ENDP
$15.91
Endo Int'l Plc
$.27
1.73%
Earnings Details
2nd Quarter June 2018
Wednesday, August 8, 2018 7:00:00 AM
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Summary

Endo Int'l Plc Beats

Endo Int'l Plc (ENDP) reported 2nd Quarter June 2018 earnings of $0.76 per share on revenue of $714.7 million. The consensus earnings estimate was $0.55 per share on revenue of $685.1 million. The Earnings Whisper number was $0.61 per share. Revenue fell 18.4% compared to the same quarter a year ago.

The company said it expects 2018 earnings of $2.50 to $2.60 per share on revenue of $2.75 billion to $2.85 billion. The company's previous guidance was earnings of $2.15 to $2.55 per share on revenue of $2.60 billion to $2.80 billion and the current consensus earnings estimate is $2.39 per share on revenue of $2.76 billion for the year ending December 31, 2018.

Endo International PLC is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded pharmaceutical and generic products as well as medical devices.

Results
Reported Earnings
$0.76
Earnings Whisper
$0.61
Consensus Estimate
$0.55
Reported Revenue
$714.7 Mil
Revenue Estimate
$685.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Endo Reports Second-Quarter 2018 Financial Results

DUBLIN, Aug. 8, 2018 /PRNewswire/ --

  • Second-quarter 2018 revenues of $715 million compared to second-quarter 2017 revenues of $876 million
  • Second-quarter 2018 XIAFLEX® franchise revenues increased 27 percent versus second-quarter 2017 to $64 million
  • Second-quarter 2018 Sterile Injectables revenues increased 21 percent versus second-quarter 2017 to $218 million
  • Entered exclusive licensing agreement with Nevakar for the development of five 505(b)(2) injectable products
  • Company raises 2018 financial guidance
  • Phase 3 trials for collagenase clostridium histolyticum (CCH) for the treatment of cellulite now expected to have top-line results in fourth-quarter 2018

Endo International plc (NASDAQ: ENDP) today reported second-quarter 2018 financial results, including:

  • Revenues of $715 million, an 18 percent decrease compared to second-quarter 2017 revenues of $876 million; revenues increased two percent compared to first-quarter 2018.
  • Reported net loss from continuing operations of $52 million compared to second-quarter 2017 reported net loss from continuing operations of $696 million.
  • Reported diluted loss per share from continuing operations of $0.23 compared to second-quarter 2017 reported diluted loss per share from continuing operations of $3.12.
  • Adjusted income from continuing operations of $172 million compared to second-quarter 2017 adjusted income from continuing operations of $207 million.
  • Adjusted diluted EPS from continuing operations of $0.76 compared to second-quarter 2017 adjusted diluted EPS from continuing operations of $0.93.
  • Adjusted EBITDA of $351 million compared to second-quarter 2017 adjusted EBITDA of $388 million.

"Throughout 2018, we successfully executed on our strategic initiatives. We continued to reinvest into our Specialty segment, which delivered record Xiaflex sales in the second-quarter. The recent growth of our U.S. Branded Sterile Injectables business has focused our efforts on completing the Somerset/Wintac acquisition, which remains on track to close in the fourth quarter. Additionally, we are proud to announce a new collaboration with Nevakar, Inc. We believe this collaboration will bring several critical care products to our sterile portfolio," said Paul Campanelli, President and CEO of Endo. "Lastly, while our U.S. Generic Pharmaceuticals segment has faced a challenging market environment, we are cautiously optimistic that the portfolio decisions we made over the past 18 months position us well for the future."

 

FINANCIAL PERFORMANCE
(in thousands, except per share amounts)



Three Months Ended June 30,




Six Months Ended June 30,




2018


2017


Change


2018


2017


Change

Total Revenues

$

714,696



$

875,731



(18)

%


$

1,415,223



$

1,913,331



(26)

%

Reported Loss from Continuing
Operations

$

(52,479)



$

(696,020)



(92)

%


$

(550,217)



$

(861,443)



(36)

%

Reported Diluted Weighted Average
hares

223,834



223,158



%


223,677



223,086



%

Reported Diluted Loss per Share
from Continuing Operations

$

(0.23)



$

(3.12)



(93)

%


$

(2.46)



$

(3.86)



(36)

%

Adjusted Income from Continuing
Operations

$

172,195



$

207,201



(17)

%


$

322,978



$

482,446



(33)

%

Adjusted Diluted Weighted Average
Shares1

227,273



223,785



2

%


226,114



223,560



1

%

Adjusted Diluted EPS from
Continuing Operations

$

0.76



$

0.93



(18)

%


$

1.43



$

2.16



(34)

%

__________

(1)

Diluted per share data is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.

 

CONSOLIDATED RESULTS

Total revenues were $715 million in second-quarter 2018 compared to $876 million in the same period in 2017. This performance was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals product ezetimibe tablets, the generic version of ZETIA®. Also contributing to the quarter's revenue performance versus prior year were the annualization of the impact from 2017 competitive entries and product discontinuances in the U.S. Generic Pharmaceuticals segment, the divestitures of the Company's South African and Mexican businesses, Litha and Somar, and the voluntary market withdrawal of OPANA® ER.

