020 included in our ~~2019~~2020 Annual Report on Form 10-K.

On January 31, 2020, we acquired a 65.1% controlling interest in both AvKARE Inc., a Tennessee corporation now a limited liability company (“AvKARE, LLC”), and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”). As a result of the AvKARE, LLC and R&S acquisitions (the “Acquisitions”), we now

Overview

We have three reportable ~~segments,~~segments: Generics, Specialty, and AvKARE.

Our Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical products, with a focus on products addressing central nervous system ("CNS") disorders, including migraine and Parkinson’s disease. Our portfolio of products includes Rytary®, an extended release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication. In addition to Rytary®, our promoted Specialty portfolio includes Zomig® (zolmitriptan) products, for the treatment of migraine headaches, which is sold under a license agreement with AstraZeneca U.K. Limited, Emverm® (mebendazole) 100 mg chewable tablets, for the treatment of pinworm, whipworm, common roundworm, common hookworm and American hookworm in single or mixed infections, and Unithroid® (levothyroxine sodium), for the treatment of hypothyroidism, which is sold under a license and distribution agreement with JSP.

For Specialty products, the majority of the product’s commercial value is usually realized during the period in which the product has market exclusivity. In the U.S. and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s sales.

Generics

Our Generics segment includes approximately 250 product families covering an extensive range of dosage forms and delivery systems, including both immediate and extended release oral solids, powders, liquids, sterile injectables, nasal sprays, inhalation and respiratory products, ophthalmics (which are sterile pharmaceutical preparations administered for ocular conditions), films, transdermal patches and topicals (which are creams or gels designed to administer pharmaceuticals locally through the skin). We focus on developing products with substantial barriers-to-entry resulting from complex drug formulations or manufacturing, or legal or regulatory challenges. Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results. The entrance into the market of additional competition generally has a negative impact on the volume and / or pricing of the affected products. Additionally, pricing is often affected by factors outside of the Company’s control.

Specialty

Our Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical products, with a focus on products addressing central nervous system ("CNS") disorders, including migraine and Parkinson’s disease. Our portfolio of products includes Rytary®, an extended release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication. In addition to Rytary®, our promoted Specialty portfolio includes Unithroid® (levothyroxine sodium), for the treatment of hypothyroidism, which is sold under a license and distribution agreement with Jerome Stevens Pharmaceuticals, Inc., Emverm® (mebendazole) 100 mg chewable tablets, for the treatment of pinworm, whipworm, common roundworm, common hookworm and American hookworm in single or mixed infections, and Zomig® (zolmitriptan) products, for the treatment of migraine headaches, which is sold under a license agreement with AstraZeneca U.K. Limited. We believe that we have the research, development and formulation expertise to develop branded products that will deliver significant improvements over existing therapies.

For Specialty products, the majority of the product’s commercial value is usually realized during the period in which the product has market exclusivity. In the U.S. when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s sales. We expect to lose market exclusivity on Zomig® Spray on May 29, 2021 due to patent expiration.

AvKARE

Our AvKARE segment 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 a wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and surgical products. 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 of America focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

The Pharmaceutical Industry

The pharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. For a more detailed explanation of our business and its risks, refer to our ~~2019~~2020 Annual Report on Form ~~10-K.~~10-K

,as supplemented by Part II, Item 1A “Risk Factors” of our subsequent Quarterly Reports on Form 10-Q.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of a novel strain of coronavirus (“COVID-19”) as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including imposing restrictions on movement and travel such as quarantines and shelter-in-place requirements, and restricting or prohibiting outright some or all commercial and business activity, including the manufacture and distribution of certain goods and the provision of non-essential services. These measures, though currently temporary in nature, may become more severe and continue indefinitely depending on the evolution of the outbreak.

~~The Company did not observe significant impacts on its business or results of operations for~~

We observed lost sales and some supply interruptions during the year ended December 31, 2020 in our New York, New Jersey and India manufacturing plants. Additionally, decreased influenza activity during the three months ended March 31, ~~2020 due~~2021, drove significantly lower sales volume and increased returns related to Oseltamivir as compared to the global emergence of COVID-19. However, during March and April 2020, as the infection rate of COVID-19 spread throughout New York and New Jersey, the governors of those states issued executive orders requiring residents, among other things,prior period.

While manufacturing has resumed to ~~remain at home with limited exceptions such as working at an essential business. Although as a pharmaceutical manufacturer Amneal is an essential business,~~around pre-COVID-19 levels, we may again experience ~~increased manufacturing and packaging delays~~supply chain constraints at our New York, ~~and~~ New Jersey, India or other facilities during ~~April and May 2020.~~subsequent waves of COVID-19 infections. These potential ~~manufacturing and packaging delays~~supply chain disruptions may significantly impact our ~~second quarter~~2021 results of operations and cash flows. ~~To mitigate any potential~~

overall market liquidity constraints, we borrowed $300 million under our revolving credit facility in March 2020 as a precautionary measure. As the financial markets stabilized following a period of high volatility due the COVID-19 pandemic, the Company repaid $200 million of the $300 million of borrowings under the Revolving Credit Facility in May 2020. (Refer to ~~Note 13.Debt,~~ ~~for further details). As noted in our 2019 Annual Report on Form 10-K, several~~Several of our key domestic manufacturing, packaging, and ~~R&D~~ facilities are located in New York and New Jersey, ~~the~~ two states with ~~the highest~~a high number of confirmed cases of COVID-19. ~~To offset any potential decreased second quarter output,~~Additionally, we ~~will increase production during the third~~have key international manufacturing and ~~fourth quarters, if necessary.~~

research and development facilities in India, a country with a high number of confirmed cases of COVID-19.

To the extent that the COVID-19 pandemic continues or worsens, national, state, local and ~~local~~international governments may impose additional restrictions or extend the restrictions already in place. The ~~continuing spread~~worsening of ~~COVID-19~~the pandemic and the related safety and business operating restrictions could result in a number of adverse impacts to our business, including, but not limited to, additional disruption to the economy and our customers, additional work restrictions, and supply chains being interrupted or slowed. Also, governments may impose other laws, regulations, or taxes that could adversely impact our business, financial condition, or results of operations. Further, depending on the extent to which our customers are affected, they could delay or reduce purchases of ~~services~~products we provide. The potential effects of the COVID-19 pandemic also could impact us in a number of other ways including, but not limited to, reductions to our profitability, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying amount of goodwill or other definite-lived assets.

We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by national, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers, and shareholders. ToUntil the ultimate extent and duration of the pandemic ~~worsens,~~is known, we cannot predict the ultimate effects itthe pandemic may have on our business, in particular with respect to demand for our ~~services,~~products, our strategy, and our prospects, the effects on our customers, or the impact on our financial results. ~~Refer to Part II,~~ ~~Item 1A "Risk Factors"~~ ~~of this Quarterly Report on Form 10-Q for further discussion of the potential impact of the COVID-19 pandemic on our business.~~

Results of Operations

Consolidated Results

The following table sets forth our summarized, consolidated results of operations for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):


	Three Months Ended March 31,
	2021		2020
Net revenue	$	493,105	$	498,533
Cost of goods sold	301,543		313,578
Cost of goods sold impairment charges	—		1,456
Gross profit	191,562		183,499
Selling, general and administrative	90,726		77,976
Research and development	48,182		36,379
In-process research and development impairment charges	—		960
Intellectual property legal development expenses	3,582		1,270
Acquisition, transaction-related and integration expenses	2,802		2,575
Charges related to legal matters, net	—		4,500
Restructuring and other charges	363		2,048
Operating income	45,907		57,791
Total other expense, net	(31,003)		(44,447)
Income before income taxes	14,904		13,344
Provision for (benefit from) income taxes	359		(108,173)
Net income	$	14,545	$	121,517

