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Endo Reports Third-Quarter 2019 Financial Results

- Operating Performance Led by Year-over-Year Double-Digit-Percentage Revenue Growth in Sterile Injectables and in Specialty Products Portfolio of Branded Pharmaceuticals -

- Full-Year 2019 Financial Guidance Updated to Narrow Expected Ranges for Revenue, Adjusted Diluted Net Income per Share from Continuing Operations and Adjusted EBITDA -

DUBLIN , Nov. 4, 2019 /CNW/ -- Endo International plc (ENDP) today reported third-quarter 2019 financial results, including:

  • Revenues of $729 million decreased 2% compared to third-quarter 2018 revenues of $745 million .
  • Branded Pharmaceuticals - Specialty Products revenues increased 18% to $132 million compared to third-quarter 2018 revenues of $112 million .
  • Sterile Injectables revenues increased 11% to $264 million compared to third-quarter 2018 revenues of $237 million .
  • Reported loss from continuing operations of $41 million compared to third-quarter 2018 reported loss from continuing operations of $146 million .
  • Reported diluted net loss per share from continuing operations of $0.18 compared to third-quarter 2018 reported diluted net loss per share from continuing operations of $0.65 .
  • Adjusted income from continuing operations of $138 million compared to third-quarter 2018 adjusted income from continuing operations of $165 million .
  • Adjusted diluted net income per share from continuing operations of $0.60 compared to third-quarter 2018 adjusted diluted net income per share from continuing operations of $0.71 .
  • Adjusted EBITDA of $321 million compared to third-quarter 2018 adjusted EBITDA of $328 million .

"Endo generated strong operating performance in the third quarter, which was led by continued year-over-year double-digit percentage revenue growth in our Sterile Injectables segment and in the Specialty Products portfolio of our Branded Pharmaceuticals segment, including 29% growth in our XIAFLEX® franchise," said Paul Campanelli , President and Chief Executive Officer at Endo. "Additionally, during the quarter, we submitted a Biologics License Application for our CCH for Cellulite product with the FDA and settled the Track 1 opioid litigation cases. We believe that a balanced approach to executing our multi-year strategic plan while being responsive to the current external environment remains appropriate and that we are well-positioned to meet our 2019 financial guidance."

FINANCIAL PERFORMANCE









(in thousands, except per share amounts)










Three Months Ended September 30,




Nine Months Ended September 30,




2019


2018


Change


2019


2018


Change

Total Revenues, Net

$

729,426



$

745,466



(2)

%


$

2,149,564



$

2,160,689



(1)

%

Reported Loss from Continuing Operations

$

(41,431)



$

(146,071)



(72)

%


$

(152,095)



$

(696,288)



(78)

%

Reported Diluted Weighted Average Shares

226,598



224,132



1

%


225,804



223,829



1

%

Reported Diluted Net Loss per Share from Continuing Operations

$

(0.18)



$

(0.65)



(72)

%


$

(0.67)



$

(3.11)



(78)

%

Adjusted Income from Continuing Operations

$

138,129



$

164,845



(16)

%


$

380,617



$

487,823



(22)

%

Adjusted Diluted Weighted Average Shares (1)

230,907



232,358



(1)

%


231,751



228,195



2

%

Adjusted Diluted Net Income per Share from Continuing Operations

$

0.60



$

0.71



(15)

%


$

1.64



$

2.14



(23)

%

__________

(1)

Reported Diluted Net Loss per Share from continuing operations is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of ordinary 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 $729 million in third-quarter 2019 compared to $745 million during the same period in 2018. This decrease was primarily attributable to competitive pressures in the Generic Pharmaceuticals segment and the Established Products portfolio of the Branded Pharmaceuticals segment, partially offset by continued strong growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.

GAAP loss from continuing operations in third-quarter 2019 was $41 million compared to GAAP loss from continuing operations of $146 million during the same period in 2018. This result was primarily attributable to a decrease in asset impairment charges. GAAP diluted net loss per share from continuing operations in third-quarter 2019 was $0.18 compared to GAAP diluted net loss per share from continuing operations of $0.65 in third-quarter 2018.

Adjusted income from continuing operations in third-quarter 2019 was $138 million compared to $165 million in third-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin in the Generic Pharmaceuticals segment due to a decline in revenue and an unfavorable change in product mix. Adjusted diluted net income per share from continuing operations in third-quarter 2019 was $0.60 compared to $0.71 in third-quarter 2018.

