Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2015

¨		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: 001-3356220

ALBANY MOLECULAR RESEARCH, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		14-1742717
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

26 Corporate Circle

Albany, New York 12212

(Address of principal executive offices)

(518) 512-2000

(Registrant’s telephone number, including area code)

N/A

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

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 x

No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x

No ¨

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

Large accelerated filer ¨		Accelerated filer x
Non-accelerated filer ¨		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨

No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at July 31, 2015
Common Stock, $.01 par value		35,453,069 excluding treasury shares of 5,501,984

ALBANY MOLECULAR RESEARCH, INC.

INDEX

Part I.	Financial Information		3

	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive Income	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

	Item 4.	Controls and Procedures	33

Part II.	Other Information		34

	Item 1.	Legal Proceedings	34

	Item 1A.	Risk Factors	34

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

	Item 6.	Exhibits	35

Signatures			36

Exhibit Index

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Albany Molecular Research, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended						Six Months Ended
(Dollars in thousands, except for per share data)	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014

Contract revenue	$	85,226		$	61,474		$	160,358		$	112,512
Recurring royalties		4,322			6,705			11,007			14,988
Total revenue		89,548			68,179			171,365			127,500

Cost of contract revenue		64,668			45,038			122,807			86,648
Technology incentive award		179			424			560			1,017
Research and development		384			128			875			207
Selling, general and administrative		16,518			12,747			33,992			23,376
Postretirement benefit plan settlement gain		–			–			–			(1,285	)
Restructuring charges		1,632			1,042			3,119			1,272
Impairment charges		–			3,718			2,615			3,718
Total operating expenses		83,381			63,097			163,968			114,953

Income from operations		6,167			5,082			7,397			12,547

Interest expense, net		(3,179	)		(3,065	)		(6,214	)		(5,681	)
Other income (expense), net		634			(192	)		1,103			(232	)

Income before income taxes		3,622			1,825			2,286			6,634

Income tax expense (benefit)		1,315			(1,899	)		2,202			(590	)

Net income	$	2,307		$	3,724		$	84		$	7,224

Basic income per share	$	0.07		$	0.12		$	0.00		$	0.23

Diluted income per share	$	0.07		$	0.11		$	0.00		$	0.22

See notes to unaudited condensed consolidated financial statements.

Albany Molecular Research, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Net income	$	2,307	$	3,724	$	84	$	7,224
Foreign currency translation gain		1,742		364		596		1,008
Net actuarial gain of pension and postretirement benefits		154		101		308		186
Total comprehensive income	$	4,203	$	4,189	$	988	$	8,418

See notes to unaudited condensed consolidated financial statements.

Albany Molecular Research, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(Dollars and shares in thousands, except per share data)	June 30, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	42,556		$	46,995
Restricted cash		3,000			4,052
Accounts receivable, net		79,068			72,123
Royalty income receivable		4,450			5,061
Income tax receivable		2,295			—
Inventory		60,605			49,880
Prepaid expenses and other current assets		11,281			10,558
Deferred income taxes		2,280			2,343
Property and equipment held for sale		1,132			—
Total current assets		206,667			191,012

Property and equipment, net		175,045			165,475
Notes hedges		81,157			58,928
Goodwill		94,044			61,778
Intangible assets and patents, net		39,563			32,548
Deferred income taxes		1,220			4,884
Other assets		4,888			5,328
Total assets	$	602,584		$	519,953
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	49,503		$	35,757
Deferred revenue and licensing fees		10,092			11,171
Arbitration reserve		—			327
Income taxes payable		—			350
Accrued pension benefits		509			638
Current installments of long-term debt		455			447
Total current liabilities		60,559			48,690
Long-term liabilities:
Long-term debt, excluding current installments		201,651			159,980
Notes conversion derivative		81,157			58,928
Pension and postretirement benefits		7,856			8,167
Other long-term liabilities		2,336			2,366
Total liabilities		353,559			278,131
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued or outstanding		—			—
Common stock, $0.01 par value, 100,000 shares authorized, 38,742 shares issued as of June 30, 2015 and 38,098 shares issued as of December 31, 2014		387			381
Additional paid-in capital		250,700			243,874
Retained earnings		79,716			79,632
Accumulated other comprehensive loss, net		(13,530	)		(14,434	)
		317,273			309,453
Less, treasury shares at cost, 5,501 shares as of June 30, 2015 and 5,465 shares as of December 31, 2014		(68,248	)		(67,631	)
Total stockholders’ equity		249,025			241,822
Total liabilities and stockholders’ equity	$	602,584		$	519,953

See notes to unaudited condensed consolidated financial statements.

Albany Molecular Research, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

	Six Months Ended
(Dollars in thousands)	June 30, 2015			June 30, 2014

Operating activities
Net income	$	84		$	7,224
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible amortization		11,762			8,025
Deferred financing amortization		534			1,033
Accretion of discount on long-term debt		3,057			2,823
Deferred income taxes		826			(2,492	)
Loss on disposal of property and equipment		101			126
Impairment charges		2,615			3,718
Allowance for bad debts		509			33
Stock-based compensation expense		3,019			1,957
Gain on settlement of post-retirement liability		-			(1,285	)
Excess tax benefit of stock option exercises		(1,727	)		(1,080	)
Changes in operating assets and liabilities that provide (use) cash, net of impact of business combinations:
Accounts receivable		43			(5,460	)
Royalty income receivable		611			982
Inventory		(10,481	)		(8,823	)
Prepaid expenses and other assets		456			(2,263	)
Accounts payable and accrued expenses		10,318			(1,105	)
Income taxes		1,894			47
Deferred revenue and licensing fees		(3,573	)		1,010
Pension and postretirement benefits		36			(118	)
Other long-term liabilities		(72	)		13
Net cash provided by operating activities		20,012			4,365

Investing activities
Purchase of businesses, net of cash acquired		(59,656	)		(38,704	)
Purchases of property and equipment		(7,541	)		(6,446	)
Payments for patent applications and other costs		(54	)		(198	)
Proceeds from disposal of property and equipment		31			–
Net cash used in investing activities		(67,220	)		(45,348	)

Financing activities
Borrowings on long-term debt		39,000			–
Principal payments on long-term debt		(376	)		(4,988	)
Deferred financing costs		(11	)		(222	)
Change in restricted cash		1,052			(1,943	)
Proceeds from sale of common stock		2,087			1,519
Purchases of treasury stock		(617	)		(422	)
Excess tax benefit of stock option exercises		1,727			1,080
Net cash provided by financing activities		42,862			(4,976	)

Effect of exchange rate changes on cash and cash equivalents		(93	)		448

Decrease in cash and cash equivalents		(4,439	)		(45,511	)

Cash and cash equivalents at beginning of period		46,995			175,928

Cash and cash equivalents at end of period	$	42,556		$	130,417

See notes to unaudited condensed consolidated financial statements.

(All amounts in thousands, except per share amounts, unless otherwise noted)

Note 1 — Summary of Operations and Significant Accounting Policies

Nature of Business and Operations

Albany Molecular Research, Inc. (the “Company”) is a leading global contract research and manufacturing organization providing customers fully integrated drug discovery, development, and manufacturing services. We supply a broad range of services and technologies supporting the discovery and development of pharmaceutical products, the manufacturing of Active Pharmaceutical Ingredients (“API”) and the manufacturing of drug product for new and generic drugs, as well as research, development and manufacturing for the agrochemical and other industries. With locations in the United States, Europe, and Asia, we maintain geographic proximity to our customers and flexible cost models.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair statement of the results for the interim period have been included. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as of June 30, 2015. All intercompany balances and transactions have been eliminated during consolidation. Assets and liabilities of non-U.S. operations are translated at period-end rates of exchange, and the statements of operations are translated at the average rates of exchange for the period. Unrealized gains or losses resulting from translating non-U.S. currency financial statements are recorded in accumulated other comprehensive loss in the accompanying unaudited condensed consolidated balance sheets. When necessary, prior years’ unaudited condensed consolidated financial statements have been reclassified to conform to the current year presentation.

Use of Management Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates included in the accompanying consolidated financial statements include assumptions regarding the valuation of inventory, intangible assets, and long-lived assets and assumptions associated with our accounting for business combinations. Other significant estimates include assumptions utilized in determining actuarial obligations in conjunction with the Company’s pension and postretirement health plans, the amount and realizabilty of deferred tax assets, assumptions utilized in determining stock-based compensation, as well as those utilized in determining the value of both the notes hedges and the notes conversion derivative and the assumptions related to the collectability of receivables. Actual results can vary from these estimates.

Contract Revenue Recognition

The Company’s contract revenue consists primarily of amounts earned under contracts with third-party customers and reimbursed expenses under such contracts. Reimbursed expenses consist of chemicals and other project specific costs. The Company also seeks to include provisions in certain contracts that contain a combination of up-front licensing fees, milestone and royalty payments should the Company’s proprietary technology and expertise lead to the discovery of new products that become commercial. Generally, the Company’s contracts may be terminated by the customer upon 30 days’ to two years’ prior notice, depending on the terms and/or size of the contract. The Company analyzes its agreements to determine whether the elements can be separated and accounted for individually or as a single unit of accounting in accordance with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 605-25, “Revenue Arrangements with Multiple Deliverables,” and Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition”. Allocation of revenue to individual elements that qualify for separate accounting is based on the separate selling prices determined for each component, and total contract consideration is then allocated pro rata across the components of the arrangement. If separate selling prices are not available, the Company will use its best estimate of such selling prices, consistent with the overall pricing strategy and after consideration of relevant market factors.

The Company generates contract revenue under the following types of contracts:

Fixed-Fee. Under a fixed-fee contract, the Company charges a fixed agreed upon amount for a deliverable. Fixed-fee contracts have fixed deliverables upon completion of the project. Typically, the Company recognizes revenue for fixed-fee contracts after projects are completed, delivery is made and title transfers to the customer, and collection is reasonably assured. In certain instances, the Company’s customers request that the Company retain materials produced upon completion of the project due to the fact that the customer does not have a qualified facility to store those materials or for other reasons. In these instances, the revenue recognition process is considered complete when project documents have been delivered to the customer, as required under the arrangement, or other customer-specific contractual conditions have been satisfied.

Full-time Equivalent (“FTE”). An FTE agreement establishes the number of Company employees contracted for a project or a series of projects, the duration of the contract period, the price per FTE, plus an allowance for chemicals and other project specific costs, which may or may not be incorporated in the FTE rate. FTE contracts can run in one month increments, but typically have terms of six months or longer. FTE contracts typically provide for annual adjustments in billing rates for the scientists assigned to the contract.

These contracts involve the Company’s scientists providing services on a “best efforts” basis on a project that may involve a research component with a timeframe or outcome that has some level of unpredictability. There are no fixed deliverables that must be met for payment as part of these services. As such, the Company recognizes revenue under FTE contracts on a monthly basis as services are performed according to the terms of the contract.

Time and Materials. Under a time and materials contract, the Company charges customers an hourly rate plus reimbursement for chemicals and other project specific costs. The Company recognizes revenue for time and material contracts based on the number of hours devoted to the project multiplied by the customer’s billing rate plus other project specific costs incurred.

Recurring Royalty and Milestone Revenues

Recurring Royalty Revenue. Recurring royalties have historically related to royalties under a license agreement with Sanofi based on the worldwide net sales of fexofenadine HCl, marketed as Allegra in the Americas and Telfast elsewhere, as well as on sales of Sanofi’s authorized or licensed generics and sales by certain authorized sub-licensees. These royalty payments ceased in May 2015 due to the expiration of patents under the license agreement. The Company currently receives royalties in conjunction with a Development and Supply Agreement with Allergan, plc (“Allergan”). These royalties are earned on net sales of a generic product sold by Allergan. The Company records royalty revenue in the period in which the net sales of this product occur. Royalty payments from Allergan are due within 60 days after each calendar quarter and are determined based on sales of the qualifying products in that quarter.

Up-Front License Fees and Milestone Revenue. The Company recognizes revenue from up-front non-refundable licensing fees on a straight-line basis over the period of the underlying project. The Company will recognize revenue arising from a substantive milestone payment upon the successful achievement of the event, and the resolution of any uncertainties or contingencies regarding potential collection of the related payment, or if appropriate over the remaining term of the agreement.

Generic Parenteral Drug Product Arrangements

In 2014, the Company entered into development and supply agreements with (“the Genovi Agreements”) Genovi Pharmaceuticals Limited (“Genovi”), to manufacture select generic parenteral drug products for registration and subsequent commercialization in the U.S., Europe, and select emerging markets.

Under the terms of the Genovi Agreements, the Company may receive up to $3,236 in milestone payments for each drug product candidate upon achievement of certain development milestones, including technology transfer activities, analytical development, and manufacture of regulatory submission batches.

Following U.S. Food and Drug Administration approval, the Company will supply generic parenteral drug products to Genovi pursuant to the Genovi Agreements, and for certain of these products, receive payments based on Genovi's sales of such products.

The Company has determined the milestones contained in the Genovi Agreements to be substantive milestones in accordance with ASC 605-28-25, “Revenue Recognition – Milestone Method” (“ASC 605”). In evaluating the milestones included in the Genovi Agreements, the Company considered the following:

The Company considered each individual milestone to be commensurate with the enhanced value of the underlying licensed intellectual property or drug product candidate as they are advanced from the development stage to a commercialized product, and considered them to be reasonable when evaluated in relation to the total agreement consideration, including other milestones.

The milestones are deemed to relate solely to past performance, as each milestone is payable to the Company only after the achievement of the related event defined in the agreement, and is not refundable if additional future success events do not occur.

For both the three months and six months ended June 30, 2015 and 2014, no milestone revenue was recognized by the Company.

