Endo Reports Fourth-Quarter And Full-Year 2017 Financial Results

Published: Feb 27, 2018

DUBLIN, Feb. 27, 2018 /PRNewswire/ - Endo International plc (NASDAQ: ENDP) today reported fourth-quarter 2017 financial results, including:

  • Revenues of $769 million, a 38 percent decrease compared to fourth-quarter 2016 revenues of $1,242 million.
  • Reported net loss from continuing operations of $272 million compared to fourth-quarter 2016 reported net loss from continuing operations of $3,333 million.
  • Reported diluted loss per share from continuing operations of $1.22 compared to fourth-quarter 2016 reported diluted loss per share from continuing operations of $14.96.
  • Adjusted income from continuing operations of $174 million compared to fourth-quarter 2016 adjusted income from continuing operations of $396 million.
  • Adjusted diluted EPS from continuing operations of $0.77 compared to fourth-quarter 2016 adjusted diluted EPS from continuing operations of $1.77.
  • Adjusted EBITDA of $327 million compared to fourth-quarter 2016 adjusted EBITDA of $556 million.

"Despite the challenges impacting the U.S. generics industry, Endo delivered solid operating results in 2017, including strong adjusted EBITDA generation," said Paul Campanelli, President and CEO of Endo. "Importantly, those core areas of focus where we continue to invest outperformed in 2017, as Sterile Injectables and Branded Specialty Products both achieved double-digit growth. We enter 2018 leaner and better positioned for the future, and the year has already been marked by a pivotal event. Earlier this month, we began our Phase 3 clinical trials of CCH for the treatment of cellulite. We view this as a major milestone for a new and important potential growth driver for our Company."

    FINANCIAL PERFORMANCE

    (in thousands, except per share amounts)


                                                  Three Months Ended December 31,                            Year Ended December 31,

                                                2017                               2016      Change             2017                  2016                Change
                                                ----                               ----      ------             ----                  ----                ------

    Total Revenues                                       $768,640                            $1,241,513            (38)%                       $3,468,858             $4,010,274     (14)%

    Reported Loss from Continuing                      $(271,581)                         $(3,333,325)           (92)%                     $(1,232,711)          $(3,223,772)    (62)%
    Operations

    Reported Diluted Weighted Average        223,322                              222,870                - %                  223,198              222,651       -   %
    Shares

    Reported Diluted Loss per Share                       $(1.22)                             $(14.96)           (92)%                          $(5.52)              $(14.48)    (62)%
    from Continuing Operations

    Adjusted Income from Continuing                      $173,863                              $395,791            (56)%                         $860,361             $1,054,382     (18)%
    Operations

    Adjusted Diluted Weighted Average        224,577                              223,178               1%                    223,978              223,090       -   %
    Shares(1)

    Adjusted Diluted EPS from                               $0.77                                 $1.77            (56)%                            $3.84                  $4.73     (19)%
    Continuing Operations
    __________

    (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 decreased by 38 percent to $769 million in fourth-quarter 2017 compared to the same period in 2016. The decline was primarily due to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals products ezetimibe tablets, the generic version of ZETIA®, and quetiapine extended-release (ER) tablets, the generic version of SEROQUEL XR®, both of which launched in fourth-quarter 2016. Also contributing to the decline in total revenues were previously announced U.S. Generic Pharmaceuticals product discontinuances, pricing pressure from increased competition primarily impacting the U.S. Generics Base business, the divestitures of Litha and Somar, as well as the cessation of OPANA® ER shipments to customers by September 1, 2017.

GAAP net loss from continuing operations in fourth-quarter 2017 was $272 million compared to GAAP net loss from continuing operations of $3,333 million during the same period in 2016. This decrease included the impact of lower asset impairment charges and intangible asset amortization in fourth-quarter 2017. GAAP diluted net loss per share from continuing operations for fourth-quarter 2017 was $1.22, compared to GAAP diluted net loss per share from continuing operations of $14.96 in fourth-quarter 2016.