BRANDED PHARMACEUTICALS

Third-quarter 2019 Branded Pharmaceuticals revenues were $217 million compared to $220 million in third-quarter 2018. This decrease was primarily attributable to ongoing generic competition in the Established Products portfolio, offset by continued strong growth in the Specialty Products portfolio.

Specialty Products revenues increased 18% to $132 million in third-quarter 2019 compared to $112 million in third-quarter 2018, primarily driven by the continued strong performance of XIAFLEX®. Sales of XIAFLEX® increased 29% to $83 million compared to $64 million in third-quarter 2018, primarily attributable to demand growth in both the Peyronie's Disease and Dupuytren's Contracture indications driven by continued commercial execution and investment in promotional activities.

During third-quarter 2019, Endo also submitted a Biologics License Application to the U.S. Food and Drug Administration for its Collagenase Clostridium Histolyticum (CCH) product for the treatment of cellulite.        

STERILE INJECTABLES

Third-quarter 2019 Sterile Injectables revenues were $264 million , an increase of 11% compared to $237 million in third-quarter 2018. This increase reflects the continued strong growth of VASOSTRICT® and ADRENALIN®, as well as strong growth of APLISOL®, reflecting wholesalers' restocking following a temporary supply shortage.

GENERIC PHARMACEUTICALS

Third-quarter 2019 Generic Pharmaceuticals revenues were $218 million , a decrease of 15% compared to $258 million in third-quarter 2018. This performance was primarily attributable to increased competitive pressure on certain generic products. Partially offsetting the decrease was the contribution of certain product launches including, among others, colchicine tablets, the authorized generic of Colcrys®. During third-quarter 2019, the Generic Pharmaceuticals segment launched four products.

INTERNATIONAL PHARMACEUTICALS

Third-quarter 2019 International Pharmaceuticals revenues were $30 million , which was flat versus third-quarter 2018. This quarter benefited from delayed competition which Endo expects to materialize in the near-term.

2019 FINANCIAL GUIDANCE

Endo is updating its financial guidance for the 12 months ending December 31, 2019, narrowing the expected ranges regarding revenue, adjusted diluted net income per share from continuing operations, and Adjusted EBITDA. The Company now estimates:

  • Total revenues to be between $2.86 billion and $2.89 billion compared to previous guidance of $2.76 billion to $2.96 billion ;
  • Adjusted diluted net income per share from continuing operations to be between $2.10 and $2.25 compared to previous guidance of $2.00 to $2.25 ; and
  • Adjusted EBITDA to be between $1.26 billion and $1.30 billion compared to previous guidance of $1.24 billion to $1.34 billion .

The Company's 2019 non-GAAP financial guidance is based on the following assumptions:

  • Adjusted gross margin of approximately 64.7% to 65.7% compared to previous guidance of 65.0% to 66.0%;
  • Adjusted operating expenses as a percentage of revenue to be approximately 25.0% compared to  24.5% to 25.0%;
  • Adjusted interest expense of approximately $540 million compared to $550 million to $560 million ;
  • Adjusted effective tax rate of approximately 16.5% compared to 17.5% to 18.5%; and
  • Adjusted diluted weighted average shares outstanding of approximately 234 million.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of September 30, 2019, the Company had approximately $1.5 billion in unrestricted cash; debt of $8.4 billion ; net debt of approximately $6.9 billion and a net debt to adjusted EBITDA ratio of 5.3.

Third-quarter 2019 cash provided by operating activities was $33 million , compared to $22 million of net cash used in operating activities during third-quarter 2018.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release on November 5, 2019 at 7:30 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 1186004. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from November 5, 2019 at 10:30 a.m. ET until 10:30 a.m. ET on November 8, 2019 by dialing U.S./ Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 1186004.

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.

