Impax Laboratories (IPXL) 8-K Impax Laboratories Reports Fourth Quarter and Record Full Year 2010 Financial Results

Exhibit 99.1

Company Contact:
Mark Donohue
Sr. Director
Investor Relations and Corporate Communications
(215) 558-4526
www.impaxlabs.com

Impax Laboratories Reports Fourth Quarter and Record Full Year
2010 Financial Results

HAYWARD, Calif. (February 24, 2011) — Impax Laboratories, Inc. (NASDAQ: IPXL)today reported fourth quarter and record full year ended December 31, 2010 financial results.

Full Year 2010 Results

• Net income excluding adjusted items increased to a record $195.6 million, or $2.98 per diluted share, compared to $62.3 million, or $1.02 per diluted share, in the prior year, due to strong sales from the March 2, 2010 launch of generic Flomax®, a full year of sales from generic Adderall XR®, and higher fenofibrate product sales.

• Total revenues excluding the effect of a change in accounting for revenue from the Company’s Strategic Alliance Agreement with Teva Pharmaceuticals, increased $324.7 million to a record $683.1 million compared to the prior year.

• Earnings before interest, taxes, depreciation and amortization (EBITDA), excluding adjusted items, increased to $316.1 million compared to $98.7 million in the prior year.

• On a generally accepted accounting principle basis (GAAP), net income increased to $250.4 million, or $3.82 per diluted share, compared to $50.1 million, or $0.82 per diluted share for the full year 2009.

• GAAP total revenues increased $521.1 million to $879.5 million.

Fourth Quarter 2010 Results

• Net income excluding adjusted items decreased to $15.3 million, or $0.23 per diluted share, compared to $44.4 million, or $0.71 per diluted share, in the prior year period.

• Total revenues declined to $99.1 million compared to $176.1 million in the prior year period, primarily due to stronger sales of generic Adderall XR® in the fourth quarter of 2009, the quarter in which the product was launched, as compared to the fourth quarter of 2010 ($110.7 million in the fourth quarter of 2009 compared to $29.5 million in the fourth quarter of 2010).

• EBITDA excluding adjusted items was $16.8 million compared to $65.4 million in the prior year period.

• GAAP basis net income decreased to $12.4 million, or $0.19 per diluted share, compared to $38.1 million, or $0.61 per diluted share in the prior year period.

Please refer to page 10 and 11 for a reconciliation of GAAP to non-GAAP items.

“In 2010, our generics division, Global Pharmaceuticals, achieved record levels of revenue, profit and earnings due to the significant investments we have made in research and development. This strong performance resulted in our cash and short-term investments increasing $258 million year over year to more than $348 million as of December 31, 2010, and we continue to have no debt. Impax Pharmaceuticals, our brand division, also achieved several meaningful milestones in 2010. Most recently, in December we announced an agreement for the development and commercialization of our late-stage product IPX066 for Parkinson’s disease with GlaxoSmithKline. GSK has an exclusive license to sell IPX066 throughout the world except in the U.S. and Taiwan. We received an $11.5 million upfront payment and are eligible to receive potential payments of up to $175 million upon the successful achievement of development and commercialization milestones. We also completed the first Phase III APEX-PD study in naïve patients and announced positive top line results in November” said Larry Hsu, Ph.D., president and CEO, Impax Laboratories, Inc.

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“We are optimistic that 2011 will bring additional positive developments as we recently completed the ADVANCED-PD Phase III study for IPX066 and look forward to the top line data release in the second quarter of 2011. We continue to progress toward filing the new drug application in the U.S. in the fourth quarter of 2011. In the generics division, we are taking action to favorably resolve the issue of supply of generic Adderall XR® from Shire. We received some product from the 2010 quota in February and expect additional product from that quota in March; the first shipment of the 2011 quota is expected in early April. We have the customer demand to support increased market share well over 2010 levels. Impax therefore is pursuing every available means to acquire sufficient product to meet that greater demand, including aggressively enforcing its contractual rights through expedited litigation.”