Net Revenue

Net revenue for the three months ended March 31, ~~2020 increased~~2021 decreased by ~~12%~~1%, or ~~$53~~$5 million, to ~~$499~~$493 million as compared to ~~$446~~$499 million for the three months ended March 31, ~~2019.~~2020. The ~~increase over~~decrease from the prior year ~~is primarily~~was attributable to ~~$58 million from the newly acquired AvKARE segment, $62 million from new product launches after March 31, 2019~~a decline in our Generics segment of $40 million, which was primarily due to a $23 million decline in Oseltamivir (generic Tamiflu®) sales from lower demand and ~~$11~~increased returns activity above historical levels due to decreased influenza activity during the COVID-19 pandemic and an increase in customer purchases for the three months ended March 31, 2020 at the onset of the COVID-19 pandemic. New products launched in 2020 and 2021 contributed revenue growth of $36 million, ~~primarily from volume increases~~which more than offset erosion in our base business. Offsetting the decline in Generic revenues was growth in AvKARE segment of $27 million, as the first quarter of 2021 included three months of sales as compared to two months in the prior year, and growth in our Specialty segment ~~which were partially offset by price erosion~~of $8 million, primarily due to growth in ~~our Generics segment~~demand for Rytary® and ~~a $15 million decline from the divestitures of our international businesses primarily in the U.K. and Germany.~~

Unithroid®.

Cost of Goods Sold and Gross Profit

Cost of goods sold, including impairment charges, decreased ~~13%~~4%, or ~~$48~~$13 million, to $302 million for the three months ended March 31, 2021 as compared to $315 million for the three months ended March 31, ~~2020 as compared to $363 million for the three months ended March 31, 2019.~~2020. The decrease in cost of goods sold was primarily attributable to a ~~$52~~decrease in revenue as noted above, a $1.5 million decrease in intangible asset impairments, ~~mainly in our Generics segment, a $36 million decrease in expenses related~~and gross margin improvement due to reduced material costs, better plant utilization as well as the ~~Levothyroxine transition agreement with Lannett Company ("Lannett")~~impact of 2020 and a $6 million decline associated with the divestitures of our international businesses primarily in the U.K. and Germany, which were partially offset by a $47 million increase associated with the Acquisitions.

~~Accordingly, gross~~2021 new product introductions.

Gross profit for the three months ended March 31, ~~2020~~2021 was ~~$183~~$192 million ~~(37%~~(39% of total net revenue) as compared to gross profit of ~~$83~~$183 million ~~(19%~~(37% of total net revenue) for the three months ended March 31, ~~2019.~~2020. Our gross profit as a percentage of net revenue increased compared to the prior year primarily as a result of the ~~$52 million decline in intangible impairment charges, as well as other~~ factors ~~described~~noted above.

Selling, General, and Administrative

Selling, ~~General,~~general, and ~~Administrative~~administrative (“SG&A”) expenses for the three months ended March 31, ~~2020~~2021 were ~~$78~~$91 million, as compared to ~~$84~~$78 million for the three months ended March 31, ~~2019.~~2020. The $6$13 million ~~decrease~~increase from the prior year was primarily due to ~~cost savings associated with our restructuring~~the AvKARE segment, as the first quarter of 2021 included three months’ of expenditures as compared to two months in the prior year, an increase in employee compensation, and ~~integration programs. These decreases~~an increase in indirect taxes. The increases were partially offset by ~~an $11 million increase~~a decrease in expenditures associated with in-person meetings and related expenses due to the ~~Acquisitions.~~

COVID-19 pandemic.

Research and Development

Research and development (“R&D”) expenses for the three months ended March 31, ~~2020~~2021 were ~~$36~~$48 million, as compared to ~~$54~~$36 million for the three months ended March 31, 2019. The $18 million decrease compared to the prior year is primarily attributable to cost savings in our Generics segment associated with the Company’s restructuring programs and the timing of expenses in 2020 due to delayed spending as a result of COVID-19.

~~In-Process Research and Development Impairment Charges~~

~~We recognized in-process research and development (“IPR&D”) impairment charges of $1 million in our Generics segment~~ for the three months ended March 31, 2020. The ~~charges are~~$12 million increase compared to the prior year was primarily attributable to an increased in-licensing and upfront milestone payments of $9 million to grow our Specialty and Generics pipelines, and increased project spend for ongoing project costs associated with ~~two products. One of the products experienced a delay in its estimated launch date~~IPX203 and ~~the other~~complex generic product ~~was canceled due to the withdrawal of our development partner.~~

~~We recognized IPR&D impairment charges for the three months ended March 31, 2019 of $23 million.~~ ~~The charges are primarily associated with two products in our Generics segment that were acquired as part of the Combination~~.

candidates.

Intellectual Property Legal Development Expense

Intellectual property legal development expenses include, but are not limited to, costs associated with formulation assessments, patent challenge opinions and strategy, and litigation expenses to defend our intellectual property. Intellectual property legal development expenses for the three months ended March 31, ~~2020~~2021 were $1$4 million as compared to $4$1 million for the three months ended March 31, ~~2019. These costs include, but are not limited~~2020. The increase in expenses from the prior year related to ~~formulation assessments, patent challenge opinions~~an increase in the number of individual cases and ~~strategy, and litigation expenses to defend the intellectual property.~~

corresponding litigation.

Acquisition, Transaction-Related and Integration Expenses

~~We recognized approximately $3 million of acquisition,~~

Acquisition, transaction-related and integration expenses were $3 million for both the three months ended March 31, ~~2020 as compared to $6 million for the three months ended~~2021 and March 31, ~~2019.~~

2020. Expenses for the three months ended March 31, ~~2020~~2021 were primarily related to the ~~Acquisitions. The decrease from~~acquisition of Kashiv Specialty Pharmaceuticals, LLC, which closed on April 2, 2021, and integration expenses related to the ~~prior year is~~businesses that comprise our AvKARE segment. For the three months ended March 31, 2020, acquisition, transaction-related and integration expenses were primarily related to ~~substantial completion~~the acquisition of ~~integration activities related~~the businesses that comprise our AvKARE segment. Refer to ~~the Combination.~~

Note 3. Acquisitions and Divestitures, for additional information on these acquisitions.

Charges Related to Legal Matters,

Net

There were no charges related to legal matters for the three months ended March 31, 2021. For the three months ended March 31, 2020, we recorded ~~charges~~a net charge of $5 million, ~~for commercial legal proceedings and claims,~~ approximately $3 million of which was recorded in our Generics segment and $2 million in our Specialty segment.

Restructuring and Other Charges

On July 10, 2019, we announced a plan to restructure our operations that is intended to reduce costs and optimize our organizational and manufacturing infrastructure. Pursuant to the restructuring plan as revised, we expect to reduce our headcount by approximately 300 to 350 by December 31, 2021, primarily by ~~ceasing~~closing our manufacturing ~~at our~~facility located in Hauppauge, ~~NY facility.~~

NY. Through March 31, 2021, the Company reduced headcount by 280 employees under this plan.

Restructuring and other charges were $0.4 million and $2 million ~~for~~during the three months ended March 31, 2021 and 2020, ~~and~~respectively. These charges primarily consisted of ~~charges associated with cash severance and other~~ the cost of benefits provided pursuant to our severance programs for former senior ~~executives.~~

~~Restructuring~~executives and ~~other charges~~management employees.