FINANCIAL SCHEDULES

The following table presents Endo's unaudited Total revenues, net for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):

 


Three Months Ended September 30,


Percent
Growth


Nine Months Ended September 30,


Percent
Growth


2019


2018



2019


2018


Branded Pharmaceuticals:












Specialty Products:












XIAFLEX®

$

82,756



$

64,214



29

%


$

226,118



$

184,855



22

%

SUPPRELIN® LA

20,772



20,408



2

%


66,542



60,948



9

%

Other Specialty (1)

28,470



27,614



3

%


78,397



69,226



13

%

Total Specialty Products

$

131,998



$

112,236



18

%


$

371,057



$

315,029



18

%

Established Products:












PERCOCET®

$

28,561



$

30,730



(7)

%


$

88,199



$

93,539



(6)

%

TESTOPEL®

13,236



15,962



(17)

%


40,830



44,976



(9)

%

Other Established (2)

43,518



61,172



(29)

%


129,765



179,428



(28)

%

Total Established Products

$

85,315



$

107,864



(21)

%


$

258,794



$

317,943



(19)

%

Total Branded Pharmaceuticals (3)

$

217,313



$

220,100



(1)

%


$

629,851



$

632,972



%

Sterile Injectables:












VASOSTRICT®

$

129,691



$

112,333



15

%


$

384,854



$

332,387



16

%

ADRENALIN®

40,311



35,460



14

%


133,468



101,858



31

%

APLISOL®

28,085



15,992



76

%


55,996



49,064



14

%

Ertapenem for injection

21,853



25,798



(15)

%


79,619



25,798



NM


Other Sterile Injectables (4)

43,695



47,567



(8)

%


124,026



161,740



(23)

%

Total Sterile Injectables (3)

$

263,635



$

237,150



11

%


$

777,963



$

670,847



16

%

Total Generic Pharmaceuticals

$

218,012



$

257,969



(15)

%


$

654,322



$

748,445



(13)

%

Total International Pharmaceuticals

$

30,466



$

30,247



1

%


$

87,428



$

108,425



(19)

%

Total revenues, net

$

729,426



$

745,466



(2)

%


$

2,149,564



$

2,160,689



(1)

%

__________

(1)

Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®. Beginning with our first-quarter 2019 reporting, TESTOPEL®, which was previously included in Other Specialty, has been reclassified and is now included in the Established Products portfolio for all periods presented.

(2)

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

(3)

Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2019 and/or any product having revenues in excess of $25 million during any quarterly period in 2019 or 2018.

(4)

Products included within Other Sterile Injectables include ephedrine sulfate injection and others.

 

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share data):


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018

TOTAL REVENUES, NET

$

729,426



$

745,466



$

2,149,564



$

2,160,689


COSTS AND EXPENSES:








Cost of revenues

389,165



412,965



1,169,282



1,198,468


Selling, general and administrative

168,329



163,791



471,749



478,615


Research and development

36,519



39,683



96,353



160,431


Litigation-related and other contingencies, net

(14,414)



(1,750)



(4,093)



15,370


Asset impairment charges

4,766



142,217



258,652



613,400


Acquisition-related and integration items

16,025



1,288



(26,983)



13,284


Interest expense, net

136,903



131,847



404,387



385,896


Gain on extinguishment of debt





(119,828)




Other expense (income), net

16,203



(1,507)



20,408



(33,216)


LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX

$

(24,070)



$

(143,068)



$

(120,363)



$

(671,559)


INCOME TAX EXPENSE

17,361



3,003



31,732



24,729


LOSS FROM CONTINUING OPERATIONS

$

(41,431)



$

(146,071)



$

(152,095)



$

(696,288)


DISCONTINUED OPERATIONS, NET OF TAX

(37,984)



(27,134)



(51,898)



(43,273)


NET LOSS

$

(79,415)



$

(173,205)



$

(203,993)



$

(739,561)


NET LOSS PER SHARE—BASIC:








Continuing operations

$

(0.18)



$

(0.65)



$

(0.67)



$

(3.11)


Discontinued operations

(0.17)



(0.12)



(0.23)



(0.19)


Basic

$

(0.35)



$

(0.77)



$

(0.90)



$

(3.30)


NET LOSS PER SHARE—DILUTED:








Continuing operations

$

(0.18)



$

(0.65)



$

(0.67)



$

(3.11)


Discontinued operations

(0.17)



(0.12)



(0.23)



(0.19)


Diluted

$

(0.35)



$

(0.77)



$

(0.90)



$

(3.30)


WEIGHTED AVERAGE SHARES:








Basic

226,598



224,132



225,804



223,829


Diluted

226,598



224,132



225,804



223,829



 

The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2019 and December 31, 2018 (in thousands):