Proprietary Drug Development Arrangements

The Company has discovered and conducted the early development of several new drug candidates, with a view to out-licensing these candidates to partners for further development in return for a potential combination of up-front license fees, milestone payments and recurring royalty payments if compounds resulting from our intellectual property are successfully developed into new drugs and reach the market. The milestones included in the Company’s current license arrangements would not have a significant impact on the Company’s consolidated operating results, financial position, or cash flows.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consist of money market accounts and overnight deposits. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Restricted cash balances at June 30, 2015 and December 31, 2014, are required as collateral for the letters of credit associated with our debt agreements.

Long-Lived Assets

The Company assesses the impairment of a long-lived asset group whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include, among others, the following:

a significant change in the extent or manner in which a long-lived asset group is being used;

a significant change in the business climate that could affect the value of a long-lived asset group; or

a significant decrease in the market value of assets.

If the Company determines that the carrying value of long-lived assets may not be recoverable, based upon the existence of one or more of the above indicators of impairment, the Company compares the carrying value of the asset group to the undiscounted cash flows expected to be generated by the asset group. If the carrying value exceeds the undiscounted cash flows, an impairment charge is indicated. An impairment charge is recognized to the extent that the carrying amount of the asset group exceeds its fair value and will reduce only the carrying amounts of the long-lived assets.

Derivative Instruments and Hedging Activities

The Company accounts for derivatives in accordance with FASB ASC Topic 815, “Derivatives and Hedging”, which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or a liability measured at fair value. Additionally, changes in a derivative’s fair value shall be recognized currently in earnings unless specific hedge accounting criteria are met.

Recently Issued Accounting Pronouncements

In July 2015, the FASB issued Accounting Standards Update ("ASU") No. 2015-11, “Simplifying the measurement of inventory.” This ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and for interim periods therein. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. The ASU applies to entities that measure an investment’s fair value using the net asset per share (or an equivalent) practical expedient, while the amendments of the ASU eliminate the requirement to classify the investment within the fair value hierarchy. In addition, the requirement to make specific disclosures for all investments eligible to be assessed at fair value with the net asset value per share practical expedient has been removed. Instead, such disclosures are restricted only to investments that the entity has decided to measure using the practical expedient. The amendments in this ASU apply for fiscal years starting after December 15, 2015, and the interim periods within. The amendments are to be applied retrospectively to all periods offered, with early adoption permitted. The Company does not expect this ASU to have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which updated guidance to clarify the required presentation of debt issuance costs. The amended guidance requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying amount of the recognized debt liability, consistent with the treatment of debt discounts. Amortization of debt issuance costs is to be reported as interest expense. The recognition and measurement guidance for debt issuance costs are not affected by the updated guidance. The updated guidance is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its consolidated financial statements. At June 30, 2015, the Company has $3,534 of debt issuance costs included in other assets.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period." This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period, be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company does not expect this ASU to have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers: (Topic 606)." This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in ASC Topic 605, "Revenue Recognition," and most industry-specific guidance. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (e.g., assets within the scope of ASC Topic 360, "Property, Plant, and Equipment," and intangible assets within the scope of ASC Topic 350, "Intangibles-Goodwill and Other") are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB approved the deferral of the effective date to calendar years beginning after December 15, 2017. Early adoption is not permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

Note 2 — Earnings Per Share

The shares used in the computation of the Company’s basic and diluted earnings per share are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Weighted average common shares outstanding - basic		32,124		31,490		31,999		31,385
Dilutive effect of warrants		179		-		90		-
Dilutive effect of share-based compensation		923		1,128		950		1,091
Weighted average common shares outstanding - diluted		33,226		32,618		33,039		32,476

The Company has excluded certain outstanding stock options, non-vested restricted stock and warrants from the calculation of diluted earnings per share for the three and six months ended June 30, 2015 because of anti-dilutive effects. The weighted average number of anti-dilutive common equivalents outstanding (before the effects of the treasury stock method) was 271 and 9,637 for the three months ended June 30, 2015 and 2014, respectively, and 194 and 9,886 for the six months ended June 30, 2015 and 2014, respectively. These amounts are not included in the calculation of weighted average common shares outstanding.

Note 3 – Business Acquisitions

On January 8, 2015 the Company completed the purchase of all of the outstanding equity interests of Aptuit's Glasgow, UK business (“Glasgow”) for total consideration of $23,635. The Glasgow facility will extend the Company’s capabilities to sterile injectable drug product pre-formulation, formulation and clinical stage manufacturing. Glasgow has been assigned to the Drug Product Manufacturing (“DPM”) segment.

The following table summarizes the preliminary allocation of the purchase price to the fair value of the net assets acquired:

	January 8, 2015
Assets Acquired
Accounts receivable	$	3,395
Prepaid expenses and other current assets		95
Inventory		1,479
Property and equipment		4,285
Intangible assets		4,700
Goodwill		13,656
Other long term-assets		33
Total assets acquired	$	27,643

Liabilities Assumed
Accounts payable and accrued expenses	$	1,544
Deferred revenue		2,276
Other long-term liabilities		188
Total liabilities assumed		4,008
Net assets acquired	$	23,635

The goodwill of $13,656 is primarily attributed to the synergies expected to arise after the acquisition and is not deductible for tax purposes.

On February 13, 2015 the Company completed the purchase of assets and assumed certain liabilities of Aptuit's Solid State Chemical Information/West Lafayette, Indiana business (“SSCI”) for total consideration of $36,021. SSCI brings extensive material science knowledge and technology and expands the Company’s capabilities in analytical testing to include peptides, proteins and oligonucleotides. SSCI has been assigned to the Discovery and Development Services (“DDS”) segment.

The following table summarizes the preliminary allocation of the purchase price to the fair value of the net assets acquired:

	February 13, 2015
Assets Acquired
Accounts receivable	$	2,327
Prepaid expenses and other current assets		801
Property and equipment		11,976
Intangible assets		3,560
Goodwill		18,055
Other long term assets		171
Total assets acquired	$	36,890

Liabilities Assumed
Accounts payable and accrued expenses	$	647
Deferred revenue		222
Total liabilities assumed		869
Net assets acquired	$	36,021

The goodwill of $18,055 is primarily attributed to the synergies expected to arise after the acquisition and is deductible for tax purposes.

For both Glasgow and SSCI, final valuations will be completed to determine the fair value of the acquired property and equipment and any identifiable intangibles, which may result in changes to the above preliminary estimated fair values, as well as changes to the allocated goodwill.

Revenue and operating income from Glasgow for the period January 9, 2015 to June 30, 2015 was $7,449 and $1,739, respectively. Revenue and operating income from SSCI for the period ended February 13, 2015 to June 30, 2015 was $6,086 and $1,075, respectively.

The following table shows the unaudited combined condensed pro forma statements of operations for the three and six months ended June 30, 2015 and 2014, respectively, as if the Glasgow and SSCI acquisitions had occurred on January 1, 2014. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisitions had occurred as of the date indicated or what such results would be for any future periods.

	Three months ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Total revenues	$	74,284	$	172,723	$	138,993
Net Income		3,535		323		5,164
Earnings per share:
Basic	$	0.11	$	0.01	$	0.16
Diluted	$	0.11	$	0.01	$	0.16

For the six month periods ended June 30, 2015 and 2014, pre-tax net income was adjusted by reducing expenses by $985 for acquisition related costs and by increasing expenses by $985 for acquisition related costs, respectively.

For the six months ended June 30, 2015 pre-tax net income was adjusted by increasing expenses by $471 for purchase accounting related depreciation and amortization. For the three and six months ended June 30, 2014 pre-tax net income was adjusted by increasing expenses by $700 and $1,400, respectively for purchase accounting related depreciation and amortization.

The Company funded the acquisitions of SSCI and Glasgow utilizing the proceeds from a $75,000 senior secured credit agreement that was completed in October of 2014. The Company did not have sufficient cash on hand to complete these acquisitions as of January 1, 2014. For the purposes of presenting the pro forma combined condensed statement of operations for the three and six months ended June 30, 2014, the Company has included the assumption of bridge financing as of January 1, 2014 to fund the acquisition of SSCI and Glasgow as of that date. The pro forma combined condensed statement of operations for the three and six months reflects the recognition of interest expense on the assumed bridge financing for the period January 1, 2014 to June 30, 2014, using the rate of interest that the Company paid on its senior secured credit facility. For the six months ended June 30, 2015, pre-tax net income was adjusted by $0 and $98 of pro forma interest expense on the senior secured facility to assume that the amount had been outstanding for the entire three and six month periods. For the three and six months ended June 30, 2014, pre-tax net income was adjusted by $375 and $750, respectively, of pro forma interest expense on the senior secured facility.

Note 4 — Inventory

Inventory consisted of the following as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
Raw materials	$	28,040	$	24,298
Work in process		8,586		4,563
Finished goods		23,979		21,019
Total inventories, at cost	$	60,605	$	49,880

Note 5 –Debt

The following table summarizes long-term debt:

	June 30, 2015			December 31, 2014
Convertible senior notes, net of unamortized debt discount	$	125,753		$	122,696
Revolving credit facility		74,000			35,000
Industrial development authority bond		2,080			2,390
Capital leases – equipment & other		273			341
		202,106			160,427
Less current portion		(455	)		(447	)
Total long-term debt	$	201,651		$	159,980

The aggregate maturities of long-term debt, exclusive of unamortized debt discount of $24,247 at June 30, 2015, are as follows:

2015 (remaining)	$	69
2016		448
2017		74,397
2018		150,349
2019		350
Thereafter		740
Total	$	226,353

Convertible Senior Notes

On December 4, 2013, the Company completed a private offering of $150,000 aggregate principal amount of 2.25% Cash Convertible Senior Notes (the “Notes”), dated as of December 4, 2013 between the Company and Wilmington Trust, National Association, as Trustee. The Notes will mature on November 15, 2018, unless earlier repurchased or converted into cash in accordance with their terms prior to such date and interest is paid in arrears semiannually on each May 15 and November 15 at an annual rate of 2.25% beginning on May 15, 2014. The Notes were offered and sold only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").

The Notes are not convertible into the Company's common stock or any other securities under any circumstances. Holders may convert their Notes solely into cash at their option at any time prior to the close of business on the business day immediately preceding May 15, 2018 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period in which the trading price per thousand dollars principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after May 15, 2018 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes solely into cash at any time, regardless of the foregoing circumstances. Upon conversion, in lieu of receiving shares of the Company's common stock, a holder will receive, per thousand dollars principal amount of Notes, an amount in cash equal to the settlement amount, determined in the manner set forth in the indenture. The initial conversion rate is 63.9844 shares of the Company's common stock per thousand dollars principal amount of Notes (equivalent to an initial conversion price of approximately $15.63 per share of common stock). The conversion rate is subject to adjustment in some events as described in the Indenture but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company has agreed to pay a cash make-whole premium by increasing the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event in certain circumstances as described in the indenture.

The Company may not redeem the Notes prior to the maturity date, and no sinking fund is provided for the Notes.

The cash conversion feature of the Notes (“Notes Conversion Derivative”) requires bifurcation from the Notes in accordance with ASC Topic 815, Derivatives and Hedging, and is accounted for as a derivative liability. The fair value of the Notes Conversion Derivative at the time of issuance of the Notes was $33,600 and was recorded as original debt discount for purposes of accounting for the debt component of the Notes. This discount is amortized as interest expense using the effective interest method over the term of the Notes. For the three and six months ended June 30, 2015, the Company recorded $1,542 and $3,057, respectively, of amortization of the debt discount as interest expense based upon an effective rate of 7.69%.

The components of the Notes were as follows:

	June 30, 2015		December 31, 2014
Principal amount	$	150,000	$	150,000
Unamortized debt discount		24,247		27,304
Net carrying amount of Notes	$	125,753	$	122,696

In connection with the pricing of the Notes, on November 19, 2013, the Company entered into cash convertible note hedge transactions (“Notes Hedges”) relating to a notional number of shares of the Company's common stock underlying the Notes to be issued by the Company with two counterparties (the "Option Counterparties"). The Notes Hedges, which are cash-settled, are intended to reduce the Company’s exposure to potential cash payments that we are required to make upon conversion of the Notes in excess of the principal amount of converted notes if our common stock price exceeds the conversion price. The Notes Hedges are accounted for as a derivative instrument in accordance with ASC Topic 815. The aggregate cost of the note hedge transaction was $33,600.

At the same time, the Company also entered into separate warrant transactions with each of the Option Counterparties initially relating, in the aggregate, to 9,598 shares of the Company's common stock underlying the note hedge transactions. The cash convertible note hedge transactions are intended to offset cash payments due upon any conversion of the Notes. However, the warrant transactions could separately have a dilutive effect to the extent that the market price per share of the Company's common stock (as measured under the terms of the warrant transactions) exceeds the applicable strike price of the warrants. The initial strike price of the warrants is $18.9440 per share, which is 60% above the last reported sale price of the Company's common stock of $11.84 on November 19, 2013 and proceeds of $23,100 were received from the Option Counterparties from the sale of the warrants.

Aside from the initial payment of a $33,600 premium to the Option Counterparties, the Company is not required to make any cash payments to the Option Counterparties under the Note Hedges and will be entitled to receive from the Option Counterparties an amount of cash, generally equal to the amount by which the market price per share of common stock exceeds the strike price of the Note Hedges during the relevant valuation period. The strike price under the Note Hedges is initially equal to the conversion price of the Notes. Additionally, if the market price per share of the Company's common stock, as measured under the warrant transactions, exceeds the strike price of the warrants during the measurement period at the maturity of the warrants, the Company will be obligated to issue to the Option Counterparties a number of shares of the Company's common stock in an amount based on the excess of such market price per share of the Company's common stock over the strike price of the warrants. The Company will not receive any proceeds if the warrants are exercised.

Neither the Notes Conversion Derivative nor the Notes Hedges qualify for hedge accounting, thus any changes in the fair market value of the derivatives is recognized immediately in the statement of operations. As of June 30, 2015 and June 30, 2014, the changes in fair market value of the Notes Conversion Derivative and the Notes Hedges were equal, therefore there was no change in fair market value that was recognized in the statement of operations.