Other Expense, Net

Other expense, net was $31 million for the three months ended March 31, ~~2019 were $6 million and primarily consisted of charges of approximately $2 million for cash and other severance provided pursuant~~2021, as compared to ~~our severance programs for employees at our Hayward, CA facility and other facilities and $4 million for cash severance charges associated with the cost of benefits for former senior executives.~~

~~Other Expense, Net~~

~~Other expense, net was~~ $44 million for the three months ended March 31, ~~2020, as compared to $39 million for the three months ended March 31, 2019.~~2020. The ~~increase~~decrease of $5$13 million was primarily ~~attributable~~due to a $9$6 million ~~gain from the divestiture of our U.K. business in the prior year, partially offset by a $3 million decrease~~decline in interest expense ~~as reductions~~due to a reduction in interest rates, ~~offset increased borrowings.~~

as well as a $7 million favorable period over period impact of net foreign exchange gains and losses. The favorable net foreign exchange impact was primarily associated with the weakening of the Swiss franc relative to the U.S. dollar.

~~Benefit From~~Provision For (Benefit From) Income Taxes

For the three months ended March 31, 2021 and 2020, ~~and 2019, the Company's benefit~~our provision (benefit) for income taxes and effective tax rates were ~~$108~~$0.4 million and ~~(810.6%)~~2.4% and $8$(108) million and ~~6.3%~~(810.6)%, respectively. The ~~year over year change is~~income tax benefit for the three months ended March 31, 2020 was primarily ~~associated with the~~impacted by a $110 million ~~benefit from the~~ carryback of U.S. Federal ~~deferred tax assets~~net operating losses under the Coronavirus Aid, Relief and Economic Security Act ~~(the “CARES Act”~~("CARES Act")~~, which the Company expects to receive in cash in the year ending December 31, 2020.~~ . The CARES Act iswas an emergency economic stimulus package in response to the ~~coronavirus outbreak~~COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. For further details, refer to ~~These deferred tax assets had a 100% valuation allowance as of December 31, 2019.~~

Note 8. Income Taxes.

Net Income ~~(Loss)~~

We recognized net income for the three months ended March 31, ~~2020~~2021 of ~~$122~~$15 million as compared to net ~~loss~~income of ~~$125~~$122 million for the three months ended March 31, ~~2019.~~2020. The ~~year over year increase~~year-over-year decrease in net income of ~~$246~~$107 million ~~is primarily~~was attributable to the factors listed above, most notably the tax benefit from a ~~$100~~$110 million ~~favorable impact from income taxes, a $74 million decline~~carryback of ~~intangible asset impairment charges, a $36 million decrease in expenses related to~~U.S. Federal net operating losses under the Levothyroxine transition agreement with Lannett, and a $18 million decline in R&D expenses. These beneficial net income factors were partially offset by a $9 million decline related to a gain from sale of our U.K. businessCARES Act in the prior ~~year~~

year.

Generics

The following table sets forth results of operations for our Generics segment for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):


	Three Months Ended March 31,						Three Months Ended March 31,
	2020		2019				2021		2020
Net revenue	$	352,586	$	382,477		Net revenue	$	312,508	$	352,586
Cost of goods sold		218,865		278,878		Cost of goods sold	185,298		218,865
Cost of goods sold impairment charges		1,456		53,297		Cost of goods sold impairment charges	—		1,456
Gross profit		132,265		50,302		Gross profit	127,210		132,265
Selling, general and administrative		16,623		24,148		Selling, general and administrative	18,762		16,623
Research and development		29,034		50,151		Research and development	36,117		29,034
In-process research and development impairment charges		960		22,787		In-process research and development impairment charges	—		960
Charges related to legal matters		2,500		—
Intellectual property legal development expenses		1,265		3,121		Intellectual property legal development expenses	3,582		1,265
Other operating expense		46		4,678
Operating income (loss)	$	81,837	$	(54,583	)
Charges related to legal matters, net						Charges related to legal matters, net	—		2,500
Restructuring and other charges						Restructuring and other charges	80		46
Operating income						Operating income	$	68,669	$	81,837

Net Revenue

Generics net revenue was ~~$353~~$313 million for the three months ended March 31, ~~2020,~~2021, a decrease of ~~$29~~$40 million or 8%11% when compared with the same period in ~~2019.~~2020. The ~~year over year~~year-over-year decrease was primarily ~~driven by price~~due to a $23 million 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 and an increase in customer purchases for the three months ended March 31, 2020 at the onset of the COVID-19 pandemic. Additionally, products launched in 2020 and 2021 contributed revenue growth of $36 million, which more than offset erosion in our existing business primarily from Levothyroxine and Diclofenac Gel generic competition, a $13 million decline from the reclassification of Oxymorphone to our Specialty segment, and a $15 million decline from the divestitures of our international businesses primarily in the U.K. and Germany, partially offset by $62 million from new product launches after March 31, 2019, which included EluRyng and Sucralfate Oral Suspension.

base business.

Cost of Goods Sold and Gross Profit

Generics cost of goods sold, including impairment charges, for the three months ended March 31, ~~2020~~2021 was ~~$220~~$185 million, a decrease of ~~34%~~16% or ~~$112~~$35 million compared to the three months ended March 31, ~~2019.~~2020. The ~~year over year~~ decrease ~~was primarily associated with a $52 million decline~~ in ~~intangible asset impairment charges. Cost~~cost of goods sold was ~~also favorably impacted by~~primarily attributable to a ~~$36~~decrease in sales as noted above, a $1.5 million ~~decline of expenses~~decrease in intangible asset impairments, and gross margin improvement. The increase in gross margin was primarily related to 2020 and 2021 new product launches, the ~~Levothyroxine transition agreement with Lannett~~impact of reducing material cost components by $12 million versus the prior year period, and ~~a $6 million decline associated with the divestitures of our international businesses primarily in the U.K~~better plant utilization and ~~Germany.~~

product mix.

Generics gross profit for the three months ended March 31, ~~2020~~2021 was ~~$132~~$127 million ~~(38%~~(41% of ~~Generics~~ net revenue) as compared to gross profit of ~~$50~~$132 million ~~(13%~~(38% of ~~Generics~~ net revenue) for the three months ended March 31, ~~2019. Our Generics gross profit as a percentage of sales increased compared to the prior year period primarily~~2020 as a result of the ~~$52 million decline in impairment charges and the other~~ factors described above.

Selling, General, and Administrative

Generics SG&A expense for the three months ended March 31, ~~2020~~2021 was ~~$17~~$19 million, as compared to $24 million for the three months ended March 31, 2019. The year over year decrease was primarily associated with cost savings initiatives associated with our restructuring and integration programs and the timing of expenses in 2020 due to delayed spending as a result of COVID-19.

~~Research and Development~~

Generics research and development expenses for the three months ended March 31, 2020 was $29 million, a decrease of 42% or $21 million compared to the three months ended March 31, 2019. The year over year decrease is primarily associated with cost savings associated with our restructuring programs.

~~In-Process Research and Development Impairment Charges~~

~~We recognized IPR&D impairment charges of $1~~$17 million for the three months ended March 31, 2020. The ~~charges are~~$2 million or 13% year-over-year increase was primarily attributed to increased employee compensation and an increase in indirect taxes. The overall increase was partially offset by a decrease in expenditures associated with ~~two products. One of the products experienced a delay in its estimated launch date~~in-person meetings and ~~the other product was canceled~~related expenses due to the ~~withdrawal of our development partner.~~

~~We recognized IPR&D impairment charges for the three months ended March 31, 2019 of $23 million.~~ COVID-19 pandemic.

~~The charges are primarily associated with two products in our~~

Research and Development

Generics ~~segment that were acquired as part of the Combination~~.

~~Charges Related to Legal Matters~~

~~For the three months ended March 31, 2020, we recorded charges of approximately $3 million for commercial legal claims.~~

~~Intellectual Property Legal Development Expenses~~

~~Generics intellectual property legal development~~R&D expenses for the three months ended March 31, ~~2020 were $1~~2021 was $36 million, asan increase of 24% or $7 million compared to ~~$3 million for~~ the ~~prior year period. These costs~~three months ended March 31, 2020. The year-over-year increase was primarily associated with increased project spend on complex generics and success-based milestone achievements on certain projects.