September 30,
2019


December 31,
2018

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

1,526,250



$

1,149,113


Restricted cash and cash equivalents

222,491



305,368


Accounts receivable

420,195



470,570


Inventories, net

338,513



322,179


Other current assets

141,686



95,920


Total current assets

$

2,649,135



$

2,343,150


TOTAL NON-CURRENT ASSETS

7,185,731



7,789,243


TOTAL ASSETS

$

9,834,866



$

10,132,393


LIABILITIES AND SHAREHOLDERS' DEFICIT




CURRENT LIABILITIES:




Accounts payable and accrued expenses, including legal settlement accruals

$

1,612,124



$

1,914,285


Other current liabilities

55,603



35,811


Total current liabilities

$

1,667,727



$

1,950,096


LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,364,911



8,224,269


OTHER LIABILITIES

463,705



456,311


SHAREHOLDERS' DEFICIT

(661,477)



(498,283)


TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$

9,834,866



$

10,132,393



 

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2019 and 2018 (in thousands):


Nine Months Ended September 30,


2019


2018

OPERATING ACTIVITIES:




Net loss

$

(203,993)



$

(739,561)


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




Depreciation and amortization

468,409



556,503


Asset impairment charges

258,652



613,400


Other, including cash payments to claimants from Qualified Settlement Funds

(403,824)



(233,350)


Net cash provided by operating activities

$

119,244



$

196,992


INVESTING ACTIVITIES:




Purchases of property, plant and equipment, excluding capitalized interest

$

(47,812)



$

(56,544)


Proceeds from sale of business and other assets, net

4,780



43,753


Other

(2,295)



(891)


Net cash used in investing activities

$

(45,327)



$

(13,682)


FINANCING ACTIVITIES:




Proceeds from (payments on) borrowings, net

$

247,897



$

(29,535)


Other

(28,333)



(33,273)


Net cash provided by (used in) financing activities

$

219,564



$

(62,808)


Effect of foreign exchange rate

780



(608)


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

$

294,261



$

119,894


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

1,476,837



1,311,014


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

$

1,771,098



$

1,430,908



 

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 nine months ended September 30, 2019 and 2018 (in thousands):


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018

Net loss (GAAP)

$

(79,415)



$

(173,205)



$

(203,993)



$

(739,561)


Income tax expense

17,361



3,003



31,732



24,729


Interest expense, net

136,903



131,847



404,387



385,896


Depreciation and amortization (15)

147,621



176,856



468,409



521,325


EBITDA (non-GAAP)

$

222,470



$

138,501



$

700,535



$

192,389










Inventory step-up and other cost savings (2)

$



$

71



$



$

261


Upfront and milestone-related payments (3)

1,672



4,731



4,055



43,027


Inventory reserve increase from restructuring (4)



207





2,797


Retention and separation benefits and other restructuring (5)

11,023



3,794



15,172



79,344


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

(14,414)



(1,750)



(4,093)



15,370


Asset impairment charges (7)

4,766



142,217



258,652



613,400


Acquisition-related and integration costs (8)



519





1,553


Fair value of contingent consideration (9)

16,025



769



(26,983)



11,731


Gain on extinguishment of debt (10)





(119,828)




Share-based compensation

11,576



13,736



48,909



43,722


Other expense (income), net (16)

16,203



(1,507)



20,408



(33,216)


Other adjustments

13,795



(67)



13,882



(775)


Discontinued operations, net of tax (13)

37,984



27,134



51,898



43,273


Adjusted EBITDA (non-GAAP)

$

321,100



$

328,355



$

962,607



$

1,012,876



 

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 nine months ended September 30, 2019 and 2018 (in thousands):


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018

Loss from continuing operations (GAAP)

$

(41,431)



$

(146,071)



$

(152,095)



$

(696,288)


Non-GAAP adjustments:








Amortization of intangible assets (1)

131,932



161,275



417,949



471,662


Inventory step-up and other cost savings (2)



71





261


Upfront and milestone-related payments (3)

1,672



4,731



4,055



43,027


Inventory reserve increase from restructuring (4)



207





2,797


Retention and separation benefits and other restructuring (5)

11,023



3,794



15,172



79,344


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

(14,414)



(1,750)



(4,093)



15,370


Asset impairment charges (7)

4,766



142,217



258,652



613,400


Acquisition-related and integration costs (8)



519





1,553


Fair value of contingent consideration (9)

16,025



769



(26,983)