The following table summarizes the fair value and the presentation in the consolidated balance sheet:

	Location on Balance Sheet	June 30, 2015			December 31, 2014
Notes Hedges	Other assets	$	81,157		$	58,928
Notes Conversion Derivative	Other liabilities	$	(81,157	)	$	(58,928	)

The Company’s convertible notes are not convertible into the Company’s common stock or any other securities under any circumstances. Holders may convert their notes solely into cash at their option during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the notes’ conversion price of $15.63, or $20.32, on each applicable trading day. Holders of the notes may not convert their notes into cash during the quarter ending September 30, 2015, as the conditions for conversion were not met based on the closing price of the our common stock during the 30 consecutive trading days ended June 30, 2015. The average closing price for the Company’s common stock for the three months ended June 30, 2015 was $19.30.

Term Loan and Revolving Credit Facility

In April 2012, the Company entered into a $20,000 credit facility consisting of a four-year, $5,000 term loan and a $15,000 revolving line of credit. In April 2014, the Company utilized the balance of restricted cash to pay off the balance of the term loan, thereby eliminating the term loan liability. In June 2014, the Company terminated the credit agreement while still maintaining the letters of credit, thus requiring the Company to continue to maintain restricted cash to collateralize these letters of credit.

The balance required to be maintained as restricted cash must be at least 110% of the maximum potential amount of the outstanding letters of credit. As of June 30, 2015, the Company had $2,111 of outstanding letters of credit secured by restricted cash of $3,000 and $960 of outstanding letters of credit that were unsecured.

On October 24, 2014, the Company entered into a $50,000 senior secured credit agreement (the “Credit Agreement”) consisting of a three-year, $50,000 revolving credit facility, which includes a $15,000 sublimit for the issuance of standby letters of credit and a $5,000 sublimit for swing line loans. The Credit Agreement also included an accordion feature that, subject to securing additional commitments from existing lenders or new lending institutions, would have allowed the Company to increase the aggregate commitments under the Credit Agreement by up to $10,000. On December 23, 2014, the Credit Agreement was amended to increase the available commitment to $75,000, increasing and using the accordion feature in its entirety. The amount available to be borrowed under the Credit Agreement at June 30, 2015 was $40.

Borrowings made under the Credit Agreement bear interest at (a) the one-month, three-month or six-month LIBOR rate (the “LIBOR Rate”) or (b) a base rate determined by reference to the highest of (i) the Barclays Bank PLC prime rate, (ii) the United States federal funds rate plus 0.50% and (iii) a daily rate equal to the one-month LIBOR Rate plus 1.0% (the “Base Rate”), plus an applicable margin of 2.25% per annum for LIBOR Rate loans and 1.25% per annum for Base Rate loans. As of June 30, 2015 the interest rate on the Credit Agreement was 2.54%.

The Credit Agreement contains financial covenants, including maximum total leverage ratio and minimum consolidated current assets and extends for the remaining term of the agreement. As of June 30, 2015, the Company was in compliance with its current financial covenants.

Refer to Note 15 for a discussion on the Company’s subsequent financing in July of 2015.

Note 6 — Restructuring and Impairment

In April 2015, the Company announced a restructuring plan with respect to certain operations in the UK, within its Active Pharmaceutical Ingredients (“API”) business segment. In connection with the restructuring plan, the Company expects to cease all operations at its Holywell, UK facility effective in the fourth quarter or before December 31, 2015. The Company recorded $1,212 and $2,476 in charges for reduction in force and termination benefits related to the UK facility during the three and six months ended June 30, 2015, respectively. In conjunction with the Company’s actions to cease operations at its Holywell, UK facility, the Company also recorded property and equipment impairment charges of $2,550 in the API segment in the first quarter of 2015. These charges are included under the caption “impairment charges” on the consolidated statement of operations. The Company is in the process of assessing which fixed assets will be transferred to other Company facilities. Equipment that will not be transferred or recovered through sale may be subject to accelerated depreciation over the remaining operating period of the facility.

In the third quarter of 2014, the Company recorded restructuring charges related to optimizing the Singapore facility’s footprint. In April 2014, the Company announced a restructuring plan transitioning Discovery and Development Services (“DDS”) activities at its Syracuse, N.Y. site to other sites within the Company and ceased operations in Syracuse, NY at the end of June 2014. The actions taken are consistent with the Company’s ongoing efforts to consolidate its facility resources to more effectively utilize its discovery and development resource pool and to further reduce its facility cost structure.

Restructuring charges for the three and six months ended June 30, 2015 were $1,632 and $3,119, respectively, consisting primarily of UK termination charges and costs associated with the transfer of continuing products from the Holywell facility to other manufacturing locations as well as, lease termination and other charges associated with the previously announced restructuring at the Company’s Syracuse, NY facility.

The following table displays the restructuring activity and liability balances for the six month period ended and as of June 30, 2015:

	Balance at January 1, 2015		Charges/ (reversals)		Amounts Paid			Foreign Currency Translation & Other Adjustments			Balance at June 30, 2015

Termination benefits and personnel realignment	$	226	$	2,476		(254	)		(52	)	$	2,396
Lease termination and relocation charges		3,280		395		(1,832	)		(67	)		1,776
Other		–		248		(202	)		(33	)		13
Total	$	3,506	$	3,119		(2,288	)		(152	)	$	4,185

Termination benefits and personnel realignment costs relate to severance packages, outplacement services, and career counseling for employees affected by the restructuring. Lease termination charges relate to estimated costs associated with exiting a facility, net of estimated sublease income.

Restructuring charges are included under the caption “Restructuring charges” in the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014 and the restructuring liabilities are included in “Accounts payable and accrued expenses” and “other long-term liabilities” on the consolidated balance sheets at June 30, 2015 and December 31, 2014.

Anticipated cash outflow related to the restructuring reserves as of June 30, 2015 for the remainder of 2015 is approximately $2,505.

The Company is currently marketing its Syracuse, NY facility for sale, within its DDS operating segment. The facility is classified as for held for sale in accordance with ASC Topic 360, “Property, Plant and Equipment”, as amended by ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Components of an Entity”. The long-lived assets associated with the Syracuse, NY facility have been segregated to a separate line item on the consolidated balance sheet until they are sold and depreciation expense on the location has ceased. The carrying value of the facility is $1,132 at June 30, 2015.

Note 7 — Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, 2015 were as follows:

	DDS		API		DPM		Total
Balance as of December 31, 2014	$	-	$	16,899	$	44,879	$	61,778
Goodwill acquired		18,055		-		13,656		31,711
Foreign exchange translation		-		-		555		555
Balance as of June 30, 2015	$	18,055	$	16,899	$	59,090	$	94,044

The components of intangible assets are as follows:

	Cost		Impairment			Accumulated Amortization			Net		Amortization Period
*June 30, 2015*
Patents and Licensing Rights	$	5,350	$	(2,508	)	$	(1,921	)	$	921	2-16 years
Customer Relationships		39,605		-			(2,793	)		36,812	5-20 years
Trademarks		2,190		-			(360	)		1,830	5 years
Total	$	47,145	$	(2,508	)	$	(5,074	)	$	39,563

	Cost		Impairment			Accumulated Amortization			Net		Amortization Period
*December 31, 2014*
Patents and Licensing Rights	$	4,716	$	(2,443	)	$	(1,781	)	$	492	2-16 years
Customer Relationships		32,315		-			(1,679	)		30,636	5-20 years
Trademarks		1,600		-			(180	)		1,420	5 years
Total	$	38,631	$	(2,443	)	$	(3,640	)	$	32,548

Amortization expense related to intangible assets was $677 and $281 for the three months ended June 30, 2015 and 2014, respectively, and $1,427 and $392 for the six months ended June 30, 2015 and 2014, respectively. The weighted average amortization period is 16.4 years.

The following chart represents estimated future annual amortization expense related to intangible assets:

Year ending December 31,
2015 (remaining)	$	1,385
2016		2,784
2017		2,784
2018		2,779
2019		2,599
Thereafter		27,232
Total	$	39,563

Note 8 — Share-Based Compensation

During the three and six months ended June 30, 2015 and, the Company recognized total share based compensation cost of $1,464 and $3,019, respectively, as compared to total share based compensation cost for the three and six months ended June 30, 2014 of $1,024 and $1,957, respectively.

The Company grants share-based compensation, including restricted shares, under its 2008 Stock Option and Incentive Plan, as amended, as well as its 1998 Employee Stock Purchase Plan, as amended (“ESPP”).

Restricted Stock

A summary of unvested restricted stock activity during the six months ended June 30, 2015 is presented below:

	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Outstanding, January 1, 2015		923		$	10.81
Granted		384		$	16.28
Vested		(176	)	$	9.36
Forfeited		(99	)	$	8.75
Outstanding, June 30, 2015		1,032		$	13.28

As of June 30, 2015, there was $11,319 of total unrecognized compensation cost related to unvested restricted shares. That cost is expected to be recognized over a weighted-average period of 3.05 years. Of the 1,032 restricted shares outstanding, the Company currently expects all shares to vest.

Stock Options

The fair value of each stock option award is estimated at the date of grant using the Black-Scholes valuation model based on the following assumptions:

	For the Six Months Ended
	June 30, 2015			June 30, 2014
Expected life in years		5			5
Risk free interest rate		1.59	%		1.52	%
Volatility		42	%		53	%
Dividend yield		—			—

A summary of stock option activity under the Company’s Stock Option and Incentive Plans during the six-month period ended June 30, 2015 is presented below:

	Number of Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding, January 1, 2015		1,804		$	6.18
Granted		266		$	16.93
Exercised		(328	)	$	4.98
Forfeited		(169	)	$	5.66
Expired		—			—
Outstanding, June 30, 2015		1,573		$	8.31		7.15	$	18,737
Options exercisable, June 30, 2015		971		$	5.86		6.15	$	13,932

The weighted average fair value of stock options granted for the six months ended June 30, 2015 and 2014 was $6.51 and $4.85, respectively. As of June 30, 2015, there was $2,606 of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 2.77 years. Of the 1,573 stock options outstanding, the Company currently expects all options to vest.

Employee Stock Purchase Plan

During the six months ended June 30, 2015 and 2014, 46 and 36 shares, respectively, were issued under the Company’s ESPP.

During the six months ended June 30, 2015 and 2014, cash received from stock option exercises and employee stock purchases under the ESPP was $2,087 and $1,519, respectively. The excess tax benefit realized for the tax deductions from share based compensation was $1,727 and $1,080 for the six months ended June 30, 2015 and 2014, respectively.

Note 9 — Operating Segment Data

The Company has organized its operations into the Discovery and Development Services (“DDS”), API (“API”) and Drug Product Manufacturing (“DPM”) segments. The DDS segment includes activities such as drug lead discovery, optimization, drug development and small scale commercial manufacturing. API includes pilot to commercial scale manufacturing of active pharmaceutical ingredients and intermediates and high potency and controlled substance manufacturing. DPM includes pre-formulation, formulation and process development through commercial scale production of complex liquid-filled and lyophilized injectable formulations. Corporate activities include sales and marketing and administrative functions, as well as research and development costs that have not been allocated to the operating segments. Prior period disclosures have been adjusted to reflect the changes in reportable segments that took place in the third quarter of 2014 in conjunction with the purchase of Oso Biopharmaceuticals Manufacturing, LLC (“OsoBio”).

The following table contains earnings data by operating segment, reconciled to totals included in the unaudited condensed consolidated financial statements:

	Contract Revenue		Milestone & Recurring Royalty Revenue		Income (Loss) from Operations			Depreciation and Amortization
For the three months ended June 30, 2015
DDS	$	23,363	$	1,787	$	7,431		$	2,134
API		39,997		2,535		12,174			2,301
DPM		21,866		—		3,080			1,842
Corporate (b)		—		—		(16,518	)		—
Total	$	85,226	$	4,322	$	6,167		$	6,277

	Contract Revenue (a)		Milestone & Recurring Royalty Revenue		Income (Loss) from Operations			Depreciation and Amortization
For the three months ended June 30, 2014
DDS	$	19,125	$	4,239	$	2,686		$	1,761
API		39,610		2,466		15,552			2,213
DPM		2,739		—		(409	)		290
Corporate (b)		—		—		(12,747	)		—
Total	$	61,474	$	6,705	$	5,082		$	4,264

	Contract Revenue		Milestone & Recurring Royalty Revenue		Income (Loss) from Operations			Depreciation and Amortization
For the six months ended June 30, 2015
DDS	$	42,627	$	5,604	$	15,120		$	3,960
API		77,845		5,403		20,005			4,723
DPM		39,886		—		6,264			3,079
Corporate (b)		—		—		(33,992	)		—
Total	$	160,358	$	11,007	$	7,397		$	11,762

	Contract Revenue (a)		Milestone & Recurring Royalty Revenue		Income (Loss) from Operations			Depreciation and Amortization
For the six months ended June 30, 2014
DDS	$	38,115	$	10,214	$	11,146		$	3,513
API		69,370		4,774		25,633			3,938
DPM		5,027		—		(856	)		574
Corporate (b)		—		—		(23,376	)		—
Total	$	112,512	$	14,988	$	12,547		$	8,025

(a)

A portion of the 2014 amounts were reclassified from DDS to API to better align business activities within the Company’s reporting segments. This reclassification impacted contract revenues for 2014.

(b)

The Corporate entity consists primarily of the general and administrative activities of the Company.