Adjusted income from continuing operations in fourth-quarter 2017 was $174 million compared to $396 million in fourth-quarter 2016. This decrease resulted primarily from lower revenues of ezetimibe tablets, quetiapine ER tablets, Base business generic products and OPANA® ER as well as an increase in interest expense, mainly due to the refinancing of the Company's secured debt in April 2017, which enhanced operational flexibility and extended the Company's maturity schedule. Adjusted diluted EPS from continuing operations in fourth-quarter 2017 was $0.77 compared to $1.77 in fourth-quarter 2016.

U.S. GENERIC PHARMACEUTICALS

During fourth-quarter 2017, the U.S. Generic Pharmaceuticals segment launched six products and submitted two regulatory filings. In 2017, the U.S. Generic Pharmaceuticals segment launched 17 new generic products and the Company made 12 regulatory submissions. As of December 31, 2017, the Company had approximately 100 Abbreviated New Drug Applications pending with the U.S. Food and Drug Administration.

Fourth-quarter 2017 U.S. Generic Pharmaceuticals results include:

  • Revenues of $499 million, a 43 percent decrease compared to fourth-quarter 2016; this decline was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file products ezetimibe tablets and quetiapine ER tablets. Also contributing to the decline were previously announced product discontinuances and pricing pressure from increased competition primarily impacting the Base business.
  • Sterile Injectables revenue increased 16 percent compared to fourth-quarter 2016; this increase was driven primarily by ADRENALIN®.
  • New Launches and Alternative Dosages revenue decreased 67 percent compared to fourth-quarter 2016; this decrease was driven primarily by the expiration of the marketing exclusivity periods for ezetimibe tablets and quetiapine ER tablets.
  • The U.S. Generics Base business revenues decreased 37 percent compared to fourth-quarter 2016; this decrease primarily resulted from the impact of 2016 and 2017 competitive events, previously announced product discontinuances and the continued impact of pricing due to consolidation among our trade accounts.

U.S. BRANDED PHARMACEUTICALS

In February 2018, Endo announced the initiation of two Phase 3 clinical trials of collagenase clostridium histolyticum (or "CCH") for the treatment of cellulite.

Fourth-quarter 2017 U.S. Branded Pharmaceuticals results include:

  • Revenues of $228 million, a 21 percent decrease compared to fourth-quarter 2016; this decrease was primarily attributable to the decline in revenues of OPANA® ER resulting from the cessation of product shipments by September 1, 2017 and generic competition adversely impacting the Company's Established Products portfolio.
  • Specialty Products revenues increased 8 percent in fourth-quarter 2017 versus the same period in 2016, driven by strong performance from XIAFLEX® and other products within our Specialty Products portfolio. Sales of XIAFLEX®, our flagship Branded product, increased 10 percent compared to fourth-quarter 2016; this increase was primarily attributable to volume growth that was driven, in part, by a full year of direct-to-consumer initiatives intended to increase patient awareness of XIAFLEX® as a possible treatment option for Dupuytren's Contracture and Peyronie's Disease.

INTERNATIONAL PHARMACEUTICALS

Fourth-quarter 2017 International Pharmaceuticals revenues were $41 million, compared to $70 million in the same period in 2016. The decline is primarily attributable to the sale of the Company's South African Litha business to Acino Pharma AG, which closed on July 3, 2017, and the sale of the Company's Mexican Somar business to Advent International, which closed on October 25, 2017.

2018 FINANCIAL GUIDANCE

For the full twelve months ending December 31, 2018, at current exchange rates, Endo is providing guidance on revenue, adjusted diluted EPS from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:

  • Total revenues to be between $2.6 billion and $2.8 billion;
  • Adjusted diluted EPS from continuing operations to be between $2.15 and $2.55; and
  • Adjusted EBITDA from continuing operations to be between $1.2 billion and $1.3 billion.

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

  • Adjusted gross margin of approximately 67.0% to 68.0%;
  • Adjusted operating expenses as a percentage of revenues of approximately 25.5% to 26.5%;
  • 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 226 million.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of December 31, 2017, the Company had $987 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.3 billion and a net debt to adjusted EBITDA ratio of 4.6.