11,731


Gain on extinguishment of debt (10)





(119,828)




Other (11)

28,634



1,353



30,254



(29,908)


Tax adjustments (12)

(78)



(2,270)



(42,466)



(25,126)


Adjusted income from continuing operations (non-GAAP)

$

138,129



$

164,845



$

380,617



$

487,823



 

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 nine months ended September 30, 2019 and 2018 (in thousands, except per share data):


Three Months Ended September 30, 2019


Total
revenues,
net


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

Reported (GAAP)

$    729,426


$    389,165


$    340,261


46.6 %


$    211,225


29.0 %


$    129,036


17.7 %


$    153,106


$    (24,070)


$      17,361


(72.1)%


$    (41,431)


$    (37,984)


$    (79,415)


$           (0.18)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(131,932)


131,932




-




131,932




-


131,932


-




131,932


-


131,932



Upfront and milestone-related payments (3)

-


(542)


542




(1,130)




1,672




-


1,672


-




1,672


-


1,672



Retention and separation benefits and other restructuring (5)

-


(1,004)


1,004




(10,019)




11,023




-


11,023


-




11,023


-


11,023



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

-


-


-




14,414




(14,414)




-


(14,414)


-




(14,414)


-


(14,414)



Asset impairment charges (7)

-


-


-




(4,766)




4,766




-


4,766


-




4,766


-


4,766



Fair value of contingent consideration (9)

-


-


-




(16,025)




16,025




-


16,025


-




16,025


-


16,025



Other (11)

-


-


-




(14,053)




14,053




(14,581)


28,634


-




28,634


-


28,634



Tax adjustments (12)

-


-


-




-




-




-


-


78




(78)


-


(78)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


37,984


37,984



After considering items (non-GAAP)

$    729,426


$    255,687


$    473,739


64.9 %


$    179,646


24.6 %


$    294,093


40.3 %


$    138,525


$    155,568


$      17,439


11.2 %


$    138,129


$              -


$    138,129


$            0.60

 

 


Three Months Ended September 30, 2018


Total
revenues,
net


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

Reported (GAAP)

$    745,466


$    412,965


$    332,501


44.6 %


$    345,229


46.3 %


$    (12,728)


(1.7)%


$    130,340


$  (143,068)


$        3,003


(2.1)%


$  (146,071)


$    (27,134)


$  (173,205)


$           (0.65)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(161,275)


161,275




-




161,275




-


161,275


-




161,275


-


161,275



Inventory step-up and other cost savings (2)

-


(71)


71




-




71




-


71


-




71


-


71



Upfront and milestone-related payments (3)

-


(745)


745




(3,986)




4,731




-


4,731


-




4,731


-


4,731



Inventory reserve increase from restructuring (4)

-


(207)


207




-




207




-


207


-




207


-


207



Retention and separation benefits and other restructuring (5)

-


(3,626)


3,626




(168)




3,794




-


3,794


-




3,794


-


3,794



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

-


-


-




1,750




(1,750)




-


(1,750)


-




(1,750)


-


(1,750)



Asset impairment charges (7)

-


-


-




(142,217)




142,217




-


142,217


-




142,217


-


142,217



Acquisition-related and integration costs (8)

-


-


-




(519)




519




-


519


-




519


-


519



Fair value of contingent consideration (9)

-


-


-




(769)




769




-


769


-




769


-


769



Other (11)

-


-


-




-




-




(1,353)


1,353


-




1,353


-


1,353



Tax adjustments (12)

-


-


-




-




-




-


-


2,270




(2,270)


-


(2,270)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


27,134


27,134



After considering items (non-GAAP)

$    745,466


$    247,041


$    498,425


66.9 %


$    199,320


26.7 %


$    299,105


40.1 %


$    128,987


$    170,118


$        5,273


3.1 %


$    164,845


$              -


$    164,845


$            0.71


 

 


Nine Months Ended September 30, 2019


Total revenues, net


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

Reported (GAAP)

$ 2,149,564


$ 1,169,282


$    980,282


45.6 %


$    795,678


37.0 %


$    184,604


8.6 %


$    304,967


$  (120,363)


$      31,732


(26.4)%


$  (152,095)


$    (51,898)


$  (203,993)


$           (0.67)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(417,949)


417,949




-




417,949




-


417,949


-




417,949


-


417,949



Upfront and milestone-related payments (3)