Dr. Hsu concluded, “Our continued long-term commitment to invest across both our generic and brand divisions has produced record returns in the past few years. We have valuable pipelines of product opportunities in each of our businesses. We plan to reinvest in vital strategic generic and brand initiatives to continue to drive near and long term growth, and remain diligent in our approach as we look for merger and acquisition opportunities that are strategically right, financially attractive with manageable execution risks.”

Segment Information

The Company has two reportable segments, the Global Pharmaceuticals Division (generic products) and the Impax Pharmaceuticals Division (brand products) and does not allocate general corporate services to either segment.

Global Pharmaceuticals Division Information

	Three Months Ended				Twelve Months Ended
	December 31				December 31,
(Unaudited; amounts in thousands)	2010		2009		2010		2009
Revenues:
Global Product sales, net	$	85,095	$	163,935	$	622,889	$	287,079
Private Label		535		244		2,074		5,513
Rx Partner (a)		3,773		3,652		217,277		33,835
OTC Partner		2,449		1,587		8,888		6,842
Research Partner		3,385		3,274		13,539		11,680
Other		—		1		—		12
Total Revenues (a)		95,237		172,693		864,667		344,961
Cost of revenues (a)		45,854		85,932		328,163		158,270
Gross profit (a)		49,383		86,761		536,504		186,691
Operating expenses:
Research and development		11,703		9,937		44,311		38,698
Patent litigation		1,599		1,321		6,384		5,379
Selling, general and administrative		4,801		3,264		15,951		10,891
Total operating expenses		18,103		14,522		66,646		54,968
Income from operations (a)	$	31,280	$	72,239	$	469,858	$	131,723

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(a) In July 2010, the Company materially modified its Strategic Alliance Agreement with Teva and applied the revised revenue recognition standards of FASB ASC 605-25, “Multiple Element Arrangements.” Application of the revised standards resulted in the recognition in the third quarter of 2010 of previously deferred net revenue and related costs that would have been recognized over the remaining life of the Teva agreement under the prior standards. Please refer to the attached information and footnotes on pages 10 and 11 for a further description.

Fourth Quarter 2010

Global Pharmaceuticals Division revenues in the fourth quarter of 2010 decreased $77.5 million to $95.2 million over the prior year period, driven by a significant decrease in Global Product sales, net, as discussed below.

During the fourth quarter of 2010, Global Product sales, net, decreased $78.8 million to $85.1 million compared to the prior year period primarily due to higher sales in the fourth quarter of 2009 of generic Adderall XR® following its launch on October 1, 2009 ($110.7 million in the fourth quarter of 2009 compared to $29.5 million in the fourth quarter of 2010). In the fourth quarter of 2009, certain market disruptions caused by supply shortages of generic Adderall XR® may have impacted sales of a competitor and subsequently benefited the Company’s sales, while disruptions in the supply of product to the Company during 2010 limited fourth quarter of 2010 sales.

Gross profit in the fourth quarter of 2010 decreased $37.4 million to $49.4 million over the same period in 2009 primarily due to the decrease in sales of generic Adderall XR®. Gross profit margin of 52% for the fourth quarter of 2010 increased from the 50% margin for the prior year period due to the slightly higher concentration of higher-margin products.

Research and development expenses for the fourth quarter of 2010 increased $1.8 million to $11.7 million, compared to the prior year primarily due to higher spending on bio-equivalency studies, active pharmaceutical ingredients and compensation expenses.

Selling, general and administrative expenses for the fourth quarter of 2010 increased $1.5 million to $4.8 million compared to the prior year period due to higher marketing and severance related expenses relating to a former company executive.

Full Year 2010

The following table reflects the impact on the Global Pharmaceuticals Division results for the twelve months ended December 31, 2010 due to the change in revenue recognition under the Company’s Strategic Alliance Agreement with Teva.