Fourth-quarter 2017 cash provided by operating activities was $132 million, compared to $84 million of net cash provided by operating activities in the comparable 2016 period. The 2016 period was impacted by higher payments related to U.S. mesh product liability claims.

During fourth-quarter 2017, the Company recorded pre-tax, non-cash asset impairment charges of $130 million, $126 million of which related to in-process research and development and developed technology intangible assets in its U.S. Generic Pharmaceuticals segment.

In addition, the Company recorded a total increase of approximately $200 million to its legal reserves relating to both LIDODERM® antitrust matters and Testosterone Replacement Therapy (TRT) product liability matters after determining that a loss is probable and reasonably estimable. The LIDODERM® portion of the reserve increase includes an estimated loss for, among other matters, a settlement in principle of all remaining claims filed against the Company's subsidiary, Endo Pharmaceuticals Inc., in In re Lidoderm Antitrust Litigation, MDL No. 2521, pending in the U.S. District Court for the Northern District of California. The TRT portion of the reserve increase includes an estimated loss for, among other matters, all testosterone-related product liability cases filed against the Company's subsidiaries in In Re Testosterone Replacement Therapy Products Liability Litigation, MDL No. 2545, pending in the U.S. District Court for the Northern District of Illinois, and in other courts. In February 2018 the court in MDL No. 2545 entered a case management order reporting that the parties had entered into a memorandum of understanding regarding a potential global settlement and directing that all proceedings involving the Company's subsidiaries be temporarily stayed so that the parties may devote their efforts to finalizing a master settlement agreement.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release today 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 4978556. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from February 27, 2018 at 10:30 a.m. ET until 10:30 a.m. ET on March 2, 2018 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 4978556.

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 for the three and twelve months ended December 31, 2017 and 2016 (in thousands):


                                                                                                           Three Months Ended December 31,          Percent           Year Ended December 31,       Percent

                                                                                                          2017                               2016     Growth             2017                  2016    Growth
                                                                                                          ----                               ----     ------             ----                  ----    ------

    U.S. Generic Pharmaceuticals:

    U.S. Generics Base                                                                                            $182,314                             $288,142             (37)%                        $829,729        $1,230,097 (33)%

    Sterile Injectables                                                                                167,342                              143,905               16%                  654,270             530,805   23%

    New Launches and Alternative Dosages                                                               149,396                              450,127             (67)%                  797,002             803,711  (1)%
                                                                                                       -------                              -------                                    -------             -------

    Total U.S. Generic Pharmaceuticals                                                                            $499,052                             $882,174             (43)%                      $2,281,001        $2,564,613 (11)%
                                                                                                                  --------                             --------                                        ----------        ----------

    U.S. Branded Pharmaceuticals:

    Specialty Products:

    XIAFLEX(R)                                                                                                     $61,265                              $55,530               10%                        $213,378          $189,689   12%

    SUPPRELIN(R) LA                                                                                     22,743                               20,793                9%                   86,211              78,648   10%

    Other Specialty (1)                                                                                 39,977                               38,243                5%                  153,384             138,483   11%

       Total Specialty Products                                                                                   $123,985                             $114,566                8%                        $452,973          $406,820   11%
                                                                                                                  --------                             --------                                          --------          --------

    Established Products:

    OPANA(R) ER                                                                                                     $1,770                              $38,880             (95)%                         $83,826          $158,938 (47)%

    PERCOCET(R)                                                                                         32,048                               36,029             (11)%                  125,231             139,211 (10)%

    VOLTAREN(R) Gel                                                                                     15,134                               18,612             (19)%                   68,780             100,642 (32)%

    LIDODERM(R)                                                                                         13,924                               21,122             (34)%                   51,629              87,577 (41)%

    Other Established (2)                                                                               41,514                               60,087             (31)%                  175,086             273,106 (36)%

       Total Established Products                                                                                 $104,390                             $174,730             (40)%                        $504,552          $759,474 (34)%

    Total U.S. Branded Pharmaceuticals (3)                                                                        $228,375                             $289,296             (21)%                        $957,525        $1,166,294 (18)%
                                                                                                                  --------                             --------                                          --------        ----------