Intellectual Property Legal Development Expenses

~~Other Operating Expenses~~

Intellectual property legal development expenses for the three months ended March 31, 2021 were $4 million as compared to $1 million for the three months ended March 31, 2020. The increase in expenses from the prior year relates to the number of individual cases and corresponding litigation.

Charges Related to Legal Matters, Net

There were no charges related to legal matters for the three months ended March 31, 2021. For the three months ended March 31, 2020, ~~other operating expenses were immaterial. For the three months ended March 31, 2019,~~ we recorded $5a net charge of $3 million ~~of other operating expenses.~~ ~~These expenses were primarily attributable to integration expenses associated with the Combination~~.

for commercial legal claims.

Specialty

The following table sets forth results of operations for our Specialty segment for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):


	Three Months Ended March 31,					Three Months Ended March 31,
	2020		2019			2021		2020
Net revenue	$	87,977	$	63,643	Net revenue	$	95,931	$	87,977
Cost of goods sold		47,818		30,865	Cost of goods sold	48,198		47,818

Gross profit		40,159		32,778	Gross profit	47,733		40,159
Selling, general and administrative		20,942		21,327	Selling, general and administrative	19,881		20,942
Research and development		7,345		3,707	Research and development	12,065		7,345
Charges related legal matters		2,000		—

Intellectual property legal development expenses		5		1,045	Intellectual property legal development expenses	—		5
Other operating expense		—		2,062

Charges related to legal matters, net					Charges related to legal matters, net	—		2,000

Operating income	$	9,867	$	4,637	Operating income	$	15,787	$	9,867

Net Revenue

Specialty net revenue for the three months ended March 31, ~~2020~~2021 was ~~$88~~$96 million, an increase of ~~38%~~$8 million, or ~~$24 million~~9%, compared to the three months ended March 31, ~~2019. The increase from the prior year period was primarily~~2020 due to ~~$13 million from the reclassification of Oxymorphone from our Generics segment as well as an $8 million increase~~growth in ~~our existing business primarily associated with volume increases in Rytary~~demand for Rytary® and ~~Unithroid.~~

Unithroid®.

Cost of Goods Sold and Gross Profit

Specialty cost of goods sold for of both the three months ended March 31, 2021 and 2020 was $48 million, an increase of $17 million or 55% compared to the three months ended March 31, 2019. The increase from the prior year period was primarily due to the reclassification of Oxymorphone, $9 million of incremental royalty expense associated with the reclassification of Oxymorphone and $5 million of incremental amortization expense, as well as a volume increase in our existing business.

~~Accordingly,~~ million.

Specialty gross profit for the three months ended March 31, ~~2020~~2021 was ~~$40~~$48 million ~~(46%~~(50% of ~~Specialty~~ net revenue) as compared to gross profit of ~~$33~~$40 million ~~(52%~~(46% of ~~Specialty~~ net revenue) for the three months ended March 31, ~~2019.~~

2020. The increase in gross profit primarily related to the mix of revenues, including the impact of non-promoted products. The increase in gross margin was due to growth in higher margin products offsetting declines in Zomig® nasal spray, which has a higher cost structure than the overall Specialty portfolio.

Selling, General, and Administrative

Specialty SG&A expense ~~of $21~~was $20 million for the three months ended March 31, ~~2020~~2021, a decrease of $1 million or 5% compared to the three months ended March 31, 2020. The decrease was ~~flat~~primarily driven by a decline associated with in-person

meetings and marketing expenses due to the COVID-19 pandemic, which was partially offset by an increase in indirect taxes and payroll-related expenses, including expenses associated with the ~~prior year.~~

expansion of our sales force.

Research and Development

Specialty ~~research and development~~R&D expenses for the three months ended March 31, ~~2020~~2021 were $7$12 million, as compared to $4$7 million for the three months ended March 31, ~~2019.~~2020. The $3$5 million increase from the prior year period was primarily due to ~~a $2 million milestone achievement of one of~~licensing and upfront milestones incurred to grow our ~~development partners~~.

Specialty pipeline.

Charges Related to Legal Matters,

Net

There were no charges related to legal matters for the three months ended March 31, 2021. For the three months ended March 31, 2020, weSpecialty recorded a charge of $2 million for commercial legal proceedings.

~~Other Operating Expenses~~

~~For the three months ended March 31, 2019, other operating expenses of $2 million were primarily attributable to integration expenses associated with the Combination (none in 2020).~~

AvKARE

The following table sets forth results of operations for our AvKARE segment for the three months ended March 31, 2021 and 2020 (in thousands):


	Three Months Ended March 31,					Three Months Ended March 31,
	2020		2019			2021		2020
Net revenue	$	57,970	$	—	Net revenue	$	84,666	$	57,970
Cost of goods sold		46,895		—	Cost of goods sold	68,047		46,895
Gross profit		11,075		—	Gross profit	16,619		11,075
Selling, general and administrative		10,788		—	Selling, general and administrative	13,704		10,788
Acquisition, transaction-related and integration expenses					Acquisition, transaction-related and integration expenses	931		—
Operating income	$	287	$	—	Operating income	$	1,984	$	287

~~Our AvKARE segment consists~~

We completed the acquisitions of the businesses ~~we acquired in the Acquisitions~~that comprise our AvKARE segment on on January 31, 2020. ~~Prior~~As a result, the increase in results of operations for the AvKARE segment are primarily due to ~~the Acquisitions, we did not have an AvKARE segment.~~three months of activity in 2021 as compared to two months of activity in 2020. Refer to Note 3. Acquisitions and Divestitures.

, for additional information on the acquisitions.

Liquidity and Capital Resources

Our primary source of liquidity is cash generated from operations, available cash and borrowings under debt financing arrangements, including ~~$394~~$435 million of available ~~additional~~ capacity on our ~~Revolving Credit Facility~~revolving credit facility as of ~~May 11,~~March 31, 2021. Refer to Note 17. Debt in our 2020 ~~as defined below.~~ Annual Report on Form 10-K for additional information.We believe these sources are sufficient to fund our planned operations, meet our interest and contractual obligations and provide sufficient liquidity over the next 12 ~~months.~~months from the date of filing of this Form 10-Q. However, our ability to satisfy our working capital requirements and debt obligations will depend upon economic conditions, the impact of the COVID-19 pandemic, and demand for our products, which are factors that may be out of our control.

Our primary uses of capital resources are to fund operating activities, including research and development expenses associated with new product filings, and pharmaceutical product manufacturing expenses, license payments, ~~and~~ spending on production facility expansions and capital equipment ~~items.~~

~~On March 27, 2020, President Trump signed into law~~items, and acquisitions. As the ~~CARES Act. The CARES Act is~~impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to sources of liquidity, particularly our cash flows from operations, and financial condition. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

We estimate that we will invest approximately $60 million to $70 million during 2021 for capital expenditures to support and grow our existing operations, primarily related to investments in manufacturing equipment, information technology and facilities. In addition, we closed on our acquisition of 98% of KSP on April 2, 2021. Under the terms of the acquisition, we paid an ~~emergency economic stimulus package in response~~upfront purchase price of $70 million with cash on hand at the closing and we expect to ~~the coronavirus outbreak which, among other things, includes provisions relating to income~~make a cash payment of $30 million on January 11, 2022. See Note. 3 Acquisitions and ~~non-income-based tax laws. We anticipate receiving approximately $110 million in cash from U.S. federal tax refunds associated with the CARES Act (refer~~Divestitures for additional information.

Refer to Note 8.17~~Income Taxes~~). ~~Other non-income-based tax provisions include deferral~~Debt in our 2020 Annual Report on Form 10-K for detailed information, including definitions, of the employer share of Social Security payroll taxes due from the CARES Act date of enactment through December 31, 2020, and a potential 50% credit on qualified wages against employment taxes each quarter with any excess credits eligible for refunds The Company continues to carefully analyze eligibility and application of both the income tax and non-income-based tax provisions.