	Twelve Months Ended December 31, 2010
(Unaudited; amounts in thousands)	As Reported		Impact of change		Adjusted
Global Pharmaceuticals Division revenues		864,667		196,440		668,227
Rx Partner revenues	$	217,277	$	196,440	$	20,837
Cost of revenues		328,163		95,426		232,737
Gross profit		536,504		101,014		435,490
Income from operations	$	469,858	$	101,014	$	368,844

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Excluding the change in revenue recognition under the Teva Agreement, Global Pharmaceuticals Division revenues for the full year 2010 increased $323.3 million to $668.2 million compared to the prior year, driven by a significant increase in Global Product sales, net, as discussed below. On a GAAP basis, total revenues increased $519.7 million to $864.7 million compared to the prior year.

Global Product sales, net, for the full year 2010 increased $335.8 million to $622.9 million primarily as a result of sales of generic Flomax®, generic Adderall XR®, and fenofibrate products. Of the $335.8 million increase, $215.1 million resulted from sales of generic Flomax®, as the Company commenced sales on March 2, 2010 and had contractual market exclusivity for this generic product for the succeeding eight week period, during which the Company was able to achieve high market-share penetration. Also contributing to the increase were full year sales of generic Adderall XR® products which launched in October 2009, and thus had only three months of sales of these products in the prior year. Partially offsetting these revenue gains was a $13.0 million decline in Rx Partner revenues (which excludes the change in revenue recognition under the Teva Agreement) primarily attributable to reduced sales of generic Wellbutrin XL® 300mg due to increased competition.

Excluding the change in revenue recognition, gross profit for the full year 2010 increased $248.8 million to $435.5 million primarily due to higher sales of generic Flomax® ($193.9 million of the year over year increase), as well as higher sales of generic Adderall XR® and fenofibrate products, as discussed above. Adjusted gross profit margin of 65% for the full year 2010 increased from the 54% margin for the prior year period due to the concentration of higher-margin products. On a GAAP basis, gross profit increased $349.8 million to $536.5 million compared to the prior year, and gross profit margin was 62% for the full year 2010 compared to 54% in the prior year.

Research and development expenses for the full year 2010 increased $5.6 million to $44.3 million, compared to the prior year due to higher spending on bio-equivalency studies, compensation expenses and active pharmaceutical ingredients used for research purposes.

Selling, general and administrative expenses for the full year 2010 increased $5.1 million to $16.0 million, compared to the prior year primarily due to higher sales levels period over period resulting in higher marketing expenses, product freight charges and incentive compensation. Also contributing to the increase was post-approval product clinical study costs, for which there was no amount present in the prior year period.

Impax Pharmaceuticals Division Information

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
(Unaudited; amounts in thousands)	2010			2009			2010			2009
Revenues:
Promotional Partner	$	3,535		$	3,441		$	14,073		$	13,448
Research Partner		330			—			769			—
Total revenues		3,865			3,441			14,842			13,448
Cost of revenues		2,803			2,792			12,083			12,043
Gross profit		1,062			649			2,759			1,405
Operating expenses:
Research and development		11,256			6,593			41,912			24,576
Selling, general and administrative		1,033			940			3,510			3,469
Total operating expenses		12,289			7,533			45,422			28,045
Loss from operations	$	(11,227	)	$	(6,884	)	$	(42,663	)	$	(26,640	)

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Fourth Quarter 2010

Impax Pharmaceuticals Division revenues in the fourth quarter of 2010 were $3.9 million, a slight increase over the prior year due primarily to the addition of Research Partner revenue related to a Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc. which was entered into in June 2010.

The Company is currently investing in research and development to develop brand products which provide longer product life cycles and the potential for significantly higher profit margins than generic products. In the fourth quarter of 2010, research and development expense increased $4.7 million to $11.3 million compared to the prior year period, primarily due to planned increased spending on clinical studies for the Company’s leading drug candidate for Parkinson’s disease.

Full Year 2010

Impax Pharmaceuticals Division revenues for the year ended December 31, 2010 increased $1.4 million to $14.8 million compared to the prior year period, due to the Company continuing to meet its physician detailing objectives and the addition of Research Partner revenue related to a Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc. which was initiated in June 2010.