GAAP net loss from continuing operations in second-quarter 2018 was $52 million compared to GAAP net loss from continuing operations of $696 million during the same period in 2017. This was primarily attributable to lower pre-tax, non-cash asset impairment charges. GAAP diluted net loss per share from continuing operations for second-quarter 2018 was $0.23, compared to GAAP diluted net loss per share from continuing operations of $3.12 in second-quarter 2017.

Adjusted income from continuing operations in second-quarter 2018 was $172 million compared to $207 million in second-quarter 2017. This performance was primarily attributable to lower revenues of ezetimibe tablets, the divestitures of Litha and Somar and the voluntary withdrawal of OPANA® ER. Adjusted diluted EPS from continuing operations in second-quarter 2018 was $0.76 compared to $0.93 in second-quarter 2017.

U.S. BRANDED - SPECIALTY & ESTABLISHED PHARMACEUTICALS

During second-quarter 2018, Endo accelerated the recruitment for two Phase 3 clinical trials of collagenase clostridium histolyticum (or "CCH") for the treatment of cellulite and now expects topline results in fourth-quarter 2018.

Second-quarter 2018 U.S. Branded - Specialty & Established Pharmaceuticals results include:

  • Revenues of $213 million compared to $245 million in second-quarter 2017; this performance was primarily attributable to the voluntary cessation of OPANA® ER shipments in third-quarter 2017. Excluding OPANA® ER and SUMAVEL™ DosePro™, which was discontinued in first-quarter 2018, revenues increased two percent compared to second-quarter 2017.
  • Specialty Products revenues increased 9 percent in second-quarter 2018 compared to second-quarter 2017, primarily driven by strong performance from XIAFLEX®. Sales of XIAFLEX® increased 27 percent compared to second-quarter 2017; this increase was primarily attributable to volume growth in both Dupuytren's Contracture and Peyronie's Disease.

U.S. BRANDED - STERILE INJECTABLES

During second-quarter 2018, the U.S. Branded Sterile Injectables segment launched glycopyrrolate injection, the generic version of ROBINUL®, as Somerset Therapeutics' exclusive distributor.

Also in second-quarter 2018, Endo entered into an exclusive licensing agreement with Nevakar, a specialty pharmaceutical company developing multiple assets in the ophthalmic and injectable areas, for the development of five differentiated, sterile injectable products in the U.S. and Canada. Nevakar will develop and seek U.S. Food and Drug Administration (FDA) approval for these products and Endo's Par Pharmaceuticals Sterile Products division will launch and distribute them upon approval. In July, the segment launched ertapenem for injection, the authorized generic of INVANZ®.

Second-quarter 2018 U.S. Branded - Sterile Injectables results include:

  • Revenues of $218 million, a 21 percent increase compared to second-quarter 2017; this increase was primarily attributable to strong growth of ADRENALIN® and VASOSTRICT®.

U.S. GENERIC PHARMACEUTICALS

During second-quarter 2018, the U.S. Generic Pharmaceuticals segment launched praziquantel tablets, the first-to-market generic version of BILTRICIDE®. In July, the segment launched colchicine tablets, the authorized generic of COLCRYS®.

Second-quarter 2018 U.S. Generic Pharmaceuticals results include:

  • Revenues of $241 million compared to $383 million in second-quarter 2017; this performance was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file product ezetimibe tablets. Also contributing were the annualization of the impact from 2017 competitive entries and previously announced product discontinuances, including the authorized generic of metoprolol.

INTERNATIONAL PHARMACEUTICALS

Second-quarter 2018 International Pharmaceuticals revenues were $43 million, compared to $67 million in the same period in 2017. This performance is primarily attributable to the sale of Litha and Somar in the second-half of 2017. Excluding Litha and Somar, which were divested in 2017, International Pharmaceuticals second-quarter 2018 revenues increased 25 percent compared to second-quarter 2017.

2018 FINANCIAL GUIDANCE

For the full twelve months ending December 31, 2018, at current exchange rates, Endo is raising its financial guidance. The Company now estimates:

  • Total revenues to be between $2.75 billion and $2.85 billion;
  • Adjusted diluted EPS from continuing operations to be between $2.50 and $2.60; and
  • Adjusted EBITDA from continuing operations to be between $1.27 billion and $1.33 billion.

The Company's 2018 non-GAAP financial guidance is based on the following assumptions:

  • Adjusted gross margin of approximately 68.5% to 69.5%;
  • Adjusted operating expenses as a percentage of revenues of approximately 26.0% to 27.0%;
  • Adjusted interest expense of approximately $530 million to $540 million;
  • Adjusted effective tax rate of approximately 11.0% to 12.0%; and
  • Adjusted diluted weighted average shares outstanding of approximately 229 million.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of June 30, 2018, the Company had $1,099 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.2 billion and a net debt to adjusted EBITDA ratio of 5.2.