~~Over the next 12 months, we~~our loans. We will make substantial payments for monthly interest and quarterly principal amounts due on our ~~term loans, Revolving Credit Facility, severance~~Term Loan and ~~capital expenditures. We~~Rondo Term Loan. Related to our Term Loan, we were required to calculate the amount of excess cash flows based on our results for the year ended December 31, 2020. As a result, we made a payment of $14 million in March 2021 to satisfy the excess cash flow requirements, in addition to our normal principal payments. Accordingly, we expect ~~that we will continue~~ to ~~have sufficient cash resources to support our debt service~~make $41 million in principal payments and ~~all other financial obligations over~~make interest payment payments totaling $112 million during 2021 related to our Term Loan. Related to our Rondo Term Loan, we expect to make $9 million in principal payments and make interest payments totaling $6 million during 2021. Additionally, we fully repaid the ~~next 12 months.~~

Short-Term Sellers Note of $1 million during February 2021.

We are party to a tax receivable agreement ("TRA") that requires us to make cash payments to APHC Holdings LLC (formerly known as Amneal Holdings LLC) ("Holdings") in respect of certain tax benefits that we may realize or may be deemed to realize as a result of ~~redemptions~~sales or exchanges of Amneal common units by Holdings. The timing and amount of any payments under the TRA will also vary, depending upon a number of factors including the timing and number of Amneal common units sold or exchanged for our class A Common Stock, the price of our class A Common Stock on the date of sale or exchange, the timing and amount of our taxable income, and the tax rate in effect at the time of realization of our taxable income. The tax receivable agreement also requires that we make an accelerated payment to Holdings equal to the present value of all future payments due under the agreement upon certain change of control and similar transactions. ~~The timing~~Further sales or exchanges occurring subsequent to March 31, 2021 could result in future Amneal tax deductions and obligations to pay 85% of ~~any payments under~~such benefits to the ~~tax receivable agreement will vary depending upon a number~~holders of ~~factors, but payments~~Amneal common units. These obligations could be ~~substantial,~~incremental to and ~~could be in excess~~substantially larger than the approximate $206 million contingent liability as of ~~the tax savings that we ultimately realize. Because~~March 31, 2021 (refer to Note 8.Income Taxes). As a result of the foregoing, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity. For further details, ~~see~~ refer to Item 1A. Risk Factors and Note 8. Income Taxes in our ~~2019~~2020 Annual Report on Form 10-K.

In addition, pursuant to the limited liability operating agreement of Amneal, as amended, in connection with any tax period, ~~Amneal~~we will be required to make distributions to ~~its~~Amneal's members, on a pro rata basis in proportion to the number of Amneal Common Units held by each member, of cash until each member (other than ~~the Company)~~Amneal) has received an amount at least equal to its assumed tax liability and ~~the Company~~Amneal has received an amount sufficient to enable it to timely satisfy all of its U.S. federal, state and local and non-U.S. tax liabilities, and meet its obligations pursuant to the tax receivable agreement. ~~For~~We did not make any tax cash distributions during the three months ended March 31, ~~2020, no~~2021. During April 2021, we made a tax ~~distributions were made~~distribution of $9 million to ~~Holdings.~~

Amneal's members.

At March 31, ~~2020,~~2021, our cash and cash equivalents consist of cash on deposit and highly liquid investments. A portion of our cash flows are derived outside the United States. As a result, we are subject to market risk associated with changes in foreign exchange rates. We maintain cash balances at both U.S. based and foreign country based commercial banks. At various times during the year, our cash balances held in the United States may exceed amounts that are insured by the Federal Deposit Insurance Corporation (FDIC). We make our investments in accordance with our investment policy. The primary objectives of our investment policy are liquidity and safety of principal.

Cash Flows

(in thousands)


	Three Months Ended March 31,							Three Months Ended March 31,
	2020			2019				2021		2020
Cash provided by (used in):							Cash provided by (used in):
Operating activities	$	49,026		$	(108,410	)	Operating activities	$	148,128	$	49,026
Investing activities		(262,042	)		(21,466	)	Investing activities	(12,693)		(262,042)
Financing activities		467,979			(21,864	)	Financing activities	(26,149)		467,979
Effect of exchange rate changes on cash		(860	)		(296	)	Effect of exchange rate changes on cash	(593)		(860)
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	254,103		$	(152,036	)
Net increase in cash, cash equivalents, and restricted cash							Net increase in cash, cash equivalents, and restricted cash	$	108,693	$	254,103

Cash Flows from Operating Activities

Net cash provided by operating activities was $148 million for the three months ended March 31, 2021 compared to $49 million for the three months ended March 31, ~~2020 compared~~2020. The improvement over the prior year was primarily attributed to ~~net~~favorable cash collections on trade accounts receivable and a favorable impact from prepaid expenses and other current assets, partially offset by an unfavorable impact from payments of accounts payable and accrued expenses, and inventories.

Cash Flows from Investing Activities

Net cash used in ~~operating~~investing activities for the three months ended March 31, 2021 was $13 million as compared to $262 million in the prior year. The change in cash used in investing activities for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily related to payments made for the acquisitions of ~~$108~~the businesses comprising our AvKARE segment in the prior year, which was partially offset by an increase in cash payments for purchases of property, plant and equipment. Refer to Note 3. Acquisitions and Divestitures, for additional information on the acquisitions.

Cash Flows from Financing Activities

Net cash used in financing activities was $26 million for the three months ended March 31, 2019. The change was primarily attributed to favorable timing impacts from the collections of trade receivables and payments of accounts payable and accrued expenses, and a decrease in payments of employee separation benefits and interest, which were partially offset by an unfavorable impact from income taxes paid.

~~Cash Flows from Investing Activities~~

~~The increase in cash used in investing activities of $241 million for the three months ended March 31, 2020~~2021 compared to ~~the three months ended March 31, 2019, was primarily related to an increase in cash paid for the Acquisitions, partially offset by a decrease in purchases of property, plant and equipment.~~

~~Cash Flows from Financing Activities~~

~~Net~~net cash provided by financing activities ~~was~~of $468 million for the three months ended March 31, ~~2020 compared to net cash used by financing activities of $22 million for the three months ended March 31, 2019.~~2020. The change was primarily attributable to ~~the net proceeds from~~ a $300 million borrowing on our Revolving Credit Facility to mitigate the uncertainty surrounding overall market liquidity due to the COVID-19 pandemic and net proceeds from a $180 million term loan associated with the acquisitions of the businesses comprising our AvKARE segment, both in the prior year, which were partially offset by an increase in principal payments related to debt and financing leases. Refer to Note 3. Acquisitions and ~~a decrease in tax distributions to non-controlling interests.~~

~~As the impact of the COVID-19 pandemic~~Divestitures, for additional information on the ~~economy and~~acquisitions. Refer to Note 17. Debt in our ~~operations evolves, we will continue to assess~~2020 Annual Report on Form 10-K for detailed information about our ~~liquidity needs. A continued worldwide disruption could materially affect our future access to sources~~indebtedness, including definitions of liquidity, particularly our cash flows from operations, and financial condition. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

terms.

Commitments and Contractual Obligations

The contractual obligations of the Company are set forth in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s ~~2019~~2020 Annual Report on Form 10-K. Other than the contractual obligations noted below, there have been no material changes to the disclosure presented in our ~~2019~~2020 Annual Report on Form 10-K.