For the full year 2010, research and development expense increased $17.3 million to $41.9 million compared to the prior year period, primarily due to planned increased spending on clinical studies for the Company’s leading drug candidate for Parkinson’s disease.

Corporate and Other Information

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
(Unaudited; amounts in thousands)	2010			2009			2010			2009
Litigation settlement	$	—		$	7,645		$	—		$	9,318
General and administrative		10,360			5,581			33,871			25,352
Total operating expenses		10,360			13,226			33,871			34,670
Loss from operations	$	(10,360	)	$	(13,226	)	$	(33,871	)	$	(34,670	)

Fourth Quarter 2010

Total corporate operating expenses for the fourth quarter of 2010 decreased $2.9 million to $10.4 million from the fourth quarter of 2009, due to the non-recurring prior year period litigation settlement charges from an agreement to settle a lawsuit related to the Company’s formerly marketed Lipram UL products and reimburse the plaintiff for litigation expenses, partially offset by increased compensation, higher insurance costs related to increasing levels of business activity and an increase in systems implementation expenses.

Full Year 2010

Total corporate operating expenses for the full year 2010 decreased slightly as the full year 2009 included a non-recurring litigation settlement charge which was primarily offset by an $8.5 million increase in general and administrative expenses. The full year 2010 increase in general and administrative expenses were due to increased compensation, higher corporate legal fees, an increase in systems implementation expenses and higher insurance costs related to increasing levels of business activity.

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Cash and Short-Term Investments

Cash and short-term investments were $348.4 million as of December 31, 2010, as compared to $90.4 million as of December 31, 2009. The change in cash and short-term investments from year-end 2009 is due to strong 2010 product sales.

2011 Financial Outlook

The Company previously disclosed its full year 2011 forecast on January 10, 2011. The Company provides this further update to its full year 2011 forecast.

• Cash flows from operating activities, less capital expenditures (Free Cash Flow), planned to be positive.

• Gross margins as a percent of total revenues of approximately 50%.

• Total research and development expenses across the generic and brand divisions to approximate $87 million with generic R&D of approximately $47 million and brand R&D of approximately $40 million.

• Patent litigation expenses of approximately $13 million.

• Selling, general and administrative expenses of approximately $65 million.

• Effective tax rate of approximately 40%.

• Updated February 2011 — capital expenditures to be approximately $69 million.

Conference Call Information

The Company will host a conference call today at 11:00 a.m. EDT to discuss its results. The number to call from within the United States is (888) 438-5525 and (719) 325-2265 internationally. The call can also be accessed via a live Webcast through the Investor Relations section of the Company’s Web site, www.impaxlabs.com. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (888) 203-1112 (in the U.S.) and (719) 457-0820 (international callers). The access conference code is 7379251.

About Impax Laboratories, Inc.

Impax Laboratories, Inc. is a technology based specialty pharmaceutical company applying its formulation expertise and drug delivery technology to the development of controlled-release and specialty generics in addition to the development of branded products. Impax markets its generic products through its Global Pharmaceuticals Division and markets third-party branded products through the Impax Pharmaceuticals Division. Additionally, where strategically appropriate, Impax has developed marketing partnerships to fully leverage its technology platform. Impax Laboratories is headquartered in Hayward, California, and has a full range of capabilities in its Hayward, Philadelphia and Taiwan facilities. For more information, please visit the Company’s Web site at: www.impaxlabs.com.

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995:

To the extent any statements made in this news release contain information that is not historical, these statements are forward-looking in nature and express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the effect of current economic conditions on the Company’s industry, business, financial position and results of operations, the ability to maintain an effective system of internal control over financial reporting, fluctuations in revenues and operating income, the ability to successfully develop and commercialize pharmaceutical products, reductions or loss of business with any significant customer, the impact of competition, the ability to sustain profitability and positive cash flows, any delays or unanticipated expenses in connection with the operation of the Taiwan facility, the effect of foreign economic, political, legal and other risks on operations abroad, the uncertainty of patent litigation, consumer acceptance and demand for new pharmaceutical products, the difficulty of predicting Food and Drug Administration filings and approvals, the inexperience of the Company in conducting clinical trials and submitting new drug applications, the ability to successfully conduct clinical trials, reliance on alliance and collaboration agreements, the availability of raw materials, the ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, the ability to protect the Company’s intellectual property, exposure to product liability claims and other risks described in the Company’s periodic reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as to the date on which they are made, and Impax undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise.