Second-quarter 2018 cash provided by operating activities was $170 million, compared to $171 million of net cash provided by operating activities in the comparable 2017 period.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release today at 9:00 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 1586569. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from August 8, 2018 at 12:00 p.m. ET until 12:00 p.m. ET on August 11, 2018 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 1586569.

A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.

ZETIA is a U.S. registered trademark of MSD International GMBH LLC
DOSEPRO is a U.S. registered trademark of Zogenix, Inc.
ROBINUL is a U.S. registered trademark of Wyeth LLC.
VOLTAREN is a registered trademark of Novartis Corporation
COLCRYS is a registered trademark of Takeda Pharmaceuticals U.S.A., Inc.
BILTRICIDE is a registered trademark of Bayer Intellectual Property GmbH
INVANZ is a registered trademark of Merck Sharp & Dohme Corp.

 

 

FINANCIAL SCHEDULES

The following table presents Endo's unaudited Total Revenues for the three and six months ended June 30, 2018 and 2017
(dollars in thousands):



Three Months Ended June 30,


Percent
Growth


Six Months Ended June 30,


Percent
Growth


2018


2017



2018


2017


U.S. Branded - Specialty &
Established Pharmaceuticals:












Specialty Products:












   XIAFLEX®

$

63,500



$

50,077



27

%


$

120,641



$

99,602



21

%

   SUPPRELIN® LA

19,963



23,649



(16)

%


40,540



42,830



(5)

%

   Other Specialty (1)

36,429



36,745



(1)

%


70,626



72,773



(3)

%

Total Specialty Products

$

119,892



$

110,471



9

%


$

231,807



$

215,205



8

%

Established Products:












   PERCOCET®

$

30,833



$

30,889



%


$

62,809



$

61,834



2

%

   VOLTAREN® Gel

17,811



20,270



(12)

%


29,128



34,544



(16)

%

   OPANA® ER



31,582



(100)

%




67,300



(100)

%

   Other Established (2)

44,101



51,976



(15)

%


89,128



116,464



(23)

%

Total Established Products

$

92,745



$

134,717



(31)

%


$

181,065



$

280,142



(35)

%

Total U.S. Branded - Specialty &
Established Pharmaceuticals (3)

$

212,637



$

245,188



(13)

%


$

412,872



$

495,347



(17)

%

U.S. Branded - Sterile Injectables:












   VASOSTRICT®

$

106,329



$

95,750



11

%


$

220,054



$

194,908



13

%

   ADRENALIN®

36,658



19,032



93

%


66,398



25,129



NM

   Other Sterile Injectables (4)

74,856



65,510



14

%


147,245



132,423



11

%

Total U.S. Branded - Sterile Injectables (3)

$

217,843



$

180,292



21

%


$

433,697



$

352,460



23

%

Total U.S. Generic Pharmaceuticals

$

241,236



$

383,020



(37)

%


$

490,476



$

932,835



(47)

%

Total International Pharmaceuticals

$

42,980



$

67,231



(36)

%


$

78,178



$

132,689



(41)

%

Total Revenues

$

714,696



$

875,731



(18)

%


$

1,415,223



$

1,913,331



(26)

%

__________


(1)

Products included within Other Specialty include TESTOPEL®, NASCOBAL® Nasal Spray and AVEED®.

(2)

Products included within Other Established include, but are not limited to, LIDODERM®, EDEX®, TESTIM® and FORTESTA® Gel, including the authorized generics.

(3)

Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $25 million during any quarterly period in 2018 or 2017.

(4)

Products included within Other Sterile Injectables include, but are not limited to, APLISOL®, ephedrine sulfate injection and neostigmine methylsulfate injection.

 

 


The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended
June 30, 2018 and 2017 (in thousands, except per share data):



Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

TOTAL REVENUES

$

714,696



$

875,731



$

1,415,223



$

1,913,331


COSTS AND EXPENSES:








Cost of revenues

381,905



539,401



785,503



1,208,363


Selling, general and administrative

148,157



155,555



314,824



332,795


Research and development

82,102



40,869



120,748



83,878


Litigation-related and other contingencies, net

19,620



(2,600)



17,120



(1,664)


Asset impairment charges

22,767



725,044



471,183



929,006


Acquisition-related and integration items

5,161



4,190



11,996



15,070


OPERATING INCOME (LOSS) FROM CONTINUING
OPERATIONS

$

54,984



$

(586,728)



$

(306,151)



$

(654,117)


INTEREST EXPENSE, NET

130,059



121,747



254,049



233,746


LOSS ON EXTINGUISHMENT OF DEBT



51,734





51,734


OTHER INCOME, NET

(28,831)



(6,709)



(31,709)



(8,746)


LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAX

$

(46,244)



$

(753,500)



$

(528,491)



$

(930,851)


INCOME TAX EXPENSE (BENEFIT)

6,235



(57,480)



21,726



(69,408)


LOSS FROM CONTINUING OPERATIONS

$

(52,479)



$

(696,020)



$

(550,217)



$

(861,443)


DISCONTINUED OPERATIONS, NET OF TAX

(8,388)



(700,498)



(16,139)



(708,903)


NET LOSS

$

(60,867)