Payments Due by Period (in thousands)

Contractual Obligations

Total

Less Than
1 Year

1-3 Years

3-5 Years

More Than
5 Years

Rondo Term Loan ⁽¹⁾

$
180,000

$
6,750

$
18,000

$
18,000

$
137,250

Revolving Credit Facility ⁽²⁾

300,000

300,000

—

—

—

Interest payments on Rondo Term Loan ⁽³⁾

36,507

6,338

15,651

13,966

552

~~(1)~~

~~Rondo Term loan relates to the Acquisitions.~~

~~(2)~~

~~Borrowings under the Company’s Revolving Credit Facility provide liquidity to mitigate the uncertainty surrounding overall market liquidity due to COVID-19.~~


	Payments Due by Period
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Kashiv Specialty Pharmaceuticals, LLC acquisition	$	100,000	$	70,000	$	30,000	$	—	$	—

~~(3)~~

~~Interest on the Rondo Term Loan was calculated based on the applicable rate at March 31, 2020.~~

The foregoing table does not include the $45 million of aggregate principal and the related interest due on the long-term promissory notes (“Sellers Notes”) and the short-term promissory note (“Short-Term Sellers Note”) issued in connection with the Acquisition because of the uncertainty as to when those amounts will be repaid. Refer to ~~the section~~ ~~Acquisition Financing – Notes Payable-Related Party~~Note 3. Acquisitions and Divestitures ~~below~~ for additional information. ~~The foregoing table also does not include interest due on the Revolving Credit Facility drawn in connection with COVID-19 because of uncertainty as to when the amount will be repaid.~~

~~Levothyroxine License and Supply Agreement; Transition Agreement~~

On August 16, 2018, the Company entered into a license and supply agreement with Jerome Stevens Pharmaceuticals, Inc. ("JSP") for Levothyroxine. This agreement designated the Company as JSP's exclusive commercial partner for Levothyroxine in the U.S. market for a 10-year term commencing on March 22, 2019. Under this license and supply agreement with JSP, the Company accrued the up-front license payment of $50 million on March 22, 2019, which was paid in April 2019. The agreement also provides for the Company to pay a profit share to JSP based on net profits of the Company's sales of Levothyroxine, after considering product costs.

On November 9, 2018, the Company entered into a transition agreement ("Transition Agreement") with Lannett and JSP. Under the terms of the Transition Agreement, the Company assumed the distribution and marketing of Levothyroxine from Lannett beginning December 1, 2018 through March 22, 2019, ahead of the commencement date of the license and supply agreement with JSP described above.

In accordance with the terms of the Transition Agreement, the Company made $47 million of non-refundable payments to Lannett. For the three months ended March 31, 2019, $37 million (none in 2020) were expensed to cost of goods sold, as the Company sold Levothyroxine. As of December 31, 2018, the Company had a $4 million transition contract liability, which was fully settled in February 2019.

Additionally, during the year ended December 31, 2019, the Company recorded $1 million in cost of sales related to reimbursement due to Lannett for certain of its unsold inventory at the end of the Transition Period, which was fully settled in March 2020.

~~Outstanding Debt Obligations~~

~~Senior Secured Credit Facilities~~

On May 4, 2018 we entered into a senior credit agreement that provided a term loan (“Term Loan”) with a principal amount of $2.7 billion and an asset backed revolving credit facility (“Revolving Credit Facility”) under which loans and letters of credit up to a principal amount of $500 million, on which $394 million are available (principal amount of up to $25 million is available for letters of credit) (collectively, the "Senior Secured Credit Facilities"). The Term Loan is repayable in equal quarterly installments at a rate of 1.00% or the original principal amount annually, with the balance payable at maturity on May 4, 2025. The Term Loan bears a variable annual interest rate, which is one-month LIBOR plus 3.5% at March 31, 2020. The Revolving Credit Facility bears an annual interest rate of one-month LIBOR plus 1.25% at March 31, 2020 and matures on May 4, 2023. The annual interest rate for the Revolving Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the average historical excess availability.

The proceeds of any loans made under the Senior Secured Credit Facilities can be used for capital expenditures, acquisitions, working capital needs and other general purposes, subject to covenants as described below. We pay a commitment fee based on the average daily unused amount of the Revolving Credit Facility at a rate based on average historical excess availability, between 0.25% and 0.375% per annum. At March 31, 2020, the Revolving Credit Facility commitment fee rate is 0.375% per annum.

During March 2020, as a precautionary measure to mitigate the uncertainty surrounding overall market liquidity due to COVID-19, we borrowed $300 million on the Revolving Credit Facility all of which is outstanding at March 31, 2020. During May 2020, $200 million was repaid.

~~Acquisition Financing – Revolving Credit and Term Loan Agreement~~

On January 31, 2020, in connection with the Acquisitions, Rondo Intermediate Holdings, LLC (“Rondo Holdings”), a wholly-owned subsidiary of Rondo, entered into a revolving credit and term loan agreement (“Rondo Credit Facility”) that provided a term loan ("Rondo Term Loan") with a principal amount of $180 million and a revolving credit facility (“Rondo Revolving Credit Facility”) which loans up to a principal amount of $30 million. The Rondo Term Loan is repayable in equal quarterly installments at a rate of 5.0% of the original principal amount annually, with the balance payable at maturity on January 31, 2025. The Rondo Credit Facility bears a variable annual interest rate, which is one-month LIBOR plus 3.0% at March 31, 2020 and matures on January 31, 2025. The annual interest rate for borrowing under the Rondo Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the total net leverage ratio, as defined in that agreement. At March 31, 2020, the Company had no outstanding borrowings under the Rondo Revolving Credit Facility.

~~Acquisition Financing – Notes Payable-Related Party~~

The Sellers Notes with a stated principal amount of $44 million and the Short-Term Sellers Note with a stated principal amount of $1 million were issued by Rondo or its subsidiary, Rondo Top Holdings, LLC, on January 31, 2020, the closing date of the Acquisitions. The Sellers Notes are unsecured and accrue interest at a rate of 5% per annum, not compounded, until June 30, 2025. The Sellers Notes are subject to prepayment at the option of Rondo, as the obligor, without premium or penalty. Mandatory payment of the outstanding principal and interest is due on June 30, 2025 if certain financial targets are achieved, the borrowers’ cash flows are sufficient (as defined in the Sellers Notes) and repayment is not prohibited by senior debt. If repayment of all outstanding principal and accrued interest on the Sellers Notes is not made on June 30, 2025, the requirements for repayment are revisited on June 30 of each subsequent year until all principal and accrued interest on the Sellers Notes are satisfied no later than January 31, 2030 or earlier, upon a change in control. The Short-Term Sellers Note is also unsecured and accrues interest at a rate of 1.6% and is due on January 31, 2020.

The Sellers Notes were recorded at a fair value of $35 million, which was estimated using the Monte-Carlo simulation approach under the option pricing framework. The Short-Term Sellers Note of $1 million was recorded at the stated principal amount of $1 million, which approximates fair value. The $9 million discount on the Sellers Notes will be amortized to interest expense using the effective interest method from January 31, 2020 to June 30, 2025 as the carrying value of the Sellers Notes will accrete to the stated principal amount of $44 million.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, ~~2020.~~

2021.

Critical Accounting Policies

For a discussion of the Company’s critical accounting policies, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2019~~2020 Annual Report on Form 10-K. There have been no material changes to the ~~disclosure~~disclosures presented in our ~~2019~~2020 Annual Report on Form 10-K.