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Impax Laboratories, Inc.
Consolidated Statements of Operations
(amounts in thousands, except share and per share data)

	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2010			2009		2010			2009
	(unaudited)			(unaudited)
Revenues:
Global Pharmaceuticals Division (1)	$	95,237		$	172,693	$	864,667		$	344,961
Impax Pharmaceuticals Division		3,865			3,441		14,842			13,448
Total Revenues		99,102			176,134		879,509			358,409
Cost of revenues (1)		48,657			88,724		340,246			170,313
Gross profit (1)		50,445			87,410		539,263			188,096
Operating expenses:
Research and development		22,959			16,530		86,223			63,274
Patent litigation		1,599			1,321		6,384			5,379
Litigation settlement		—			7,645		—			9,318
Selling, general and administrative		16,194			9,785		53,332			39,712
Total operating expenses		40,752			35,281		145,939			117,683
Income from operations (1)		9,693			52,129		393,324			70,413
Other (expense) income, net		(182	)		4		(315	)		57
Interest income		357			117		1,037			753
Interest expense		(59	)		490		(167	)		(246	)
Income before income taxes		9,809			52,740		393,879			70,977
(Benefit) Provision for income taxes		(2,594	)		14,633		143,521			21,006
Net income before noncontrolling interest		12,403			38,107		250,358			49,911
Add back loss attributable to noncontrolling interest		19			37		60			90
Net Income (1)	$	12,422		$	38,144	$	250,418		$	50,061
Net Income per share: (1)
Basic	$	0.20		$	0.63	$	4.04		$	0.83
Diluted	$	0.19		$	0.61	$	3.82		$	0.82
Weighted average common shares outstanding:
Basic		62,807,768			60,721,808		62,037,908			60,279,602
Diluted		66,210,101			62,288,318		65,565,132			61,080,184

(1) Includes amounts attributable to change in revenue recognition under the Company’s Strategic Alliance Agreement with Teva. Please refer to the attached information and footnotes on pages 10 and 11 for a further description of the impact on the twelve months ended December 31, 2010 results due to the change in revenue recognition.

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Impax Laboratories, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)

	December 31,		December 31,
	2010		2009
ASSETS
Current assets:
Cash and cash equivalents	$	91,796	$	31,770
Short-term investments		256,605		58,599
Accounts receivable, net		82,054		185,854
Inventory, net		44,549		49,130
Current portion of deferred product manufacturing costs-alliance agreements		2,012		11,624
Current portion of deferred income taxes		39,271		32,286
Prepaid expenses and other current assets		4,407		4,748
Total current assets		520,694		374,011
Property, plant and equipment, net		106,280		101,650
Deferred product manufacturing costs-alliance agreements		8,223		96,619
Deferred income taxes, net		5,069		48,544
Other assets		25,478		12,358
Goodwill		27,574		27,574
Total assets	$	693,318	$	660,756
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable	$	18,812	$	23,295
Accrued expenses		72,788		62,055
Accrued income taxes payable		2,393		31,627
Accrued profit sharing and royalty expenses		14,147		53,695
Current portion of deferred revenue-alliance agreements		18,276		33,196
Total current liabilities		126,416		203,868
Deferred revenue-alliance agreements		44,195		224,522
Other liabilities		14,558		10,139
Total liabilities	$	185,169	$	438,529
Total stockholders equity		508,149		222,227
Total liabilities and stockholders equity	$	693,318	$	660,756

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Impax Laboratories, Inc.
Condensed Consolidated Statement of Cash Flows
(amounts in thousands)