The following table summarizes other information by segment as of and for the six month period ended June 30, 2015:

	DDS		API		DPM		Total
Long-lived assets	$	76,605	$	102,058	$	129,989	$	308,652
Total assets		171,191		294,100		137,293		602,584
Goodwill included in total assets		18,055		16,899		59,090		94,044
Investments in unconsolidated affiliates		956		—		—		956
Capital expenditures		2,433		3,929		1,179		7,541

The following table summarizes other information by segment as of and for the six month period ended June 30, 2014:

	DDS		API		DPM		Total
Long-lived assets	$	62,712	$	94,738	$	6,383	$	163,833
Total assets		265,810		241,708		12,632		520,150
Goodwill included in total assets		—		16,866		—		16,866
Investments in unconsolidated affiliates		956		—		—		956
Capital expenditures		1,823		4,136		487		6,446

Note 10 — Financial Information by Customer Concentration and Geographic Area

Total percentages of contract revenues by each segment’s three largest customers for the three and six months ended June 30, 2015 and June 30, 2014 are indicated in the following table:

	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
DDS	10%, 8%, 4%	10%, 9%, 7%	11%, 9%, 4%	8%, 8%, 8%
API	23%, 12%, 10%	14%, 12%, 10%	24%, 14%, 10%	24%, 15%, 10%
DPM	20%, 12%, 7%	34%, 18%, 11%	16%, 12%, 7%	46%, 27%, 20%

Total contract revenue from GE Healthcare (“GE”), represented 11% and 13% of total contract revenue for the three and six months ended June 30, 2015, respectively. Total contract revenue from GE represented 9% and 14% of total contract revenue for the three and six months ended June 30, 2014, respectively.

The Company’s total contract revenue for the three and six months ended June 30, 2015 and 2014 was recognized from customers in the following geographic regions:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014

United States		68	%		71	%		69	%		67	%
Europe		24			15			24			20
Asia		6			8			5			8
Other		2			6			2			5

Total		100	%		100	%		100	%		100	%

Long-lived assets by geographic region are as follows:

	June 30, 2015		December 31, 2014
United States	$	153,208	$	144,490
Asia		14,720		14,986
Europe		7,126		5,999
Total long-lived assets	$	175,054	$	165,475

Note 11 — Legal Proceedings and Other

The Company, from time to time, may be involved in various claims and legal proceedings arising in the ordinary course of business. Except as noted below, the Company is not currently a party to any such claims or proceedings which, if decided adversely to the Company, would either individually or in the aggregate have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

On November 12, 2014, a purported class action lawsuit, John Gauquie v. Albany Molecular Research, Inc., et al., No. 14-cv-6637, was filed against the Company and certain of its current and former officers in the United States District Court for the Eastern District of New York. The complaint alleges claims under the Securities Exchange Act of 1934 arising from the Company’s August 5, 2014 announcement of its financial results for the second quarter of 2014, including that the OsoBio New Mexico facility experienced a power interruption in July 2014, which would have a material impact on the Company’s results. The complaint alleges that the price of the Company’s stock was artificially inflated between August 5, 2014 and November 5, 2014, and seeks certification as a class action, unspecified monetary damages and attorneys’ fees and costs.

Insurance Recovery

During the three months ended June 30, 2015, the Company received a business interruption insurance recovery of $600, relating to the OsoBio facility. This amount was recorded as Other income in the Condensed Consolidated Statements of Operations. The Company has submitted additional claims related to this event, which are currently under evaluation by the carrier. The ultimate outcome of the claims are unknown at this time.

Note 12 – Fair Value

The Company uses a framework for measuring fair value in generally accepted accounting principles and making disclosures about fair value measurements. A three-tiered fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value.

These tiers include:

Level 1 – defined as quoted prices in active markets for identical instruments;

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company determines the fair value of its financial instruments using the following methods and assumptions:

Cash and cash equivalents, restricted cash, receivables, and accounts payable: The carrying amounts reported in the consolidated balance sheets approximate their fair value because of the short maturities of these instruments.

Convertible senior notes, derivatives and hedging instruments: The fair values of the Company’s Notes, which differ from their carrying values, are influenced by interest rates and the Company's stock price and stock price volatility and are determined by prices for the Notes observed in market trading, which are level 2 inputs. The estimated fair value of the Notes at June 30, 2015 was $208,313. The Notes Hedges and the Notes Conversion Derivative are measured at fair value using level 2 inputs. These instruments are not actively traded and are valued using an option pricing model that uses observable market data for all inputs, such as implied volatility of the Company's common stock, risk-free interest rate and other factors.

Long-term debt, other than convertible senior notes: The carrying value of long-term debt approximated fair value at June 30, 2015 due to the resetting dates of the variable interest rates.

Note 13 – Accumulated Other Comprehensive Loss, Net

The activity related to accumulated other comprehensive loss, net was as follows:

	Pension and postretirement benefit plans			Foreign currency adjustments			Total Accumulated Other Comprehensive Loss
Balance at December 31, 2014, net of tax	$	(6,374	)	$	(8,060	)	$	(14,434	)
Net current period change, net of tax		308			596			904
Balance at June 30, 2015, net of tax	$	(6,066	)		(7,464	)		(13,530	)

The following table provides additional details of the amounts recognized into net earnings from accumulated other comprehensive loss, net:

	Three Months Ended						Six Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
Actuarial losses (a)	$	237		$	156		$	474		$	312
Total before tax effect		237			156			474			312
Tax benefit on amounts reclassified into earnings		(83	)		(55	)		(166	)		(110	)
	$	154		$	101		$	308		$	202

(a) Amounts represent amortization of net actuarial loss from shareholders’ equity into postretirement benefit plan cost. This amount was primarily recognized as cost of contract revenue in the consolidated statement of operations.

Note 14 – Employee Benefit Plans

In the first quarter of 2014, the union ratified an action to settle the medical component of the post-retirement plan, significantly reducing the level of benefits available to the participants. As a result, the Company recorded $1,285 of operating income in the first quarter of 2014 due to the settlement of this obligation.

Note 15 – Subsequent Events

Acquisition

On July 16, 2015, the Company acquired all the outstanding shares (“the Transaction”) of Grupo Farmaceutico, S.L (“Gadea”), a privately-held company located in Valladolid, Spain, specializing in technically complex active pharmaceutical ingredients (APIs) and finished drug product. The purchase price was $174,000, including the issuance of approximately 2,200 shares of common stock, valued at $43,800, with the balance comprised of $97,000 in cash and the assumption of $33,200 of debt.

Gadea operates a highly regarded API and finished dose development and manufacturing business with 2014 revenue of approximately $83,000. Gadea is expected to continue to operate independently within the Company's API and DPM segments.

Subsequent Financing

On July 16, 2015, the Company entered into a $230,000 senior secured credit agreement (the “Amended Credit Agreement”) with Barclays Bank PLC, as Administrative Agent, Collateral Agent, L/C Issuer and Swing Line Lender, and the lenders party thereto.

The Amended Credit Agreement, subject to the terms and conditions set forth therein, provides for a $200,000 six-year term loan and a $30,000 five-year revolving credit facility, which includes a $15,000 sublimit for the issuance of standby letters of credit and a $5,000 sublimit for swingline loans. The Amended Credit Agreement also includes an accordion feature that, subject to securing additional commitments from existing lenders or new lending institutions, will allow the Company to increase the aggregate commitments under the Amended Credit Agreement by up to $60,000 (plus, to the extent utilized to effect an increase to the revolving credit facility, an additional $20,000), plus an unlimited amount subject to compliance with a pro forma secured net leverage ratio. The Company expects to use the proceeds of any borrowings under the Amended Credit Agreement for the Transaction, working capital and other general corporate purposes of the Company and its subsidiaries, subject to the terms and conditions set forth in the Amended Credit Agreement.

At the Company’s election, loans made under the Credit Agreement will initially bear interest at the Adjusted Eurodollar Rate (as defined below) plus 4.75% or the Base Rate (as defined below) plus 3.75%. Upon achievement of a certain senior secured leverage ratio, the rates will step down to 4.50% and 3.50%, respectively. The Base Rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the federal funds rate plus ½ of 1.00%, (ii) the prime rate in effect on such day and (iii) the Adjusted Eurodollar Rate for a one month interest period beginning on such day (or, if such day is not a business day, the immediately preceding business day) plus 1.00%; provided that, in the case of the term loans, the Base Rate shall at all times be deemed to be not less than the 2.00%. The Adjusted Eurodollar Rate means for the interest period for each Eurodollar loan comprising part of the same group, the quotient obtained (expressed as a decimal, carried out to five decimal places) by dividing (i) the applicable Eurodollar rate for such interest period by (ii) 1.00% minus the Eurodollar reserve percentage; provided that, in the case of the term loans only, the Adjusted Eurodollar Rate shall at all times be deemed to be not less than 1.00%.

The Amended Credit Agreement includes a springing maturity provision such that the loans under the Amended Credit Agreement will mature 6 months prior to the maturity date of the Notes if more than $25,000 of the Notes are outstanding and the secured leverage ratio is greater than 1.50:1.00 on such date. The Amended Credit Agreement is currently being syndicated.

The borrowings under the Amended Credit Agreement are prepayable at the option of the Company, subject to a 1.00% prepayment premium in certain circumstances if prepaid within the first six months, and otherwise without premium or penalty (other than customary breakage costs for Eurodollar loans). Amounts prepaid under the term loan facility are not available for reborrowing, but amounts prepaid under the revolving credit facility are available for reborrowing unless the Company decides to permanently reduce the commitments under the revolving credit facility, subject to the terms and conditions of the Amended Credit Agreement.

In connection with the Transaction, the Company fully paid off amounts owed under the Revolver and expects to use the additional financing for general corporate purposes.

The obligations under the Amended Credit Agreement are guaranteed by each material domestic subsidiary of the Company (each a “Guarantor”) and are secured by first priority liens on, and security interests in, substantially all of the present and after-acquired assets of the Company and each Guarantor subject to certain customary exceptions.

The Amended Credit Agreement contains customary representations and warranties relating to the Company and its subsidiaries. The Amended Credit Agreement also contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements. The Amended Credit Agreement is also subject to certain customary “Market Flex” provisions, which, if utilized, could alter certain of the terms.

Termination of Shareholder Rights Agreement

On August 5, 2015, the Company and Computershare, Inc., a Delaware corporation, successor-in-interest to Computershare Shareowner Services LLC (the “Rights Agent”) entered into an amendment and termination (the “Amendment”) of the Shareholder Rights Agreement, dated as of July 27, 2012, by and between the Company and the Rights Agent (the “Rights Agreement”). The Amendment accelerates the final expiration date of the Company’s preferred share purchase rights issued under the Rights Agreement. As a result of the Amendment, the preferred share purchase rights expired and the Rights Agreement terminated effective as of the close of business on August 5, 2015.

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

Forward-Looking Statements

The following discussion of our results of operations and financial condition should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the Notes thereto included within this report. This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by forward-looking words such as “may,” “could,” “should,” “would,” “will,” “intend,” “expect,” “anticipate,” “believe,” and “continue” or similar words, and include, but are not limited to, statements concerning the Company’s relationship with its largest customers, trends in pharmaceutical and biotechnology companies’ outsourcing of manufacturing services and chemical research and development, including softness in these markets, the effects of the reduction and cessation of royalties on Allegra products in 2015 and the expiration of such patents, the success of the sales of other products for which the Company receives royalties; the risk that the Company will not be able to replicate either in the short or long term the revenue stream that has been derived from the royalties payable under the Allegra® license agreements; the risk that clients may terminate or reduce demand under any strategic or multi-year deal; the Company’s ability to enforce its intellectual property and technology rights, expected benefits from past or future acquisitions, including Cedarburg Pharmaceuticals, Inc. (“Cedarburg”), the Glasgow, UK business (“Glasgow”), our SSCI/West Lafayette business (“SSCI”), Oso Biopharmaceuticals Manufacturing, LLC (“OsoBio”) and Gadea Pharmaceutical Group (“Gadea”), the Company’s ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the company’s strategic investments and acquisitions to perform as expected, earnings, contract revenues, costs and margins, statements regarding pending litigation matters, government regulation, customer spending and business trends, foreign operations, including increasing options and solutions for customers, business growth and the expansion of the Company’s global market, clinical supply manufacturing, management’s strategic plans, drug discovery, product commercialization, license arrangements, research and development projects and expenses, revenue and expense expectations for future periods, long-lived asset impairment, pension and postretirement benefit costs, competition and tax rates. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that could cause such differences include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 16, 2015, and Part II, Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q. All forward-looking statements are made as of the date of this report, and we do not undertake to update any such forward-looking statements in the future, except as required by law. References to “AMRI”, the “Company,” “we,” “us,” and “our,” refer to Albany Molecular Research, Inc. and its subsidiaries, taken as a whole.

Overview

We may consider additional acquisitions that enhance or complement our existing service offerings. In addition to growing organically, any acquisitions would generally be expected to contribute to AMRI’s growth by integrating with and expanding our current services, or adding services within the drug discovery, development and manufacturing life cycle. During 2015, we have entered into development transactions with Gadea in July, SSCI in February and Glasgow in January that impacted our results of operations and will continue to have an impact on our future operations.

We are a leading global contract research and manufacturing organization providing customers fully integrated drug discovery, development, and manufacturing services. We supply a broad range of services and technologies supporting the discovery and development of pharmaceutical products, the manufacturing of active pharmaceutical ingredients and the manufacturing of drug product for new and generic drugs, as well as research, development and manufacturing for the agrochemical and other industries. With locations in the United States, Europe, and Asia, we maintain geographic proximity to our customers and flexible cost models.

We continue to integrate our research and manufacturing facilities worldwide, increasing our access to key global markets and enabling us to provide our customers with a flexible combination of high quality services and competitive cost structures to meet their individual outsourcing needs. Our service offerings range from early stage discovery through formulation and manufacturing. We believe that the ability to partner with a single provider is of significant benefit to our customers as we are able to provide them with a more efficient transition of experimental compounds through the research and development process, ultimately reducing the time and cost involved in bringing these compounds from concept to market. Compounds discovered and/or developed in our contract research facilities can then be more easily transitioned to production at our large-scale manufacturing facilities for use in clinical trials and, ultimately, commercial sales if the product meets regulatory approval.

In addition to providing an integrated services model for outsourcing, we offer our customers the option of insourcing. With our world class expertise in managing high performing groups of scientists, this option allows us to embed our scientists into the customer’s facility allowing the customer to cost-effectively leverage their unused laboratory space.