$

(1,396,518)



$

(566,356)



$

(1,570,346)


NET LOSS PER SHARE—BASIC:








Continuing operations

$

(0.23)



$

(3.12)



$

(2.46)



$

(3.86)


Discontinued operations

(0.04)



(3.14)



(0.07)



(3.18)


Basic

$

(0.27)



$

(6.26)



$

(2.53)



$

(7.04)


NET LOSS PER SHARE—DILUTED:








Continuing operations

$

(0.23)



$

(3.12)



$

(2.46)



$

(3.86)


Discontinued operations

(0.04)



(3.14)



(0.07)



(3.18)


Diluted

$

(0.27)



$

(6.26)



$

(2.53)



$

(7.04)


WEIGHTED AVERAGE SHARES:








Basic

223,834



223,158



223,677



223,086


Diluted

223,834



223,158



223,677



223,086


 

 

The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2018 and
December 31, 2017 (in thousands):



June 30, 2018


December 31,
2017

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

1,098,788



$

986,605


Restricted cash and cash equivalents

358,211



320,453


Accounts receivable

451,240



517,436


Inventories, net

343,318



391,437


Other current assets

57,341



55,146


   Total current assets

$

2,308,898



$

2,271,077


TOTAL NON-CURRENT ASSETS

8,549,137



9,364,503


TOTAL ASSETS

$

10,858,035



$

11,635,580


LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY




CURRENT LIABILITIES:




Accounts payable and accrued expenses, including legal settlement accruals

$

2,117,079



$

2,184,618


Other current liabilities

35,987



36,291


   Total current liabilities

$

2,153,066



$

2,220,909


LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,233,005



8,242,032


OTHER LIABILITIES

534,041



687,759


SHAREHOLDERS' (DEFICIT) EQUITY

(62,077)



484,880


TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

$

10,858,035



$

11,635,580


 

 

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended
June 30, 2018 and 2017 (in thousands):



Six Months Ended June 30,


2018


2017

OPERATING ACTIVITIES:




Net loss

$

(566,356)



$

(1,570,346)


Adjustments to reconcile Net loss to Net cash provided by operating activities:




  Depreciation and amortization

379,646



499,656


  Asset impairment charges

471,183



929,006


  Other, including cash payments to claimants from Qualified Settlement Funds

(65,341)



480,770


  Net cash provided by operating activities

$

219,132



$

339,086


INVESTING ACTIVITIES:




Purchases of property, plant and equipment, excluding capitalized interest

$

(41,960)



$

(59,729)


Proceeds from sale of business and other assets, net

37,971



18,531


Other

(4,999)




  Net cash used in investing activities

$

(8,988)



$

(41,198)


FINANCING ACTIVITIES:




Payments on borrowings, net

$

(19,650)



$

(2,550)


Other

(21,143)



(97,033)


  Net cash used in financing activities

$

(40,793)



$

(99,583)


Effect of foreign exchange rate

(1,010)



2,926


Movement in cash held for sale



(21,125)


NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND
RESTRICTED CASH EQUIVALENTS

$

168,341



$

180,106


CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS, BEGINNING OF PERIOD

1,311,014



805,180


CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS, END OF PERIOD

$

1,479,355



$

985,286


 

SUPPLEMENTAL FINANCIAL INFORMATION

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.

The tables below provide reconciliations of certain of our non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.

 


Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six
months ended June 30, 2018 and 2017 (in thousands):



Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Net loss (GAAP)

$

(60,867)



$

(1,396,518)



$

(566,356)



$

(1,570,346)


Income tax expense (benefit)

6,235



(57,480)



21,726



(69,408)


Interest expense, net

130,059



121,747



254,049



233,746


Depreciation and amortization (15)

170,011



212,801



344,469



496,910


EBITDA (non-GAAP)

$

245,438



$

(1,119,450)



$

53,888



$

(909,098)










Inventory step-up and other cost savings (2)

$

124



$

100



$

190



$

215


Upfront and milestone-related payments (3)

36,964



3,082



38,296



6,177


Inventory reserve increase from restructuring (4)

202



7,899



2,590



7,899


Separation benefits and other restructuring (5)

28,951



16,715



75,550



39,385


Certain litigation-related and other contingencies, net (6)

19,620



(2,600)



17,120



(1,664)


Asset impairment charges (7)

22,767



725,044



471,183



929,006


Acquisition-related and integration costs (8)

1,034



2,240



1,034



6,936


Fair value of contingent consideration (9)

4,127



1,950



10,962



8,134


Loss on extinguishment of debt (10)



51,734





51,734


Share-based compensation

12,096



7,512



29,986



27,005


Other income, net (16)

(28,831)



(6,709)



(31,709)



(8,746)


Other adjustments

(10)



(114)



(708)



(17)


Discontinued operations, net of tax (13)

8,388



700,498



16,139



708,903


Adjusted EBITDA (non-GAAP)

$

350,870



$

387,901



$

684,521



$

865,869


 

 


Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)

The following table provides a reconciliation of our Loss from continuing operations (GAAP) to our Adjusted income from
continuing operations (non-GAAP) for the three and six months ended June 30, 2018 and 2017 (in thousands):



Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Loss from continuing operations (GAAP)

$

(52,479)



$

(696,020)



$

(550,217)



$

(861,443)


Non-GAAP adjustments:








  Amortization of intangible assets (1)

153,215



190,943



310,387



454,077


  Inventory step-up and other cost savings (2)

124



100



190



215


  Upfront and milestone-related payments (3)

36,964



3,082



38,296



6,177


  Inventory reserve increase from restructuring (4)

202



7,899



2,590



7,899


  Separation benefits and other restructuring (5)

28,951



16,715



75,550



39,385


  Certain litigation-related and other contingencies, net (6)

19,620



(2,600)



17,120



(1,664)


  Asset impairment charges (7)

22,767



725,044



471,183



929,006


  Acquisition-related and integration costs (8)

1,034



2,240



1,034



6,936


  Fair value of contingent consideration (9)

4,127



1,950



10,962



8,134


  Loss on extinguishment of debt (10)



51,734





51,734


  Other (11)

(28,007)



(3,233)



(31,261)



(4,168)


  Tax adjustments (12)

(14,323)



(90,653)



(22,856)



(153,842)


Adjusted income from continuing operations (non-GAAP)

$

172,195



$

207,201



$

322,978



$

482,446


 

 

Reconciliation of Other Adjusted Income Statement Data (non-GAAP)

The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and six months ended June 30, 2018
and 2017 (in thousands, except per share data):



Three Months Ended June 30, 2018


Total revenues


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating expense to revenue %


Operating income from continuing operations


Operating margin %


Other non-operating expense, net


(Loss) income from continuing operations before income tax


Income tax expense


Effective tax rate


(Loss) income from continuing operations


Discontinued operations, net of tax


Net (loss) income


Diluted (loss) income per share from continuing operations (14)

Reported (GAAP)

$    714,696


$    381,905


$    332,791


47 %


$    277,807


39 %


$     54,984


8 %


$ 101,228


$         (46,244)


$    6,235


(13)%


$   (52,479)


$      (8,388)


$      (60,867)


$          (0.23)

Items impacting comparability:
































Amortization of intangible assets (1)


(153,215)


153,215







153,215





153,215





153,215



153,215


0.67

Inventory step-up and other cost savings (2)


(124)


124







124





124





124



124


Upfront and milestone-related payments (3)


(694)


694




(36,270)




36,964





36,964





36,964



36,964


0.17

Inventory reserve increase from restructuring (4)


(202)


202







202





202





202



202


Separation benefits and other restructuring (5)


(26,613)


26,613




(2,338)




28,951





28,951





28,951



28,951


0.13

Certain litigation-related and
other contingencies, net (6)






(19,620)




19,620





19,620





19,620



19,620


0.09

Asset impairment charges (7)






(22,767)




22,767





22,767





22,767



22,767


0.10

Acquisition-related and integration costs (8)






(1,034)




1,034





1,034





1,034



1,034


Fair value of contingent consideration (9)






(4,127)




4,127





4,127





4,127



4,127


0.02

Other (11)












28,007


(28,007)





(28,007)



(28,007)


(0.13)

Tax adjustments (12)














14,323




(14,323)



(14,323)


(0.06)

Exclude discontinued operations, net of tax (13)


















8,388


8,388


After considering items (non-GAAP)

$    714,696


$    201,057


$    513,639


72 %


$    191,651


27 %


$   321,988


45 %


$ 129,235


$         192,753


$  20,558


11 %


$  172,195


$             —


$     172,195


$            0.76


































































Three Months Ended June 30, 2017


Total revenues


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating expense to revenue %


Operating (loss) income from continuing operations


Operating margin %


Other non-operating expense, net


(Loss) income from continuing operations before income tax


Income tax (benefit) expense


Effective tax rate


(Loss) income from continuing operations


Discontinued operations, net of tax


Net (loss) income


Diluted (loss) income per share from continuing operations (14)

Reported (GAAP)

$    875,731


$    539,401


$    336,330


38 %


$    923,058


105 %


$  (586,728)


(67)%


$ 166,772


$       (753,500)


$ (57,480)


8 %


$ (696,020)


$  (700,498)


$ (1,396,518)


$          (3.12)

Items impacting comparability:
































Amortization of intangible assets (1)


(190,943)


190,943







190,943





190,943





190,943



190,943


0.86

Inventory step-up and other cost savings (2)


(100)


100







100





100





100



100


Upfront and milestone-related payments (3)


(682)


682




(2,400)




3,082





3,082





3,082



3,082


0.01

Inventory reserve increase from restructuring (4)


(7,899)


7,899







7,899





7,899





7,899



7,899


0.04

Separation benefits and other restructuring (5)


(5,026)


5,026




(11,689)




16,715





16,715





16,715



16,715


0.07

Certain litigation-related and
other contingencies, net (6)






2,600




(2,600)





(2,600)





(2,600)



(2,600)


(0.01)

Asset impairment charges (7)






(725,044)