	Twelve Months Ended December 31,
	2010			2009
Cash flows from operating activities:
Net income	$	250,418		$	50,061
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		12,649			11,266
Amortization of 3.5% Debentures discount and deferred financing costs		—			307
Amortization of Credit Agreement deferred financing costs		25			75
Bad debt expense		277			229
Deferred income taxes (benefit)		42,662			(10,379	)
Tax benefit related to the exercise of employee stock options		(6,172	)		(213	)
Change in accrual for uncertain tax positions		280			(6,308	)
Deferred revenue-Alliance Agreements		35,704			49,255
Deferred product manufacturing costs-Alliance Agreements		(10,640	)		(26,018	)
Deferred revenue recognized-Alliance Agreements		(230,951	)		(52,357	)
Amortization deferred product manufacturing costs-Alliance Agreements		108,648			24,497
Accrued profit sharing and royalty expense		101,247			53,912
Profit sharing and royalty payments		(140,794	)		(469	)
Payments on exclusivity period fee		—			(6,000	)
Accrued litigation settlement expenses		—			5,865
Payments on accrued litigation settlements		(5,865	)		(11,495	)
Share-based compensation expense		10,714			7,391
Accretion of interest income on short-term investments		(638	)		(519	)
Changes in assets and liabilities:
Accounts receivable		103,523			(142,777	)
Inventory		4,581			(16,825	)
Prepaid expenses and other assets		(12,092	)		2,179
Accounts payable and accrued expenses		(17,896	)		57,059
Other liabilities		4,081			3,107
Net cash provided by (used in) operating activities	$	249,761		$	(8,157	)
Cash flows from investing activities:
Purchase of short-term investments		(403,086	)		(66,626	)
Maturities of short-term investments		205,718			59,256
Acquisition of ANDA intellectual property rights		—			(750	)
Purchases of property, plant and equipment		(16,267	)		(13,667	)
Net cash (used in) investing activities	$	(213,635	)	$	(21,787	)
Cash flows from financing activities:
Repayment of long-term debt		—			(12,887	)
Tax benefit related to the exercise of employee stock options		6,172			213
Proceeds from exercise of stock options and purchases under the ESPP		17,728			5,113
Net cash provided by (used in) financing activities	$	23,900		$	(7,561	)
Net increase (decrease) in cash and cash equivalents	$	60,026		$	(37,505	)
Cash and cash equivalents, beginning of period	$	31,770		$	69,275
Cash and cash equivalents, end of period	$	91,796		$	31,770

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Impax Laboratories, Inc.
Non-GAAP Financial Measures

Global Pharmaceutical Division total revenues, Rx Partner revenues, cost of revenues, gross profit, gross profit margin and income from operations excluding certain adjusted items and consolidated total revenues, cost of revenues, gross profit, income from operations, net income, EBITDA and net income per diluted share excluding certain adjusted items are not measures of financial performance under generally accepted accounting principles (GAAP) and should not be construed as substitutes for, or superior to, Global Pharmaceutical Division total revenues, Rx Partner revenues, cost of revenues, gross profit, gross profit margin and income from operations and consolidated total revenues, cost of revenues, gross profit, income from operations, net income, and net income per diluted share as a measure of financial performance. However, management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the Company’s operations and to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provides meaningful supplementary information to and facilitates analysis by investors in evaluating the Company’s financial performance, results of operations and trends. The Company’s calculation of Global Pharmaceutical Division total revenues, Rx Partner revenues, cost of revenues, gross profit, gross profit margin and income from operations excluding certain adjusted items and consolidated total revenues, cost of revenues, gross profit, income from operations, net income, EBITDA and net income per diluted share excluding certain adjusted items may not be comparable to similarly designated measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment.

The following table reflects the impact on the Company’s consolidated results due to the change in revenue recognition to the Company’s Strategic Alliance Agreement with Teva. Please refer to footnote (1) on page 11 for additional information.