As our customers continue to seek innovative new strategies for R&D efficiency and productivity, we are aggressively realigning our business and resources to address their needs. We use a cross-functional approach that maximizes the strengths of both insourcing and outsourcing, by leveraging the Company’s people, know-how, facilities, expertise and global project management to provide exactly what is needed across the discovery, development or manufacturing process. We have also streamlined our sales and marketing organization to optimize cross-selling opportunities and have enhanced our commitment to quality with the appointment of key personnel, underscoring our dedication to client service. Our improved organizational structure, combined with more focused marketing efforts, should enable us to continue to drive long term growth and profitability.

Over the last few years, we have implemented a number of organizational and rationalization initiatives and acquired new businesses to better align our operations to most efficiently support our customer’s needs and grow our revenue and overall profitability. The goal of these restructuring activities has been to advance our strategy of increasing global competitiveness and managing costs by aligning resources to meet shifting customer demand and market preferences, while optimizing our location footprint. Our acquisitions enhance and complement our existing service offerings and are expected to contribute to our growth.

Our backlog of open manufacturing orders and accepted service contracts was $176.7 million at June 30, 2015 as compared to $116.8 million at June 30, 2014. Our manufacturing and services contracts are completed over varying durations, from short to extended periods of time.

We believe our aggregate backlog as of any date is not necessarily a meaningful indicator of our future results for a variety of reasons. First, contracts vary in duration, and therefore the timing and amount of revenues recognized from backlog can vary from period to period. Second, the Company’s manufacturing and services contracts are of a nature that a customer may, at its option, cancel or delay the timing of delivery, which would change our projections concerning the timing and extent to which revenue may be recognized. In addition, the value of the Company’s services contracts that are conducted on a time and materials or full-time equivalent basis are based on estimates, from which actual revenue generated could vary. Finally, there is no assurance that projects included in backlog will not be terminated or delayed at any time by customers or regulatory authorities. We cannot provide any assurance that we will be able to realize all or most of the net revenues included in backlog or estimate the portion to be filled in the current year.

Results of Operations – Three and Six Months ended June 30, 2015 Compared to Three and Six Months Ended June 30, 2014

Our total revenue for the quarter ended June 30, 2015 was $89.5 million, which included $85.2 million from our contract service business and $4.3 million from royalties on sales of Allegra/Telfast and certain products sold by Allergan. Consolidated gross margin was 24.1% for the quarter ended June 30, 2015 as compared to 26.7% for the quarter ended June 30, 2014. Our net income was $2.3 million and $0.1 million during the three and six months ended June 30, 2015, respectively.

During the six months ended June 30, 2015, cash provided by operations was $20.0 million compared to cash provided by operations of $4.4 million for the same period of 2014. The increase in cash provided by operations was primarily driven by an increase in accounts payable and accrued expenses and a decrease in accounts receivable balances during the period. During the six months ended June 30, 2015, we spent $7.6 million on capital expenditures, primarily related to growth and maintenance of our existing facilities. During the six months ended June 30, 2015, we spent $23.5 million to acquire Glasgow and $36.1 million to acquire SSCI. A significant portion of the cash spent on acquisitions, $39.0 million, was in the form of increased borrowings under our credit facility.

Operating Segment Data

We’ve organized our operations into the Discovery and Development Services (“DDS”), API (“API”) and Drug Product Manufacturing (“DPM”) segments. DDS includes activities such as drug lead discovery, optimization, drug development and small scale commercial manufacturing. API includes pilot to commercial scale manufacturing of active pharmaceutical ingredients and intermediates and high potency and controlled substance manufacturing. DPM includes pre-formulation, formulation and process development through commercial scale production of complex liquid-filled and lyophilized injectable formulations. Corporate activities include sales and marketing and administrative functions, as well as research and development costs that have not been allocated to the operating segments. Prior period disclosures have been adjusted to reflect the changes in reportable segments that took place in the third quarter of 2014 in conjunction with the purchase of OsoBio.

A portion of 2014 contract revenue and cost of revenue was reclassified from DDS to API to better align with the business activities within our reporting segments.

Revenue

Total contract revenue

Contract revenue consists primarily of fees earned under manufacturing or service contracts with third-party customers. Our contract revenues for each of our DDS, API and Drug Product segments were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2015		2014		2015		2014

DDS	$	23,363	$	19,125	$	42,627	$	38,115
API		39,997		39,610		77,845		69,370
DPM		21,866		2,739		39,886		5,027
Total	$	85,226	$	61,474	$	160,358	$	112,512

DDS contract revenue for the three months ended June 30, 2015 increased primarily due to incremental revenue from our acquisition of the SSCI business in February 2015, which provided $4.1 million of incremental revenues during the period. For the six months ended June 30, 2015, DDS revenues increased primarily due to the incremental revenue from our acquisition of the SSCI business with incremental revenues of $6.1 million during the period and increased demand in our Singapore chemistry services, partially offset by decreases in U.S. small scale development and U.S. chemistry services. We currently expect DDS revenue for full year 2015 to increase from amounts in 2014 driven by improved facility utilization at all of our sites as well as incremental revenue from our acquisition of the SSCI business.

API contract revenue for the three months ended June 30, 2015 was consistent with the same period in 2014. API contract revenue for the six months ended June 30, 2015 increased from 2014 primarily due to an increase in commercial demand at our existing large scale facilities in India as well as $9.1 million of incremental revenue from the Cedarburg acquisition which we completed in April 2014. These increases were partially offset by a decrease in demand in large-scale services at our facility in the U.K. We currently expect continued growth in API contract revenue for full year 2015 due to on-going demand for our commercial and clinical manufacturing services worldwide, and incremental revenue from Cedarburg and our acquisition of Grupo Farmaceutico, S.L (“Gadea”) in July 2015.

DPM contract revenue for the three and six months ended June 30, 2015 increased from 2014 due to $13.2 and $24.5 million, respectively, in revenue from the July 2014 acquisition of OsoBio, $3.5 and $7.5 million, respectively, from our acquisition of the Glasgow, U.K. facility in January 2015, and increased demand at our Burlington, MA facility. We currently expect continued growth in DPM contract revenue for full year 2015 due to a full year of revenue from OsoBio, the incremental revenue from our Glasgow, U.K. facility and continued demand at our Burlington facility and incremental revenue from our acquisition of Gadea in July 2015.

Recurring royalty revenue

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	4,322	$	6,705	$	11,007	$	14,988

Our recurring royalties consist of worldwide sales of Allegra/Telfast and Sanofi over-the-counter product and authorized generics. Additionally, we earn recurring royalty revenue in conjunction with a Development and Supply Agreement with Allergan.

Recurring royalties decreased during the three and six months ended June 30, 2015 as compared to 2014 as a result of continued patent expirations associated with Allegra/Telfast. These amounts were partially offset by an increase in Allergan royalties during the periods. We currently expect full year 2015 recurring royalties to decline due to the expiration of the patents underlying the Allegra royalties in the second quarter of 2015.

The recurring royalties we receive on the sales of Allegra/Telfast have historically provided a material portion of our revenues, earnings and operating cash flows. All patents covered by our license agreements have expired as of June 30, 2015, and we will not receive any additional royalties on the sales of fexofenadine product in future periods. We continue to develop our business in an effort to supplement the revenues, earnings and operating cash flows that have historically been provided by Allegra/Telfast royalties.

Costs and Expenses

Cost of contract revenue

Cost of contract revenue consists of compensation and associated fringe benefits for employees, chemicals, depreciation and other indirect project related costs. Cost of contract revenue for our DDS, API and DPM segments were as follows:

Segment	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2015			2014			2015			2014

DDS	$	17,438		$	15,428		$	32,194		$	31,055
API		28,434			26,469			57,017			49,714
DPM		18,796			3,141			33,596			5,879
Total	$	64,668		$	45,038		$	122,807		$	86,648

DDS Gross Margin		25.4	%		19.3	%		24.5	%		18.5	%
API Gross Margin		28.9	%		33.2	%		26.8	%		28.3	%
DPM Gross Margin		14.0	%		(14.7	)%		15.8	%		(16.9	)%
Total Gross Margin		24.1	%		26.7	%		23.4	%		23.0	%

DDS contract revenue gross margin percentage increased for the three and six months ended June 30, 2015 compared to the same periods in 2014. This increase is primarily due to cost reduction initiatives and facility optimization and also due to the addition of higher margin revenues at our SSCI facility. We currently expect DDS contract margin for 2015 to improve over amounts recognized in 2014 primarily due to the full year benefit of previous cost reduction initiatives and facility optimization as well as higher margin revenues from our acquisition of the SSCI business.

API contract revenue gross margin percentage decreased for the three and six months ended June 30, 2015 compared to the same periods in 2014 due to a decrease in higher margin commercial sales during the second quarter of 2015.We currently expect improvement in API contract margins for 2015 driven by an increase in capacity utilization at all of our large-scale facilities worldwide.

DPM contract revenue gross margin percentage increased for the three and six months ended June 30, 2015 compared to the same periods in 2014 primarily due to the addition of revenue from OsoBio, which was acquired in July 2014, the benefit of the Glasgow business acquired in January 2015 and increased utilization at our Burlington, MA facility. We currently expect continued improvement in DPM contract margins for 2015 driven by these factors and also by increased overall capacity utilization.

Technology incentive award

We maintain a Technology Development Incentive Plan, the purpose of which is to stimulate and encourage novel innovative technology developments by our employees. This plan allows eligible participants to share in a percentage of the net revenue earned by us relating to patented technology with respect to which the eligible participant is named as an inventor or made a significant intellectual contribution. To date, the royalties from Allegra are the main driver of the awards. These royalties from Allegra have ceased as of June 30, 2015 due to the expiration of underlying patents. The incentive awards were as follows:

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	179	$	424	$	560	$	1,017

Technology incentive award expense decreased for the three and six months ended June 30, 2015 as compared to the same periods in the prior year due to the decrease in Allegra recurring royalty revenue as discussed above.

Research and development

Research and development (“R&D”) expense consists of compensation and benefits for scientific personnel for work performed on proprietary technology R&D projects, costs of chemicals, materials, outsourced activities and other out of pocket costs and overhead costs.

Our R&D activities are primarily accounted for in our API segment and relate to the potential manufacture of new products, the development of processes for the manufacture of generic products with commercial potential, and the development of alternative manufacturing processes.

Research and development expenses were as follows:

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	384	$	128	$	875	$	207

R&D expense for the three and six months ended June 30, 2015 increased compared to the same periods in 2014 relating primarily to development efforts towards new niche generic products. We currently expect full year 2015 R&D expense to be higher than 2014 in line with our strategy.

Selling, general and administrative

Selling, general and administrative (“SG&A”) expenses consist of compensation and related fringe benefits for sales, marketing, operational and administrative employees, professional service fees, marketing costs and costs related to facilities and information services. SG&A expenses were as follows:

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	16,518	$	12,747	$	33,992	$	23,376

SG&A expenses for the three and six months ended June 30, 2015 increased compared to the same periods in 2014 primarily due to costs associated with investments made to grow the business, merger and acquisition activities, including the acquisitions of Glasgow and SSCI, full period SG&A costs from our OsoBio and Cedarburg facilities, as well as incremental SG&A costs, including amortization of identifiable intangible assets, from the acquired businesses. We currently expect SG&A expenses for 2015 to increase due to a full year of operations at our Cedarburg and OsoBio locations and incremental costs as a result of the acquisitions of Glasgow and SSCI in early 2015 and Gadea in July 2015, but to remain relatively consistent as a percentage of revenue when compared to 2014.

Postretirement benefit plan settlement gain

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	-	$	-	$	-	$	(1,285	)

In the first quarter of 2014, we recognized a gain on settlement of post-retirement liability in the API segment.

Restructuring

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	1,632	$	1,042	$	3,119	$	1,272

In the first quarter of 2015, we announced a proposal, subject to consultation with our U.K. workforce, to close our U.K. facility in Holywell, Wales, within the API segment. Following the consultation process, on April 2, 2015, we announced a restructuring plan and expectation to cease operations at the Holywell facility by December 31, 2015. These actions taken are consistent with our ongoing efforts to consolidate our facility resources to more effectively utilize our resource pool and to further reduce our facility cost structure.

Restructuring charges for the three and six months ended June 30, 2015 consisted primarily of U.K. termination charges and costs associated with the transfer of continuing products from the Holywell, Wales facility to our other manufacturing locations as well as lease termination and other charges associated with the previously announced restructuring at our Syracuse, NY facility.

Restructuring charges for the three and six months ended June 30, 2014 consisted primarily of termination benefits and personnel realignment costs associated with the Syracuse, N.Y. site.

Impairment Charges

Three Months Ended June 30,				Six Months Ended June 30,
2015		2014		2015		2014
(in thousands)

$	-	$	3,718	$	2,615	$	3,718

In the first quarter of 2015, we recorded property and equipment impairment charges of $2.6 million in our API segment associated with the Company’s decision to cease operations at our U.K. facility in Holywell, Wales.

In the second quarter of 2014, we recorded property and equipment charges of $3.7 million in our DDS segment associated with the Company’s decision to cease operations at our Syracuse, New York facility.

Interest expense, net

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2015			2014			2015			2014

Interest expense	$	(3,185	)	$	(3,065	)	$	(6,226	)	$	(5,684	)
Interest income		6			-			12			3
Interest expense, net	$	(3,179	)	$	(3,065	)	$	(6,214	)	$	(5,681	)

Net interest expense increased for the three and six months ended June 30, 2015 from the same period in 2014 primarily due to increased levels of outstanding debt used to finance our acquisitions as well as an increase in amortization of deferred financing costs related to our credit facility.

Other income (expense), net

Three Months Ended June 30,					Six Months Ended June 30,
2015		2014			2015		2014
	(in thousands)
$	634	$	(192	)	$	1,103	$	(232	)

Other income for the three and six months ended June 30, 2015 was primarily related to an insurance recovery during the second quarter.