725,044





725,044





725,044



725,044


3.25

Acquisition-related and integration costs (8)






(2,240)




2,240





2,240





2,240



2,240


0.01

Fair value of contingent consideration (9)






(1,950)




1,950





1,950





1,950



1,950


0.01

Loss on extinguishment of debt (10)












(51,734)


51,734





51,734



51,734


0.23

Other (11)












3,233


(3,233)





(3,233)



(3,233)


(0.01)

Tax adjustments (12)














90,653




(90,653)



(90,653)


(0.41)

Exclude discontinued operations, net of tax (13)


















700,498


700,498


After considering items (non-GAAP)

$    875,731


$    334,751


$    540,980


62 %


$    182,335


21 %


$   358,645


41 %


$ 118,271


$         240,374


$  33,173


14 %


$  207,201


$             —


$     207,201


$            0.93


































































Six Months Ended June 30, 2018


Total revenues


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating expense to revenue %


Operating (loss) income from continuing operations


Operating margin %


Other non-operating expense, net


(Loss) income from continuing operations before income tax


Income tax expense


Effective tax rate


(Loss) income from continuing operations


Discontinued operations, net of tax


Net (loss) income


Diluted (loss) income per share from continuing operations (14)

Reported (GAAP)

$ 1,415,223


$    785,503


$    629,720


44 %


$    935,871


66 %


$  (306,151)


(22)%


$ 222,340


$       (528,491)


$  21,726


(4)%


$ (550,217)


$    (16,139)


$    (566,356)


$          (2.46)

Items impacting comparability:
































Amortization of intangible assets (1)


(310,387)


310,387







310,387





310,387





310,387



310,387


1.38

Inventory step-up and other cost savings (2)


(190)


190







190





190





190



190


Upfront and milestone-related payments (3)


(1,350)


1,350




(36,946)




38,296





38,296





38,296



38,296


0.17

Inventory reserve increase from restructuring (4)


(2,590)


2,590







2,590





2,590





2,590



2,590


0.01

Separation benefits and other restructuring (5)


(53,831)


53,831




(21,719)




75,550





75,550





75,550



75,550


0.34

Certain litigation-related and
other contingencies, net (6)






(17,120)




17,120





17,120





17,120



17,120


0.08

Asset impairment charges (7)






(471,183)




471,183





471,183





471,183



471,183


2.10

Acquisition-related and integration costs (8)






(1,034)




1,034





1,034





1,034



1,034


Fair value of contingent consideration (9)






(10,962)




10,962





10,962





10,962



10,962


0.05

Other (11)






630




(630)




30,631


(31,261)





(31,261)



(31,261)


(0.14)

Tax adjustments (12)














22,856




(22,856)



(22,856)


(0.10)

Exclude discontinued operations, net of tax (13)


















16,139


16,139


After considering items (non-GAAP)

$ 1,415,223


$    417,155


$    998,068


71 %


$    377,537


27 %


$   620,531


44 %


$ 252,971


$         367,560


$  44,582


12 %


$  322,978


$             —


$     322,978


$            1.43


































































Six Months Ended June 30, 2017


Total revenues


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating expense to revenue %


Operating (loss) income from continuing operations


Operating margin %


Other non-operating expense, net


(Loss) income from continuing operations before income tax


Income tax (benefit) expense


Effective tax rate


(Loss) income from continuing operations


Discontinued operations, net of tax


Net (loss) income


Diluted (loss) income per share from continuing operations (14)

Reported (GAAP)

$ 1,913,331


$ 1,208,363


$    704,968


37 %


$ 1,359,085


71 %


$  (654,117)


(34)%


$ 276,734


$       (930,851)


$ (69,408)


7 %


$ (861,443)


$  (708,903)


$ (1,570,346)


$          (3.86)

Items impacting comparability:
































Amortization of intangible assets (1)


(454,077)


454,077







454,077





454,077





454,077



454,077


2.03

Inventory step-up and other cost savings (2)


(215)


215







215





215





215



215


Upfront and milestone-related payments (3)


(1,351)


1,351




(4,826)




6,177





6,177





6,177



6,177


0.03

Inventory reserve increase from restructuring (4)


(7,899)


7,899







7,899





7,899





7,899



7,899


0.04

Separation benefits and other restructuring (5)


(6,687)


6,687




(32,698)




39,385





39,385





39,385



39,385


0.18

Certain litigation-related and
other contingencies, net (6)






1,664




(1,664)





(1,664)





(1,664)



(1,664)


(0.01)

Asset impairment charges (7)






(929,006)




929,006





929,006





929,006



929,006


4.16

Acquisition-related and integration costs (8)






(6,936)




6,936





6,936





6,936



6,936


0.03

Fair value of contingent consideration (9)






(8,134)




8,134





8,134





8,134



8,134


0.04

Loss on extinguishment of debt (10)












(51,734)


51,734





51,734



51,734


0.23

Other (11)












4,168


(4,168)





(4,168)



(4,168)


(0.02)

Tax adjustments (12)














153,842




(153,842)



(153,842)


(0.69)

Exclude discontinued operations, net of tax (13)


