-


(1,942)


1,942




(2,113)




4,055




-


4,055


-




4,055


-


4,055



Retention and separation benefits and other restructuring (5)

-


(1,004)


1,004




(14,168)




15,172




-


15,172


-




15,172


-


15,172



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

-


-


-




4,093




(4,093)




-


(4,093)


-




(4,093)


-


(4,093)



Asset impairment charges (7)

-


-


-




(258,652)




258,652




-


258,652


-




258,652


-


258,652



Fair value of contingent consideration (9)

-


-


-




26,983




(26,983)




-


(26,983)


-




(26,983)


-


(26,983)



Gain on extinguishment of debt (10)

-


-


-




-




-




119,828


(119,828)


-




(119,828)


-


(119,828)



Other (11)

-


-


-




(13,878)




13,878




(16,376)


30,254


-




30,254


-


30,254



Tax adjustments (12)

-


-


-




-




-




-


-


42,466




(42,466)


-


(42,466)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


51,898


51,898



After considering items (non-GAAP)

$ 2,149,564


$    748,387


$ 1,401,177


65.2 %


$    537,943


25.0 %


$    863,234


40.2 %


$    408,419


$    454,815


$      74,198


16.3 %


$    380,617


$              -


$    380,617


$            1.64

 

 


Nine Months Ended September 30, 2018


Total revenues, net


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

Reported (GAAP)

$ 2,160,689


$ 1,198,468


$    962,221


44.5 %


$ 1,281,100


59.3 %


$  (318,879)


(14.8)%


$    352,680


$  (671,559)


$      24,729


(3.7)%


$  (696,288)


$    (43,273)


$  (739,561)


$           (3.11)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(471,662)


471,662




-




471,662




-


471,662


-




471,662


-


471,662



Inventory step-up and other cost savings (2)

-


(261)


261




-




261




-


261


-




261


-


261



Upfront and milestone-related payments (3)

-


(2,095)


2,095




(40,932)




43,027




-


43,027


-




43,027


-


43,027



Inventory reserve increase from restructuring (4)

-


(2,797)


2,797




-




2,797




-


2,797


-




2,797


-


2,797



Retention and separation benefits and other restructuring (5)

-


(57,457)


57,457




(21,887)




79,344




-


79,344


-




79,344


-


79,344



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

-


-


-




(15,370)




15,370




-


15,370


-




15,370


-


15,370



Asset impairment charges (7)

-


-


-




(613,400)




613,400




-


613,400


-




613,400


-


613,400



Acquisition-related and integration costs (8)

-


-


-




(1,553)




1,553




-


1,553


-




1,553


-


1,553



Fair value of contingent consideration (9)

-


-


-




(11,731)




11,731




-


11,731


-




11,731


-


11,731



Other (11)

-


-


-




630




(630)




29,278


(29,908)


-




(29,908)


-


(29,908)



Tax adjustments (12)

-


-


-




-




-




-


-


25,126




(25,126)


-


(25,126)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


43,273


43,273



After considering items (non-GAAP)

$ 2,160,689


$    664,196


$ 1,496,493


69.3 %


$    576,857


26.7 %


$    919,636


42.6 %


$    381,958


$    537,678


$      49,855


9.3 %


$    487,823


$              -


$    487,823


$            2.14

 

 

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 nine months ended September 30, 2019 and 2018 are as follows:

(1)

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





Three Months Ended September 30,


Nine Months Ended September 30,



2019


2018


2019


2018


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

$

128,865



$

149,249



$

400,203



$

446,015



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

3,067



12,026



17,746



25,647



Total

$

131,932



$

161,275



$

417,949



$

471,662




(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 September 30,



2019


2018



Cost of revenues


Operating
expenses


Cost of
revenues


Operating
expenses


Sales-based

$

542



$



$

745



$



Development-based



1,130





3,986



Total

$

542



$

1,130



$

745



$

3,986







Nine Months Ended September 30,



2019


2018



Cost of revenues


Operating
expenses


Cost of
revenues


Operating
expenses


Sales-based

$

1,942



$



$

2,095



$



Development-based



2,113





40,932



Total

$

1,942



$

2,113



$

2,095



$

40,932




(4)

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



(5)

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





Three Months Ended September 30,



2019


2018



Cost of revenues


Operating
expenses


Cost of
revenues


Operating
expenses


Retention and separation benefits

$

1,004



$

5,672



$

1,711



$

379



Other



4,347



1,915



(211)



Total

$

1,004



$

10,019



$

3,626



$

168







Nine Months Ended September 30,



2019


2018



Cost of revenues


Operating
expenses


Cost of
revenues


Operating
expenses


Retention and separation benefits

$

1,004



$

7,884



$

15,479



$

17,215



Accelerated depreciation and product discontinuation charges





35,177





Other



6,284



6,801



4,672



Total

$

1,004



$

14,168



$

57,457



$

21,887




(6)

To exclude adjustments to our accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by our subsidiaries.