    Total International Pharmaceuticals                                                                            $41,213                              $70,043             (41)%                        $230,332          $279,367 (18)%
                                                                                                                   -------                              -------                                          --------          --------

    Total Revenues                                                                                                $768,640                           $1,241,513             (38)%                      $3,468,858        $4,010,274 (14)%
                                                                                                                  ========                           ==========                                        ==========        ==========
    __________

    (1)              Products included within Other
                     Specialty include TESTOPEL(R),
                     NASCOBAL(R) Nasal Spray, and
                     AVEED(R).

    (2)              Products included within Other
                     Established include, but are not
                     limited to, TESTIM(R) and
                     FORTESTA(R) Gel, including the
                     authorized generic.

    (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
                     2017 or 2016. LIDODERM(R) is
                     separately presented as its
                     revenues exceeded $25 million in
                     certain quarterly periods in 2016.
 

 

 

    The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and twelve months ended December 31, 2017 and 2016 (in thousands, except per share data):

                                                                                                                                         Three Months Ended December 31,                                    Year Ended December 31,

                                                                                                                                       2017                                2016                         2017                        2016
                                                                                                                                       ----                                ----                         ----                        ----

    TOTAL REVENUES                                                                                                                              $768,640                                           $1,241,513                                $3,468,858       $4,010,274

    COSTS AND EXPENSES:

    Cost of revenues                                                                                                                505,645                               756,578                                2,228,530                     2,634,973

    Selling, general and administrative                                                                                             161,199                               212,568                                  629,874                       770,728

    Research and development                                                                                                         48,545                                46,206                                  172,067                       183,372

    Litigation-related and other contingencies, net                                                                                 200,006                               (4,765)                                 185,990                        23,950

    Asset impairment charges                                                                                                        130,446                             3,518,085                                1,154,376                     3,781,165

    Acquisition-related and integration items                                                                                        26,375                                 7,400                                   58,086                        87,601
                                                                                                                                     ------                                 -----                                   ------                        ------

    OPERATING LOSS FROM CONTINUING                                                                                                            $(303,576)                                        $(3,294,559)                               $(960,065)    $(3,471,515)
    OPERATIONS


    INTEREST EXPENSE, NET                                                                                                           126,961                               111,783                                  488,228                       452,679

    LOSS ON EXTINGUISHMENT OF DEBT                                                                                                        -                                    -                                  51,734                             -

    OTHER INCOME, NET                                                                                                               (6,180)                                (740)                                (17,023)                        (338)

    LOSS FROM CONTINUING OPERATIONS BEFORE                                                                                                    $(424,357)                                        $(3,405,602)                             $(1,483,004)    $(3,923,856)
    INCOME TAX


    INCOME TAX BENEFIT                                                                                                            (152,776)                             (72,277)                               (250,293)                     (700,084)

    LOSS FROM CONTINUING OPERATIONS                                                                                                           $(271,581)                                        $(3,333,325)                             $(1,232,711)    $(3,223,772)
                                                                                                                                               ---------                                          -----------                               -----------      -----------

    DISCONTINUED OPERATIONS, NET OF TAX                                                                                            (96,836)                              (4,531)                               (802,722)                     (123,278)
                                                                                                                                    -------                                ------                                 --------                      --------

    CONSOLIDATED NET LOSS                                                                                                                     $(368,417)                                        $(3,337,856)                             $(2,035,433)    $(3,347,050)
                                                                                                                                               ---------                                          -----------                               -----------      -----------

    Less: Net income attributable to noncontrolling interests                                                                             -                                    -                                       -                           16

    NET LOSS ATTRIBUTABLE TO ENDO                                                                                                             $(368,417)                                        $(3,337,856)                             $(2,035,433)    $(3,347,066)
    INTERNATIONAL PLC


    NET LOSS PER SHARE ATTRIBUTABLE TO ENDO
    INTERNATIONAL PLC ORDINARY
    SHAREHOLDERS-BASIC:

    Continuing operations                                                                                                                        $(1.22)                                            $(14.96)                                  $(5.52)        $(14.48)

    Discontinued operations                                                                                                          (0.43)                               (0.02)                                  (3.60)                       (0.55)

    Basic                                                                                                                                        $(1.65)                                            $(14.98)                                  $(9.12)        $(15.03)
                                                                                                                                                  ======                                              =======                                    ======          =======

    NET LOSS PER SHARE ATTRIBUTABLE TO ENDO
    INTERNATIONAL PLC ORDINARY

    SHAREHOLDERS-DILUTED:

    Continuing operations                                                                                                                        $(1.22)                                            $(14.96)                                  $(5.52)        $(14.48)

    Discontinued operations                                                                                                          (0.43)                               (0.02)                                  (3.60)                       (0.55)

    Diluted                                                                                                                                      $(1.65)                                            $(14.98)                                  $(9.12)        $(15.03)
                                                                                                                                                  ======                                              =======                                    ======          =======

    WEIGHTED AVERAGE SHARES:

    Basic                                                                                                                           223,322                               222,870                                  223,198                       222,651

    Diluted                                                                                                                         223,322                               222,870                                  223,198                       222,651
 

 

 

    The following table presents unaudited Condensed Consolidated Balance Sheet data at December 31, 2017 and December 31, 2016 (in thousands):


                                                                                                                                                December 31,             December 31,
                                                                                                                                                        2017                         2016
                                                                                                                                                        ----                         ----

    ASSETS

    CURRENT ASSETS:

    Cash and cash equivalents                                                                                                                                   $986,605                       $517,250

    Restricted cash and cash equivalents                                                                                                             320,453                        282,074

    Accounts receivable                                                                                                                              517,436                        992,153

    Inventories, net                                                                                                                                 391,437                        555,671

    Assets held for sale                                                                                                                                   -                       116,985

    Other current assets                                                                                                                              55,146                        125,326

       Total current assets                                                                                                                                   $2,271,077                     $2,589,459
                                                                                                                                                              ----------                     ----------

    TOTAL NON-CURRENT ASSETS                                                                                                                       9,364,503                     11,685,650

    TOTAL ASSETS                                                                                                                                             $11,635,580                    $14,275,109
                                                                                                                                                             ===========                    ===========

    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:

    Accounts payable and accrued expenses, including legal settlement accruals                                                                                $2,184,618                     $2,470,016

    Liabilities held for sale                                                                                                                              -                        24,338

    Other current liabilities                                                                                                                         36,291                        140,391

       Total current liabilities                                                                                                                              $2,220,909                     $2,634,745
                                                                                                                                                              ----------                     ----------

    LONG-TERM DEBT, LESS CURRENT PORTION, NET                                                                                                      8,242,032                      8,141,378

    OTHER LIABILITIES                                                                                                                                687,759                        797,397

    TOTAL SHAREHOLDERS' EQUITY                                                                                                                       484,880                      2,701,589
                                                                                                                                                     -------                      ---------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                               $11,635,580                    $14,275,109
                                                                                                                                                             ===========                    ===========
 

 

 

    The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the year ended December 31, 2017 and 2016 (in thousands):


                                                                                                                                                                      Year Ended December 31,

                                                                                                                                                                 2017                            2016
                                                                                                                                                                 ----                            ----

    OPERATING ACTIVITIES:

    Consolidated net loss                                                                                                                                             $(2,035,433)                      $(3,347,050)

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

       Depreciation and amortization                                                                                                                          983,765                           983,309

       Asset impairment charges                                                                                                                             1,154,376                         3,802,493

       Other, including cash payments to claimants from Qualified Settlement Funds                                                                            451,277                         (910,609)

       Net cash provided by operating activities                                                                                                                          $553,985                           $528,143
                                                                                                                                                                          --------                           --------

    INVESTING ACTIVITIES:

    Purchases of property, plant and equipment                                                                                                                          $(125,654)                        $(138,856)

    Acquisitions, net of cash acquired                                                                                                                              -                         (30,394)

    Proceeds from sale of business and other assets, net                                                                                                      223,237                            10,870