Recently Issued Accounting Standards

Recently issued accounting standards are discussed in Note 2. Summary of Significant Accounting Policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has not been any material change in our assessment of market risk as set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in our ~~2019~~2020 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures ~~as defined in Rule 13a-15(e) of the Exchange Act,~~ were effective as of March 31, ~~2020 at the reasonable assurance level.~~

2021.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, ~~2020,~~2021, there were no changes in ~~the Company’s~~our internal control over financial reporting ~~(as defined in Rule 13a-15(f) of the Exchange Act)~~ which materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Limitations on the Effectiveness of Controls

~~Systems of~~

Management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our system of internal ~~controls~~control over financial reporting will prevent or detect all errors and ~~their associated policies and procedures,~~all fraud. A control system, no matter how well ~~conceived and~~designed or operated, ~~are designed to~~can provide aonly reasonable, but not an absolute, ~~level of~~ assurance that the objectives of the system of internal control are ~~achieved. Further, the~~met. The design of aour control system ~~must be balanced against~~reflects the fact that there are resource constraints, and ~~therefore~~that the benefits of ~~controls~~such control system must be considered relative to their costs. ~~Given~~Further, because of the inherent limitations in all control systems, ~~of controls,~~ no evaluation of controls can provide absolute assurance that all control ~~issues~~failures and instances of fraud, if any, within ~~a company~~the Company have been detected. These inherent limitations include the realities that judgments in ~~decision making~~decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the ~~individual~~intentional acts of ~~some persons,~~individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also is based in part ~~upon~~on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any ~~design~~particular control will always succeed in achieving its ~~stated goals~~objective under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Accordingly, given the inherent limitations in a cost-effective system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected. Our disclosure controls and procedures are designed to provide a reasonable assurance of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures.

conditions.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

Information pertaining to legal proceedings can be found in Note ~~17.~~14. Commitments and Contingencies and is incorporated by reference herein.

Item 1A. Risk Factors

~~Other than as set forth below, there~~

There have been no material changes to the disclosures presented in our ~~2019~~2020 Annual Report on Form 10-K under Item 1A. Risk Factors.

~~The spread of the novel coronavirus (“COVID-19”) and other adverse public health developments could adversely affect our business and results of operations.~~

Our business and results of operations could be adversely affected by the COVID-19 outbreak. In particular, the continued global spread of COVID-19 could adversely impact the Company's operations, including, among other things, its manufacturing operations, supply chain, sales and marketing and clinical trial operations. Any of these factors could adversely affect the Company's business, operating results or financial condition. The United States and China, two countries particularly hard hit by the outbreak, represent vital aspects of our direct and indirect supply chain and the United States is the largest end market for our products, representing the geographic source of almost our entire 2019 net revenue. We have taken precautionary measures intended to help minimize the risk of the virus to our employees, including requiring non-production employees to work remotely, suspending all non-essential travel worldwide, and restricting or prohibiting attendance at industry events and in-person work-related meetings. While these measures are temporary, they may continue until the outbreak is contained. The spread of COVID-19 could also negatively affect the operations of the third parties with whom we do business, including our raw material providers, aspects of our supply chain and our development, collaboration and commercial partners, for the same or different reasons that it is impacting our business directly. We expect the foregoing and other unanticipated challenges will cause delays or disruptions in the manufacture, supply and availability of our products, particularly those in New York and New Jersey and more generally will make it more difficult to operate our business.

The spread of COVID-19 could also adversely affect our clinical trial operations and other R&D activities in the United States and elsewhere, including our ability to recruit and retain volunteers, principal investigators and site staff who, as patients and healthcare providers, may have heightened exposure risks and sensitivities to COVID-19. Further, some patients may be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services or may become infected with COVID-19 themselves, any of which would delay our ability to conduct clinical trials or release clinical trial results. COVID-19 may also affect employees of third-party contract research organizations that we rely upon to carry out our clinical trials, which could result in inefficiencies due to reductions in staff and disruptions to work environments. The outbreak could impact the day-to-day operations of the FDA and other health authorities in their ability to respond to non-emergency matters, which could delay reviews and approvals of product candidates.

~~The continued spread of COVID-19 has adversely affected many industries as well as the~~ economies and financial markets of many countries, including the United States and China, resulting in a significant deceleration of economic activity. This slowdown has reduced production, decreased the level of trade, and led to ~~widespread corporate downsizing, causing a sharp increase in unemployment. I~~n recent weeks, we have also seen significant disruption of and extreme volatility in the global capital markets, which could increase the cost of, or entirely restrict access to, capital. This volatility and uncertainty have adversely affected our stock price and may continue to do so. The impact of this outbreak on the U.S., Chinese and world economies is uncertain ~~and, unless the outbreak is contained, these adverse impacts could worsen, impacting all segments of the global economy, and result in a significant recession or worse.~~

Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of any responses taken on a local, national and global level. Infections may become more widespread and that could accelerate or magnify one or more of the risks described above. While we expect the coronavirus outbreak and related events will have a negative effect on our business, the full extent and scope of the impact on national, regional and global markets and economies, and therefore our business and industry, is highly uncertain and cannot be predicted. Accordingly, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, any of which could have a material adverse impact on our business and our results of operation and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~None.~~

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit No.		Description of Document

~~10.1~~ 3.1		~~Separation Agreement between Todd Branning,~~Second Amended and Restated Certificate of Incorporation of Amneal Pharmaceuticals, Inc. ~~and Amneal Pharmaceuticals LLC, dated~~adopted as of ~~March 11, 2020 †~~May 5, 2021.*

~~10.2~~ 10.1		Employment Agreement by and among Amneal Pharmaceuticals, ~~LLC, Amneal Pharmaceuticals,~~ Inc. and ~~David Buchen,~~Joseph Todisco , dated as of ~~December 28, 2018.~~ July 29, 2020.†*

~~10.3~~ 10.2		~~Separation Agreement between David Buchen, Amneal Pharmaceuticals, Inc. and Amneal Pharmaceuticals LLC, dated as of August 2, 2019.~~†

~~10.4~~	~~First Amendment to Separation Agreement between David Buchen, Amneal Pharmaceuticals, Inc. and Amneal Pharmaceuticals LLC, dated as of November 4, 2019. †~~

~~10.5~~	Employment Agreement ~~dated March 11, 2020,~~ by and among Amneal Pharmaceuticals, ~~LLC, Amneal Pharmaceuticals,~~ Inc. and ~~Anastasios (Tasos) G. Konidaris (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 12, 2020).†~~

~~10.6~~	~~Form of Amneal Pharmaceuticals, Inc. 2018 Incentive Plan Performance Restricted Stock Unit Grant Notice and Performance Restricted Stock Unit Agreement. †~~

~~10.7~~	~~Amended and Restated Operating Agreement of Rondo Partners, LLC(incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, filed on February 3, 2020).~~

~~10.8~~	~~Revolving Credit and Term Loan Agreement,~~Nikita Shah, dated as of January 31, 2020, by and among Rondo Intermediate Holdings and LLC and Rondo Holdings, LLC, the lenders from time to time party thereto, and Trust Bank, as Administrative Agent (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K, filed on February 3, 2020)July 29, 2020. †*.

31.1		Certification of the Co - Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~200 2.*.

31.2		Certification of the Co - Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~200 2.*.

31.3		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~200 2.*.

32.1		Certification of the Co - Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2		Certification of the Co - Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.3		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

~~101~~

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020~~2021 formatted in inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for each of the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, (ii) Consolidated Statements of Comprehensive Income ~~(Loss)~~ for each of the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, (iii) Consolidated Balance Sheets as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, (iv) Consolidated Statements of Cash Flows for ~~each of~~ the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, (v) Consolidated Statements of Changes in Stockholders' Equity for each of the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 and (vi) Notes to Consolidated Financial Statements.*

104		Cover Page Interactive Data File ~~(formatted~~– The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 is formatted in Inline XBRL (included as ~~inline XBRL and contained in~~ Exhibit 101).