(7)

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





Three Months Ended September 30,


Nine Months Ended September 30,



2019


2018


2019


2018


Goodwill impairment charges

$



$



$

151,108



$

391,000



Other intangible asset impairment charges

4,261



140,609



104,660



217,576



Property, plant and equipment impairment charges

505



1,608



2,884



4,824



Total asset impairment charges

$

4,766



$

142,217



$

258,652



$

613,400




(8)

Adjustments for acquisition and integration items primarily relate to various acquisitions.



(9)

To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to our estimates regarding the timing and amount of the future revenues of the underlying products and changes in other assumptions impacting the probability of incurring, and extent to which we could incur, related contingent obligations.



(10)

To exclude the gain on the extinguishment of debt associated with our March 2019 refinancing.



(11)

Other adjustments included the following (in thousands):





Three Months Ended September 30,



2019


2018



Operating
expenses


Other non-
operating
expenses


Operating
expenses


Other non-
operating
expenses


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

$



$

(922)



$



$

1,528



(Gain) loss on sale of business and other assets



1





(177)



Other miscellaneous

14,053



15,502





2



Total

$

14,053



$

14,581



$



$

1,353







Nine Months Ended September 30,



2019


2018



Operating
expenses


Other non-
operating
expenses


Operating
expenses


Other non-
operating
expenses


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

$



$

2,874



$



$

(1,560)



(Gain) loss on sale of business and other assets



(2,000)





(24,014)



Other miscellaneous

13,878



15,502



(630)



(3,704)



Total

$

13,878



$

16,376



$

(630)



$

(29,278)





Other miscellaneous during the three and nine months ended September 30, 2019 includes $14.1 million in Operating expenses for a premium associated with an extended reporting period endorsement on an expiring insurance program and $17.5 million in Other non-operating expenses for contract termination costs incurred as a result of certain product discontinuation activities in our International Pharmaceuticals segment.



(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.



(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 September 30,


Nine Months Ended September 30,



2019


2018


2019


2018


GAAP

226,598



224,132



225,804



223,829



Non-GAAP Adjusted

230,907



232,358



231,751



228,195




(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 Retention and separation benefits and other restructuring.



(16)

To exclude Other expense (income), net per the Condensed Consolidated Statements 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 September 30, 2019 (in thousands) and the calculation of our Net Debt Leverage Ratio (non-GAAP):


Twelve Months
Ended
September 30,
2019

Net loss (GAAP)

$

(495,901)


Income tax expense

29,938


Interest expense, net

540,147


Depreciation and amortization (15)

635,614


EBITDA (non-GAAP)

$

709,798




Inventory step-up and other cost savings

$


Upfront and milestone-related payments

6,136


Inventory reserve increase from restructuring

150


Retention and separation benefits and other restructuring

19,176


Certain litigation-related and other contingencies, net

(5,654)


Asset impairment charges

562,191


Acquisition-related and integration costs

451


Fair value of contingent consideration

(18,804)


Gain on extinguishment of debt

(119,828)


Share-based compensation

59,258


Other expense, net

1,671


Other adjustments

13,920


Discontinued operations, net of tax

78,327


Adjusted EBITDA (non-GAAP)

$

1,306,792




Calculation of Net Debt:


Debt

$

8,399,061


Cash (excluding Restricted Cash)

1,526,250


Net Debt (non-GAAP)

$

6,872,811




Calculation of Net Debt Leverage:


Net Debt Leverage Ratio (non-GAAP)

5.3



 

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 net income per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, the company stresses 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, gain / loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amounts 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 (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 net income 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; changes in legislation; 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; unfavorable publicity regarding the misuse of opioids; 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 845-364-4833.

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SOURCE Endo International plc


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