708,903


708,903


After considering items (non-GAAP)

$ 1,913,331


$    738,134


$ 1,175,197


61 %


$    379,149


20 %


$   796,048


42 %


$ 229,168


$         566,880


$  84,434


15 %


$  482,446


$             —


$     482,446


$            2.16

 

 

Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures

Notes to certain line items included in the reconciliations of the GAAP financial measures to the Non-GAAP financial measures for the three and six months ended June 30, 2018 and 2017 are as follows:



(1)

Adjustments for amortization of commercial intangible assets included the following (in thousands):

 


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Amortization of intangible assets excluding fair value
step-up from contingent consideration

$

146,906



$

180,886



$

296,766



$

433,775


Amortization of intangible assets related to fair value
step-up from contingent consideration

6,309



10,057



13,621



20,302


Total

$

153,215



$

190,943



$

310,387



$

454,077


 

(2)

To exclude adjustments for inventory step-up.



(3)

Adjustments for upfront and milestone-related payments to partners included the following (in thousands):

 


Three Months Ended June 30,


2018


2017


Cost of
revenues


Operating
expenses


Cost of
revenues


Operating
expenses

Sales-based

$

694



$



$

682



$


Development-based



36,270





2,400


Total

$

694



$

36,270



$

682



$

2,400




Six Months Ended June 30,


2018


2017


Cost of
revenues


Operating
expenses


Cost of
revenues


Operating
expenses

Sales-based

$

1,350



$



$

1,351



$


Development-based



36,946





4,826


Total

$

1,350



$

36,946



$

1,351



$

4,826


 

(4)

To exclude charges reflecting adjustments to excess inventory reserves related to our various restructuring initiatives.



(5)

Adjustments for separation benefits and other restructuring included the following (in thousands):

 


Three Months Ended June 30,


2018


2017


Cost of
revenues


Operating
expenses


Cost of
revenues


Operating
expenses

Separation benefits

$

3,983



$

1,440



$

609



$

128


Accelerated depreciation and product
discontinuation charges

18,045








Other

4,585



898



4,417



11,561


Total

$

26,613



$

2,338



$

5,026



$

11,689




Six Months Ended June 30,


2018


2017


Cost of
revenues


Operating
expenses


Cost of
revenues


Operating
expenses

Separation benefits

$

13,768



$

16,836



$

2,270



$

19,255


Accelerated depreciation and product
discontinuation charges

35,177







398


Other

4,886



4,883



4,417



13,045


Total

$

53,831



$

21,719



$

6,687



$

32,698


 

(6)

To exclude litigation-related settlement charges, reimbursements and certain settlements proceeds related to suits filed by our subsidiaries.



(7)

Adjustments for asset impairment charges included the following (in thousands):

 


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Goodwill impairment charges

$



$

206,143



$

391,000



$

288,745


Other intangible asset impairment charges

22,767



476,971



76,967



595,877


Property, plant and equipment impairment charges



41,930



3,216



44,384


Total asset impairment charges

$

22,767



$

725,044



$

471,183



$

929,006


 

(8)

Adjustments for acquisition and integration items primarily relate to various acquisitions. Amounts included the following (in thousands):

 


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Integration costs (primarily third-party consulting fees)

$



$

2,233



$



$

4,476


Acquisition costs

1,034





1,034




Other



7





2,460


Total

$

1,034



$

2,240



$

1,034



$

6,936


 

(9)

To exclude the impact of changes in the fair value of contingent consideration resulting from changes in market conditions impacting the commercial potential of the underlying products.



(10)

To exclude the loss on the extinguishment of debt associated with our April 2017 refinancing.



(11)

Other adjustments included the following (in thousands):

 


Three Months Ended June 30,


2018


2017


Operating
expenses


Other
non-operating
expenses


Operating
expenses


Other
non-operating
expenses

Foreign currency impact related to the re-measurement
of intercompany debt instruments

$



$

(574)



$



$

(3,233)


(Gain) loss on sale of business and other assets



(23,837)






Other miscellaneous



(3,596)






Total

$



$

(28,007)



$



$

(3,233)




Six Months Ended June 30,


2018


2017


Operating
expenses


Other
non-operating
expenses


Operating
expenses


Other
non-operating
expenses

Foreign currency impact related to the re-measurement
of intercompany debt instruments

$



$

(3,088)



$



$

(5,927)


(Gain) loss on sale of business and other assets



(23,837)






Other miscellaneous

(630)



(3,706)





1,759


Total

$

(630)



$

(30,631)



$



$

(4,168)


 

(12)

Adjusted income taxes are calculated by tax effecting adjusted pre-tax income and permanent book-tax differences at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates. Adjusted income taxes include current and deferred income tax expense commensurate with the non-GAAP measure of profitability.



(13)

To exclude the results of the businesses reported as discontinued operations, net of tax in the Condensed Consolidated Statement of Operations.