Income tax expense (benefit)

Three Months Ended June 30,					Six Months Ended June 30,
2015		2014			2015		2014
(in thousands)

$	1,315	$	(1,899	)	$	2,202	$	(590	)

Income tax expense for the three and six months ended June 30, 2015 increased as compared to the same periods in due to a reversal in 2014 of a valuation allowance in on a new operating loss deferred tax asset for the Company’s U.K. operations of $2.8 million due to a change in estimate regarding the recoverability of those assets resulting from improved profitability.

Liquidity and Capital Resources

We have historically funded our business through operating cash flows and proceeds from borrowings. As of June 30, 2015, we had $45.6 million in cash, cash equivalents, and restricted cash and $226.4 million in bank and other related debt.

During the first half of 2015, we generated cash of $20.0 million from operating activities, compared to cash provided by operations of $4.4 million during the same period in 2014. The increase was primarily driven by an increase in accounts payable and accrued expenses.

During the six months ended June 30, 2015, cash used in investing activities was $67.2 million, resulting primarily from the use of $36.0 million in cash to acquire SSCI, $23.6 million to acquire the facility in Glasgow, U.K., and $7.5 million used for the acquisition of property and equipment. Additionally, during the six months ended June 30, 2015, we generated cash of $42.9 million from financing activities, relating primarily from borrowings on our revolving line of credit and proceeds from stock issuances resulting from exercises of stock options and employee stock purchase plan purchases.

Working capital, defined as current assets less current liabilities, was $146.1 million at June 30, 2015 as compared to $142.3 million as of December 31, 2014. This increase primarily relates to increased inventory levels and new working capital associated with the companies acquires in 2015 offset by a decrease in cash to fund the acquisitions and increases in accounts payable and accrued liabilities.

In December 2013, we issued $150 million of 2.25% Cash Convertible Senior Notes (the “Notes”), which generated net proceeds of $134.8 million, which includes the associated warrants, convertible note hedges and bank fees. In connection with the offering of these Notes, we entered into convertible note hedging transactions with two counterparties. We also entered into warrant transactions in which we sold warrants of our common stock to the counterparties. We paid the counterparties approximately $33.6 million for the convertible note hedge and received approximately $23.1 million from the counterparties for the warrants. See Note 5 for additional information regarding these transactions.

In April 2012, we entered into a $20.0 million credit facility consisting of a four-year, $5.0 million term loan and a $15.0 million revolving line of credit. In April 2014, we utilized our restricted cash to pay off the balance of the term loan, thereby eliminating the term loan liability. In June 2014 we terminated the credit agreement while still maintaining the letters of credit, thus requiring us to continue to maintain certain restricted cash to collateralize these letters of credit.

The balance required to be maintained with a financial institution as restricted cash must be at least 110% of the maximum potential amount of the outstanding letters of credit. As of June 30, 2015 we had $2.1 million of outstanding letters of credit related to this institution secured by restricted cash of $3.0 million. The amount available to be borrowed under the revolving line of credit at June 30, 2015 was $40,000. Additionally, we had $1.0 million in letters of credit with another financial institution.

On October 24, 2014, we entered into a $50.0 million senior secured credit agreement (the “Credit Agreement”) consisting of a three-year, $50.0 million revolving credit facility, which includes a $15.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swing line loans. The Credit Agreement also included an accordion feature that, subject to securing additional commitments from existing lenders or new lending institutions, allowing us to increase the aggregate commitments under the Credit Agreement by up to $10.0 million. On December 23, 2014, the Credit Agreement was amended to increase the available commitment to $75.0 million, increasing and using the accordion feature in its entirety. At June 30, 2015, the amount available to be borrowed under this agreement is $40,000.

Subsequent Financing

On July 16, 2015, we entered into a $230 million senior secured credit agreement (the “Amended Credit Agreement”) with Barclays Bank PLC, as Administrative Agent, Collateral Agent, L/C Issuer and Swing Line Lender, and the lenders party thereto.

The Amended Credit Agreement, subject to the terms and conditions set forth therein, provides for a $200 million six-year term loan and a $30 million five-year revolving credit facility, which includes a $15 million sublimit for the issuance of standby letters of credit and a $5 million sublimit for swingline loans. The Amended Credit Agreement also includes an accordion feature that, subject to securing additional commitments from existing lenders or new lending institutions, will allow the us to increase the aggregate commitments under the Amended Credit Agreement by up to $60 million (plus, to the extent utilized to effect an increase to the revolving credit facility, an additional $20 million), plus an unlimited amount subject to compliance with a pro forma secured leverage ratio. We expects to use the proceeds of any borrowings under the Amended Credit Agreement for the Transaction, working capital and other general corporate purposes of us and our subsidiaries, subject to the terms and conditions set forth in the Amended Credit Agreement.

The Amended Credit Agreement includes a springing maturity provision such that the loans under the Amended Credit Agreement will mature 6 months prior to the convertible bond maturity date if more than $25 million of the bonds are outstanding and the secured leverage ratio is greater than 1.50:1.00 on such date. The Amended Credit Agreement is currently being syndicated.

The borrowings under the Amended Credit Agreement are prepayable at the option of the Company, subject to a 1.00% prepayment premium in certain circumstances if prepaid within the first six months, and otherwise without premium or penalty (other than customary breakage costs for Eurodollar loans). Amounts prepaid under the term loan facility are not available for reborrowing, but amounts prepaid under the revolving credit facility are available for reborrowing unless the Company determines to permanently reduce the commitments under the revolving credit facility, subject to the terms and conditions of the Amended Credit Agreement.

In connection with this transaction, the Company fully paid off amounts owed under the Revolver and expects to use the additional financing for general corporate purposes.

The obligations under the Amended Credit Agreement are guaranteed by each of our material domestic subsidiaries (each a “Guarantor”) and are secured by first priority liens on, and security interests in, substantially all of the present and after-acquired assets of ours and each Guarantor subject to certain customary exceptions.

The Credit Agreement contains customary representations and warranties relating to us and our subsidiaries. The Amended Credit Agreement also contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements. The Amended Credit Agreement is also subject to certain customary “Market Flex” provisions, which, if utilized, could alter certain of the terms.

The disclosure of payments we have committed to make under our contractual obligations is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Outside of the borrowings on our senior secured credit agreement (the “Amended Credit Agreement”) as discussed under the “Subsequent Financing” section, there have been no material changes to our contractual obligations at June 30, 2015. As of June 30, 2015, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of the Securities and Exchange Commission’s Regulation S-K.

Our convertible notes are not convertible into our common stock or any other securities under any circumstances. Holders may convert their notes solely into cash at their option during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar quarter), if the last reported sale price of the our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the notes’ conversion price of $15.63, or $20.32, on each applicable trading day. Holders of the notes may not convert their notes into cash during the quarter ending September 30, 2015, as the conditions for conversion were not met based on the closing price of the our common stock during the 30 consecutive trading days ended June 30, 2015. The average closing price for our common stock for the three months ended June 30, 2015 was $19.30.

We expect that additional future capital expansion and acquisition activities, if any, could be funded with cash on hand, cash from operations, borrowings under our credit facility and/or the issuance of equity or debt securities. There can be no assurance that attractive acquisition opportunities will be available to us or will be available at prices and upon such other terms that are attractive to us. We regularly evaluate potential acquisitions of other businesses, products and product lines and may hold discussions regarding such potential acquisitions. In addition, in order to meet our long-term liquidity needs or consummate future acquisitions, we may incur additional indebtedness or issue additional equity or debt securities, subject to market and other conditions. There can be no assurance that such additional financing will be available on terms acceptable to us or at all. The failure to raise the funds necessary to finance our future cash requirements or consummate future acquisitions could adversely affect our ability to pursue our strategy and could negatively affect our operations in future periods.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to business combinations, inventories, goodwill and intangibles, other long-lived assets, derivative instruments and hedging activities, pension and postretirement benefit plans, income taxes and contingencies, among other effects. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We refer to the policies and estimates set forth in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. There have been no material changes or modifications to the policies since December 31, 2014.

Recently Issued Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-11, “Simplifying the measurement of inventory.” This ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and for interim periods therein. We are currently evaluating the impact this ASU will have on its consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. The ASU applies to entities that measure an investment’s fair value using the net asset per share (or an equivalent) practical expedient, while the amendments of the ASU eliminate the requirement to classify the investment within the fair value hierarchy. In addition, the requirement to make specific disclosures for all investments eligible to be assessed at fair value with the net asset value per share practical expedient has been removed. Instead, such disclosures are restricted only to investments that the entity has decided to measure using the practical expedient. The amendments in this ASU apply for fiscal years starting after December 15, 2015, and the interim periods within. The amendments are to be applied retrospectively to all periods offered, with early adoption permitted. We are currently evaluating the impact this ASU will have on its consolidated financial statements.

In April 2015, the FASB issued ASU No 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which updated guidance to clarify the required presentation of debt issuance costs. The amended guidance requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying amount of the recognized debt liability, consistent with the treatment of debt discounts. Amortization of debt issuance costs is to be reported as interest expense. The recognition and measurement guidance for debt issuance costs are not affected by the updated guidance. The updated guidance is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. We do not expect this ASU to have a material impact on our consolidated financial statements. At June 30, 2015, we had $3.5 million of debt issuance costs included in other assets.

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period." This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period, be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. We do not expect this ASU to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers: (Topic 606)." This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in ASC Topic 605, "Revenue Recognition," and most industry-specific guidance. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (e.g., assets within the scope of ASC Topic 360, "Property, Plant, and Equipment," and intangible assets within the scope of ASC Topic 350, "Intangibles-Goodwill and Other") are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB approved to defer the effective date of ASU 2014-09. This ASU is now effective for calendar years beginning after December 15, 2017. Early adoption is not permitted. We are currently evaluating the impact this ASU will have on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes with respect to the information on Quantitative and Qualitative Disclosures about Market Risk appearing in Part II, Item 7A to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the Company’s last fiscal quarter our management conducted an evaluation with the participation of our Chief Executive Officer and Chief Financial Officer regarding the effectiveness of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the Company’s last fiscal quarter, our disclosure controls and procedures were effective in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. We intend to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to Part 1 – Note 11 to the condensed consolidated financial statements for details and history on outstanding litigation.

Item 1A. Risk Factors

In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part II, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There are no material changes to the Risk Factors described in our Annual Report on Form 10-K for the year ended December 31, 2014.

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

The following table represents share repurchases during the three months ended June 30, 2015:

Period	(a) Total Number of Shares Purchased (1)		(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1, 2015 – April 30, 2015		1,524	$	17.91		N/A		N/A
May 1, 2015 – May 31, 2015		946	$	19.40		N/A		N/A
June 1, 2015 – June 30, 2015		4,859	$	20.11		N/A		N/A
Total		7,329	$	19.56		N/A		N/A

(1) Consists of shares repurchased by the Company for certain employee’s restricted stock that vested to satisfy minimum tax withholding obligations that arose on the vesting of the restricted stock.

Item 6. Exhibits

Exhibit
Number		Description

2.1		Share Purchase Agreement by and among Albany Molecular Research, Inc., Gadea Grupo Framaceutico, S.L., Exirisk Spain, S.L. and certain other persons thereto, dated July 16, 2015 (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission on July 16, 2015, File No. 001-35622).

3.1		Certificate of Amendment to the Restated Certificate of Incorporation of Albany Molecular Research, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 5, 2015, File No. 001-35622)
3.2		Registration Rights Agreement by and between Albany Molecular Research, Inc. and 3-Gutinver, S.L., dated as of July 16, 2015 (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission on July 16, 2015, File No. 001-35622)

4.1		Amendment and Termination of Shareholder Rights Agreement between Albany Molecular Research, Inc. and Computershare, Inc., dated as of August 5, 2015 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission on August 5, 2015, File No. 001-35622).

4.2		Certificate of Elimination of Series A Junior Participating Cumulative Preferred Stock, dated August 5, 2015 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission on August 5, 2015, File No. 001-35622).

10.1*		Employment Agreement by and between Albany Molecular Research, Inc. and Felicia Ladin

10.2		Amendment No. 2 to Credit Agreement, dated as of July 14, 2015, among Albany Molecular Research, Inc., Barclays Bank PLC, as administrative agent and collateral agent, each Lender party thereto and each other Loan Party party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission on July 16, 2015, File No. 001-35622)

31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

32.1		Certification of the 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 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		XBRL (eXtensible Business Reporting Language). The following materials from Albany Molecular Research, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) notes to consolidated financial statements.

* This certification is not “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Securities Exchange Act.

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.

	ALBANY MOLECULAR RESEARCH, INC.

Date: August 7, 2015	By:	/s/ Felicia Ladin
		Felicia Ladin
		Senior Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer)

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is made this 11th day of February, 2015 (the “Effective Date”) by and between Albany Molecular Research, Inc., a Delaware corporation (the “Company”), and Felicia Ladin (the “Executive”).

WHEREAS, the Executive became an officer and key employee of the Company on the Employment Date; and

WHEREAS, the parties hereto desire to assure that the Executive’s knowledge and familiarity with the business of the Company will continue to be available to the Company after the date hereof.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties agree as follows:

1. Employment. Subject to the provisions of Section 6, the Company hereby employs the Executive, effective on the Employment Date, and the Executive agrees to accept such employment on the Employment Date upon the terms and conditions hereinafter set forth. The Employment Date is February 4, 2015, provided, however that the parties agreed that an announcement of such employment was made on January 12, 2015. In the event that the Executive becomes an employee of the Company on any date other than February 4, 2015, then the actual date of employment shall be considered the Employment Date hereunder.