*			Filed herewith
**			This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

†

Denotes management compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: May ~~11, 2020~~ 7, 2021		Amneal Pharmaceuticals, Inc.
			(Registrant)

		By:	~~/s/ Chirag Patel~~
		~~Chirag Patel~~
		~~President and Co-Chief Executive Officer~~
		~~(Co-Principal Executive Officer)~~

	~~By:~~	~~/s/ Chintu Patel~~
		~~Chintu Patel~~
		~~Co-Chief Executive Officer~~
		~~(Co-Principal Executive Officer)~~

	~~By:~~	/s/ Anastasios Konidaris
			Anastasios Konidaris
			~~Senior~~Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

	Class A Common Stock				Class B Common Stock				Additional Paid-in		Stockholders' Accumulated			Accumulated Other Comprehensive			Non- Controlling			Total			Redeemable Non-Controlling
	Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Interests			Equity			Interests
Balance at January 1, 2020		147,070	$	1,470		152,117	$	1,522	$	606,966	$	(377,880	)	$	(68	)	$	114,778		$	346,788		$	—
Net income		—		—		—		—		—		115,067			—			5,362			120,429			1,088
Foreign currency translation adjustment		—		—		—		—		—		—			(2,525	)		(2,610	)		(5,135	)		—
Stock-based compensation		—		—		—		—		4,539		—			—			—			4,539			—
Exercise of stock options		1		—		—		—		5		—			—			—			5			—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes		240		2		—		—		90		—			—			(602	)		(510	)		—
Unrealized loss on cash flow hedge, net of tax		—		—		—		—		—		—			(30,812	)		(31,846	)		(62,658	)		—
Redeemable non-controlling interests issued for acquisitions		—		—		—		—		—		—			—			—			—			11,475
Balance at March 31, 2020		147,311	$	1,472		152,117	$	1,522	$	611,600	$	(262,813	)	$	(33,405	)	$	85,082		$	403,458		$	12,563

	Class A Common Stock				Class B Common Stock						Class B-1 Common Stock				Additional Paid-in		Stockholders' Accumulated			Accumulated Other Comprehensive			Non- Controlling			Total
	Shares		Amount		Shares			Amount			Shares		Amount		Capital		Deficit			(Loss) Income			Interests			Equity
Balance at January 1, 2019		115,047	$	1,151		171,261		$	1,713			12,329	$	123	$	530,438	$	(20,920	)	$	(7,755	)	$	391,613		$	896,363
Net loss		—		—		—			—			—		—		—		(47,881	)		—			(76,871	)		(124,752	)
Cumulative-effective adjustment from adoption of Topic 842, net of tax		—		—		—			—			—		—		—		4,957			—			8,604			13,561
Foreign currency translation adjustment		—		—		—			—			—		—		—		—			2,238			2,998			5,236
Stock-based compensation		—		—		—			—			—		—		4,347		—			—			—			4,347
Exercise of stock options		197		2		—			—			—		—		748		—			(7	)		267			1,010
Redemption of Class B Common Stock		320		3		(320	)		(3	)		—		—		1,124		—			(19	)		(882	)		223
Reclassification of foreign currency translation adjustment included in net loss		—		—		—			—			—		—		—		—			1,444			1,929			3,373
Tax distribution		—		—		—			—			—		—		—		—			—			(82	)		(82	)
Other		—		—		—			—			—		—		502		—			—			—			502
Balance at March 31, 2019		115,564	$	1,156		170,941		$	1,710			12,329	$	123	$	537,159	$	(63,844	)	$	(4,099	)	$	327,576		$	799,781

Cash	$	254,000
Sellers Notes ⁽¹⁾		35,033
Settlement of Amneal trade accounts receivable from R&S ⁽²⁾		7,440
Short-Term Seller Note ⁽³⁾		1,000
Working capital adjustment ⁽⁴⁾		(2,640	)
Fair value consideration transferred	$	294,833

	Preliminary Fair Values		Weighted-Average Useful Life
Government licenses	$	66,700	7 years
Government contracts		28,600	4 years
National contracts		28,600	5 years
Customer relationships		13,000	10 years
Trade name		500	6 years
	$	137,400

	Employee Restructuring
Balance at December 31, 2019	$	3,900
Charges to income		46
Payments		(2,077	)
Balance at March 31, 2020	$	1,869

	March 31, 2020		December 31, 2019
Deposits and advances	$	373	$	1,123
Prepaid insurance		2,648		3,858
Prepaid regulatory fees		2,330		4,016
Income and other tax receivables ⁽¹⁾		124,527		13,740
Prepaid taxes		3,200		3,255
Other current receivables		16,364		15,996
Other prepaid assets		30,575		28,176
Chargebacks receivable ⁽²⁾		24,392		—
Total prepaid expenses and other current assets	$	204,409	$	70,164

	March 31, 2020		December 31, 2019
Deferred revolving credit facility costs	$	3,434	$	3,099
Security deposits		1,730		1,938
Long-term prepaid expenses		5,875		6,438
Interest rate swap		—		16,373
Financing lease right-of-use assets		10,703		11,442
Other long-term assets		4,714		4,980
Total other assets	$	26,456	$	44,270

	March 31, 2020			December 31, 2019
Term Loan due May 2025	$	2,652,126		$	2,658,876
Rondo Term Loan due January 2025		180,000			—
Other		624			624
Total long-term debt		2,832,750			2,659,500
Less: debt issuance costs		(30,985	)		(28,975	)
Total debt, net of debt issuance costs		2,801,765			2,630,525
Less: current portion of long-term debt		(29,736	)		(21,479	)
Total long-term debt, net	$	2,772,029		$	2,609,046

	March 31, 2020		December 31, 2019
Interest rate swap ⁽¹⁾	$	46,285	$	—
Uncertain tax positions		3,601		5,088
Long-term compensation ⁽²⁾		19,484		22,735
Financing lease liabilities		3,584		3,869
Other long-term liabilities		7,892		7,891
Total other long-term liabilities	$	80,846	$	39,583

Three Months Ended March 31, 2020	Generics ^{(1) (2)}		Specialty ⁽²⁾		AvKARE ⁽¹⁾		Corporate and Other			Total Company
Net revenue	$	352,586	$	87,977	$	57,970	$	—		$	498,533
Cost of goods sold		218,865		47,818		46,895		—			313,578
Cost of goods sold impairment charges		1,456		—		—		—			1,456
Gross profit		132,265		40,159		11,075		—			183,499
Selling, general and administrative		16,623		20,942		10,788		29,623			77,976
Research and development		29,034		7,345		—		—			36,379
In-process research and development impairment charges		960		—		—		—			960
Intellectual property legal development expenses		1,265		5		—		—			1,270
Charges related to legal matters		2,500		2,000		—		—			4,500
Other operating expenses		46		—		—		4,577			4,623
Operating income (loss)	$	81,837	$	9,867	$	287	$	(34,200	)	$	57,791

Three Months Ended March 31, 2019	Generics			Specialty		Corporate and Other			Total Company
Net revenue	$	382,477		$	63,643	$	—		$	446,120
Cost of goods sold		278,878			30,865		—			309,743
Cost of goods sold impairment charges		53,297			—		—			53,297
Gross profit		50,302			32,778		—			83,080
Selling, general and administrative		24,148			21,327		38,961			84,436
Research and development		50,151			3,707		—			53,858
In-process research and development impairment charges		22,787			—		—			22,787
Intellectual property legal development expenses		3,121			1,045		—			4,166
Other operating expenses		4,678			2,062		5,453			12,193
Operating (loss) income	$	(54,583	)	$	4,637	$	(44,414	)	$	(94,360	)

	Future Amortization
Remainder of 2020	$	137,058
2021		174,569
2022		159,512
2023		148,090
2024		140,704
Thereafter		334,113
Total	$	1,094,046

	Payments Due by Period (in thousands)
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Rondo Term Loan ⁽¹⁾	$	180,000	$	6,750	$	18,000	$	18,000	$	137,250
Revolving Credit Facility ⁽²⁾		300,000		300,000		—		—		—
Interest payments on Rondo Term Loan ⁽³⁾		36,507		6,338		15,651		13,966		552

~~Delaware~~

~~32-0546926~~

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

Amneal Pharmaceuticals, Inc.
400 Crossing Boulevard,
Bridgewater, NJ

(Address of principal executive offices)

(Zip Code)