(14)

Calculated as Net (loss) income from continuing operations divided by the applicable weighted average share number. The applicable weighted average share numbers are as follows (in thousands):

 


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

GAAP EPS

223,834



223,158



223,677



223,086


Non-GAAP EPS

227,273



223,785



226,114



223,560


 

(15)

Depreciation and amortization per the Adjusted EBITDA reconciliations do not include certain depreciation amounts reflected in other lines of the reconciliations, including Acquisition-related and integration costs and Separation benefits and other restructuring.



(16)

To exclude Other income, net per the Consolidated Statement of Operations.

 

 


Reconciliation of Net Debt Leverage Ratio (non-GAAP)

The following table provides a reconciliation of our Net loss (GAAP) to our Adjusted EBITDA (non-GAAP) for the twelve
months ended June 30, 2018 (in thousands) and the calculation of our Net Debt Leverage Ratio (non-GAAP):



Twelve Months
Ended
June 30, 2018

Net loss (GAAP)

$

(1,031,443)


Income tax benefit

(159,159)


Interest expense, net

508,531


Depreciation and amortization (15)

705,265


EBITDA (non-GAAP)

$

23,194




Inventory step-up and other cost savings

$

365


Upfront and milestone-related payments

41,602


Inventory reserve increase from restructuring

8,369


Separation benefits and other restructuring

234,935


Certain litigation-related and other contingencies, net

204,774


Asset impairment charges

696,553


Acquisition-related and integration costs

2,235


Fair value of contingent consideration

52,777


Loss on extinguishment of debt


Share-based compensation

53,130


Other income, net

(39,986)


Other adjustments

(917)


Discontinued operations, net of tax

109,958


Adjusted EBITDA (non-GAAP)

$

1,386,989




Calculation of Net Debt:


Debt

$

8,267,210


Cash (excluding Restricted Cash)

1,098,788


Net Debt (non-GAAP)

$

7,168,422




Calculation of Net Debt Leverage:


Net Debt Leverage Ratio (non-GAAP)

5.2


 

Non-GAAP Financial Measures

The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These Non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP net income and its components and diluted earnings per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are Non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted EBITDA and Non-GAAP adjusted net income from continuing operations and its components (unlike GAAP net income from continuing operations and its components) may not be comparable to the calculation of similar measures of other companies. These Non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance.

Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amount of which could be significant.

See Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission for an explanation of Endo's non-GAAP financial measures.

About Endo International plc

Endo International plc (NASDAQ: ENDP) is a highly focused generics and specialty branded pharmaceutical company delivering quality medicines to patients in need through excellence in development, manufacturing and commercialization. Endo has global headquarters in Dublin, Ireland, and U.S. headquarters in Malvern, PA. Learn more at www.endo.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including but not limited to the statements by Mr. Campanelli, as well as other statements regarding product development, market potential, corporate strategy, optimization efforts and restructurings, timing, closing and expected benefits and value from any acquisition, expected growth and regulatory approvals, together with Endo's earnings per share from continuing operations amounts, product net sales, revenue forecasts and any other statements that refer to Endo's expected, estimated or anticipated future results. Because forecasts are inherently estimates that cannot be made with precision, Endo's performance at times differs materially from its estimates and targets, and Endo often does not know what the actual results will be until after the end of the applicable reporting period. Therefore, Endo will not report or comment on its progress during a current quarter except through public announcement. Any statement made by others with respect to progress during a current quarter cannot be attributed to Endo.

All forward-looking statements in this press release reflect Endo's current analysis of existing trends and information and represent Endo's judgment only as of the date of this press release. Actual results may differ materially from current expectations based on a number of factors affecting Endo's businesses, including, among other things, the following: changing competitive, market and regulatory conditions; Endo's ability to obtain and maintain adequate protection for its intellectual property rights; the timing and uncertainty of the results of both the research and development and regulatory processes, including regulatory decisions, product recalls, withdrawals and other unusual items; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; technological advances and patents obtained by competitors; the performance, including the approval, introduction, and consumer and physician acceptance of new products and the continuing acceptance of currently marketed products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; the timing or results of any pending or future litigation, investigations or claims or actual or contingent liabilities, settlement discussions, negotiations or other adverse proceedings; timing and uncertainty of any acquisition, including the possibility that various closing conditions may not be satisfied or waived, uncertainty surrounding the successful integration of any acquired business and failure to achieve the expected financial and commercial results from such acquisition; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; and Endo's ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, U.S. and international economic conditions, including higher unemployment, political instability, financial hardship, consumer confidence and debt levels, taxation, changes in interest and currency exchange rates, international relations, capital and credit availability, the status of financial markets and institutions, fluctuations or devaluations in the value of sovereign government debt, as well as the general impact of continued economic volatility, can materially affect Endo's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Endo expressly disclaims any intent or obligation to update these forward-looking statements except as required to do so by law.

Additional information concerning the above-referenced risk factors and other risk factors can be found in press releases issued by Endo, as well as Endo's public periodic filings with the U.S. Securities and Exchange Commission and with securities regulators in Canada, including the discussion under the heading "Risk Factors" in Endo's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Endo's press releases and additional information about Endo are available at www.endo.com or you can contact the Endo Investor Relations Department by calling 484-216-0000.

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SOURCE Endo International plc