2. Term of Employment. The term of the Executive’s employment pursuant to this Agreement shall commence on and as of the Employment Date (the “Effective Date”) and shall remain in effect for a period of two (2) years from the Effective Date (the “Term”). The Term shall be renewed automatically for periods of two (2) years (each a “Renewal Term”) commencing at the second anniversary of the Effective Date and on each subsequent anniversary thereafter, unless notice that this Agreement will not be extended is given by either the Executive or the Company not less than one-hundred eighty (180) days prior to the expiration of the Term (as extended by any Renewal Term). The period during which the Executive serves as an employee of the Company in accordance with and subject to the provisions of this Agreement is referred to in this Agreement as the “Term of Employment.”

3. Capacity.

(a) Duties. During the Term of Employment, the Executive shall report directly to the to the President and Chief Executive Officer and (i) shall, until the date agreed to by the Company and the Executive, serve as an executive officer of the Company with the title Senior Vice President and Treasurer, and, (ii) shall following the filing of the Annual Report on Form 10-K for the year ended December 31, 2014, serve, in addition, as the Chief Financial Officer of the Company and (iii) shall perform such duties and responsibilities as may be reasonably determined by the President and Chief Executive Officer and the Board of Directors of the Company consistent with the Executive’s title and position, duties and responsibilities as an executive officer of the Company as of the Effective Date; provided that such duties and responsibilities shall be within the general area of the Executive’s experience and skills, (iii) upon the request of the Board of Directors of the Company, shall serve as an officer and/or director of the Company and any of its subsidiaries or affiliates (provided that the Company shall indemnify the Executive for liabilities incurred as such in accordance with its current practices to the fullest extent permitted by applicable law); and (iv) shall render all services incident to the foregoing.

(b) Extent of Service. The Executive agrees to diligently serve the interests of the Company and shall devote substantially all of her working time, attention, skill and energies to the advancement of the interests of the Company and its subsidiaries and affiliates and the performance of her duties and responsibilities hereunder; provided that nothing in this Agreement shall be construed as preventing the Executive from (i) investing the Executive’s assets in any entity in a manner not prohibited by Section 7 and in such form or manner as shall not require any material activities on the Executive’s part in connection with the operations or affairs of the entities in which such investments are made, or (ii) engaging in religious, charitable or other community or non-profit activities that do not impair the Executive’s ability to fulfill the Executive’s duties and responsibilities under this Agreement.

4. Compensation.

(a) Salary. During the Term of Employment, the Company shall pay the Executive a salary (the “Base Salary”) at an annual rate as shall be determined from time to time by the Board of Directors of the Company or the Compensation Committee of the Board of Directors consistent with the general policies and practices of the Company and subject to periodic review in accordance with the policies and practices of the Company; provided, however, that in no event shall such rate per annum be less than $400,000.00. Such salary shall be subject to withholding under applicable law and shall be payable in periodic installments in accordance with the Company’s usual practice for its senior executives, as in effect from time to time.

(b) Bonus. Annually, the Company shall review the performance of the Company and of the Executive during the prior year, and the Company may provide the Executive with additional compensation as a bonus in accordance with any bonus plan then in effect from time to time for senior executives of the Company. The current bonus plan for senior executives calls for the payment of 30% of base salary upon the attainment of threshold goals; 50% upon the attainment of target goals and 100% upon the attainment of superior goals. This bonus plan shall have such terms as may be established in the sole discretion of the Board of Directors of the Company or the Compensation Committee of the Board of Directors. Executive will be paid a sign-on bonus in 2015 equal to $300,000 (the “New Hire Bonus”). The New Hire Bonus will be paid 50% within thirty (30) days of date of hire and the remaining 50% sixty (60) days following the first payment. Executive must be an active employee in good standing to receive the payments constituting the New Hire Bonus. In the event Executive receives payment of a bonus for 2014 performance from the Executive’s prior employer, Executive will inform the SVP of Human Resources of the gross amount of such bonus and it is understood that the New Hire Bonus shall be reduced by the amount of that bonus paid by the prior employer.

5. Benefits.

(a) Regular Benefits. During the Term of Employment, the Executive shall be entitled to participate in any and all medical, dental, pension and life insurance plans, disability income plans and other employee benefit plans as in effect from time to time for senior executives of the Company. Such participation shall be subject to (i) the terms of the applicable plan documents, (ii) generally applicable policies of the Company and (iii) the discretion of the Board of Directors of the Company or the administrative or other committee provided for in, or contemplated by, such plan. Compliance with this Section 5(a) shall in no way create or be deemed to create any obligation, express or implied, on the part of the Company or any subsidiary or affiliate of the Company with respect to the continuation of any benefit or other plan or arrangement maintained as of or prior to the Effective Date or the creation and maintenance of any particular benefit or other plan or arrangement at any time after the Effective Date.

(b) Reimbursement of Expenses. The Company shall promptly reimburse the Executive for all reasonable business expenses incurred by the Executive during the Term of Employment in accordance with the Company’s practices for senior executives of the Company, as in effect from time to time.

(c) Vacation. During the Term of Employment, the Executive shall receive at least four (4) weeks paid vacation annually or such greater amount as is in accordance with the Company’s practices for senior executives of the Company, as in effect from time to time.

(d) New Employment Benefits. During the time that the Executive continues to retain her primary residence in Pennslyvania, the Executive will commute to whichever AMRI location shall be reasonably necessary to perform the responsibilities of Executive’s position. Executive will be accommodated in hotels that are preferred Company hotels and reserved by the Company travel agent or adminsitrator and paid for by AMRI or in a mutually agreeable rental residence at a cost per month to be approved by the Company, not to exceed Two Thousand Five Hundred Dollars ($2,500) per month plus utilities and no such temporary living expenses shall be included in the definition of Relocation Expenses as set forth below, as allowable. Any time after the Employment Date, the Executive is eligible for the AMRI Relocation Program for executives. This program is explained in detail in the related documents and includes reimbursement or direct payment of all costs associated with the closing costs for both sale of the Executive’s primary residence in Pennsylvania and the purchase, if any, of a new residence at the agreed upon location. The Company will pay for the physical move of household goods to the new location. Appropriate tax gross-ups will be made where allowable. Rent and Untility reimbursement for temporary living will be included in the gross up consideration. The provisions of the plan are more specific and are the terms that will be adhered to in the actual reimbursement. It is expected that such residence will be in the proximity of the Company’s Massachusetts facilities, but could be elsewhere if approved by the Senior Vice President of Human Resources or the President and CEO. All such permanent relocation expenses, including the New Hire Bonus, are referred to herein as the “Relocation Expenses”.

(e) Grant of Company Equity. Effective on Employment Date, the Company will grant to Executive Twenty Five Thousand (25,000) shares of restricted stock and non-qualified stock options to purchase Seventy Five Thousand (75,000) shares of the Company’s Common Stock, such restricted stock and stock options to be granted pursuant to the Company’s 2008 Stock Option and Incentive Plan. Such restricted stock and stock options will be evidenced by standard agreements to be entered into between Executive and the Company. The restricted stock and stock options granted pursuant to this Section 5(e) will vest twenty five percent (25%) per year on each anniversary of the date of grant. The shares of restricted stock and stock options granted in this Section 5(e) are referred to herein as the New Hire Grant.

6. Termination of Employment. Notwithstanding the provisions of Section 2, the Executive’s employment under this Agreement shall terminate under the following circumstances set forth in this Section 6.

For purposes of this Agreement, “Date of Termination” means (i) if the Executive’s employment is terminated by her death as provided in Section 6(c), the date of her death; (ii) if the Executive’s employment is terminated due to his permanent disability as provided in Section 6(c), the date on which notice of termination is given; (iii) if the Executive’s employment is terminated by the Company without Cause under Section 6(e) or Section 6(g), sixty (60) days after the date on which notice of termination is given; and (iv) if the Executive’s employment is terminated under Section 6(f), or for Good Reason under Section 6(g), the date on which the applicable cure period expires. In the event that Executive’s employment terminates at any time from the date hereof to the date that is 24 months following the payment of the last to be paid of the Relocation Expenses and such termination is pursuant to Section 6(b) or 6(d); then within 30 days of the Date of Termination Executive shall repay the Relocation Expenses in full to the Company.

(a) Mutual Consent. The Executive’s employment under this Agreement may be terminated at any time by the mutual consent of the Executive and the Company on such terms as both parties shall mutually agree.

(b) Termination by the Company for Cause. The Executive’s employment under this Agreement may be terminated by the Company for Cause at any time upon written notice to the Executive without further liability on the part of the Company. For purposes of this Agreement, a termination shall be for Cause if:

(i) the Executive shall commit an act of fraud, embezzlement, misappropriation or breach of fiduciary duty against the Company or any of its subsidiaries or affiliates or shall be convicted by a court of competent jurisdiction or shall plead guilty or nolo contendere to any felony or any crime involving moral turpitude;

(ii) the Executive shall commit a material breach of any of the covenants, terms or provisions of Section 7 or 8 hereof which breach has not been cured within fifteen (15) days after delivery to the Executive by the Company of written notice thereof;

(iii) the Executive shall commit a material breach of any of the covenants, terms or provisions hereof (other than pursuant to Section 7 or 8 hereof) which breach has not been remedied within thirty (30) days after delivery to the Executive by the Company of written notice thereof; or

(iv) the Executive shall have disobeyed reasonable written instructions from the Company’s Board of Directors, Compensation Committee or other appropriate governing committee which are consistent with the terms and conditions of this Agreement or shall have deliberately, willfully, substantially and continuously failed to perform the Executive’s duties hereunder, after written notice and under circumstances effectively constituting a voluntary resignation of the Executive’s position with the Company.

Upon termination for Cause as provided in this Section 6(b), all obligations of the Company under this Agreement shall thereupon immediately terminate other than any obligations with respect to earned but unpaid Base Salary. The Company shall have any and all rights and remedies under this Agreement and applicable law.

(c) Death; Disability. The Executive’s employment under this Agreement may be terminated by the Company upon the earlier of death or permanent disability (as defined below) of the Executive continuing for a period of one hundred eighty (180) days. Upon any such termination of the Executive’s employment, all obligations of the Company under this Agreement shall thereupon immediately terminate other than any obligations with respect to (i) earned but unpaid Base Salary through the Date of Termination, (ii) bonus payments with respect to the calendar year within which such termination occurred on the basis of and to the extent contemplated in any bonus plan then in effect with respect to senior executive officers of the Company, pro-rated on the basis of the number of days of the Executive’s actual employment hereunder during such calendar year through the Date of Termination, and (iii) in the case of permanent disability, continuation at the Company’s expense of health insurance benefits (medical and dental) until the first anniversary of the Date of Termination to the extent permitted under the Company’s group health insurance policy. As used herein, the term “permanent disability” or “permanently disabled” means the inability of the Executive, by reason of injury, illness or other similar cause, after reasonable accommodation by the Company, to perform a major part of her duties and responsibilities in connection with the conduct of the business and affairs of the Company. The Company shall provide written notice to the Executive of the termination of her employment hereunder due to permanent disability.

(d) Voluntary Termination by the Executive. At any time during the Term of Employment, the Executive may terminate her employment under this Agreement upon sixty (60) days’ prior written notice to the Company. Upon termination by the Executive as provided in this Section 6(d), all obligations of the Company under this Agreement shall thereupon immediately terminate.

(e) Termination by the Company Without Cause. The Executive’s employment under this Agreement may be terminated by the Company at any time without Cause by the Company upon sixty (60) days’ prior written notice to the Executive. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 6(b) and is not a termination on account of death or disability under Section 6(c) shall be deemed a termination without Cause. Upon any such termination of the Executive’s employment, all obligations of the Company under this Agreement shall thereupon immediately terminate other than any obligations with respect to earned but unpaid Base Salary and bonus under Section 4. In addition, subject to the Executive signing a general release of claims in a form and manner satisfactory to the Company and the lapse of any statutory revocation period, the Company shall continue to pay the Executive her Base Salary at the rate then in effect pursuant to Section 4(a) for a period of one (1) year from the Date of Termination and shall pay to the Executive in monthly installments over the one (1) year period, an amount equal to the Executive’s cash bonus, if any, received in respect of the year immediately preceding the year of termination pursuant to Section 4(b) beginning with the first payroll date that begins thirty (30) days after the Date of Termination. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), each monthly payment shall be considered a separate payment. The Company shall also pay 100% of the costs to provide up to twelve (12) months of outplacement support services at a level appropriate for the Executive’s title and responsibility and provide the Executive with health and dental insurance continuation at a level consistent with the level and type the Executive had in place at the time of termination for a period of twelve (12) months from the Date of Termination. In addition, on or prior to the Date of Termination, Executive will become fully vested in any unvested shares or options granted as part of the New Hire Grant.

(f) Termination by the Executive upon Company Breach. The Executive shall have the right to terminate her employment hereunder upon written notice to the Company in the event of (i) a change in the Executive reporting directly to the Company’s Chief Executive Officer or to the Board of Directors or a material diminution in the nature or scope of the powers, duties or responsibilities of the Executive or (ii) a breach by the Company of any of its material obligations hereunder, in each case after the Executive has given written notice to the Company specifying such default by the Company within sixty (60) days of the occurrence of the default and giving the Company a reasonable time, not less than thirty (30) days, to conform its performance to its obligations hereunder. Upon any such termination of the Executive’s employment, all obligations of the Company under this Agreement shall thereupon immediately terminate other than any obligations with respect to earned but unpaid Base Salary and bonus under Section 4. In addition, subject to the Executive signing a general release of claims in a form and manner satisfactory to the Company and the lapse of any statutory revocation period, the Company shall continue to pay the Executive her Base Salary at the rate then in effect pursuant to Section 4(a) for a period of one (1) year from the Date of Termination and shall pay to the Executive in monthly installments over the one (1) year period, an amount equal to the Executive’s cash bonus, if any, received in respect of the year immediately preceding the year of termination pursuant to Section 4(b) beginning with the first payroll date that begins thirty (30) days after the Date of Termination. For purposes of Section 409A of the Code, each monthly payment shall be considered a separate payment. The Company shall also pay 100% of the costs to provide up to twelve (12) months of outplacement support services at a level appropriate for the Executive’s title and responsibility and provide the Executive with health and dental insurance continuation at a level consistent with the level and type the Executive had in place at the time of termination for a period of twelve (12) months from the Date of Termination. In addition, on or prior to the Date of Termination, Executive will become fully vested in any unvested shares or options granted as part of the New Hire Grant.