	Twelve Months Ended December 31, 2010
(Unaudited; amounts in thousands)	As reported		Impact of change(1)		Adjusted
Revenues:
Global Pharmaceuticals Division	$	864,667	$	196,440	$	668,227
Impax Pharmaceuticals Division		14,842		—		14,842
Total Revenues		879,509		196,440		683,069
Cost of revenues		340,246		95,426		244,820
Gross profit		539,263		101,014		438,249
Total operating expenses		145,939		—		145,939
Income from operations		393,324		101,014		292,310
Net income	$	250,418	$	64,204	$	186,214

The following table reconciles reported net income to adjusted net income. Please refer to footnote (1) and (2) on page 11 for additional information.

	Three months ended						Twelve months ended
(Unaudited)	December 31,						December 31,
( in millions, except per share amounts)	2010			2009			2010			2009
Net income	$	12.4		$	38.1		$	250.4		$	50.1
Adjusted to add (deduct):
Change in revenue recognition (1)		—			—			(101.0	)		—
Antitrust litigation settlement (2)		—			7.6			—			9.3
Share-based compensation		3.0			2.2			10.7			7.4
Employee severance		0.7			—			0.7			—
Income tax effect		(0.8	)		(3.5	)		34.8			(4.5	)
Adjusted net income	$	15.3		$	44.4		$	195.6		$	62.3
Adjusted net income per diluted share	$	0.23		$	0.71		$	2.98		$	1.02
GAAP net income per diluted share	$	0.19		$	0.61		$	3.82		$	0.82

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Impax Laboratories, Inc.
Non-GAAP Financial Measures

The following table reconciles reported net income to adjusted EBITDA.

	Three months ended						Twelve months ended
	December 31,						December 31,
(Unaudited; amounts in millions)	2010			2009			2010			2009
Net income	$	12.4		$	38.1		$	250.4		$	50.1
Adjusted to add (deduct):
Interest income		(0.4	)		(0.1	)		(1.0	)		(0.8	)
Interest expense		0.1			(0.5	)		0.2			0.2
Depreciation and amortization		3.6			3.5			12.7			11.6
Income taxes		(2.6	)		14.6			143.5			21.0
Noncontrolling interest		(0.0	)		(0.0	)		(0.1	)		(0.1	)
EBITDA	$	13.1		$	55.6		$	405.7		$	82.0
Adjusted to add (deduct):
Change in revenue recognition (1)		—			—			(101.0	)		—
Antitrust litigation settlement (2)		—			7.6			—			9.3
Share-based compensation		3.0			2.2			10.7			7.4
Employee severance		0.7			—			0.7			—
Adjusted EBITDA	$	16.8		$	65.4		$	316.1		$	98.7

(1)	Material Modification to Teva Agreement
	In July 2010, the Company entered into a material modification of its Strategic Alliance Agreement with Teva, and as a result the Company will apply the revised accounting standards of FASB ASC 605-25 Multiple Element Arrangements (“ASC 605-25”) which became effective for agreements entered into or materially modified on or after June 15, 2010, to its recognition of revenue under the Teva Agreement. The Company applied the accounting principles of ASC 605-25 on a prospective basis beginning in the quarter ended September 30, 2010. For the twelve months ended December 31, 2010, the application of ASC 605-25 resulted in recognition of previously deferred revenue and related costs, with the effect of increasing RX Partner revenues by $196.4 million and increasing cost of revenues by $95.4 million. For the twelve months ended December 31, 2010, net income includes $64.2 million from the application of ASC 605-25. Basic net income per share increased by approximately $1.03 and diluted net income per share increased by $0.98 for the twelve months ended December 31, 2010, as a result of the prospective application of ASC 605-25.
(2)	Litigation settlement
	In January 2010, the Company entered into an agreement to settle a lawsuit related to its previously marketed Lipram UL products. Under the terms of the litigation settlement agreement, the Company agreed to reimburse the plaintiff for certain litigation costs, which was paid by the Company in January 2010. The Company recorded an accrued expense for this payment in the year ended December 31, 2009. In the three and twelve months ended December 31, 2009 the Company recorded litigation settlement expense of $7.6 million and $9.3 million, respectively, which included legal and other professional fees incurred by the Company in its defense against the lawsuit.

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