(g) Termination Pursuant to a Change of Control. If there is a Change of Control, as defined below, during the Term of Employment, the provisions of this Section 6(g) shall apply and shall continue to apply throughout the remainder of the Term (as extended by any Renewal Term). Upon a Change of Control, the Executive will become fully vested in any outstanding stock options, Restricted Stock or other stock grants awarded and become fully vested in all Company contributions made to the Executive’s 401(k), Profit Sharing or other retirement account(s). In addition, within thirty (30) days of the Change of Control, the Company shall pay to the Executive a lump sum equal to the Executive’s pro rata target cash bonus for the year in which the Change of Control occurred (as such may be set forth in the Company’s bonus plan for such year and calculated assuming target achievement of corporate and personal goals); such pro rata amount to be determined based on the actual date of the closing of such Change of Control transaction.

If, within two (2) years following a Change of Control, the Executive’s employment is terminated by the Company without Cause (in accordance with Section 5(e) above) or by the Executive for “Good Reason” (as defined in Section 6(g)(ii) below), in lieu of any severance and other benefits payable under Section 6(e) or Section 6(f), subject to the Executive signing a general release of claims in a form and manner satisfactory to the Company and the lapse of any statutory revocation period, the Company shall pay to the Executive (or the Executive’s estate, if applicable) a lump sum amount equal to 1.5 times the sum of (x) the Executive’s Base Salary at the rate then in effect pursuant to Section 4(a), plus (y) an amount equal to the Executive’s cash bonus, if any, received in respect of the year immediately preceding the year of termination pursuant to Section 4(b) within thirty (30) days of the Date of Termination. Notwithstanding the foregoing, to the extent the cash severance payment to the Executive is considered deferred compensation subject to Section 409A of the Code, and if the Change of Control does not constitute a “change in control event” within the meaning of Section 409A of the Code, such cash severance shall be payable in installments over the same period as provided in Section 6(e). The Company shall also pay 100% of the costs to provide up to twelve (12) months of outplacement support services at a level appropriate for the Executive’s title and responsibility and provide the Executive with health and dental insurance continuation at a level consistent with the level and type the Executive had in place at the time of termination for a period of twelve (12) months from the Date of Termination.

(i) “Change of Control” shall mean the occurrence of any one of the following events: (A) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (B) a merger, reorganization or consolidation in which the outstanding shares of Stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, or (C) the sale of all of the Stock of the Company to an unrelated person or entity.

(ii) “Good Reason” shall mean the occurrence of any of the following:

(A) a change in the Executive reporting directly to the Company’s Chief Executive Officer or member of the Board of Directors or a material diminution in the nature or scope of the powers, duties or responsibilities of the Executive;

(B) a breach by the Company of any of its material obligations hereunder

(iii) The Executive shall provide the Company with reasonable notice and an opportunity to cure any of the events listed in Section 6(g)(ii) within sixty (60) days of the occurrence of the event and shall not be entitled to compensation pursuant to this Section 6(g) unless the Company fails to cure within a reasonable period of not less than thirty (30) days.

(h) Additional Limitation. Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Severance Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, the following provisions shall apply:

(A) if the Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total of the federal, state, and local income and employment taxes payable by the Executive on the amount of the Severance Payments which are in excess of the Threshold Amount, are greater than or equal to the Threshold Amount, the Executive shall be entitled to the full amount of Severance Payments.

(B) if the Threshold Amount is less than (x) the Severance Payments, but greater than (y) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the federal, state, and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the Severance Payments shall be reduced (but not below zero) to the extent necessary so that the sum of all Severance Payments shall not exceed the Threshold Amount. In such event, the Severance Payments shall be reduced in the following order: (i) cash payments not subject to Section 409A of the Code; (ii) cash payments subject to Section 409A of the Code; (iii) equity-based payments and acceleration; and (iv) non-cash forms of benefits. To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order.

For the purposes of this Section 6(h) “Threshold Amount” shall mean three (3) times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by the Executive with respect to such excise tax.

The determination as to which of the alternative provisions of this Section 6(h) shall apply to the Executive shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Executive. For purposes of determining which of the alternative provisions of this Section 6(h) above shall apply, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of the Executive’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.

(i) No Mitigation. Without regard to the reason for the termination of the Executive’s employment hereunder, the Executive shall be under no obligation to mitigate damages with respect to such termination under any circumstances and in the event the Executive is employed or receives income from any other source, there shall be no offset against the amounts due from the Company hereunder.

(j) Section 409A.

(i) Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement would be considered deferred compensation subject to the twenty percent (20%) additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six (6) months and one (1) day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six (6)-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. Any such delayed cash payment shall earn interest at an annual rate equal to the prime rate reported by The Wall Street Journal as of the date of separation from service, from such date of separation from service until the payment.

(ii) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

(iii) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service”. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

(iv) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

7. Non-Competition and No Solicitation.

(a) Because the Executive’s services to the Company are special and because the Executive has access to the Company’s confidential information, during the Term of Employment and for a period of twelve (12) months following the termination, the Executive shall not, without the express written consent of the Company, directly or indirectly, engage, participate, invest in, be employed by or assist, whether as owner, part-owner, shareholder, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity, any Person (as hereinafter defined) other than the Company and its affiliates in the Designated Industry (as hereinafter defined); provided, however, that nothing herein shall be construed as preventing the Executive from making passive investments in a Person in the Designated Industry if the securities of such Person are publicly traded and such investment constitutes less than one percent (1%) of the outstanding shares of capital stock or comparable equity interests of such Person.

(b) For purposes of this Agreement, the following terms have the following meanings:

“Person” means an individual, a corporation, an association, a partnership, a limited liability company, an estate, a trust and any other entity or organization; and

“Designated Industry” means the business of providing research and development services to pharmaceutical and biotechnology companies involved in drug development and discovery and any and all activities related thereto, including, without limitation, biological testing and biological research services, medicinal chemistry, chemical development, biocatalysis, analytical chemistry services and small-scale and large scale and any other business conducted by the Company during the Executive’s employment with the Company that comprises a major portion of the Company’s overall business.

(c) For a period of twelve (12) months following the termination of this Agreement for any reason, the Executive shall not, directly or indirectly, alone or as a member of any partnership or limited liability company or entity, or as an officer, director, shareholder, or employee of any corporation or entity (a) solicit or otherwise encourage any employee or independent contractor of the Company to terminate his/her relationship with the Company, or (b) recruit, hire or solicit for employment or for engagement as an independent contractor, any person who is or was employed by the Company at any time during the Executive’s employment with the Company. This paragraph shall not apply to persons whose employment and/or retention with the Company has been terminated for a period of twelve (12) months or longer.

8. Confidentiality. In the course of performing services hereunder and otherwise, the Executive has had, and it is anticipated that the Executive will from time to time have, access to confidential records, data, customer lists, trade secrets, technology and similar confidential information owned or used in the course of business by the Company and its subsidiaries and affiliates (the “Confidential Information”). The Executive agrees (i) to hold the Confidential Information in strict confidence, (ii) not to disclose the Confidential Information to any Person (other than in the regular business of the Company), and (iii) not to use, directly or indirectly, any of the Confidential Information for any competitive or commercial purpose; provided, however, that the limitations set forth above shall not apply to any Confidential Information which (A) is then generally known to the public, (B) became or becomes generally known to the public through no fault of the Executive, or (C) is disclosed in accordance with an order of a court of competent jurisdiction or applicable law. Upon termination of the Executive’s employment with the Company, all data, memoranda, customer lists, notes, programs and other papers and items, and reproductions thereof relating to the foregoing matters in the Executive’s possession or control, shall be returned to the Company and remain in its possession. This Section 8 shall survive the termination of this Agreement for any reason.

9. Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of her obligations hereunder will not breach or be in conflict with any other agreement to which he is a party or is bound, and that he is not now subject to any covenants which would affect the performance of her obligations hereunder.

10. Severability. In case any of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, any such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had been limited or modified (consistent with its general intent) to the extent necessary to make it valid, legal and enforceable, or if it shall not be possible to so limit or modify such invalid, illegal or unenforceable provision or part of a provision, this Agreement shall be construed as if such invalid, illegal or unenforceable provision or part of a provision had never been contained in this Agreement.

11. Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company. The Executive’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 11. This Section 11 shall survive the termination of this Agreement for any reason.

12. Arbitration of Disputes. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered in any court having jurisdiction. In the event that the Company terminates the Executive’s employment for cause under Section 6(b) and the Executive contends that cause did not exist, then the Company’s only obligation shall be to submit such claim to arbitration and the only issue before the arbitrator will be whether the Executive was in fact terminated for cause. If the arbitrator determines that the Executive was not terminated for cause by the Company, then the only remedies that the arbitrator may award are (i) payment of amounts which would have been payable if the Executive’s employment had been terminated under Section 6(e), (ii) the costs of arbitration, (iii) the Executive’s attorneys’ fees, and (iv) all rights and benefits granted or in effect with respect to the Executive under the Company’s stock option plans and agreements with the Executive pursuant thereto, with the vesting and exercise of any stock options and the forfeitability of any stock-based grants held by the Executive to be governed by the terms of such plans and the related agreements between the Executive and the Company. If the arbitrator finds that the Executive’s employment was terminated for cause, the arbitrator will be without authority to award the Executive anything, and the parties will each be responsible for their own attorneys’ fees, and they will divide the costs of arbitration equally. Furthermore, should a dispute occur concerning the Executive’s mental or physical capacity as described in Section 6(c), a doctor selected by the Executive and a doctor selected by the Company shall be entitled to examine the Executive. If the opinion of the Company’s doctor and the Executive’s doctor conflict, the Company’s doctor and the Executive’s doctor shall together agree upon a third doctor, whose opinion shall be binding. This Section 12 shall survive the termination of this Agreement for any reason.

13. Specific Performance. Notwithstanding Section 12 hereof, it is specifically understood and agreed that any breach of the provisions of this Agreement, including, without limitation, Sections 7 and 8 hereof, by the Executive is likely to result in irreparable injury to the Company and its subsidiaries and affiliates, that the remedy at law alone will be inadequate remedy for such breach and that, in addition to any other remedy it may have, the Company shall be entitled to enforce the specific performance of this Agreement by the Executive and to seek both temporary and permanent injunctive relief (to the extent permitted by law), without the necessity of proving actual damages. To the extent that any court action is permitted consistent with or to enforce Section 7 or 8 of this Agreement, the parties hereby agree to the sole and exclusive jurisdiction of the Supreme Court of the State of New York (Albany County) and the United States District Court for the Northern District of New York (City of Albany). Accordingly, with respect to any such court action, the Executive (i) submits to the personal jurisdiction of such courts, (ii) consents to service of process, and (iii) waives any other requirement (whether imposed by statute, rule of court or otherwise) with respect to personal jurisdiction or service of process.

14. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) when delivered by hand, (ii) when transmitted by facsimile and receipt is acknowledged, or (iii) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

To the Company:

Albany Molecular Research, Inc.

26 Corporate Circle

Albany, New York 12212-5154

Facsimile: (518) 867-4375

Attention: Board of Directors

To the Executive, at the address on file with the Company

or to such other address of which any party may notify the other parties as provided above. Notices shall be effective as of the date of such delivery or mailing.

15. Amendment; Waiver. This Agreement shall not be amended, modified or discharged in whole or in part except by an Agreement in writing signed by both of the parties hereto. The failure of either of the parties to require the performance of a term or obligation or to exercise any right under this Agreement or the waiver of any breach hereunder shall not prevent subsequent enforcement of such term or obligation or exercise of such right or the enforcement at any time of any other right hereunder or be deemed a waiver of any subsequent breach of the provision so breached, or of any other breach hereunder.

16. Successors and Assigns. This Agreement shall inure to the benefit of successors of the Company by way of merger, consolidation or transfer of all or substantially all of the assets of the Company, and may not be assigned by the Executive. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.

17. Entire Agreement. This Agreement constitutes the entire agreement between the parties concerning the subjects hereof and supersedes all prior understandings and agreements between the parties relating to the subject matter hereof.

18. Governing Law. This Agreement shall be construed and regulated in all respects under the laws of the State of New York.

19. Counterparts. This Agreement may be executed in counterparts, each of which when so executed and delivered shall be taken to be an original, but such counterparts shall together constitute one and the same document.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

	ALBANY MOLECULAR RESEARCH, INC.

	By:	/s/ William Marth

	EXECUTIVE:

	/s/ Felicia Ladin
	Felicia Ladin

Exhibit 31.1

CERTIFICATION

I, William S. Marth certify that:

I have reviewed this Quarterly Report on Form 10-Q of Albany Molecular Research, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2015	/s/ William S. Marth
	Name: William S. Marth
	Title: President and Chief Executive Officer
	Principal Executive Officer

Exhibit 31.2

CERTIFICATION

I, Felicia Ladin certify that:

I have reviewed this Quarterly Report on Form 10-Q of Albany Molecular Research, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2015	/s/ Felicia Ladin
	Name: Felicia Ladin
	Title: Senior Vice President, Chief Financial Officer and Treasurer
	Principal Financial Officer

Exhibit 32.1

CERTIFICATION

The undersigned officer of Albany Molecular Research, Inc. (the “Company”) hereby certifies to his knowledge that the Company’s Quarterly Report on Form 10-Q to which this certification is attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

Date: August 7, 2015
	/s/ William S. Marth
	Name: William S. Marth
	Title: President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION

Date: August 7, 2015	/s/ Felicia Ladin
	Name: Felicia Ladin
	Title: Senior Vice President, Chief Financial Officer and Treasurer

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