    Other                                                                                                                                                       7,000                          (19,172)
                                                                                                                                                                                               -------

       Net cash provided by (used in) investing activities                                                                                                                $104,583                         $(177,552)
                                                                                                                                                                          --------                          ---------

    FINANCING ACTIVITIES:

    Payments on borrowings, net                                                                                                                                          $(22,105)                        $(336,361)

    Other                                                                                                                                                   (144,888)                         (60,825)

       Net cash (used in) provided by financing activities                                                                                                              $(166,993)                        $(397,186)
                                                                                                                                                                         ---------                          ---------

    Effect of foreign exchange rate                                                                                                                             2,515                               436

    Movement in cash held for sale                                                                                                                             11,744                          (11,744)

    NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH                                                                                                    $505,834                          $(57,903)
    AND RESTRICTED CASH EQUIVALENTS


    CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH                                                                                               805,180                           863,083
    EQUIVALENTS, BEGINNING OF PERIOD


    CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH                                                                                                         $1,311,014                           $805,180
    EQUIVALENTS, END OF PERIOD

 

 

 

    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
     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, both historical and forward-looking, 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 attributable to Endo International plc (GAAP) to Adjusted EBITDA (non-GAAP) for the three and twelve months ended December 31, 2017 and 2016 (in thousands):


                                                                                                                                             Three Months Ended December 31,                               Year Ended December 31,

                                                                                                                                             2017                                2016                         2017                                2016
                                                                                                                                             ----                                ----                         ----                                ----

    Net loss attributable to Endo International plc (GAAP)                                                                                          $(368,417)                                        $(3,337,856)                                        $(2,035,433)                                        $(3,347,066)

    Income tax benefit                                                                                                                  (152,776)                             (72,277)                               (250,293)                                (700,084)

    Interest expense, net                                                                                                                 126,961                               111,783                                  488,228                                  452,679

    Depreciation and amortization (18)                                                                                                    177,321                               260,370                                  857,706                                  955,802

    EBITDA (non-GAAP)                                                                                                                               $(216,911)                                        $(3,037,980)                                          $(939,792)                                        $(2,638,669)
                                                                                                                                                     ---------                                          -----------                                            ---------                                          -----------


    Inventory step-up and other cost savings (2)                                                                                                          $109                                              $13,912                                                 $390                                             $125,699

    Upfront and milestone-related payments (3)                                                                                              2,531                                 2,455                                    9,483                                    8,330

    Inventory reserve increase (decrease) from restructuring (4)                                                                            5,779                                 (137)                                  13,678                                   24,455

    Royalty obligations (5)                                                                                                                     -                                    -                                       -                                 (7,750)

    Separation benefits and other restructuring (6)                                                                                        78,692                                37,216                                  198,770                                   83,036

    Certain litigation-related and other contingencies, net (7)                                                                           200,006                               (4,765)                                 185,990                                   23,950

    Asset impairment charges (8)                                                                                                          130,446                             3,518,085                                1,154,376                                3,781,165

    Acquisition-related and integration costs (9)                                                                                               -                                8,356                                    8,137                                   63,778

    Fair value of contingent consideration (10)                                                                                            26,375                                 (956)                                  49,949                                   23,823

    Loss on extinguishment of debt (11)                                                                                                         -                                    -                                  51,734                                        -

    Share-based compensation                                                                                                                9,897                                15,183                                   50,149                                   58,656

    Other income, net (19)                                                                                                                (6,180)                                (740)                                (17,023)                                   (338)

    Other adjustments                                                                                                                       (151)                                  781                                    (226)                                       -

    Discontinued operations, net of tax (15)                                                                                               96,836                                 4,531                                  802,722                                  123,278

    Net income attributable to noncontrolling interests (16)                                                                                    -                                    -                                       -                                      16
                                                                                                                                              ---                                  ---                                     ---                                     ---

    Adjusted EBITDA (non-GAAP)                                                                                                                        $327,429                                             $555,941                                           $1,568,337                                           $1,669,429
                                                                                                                                                      ========                                             ========                                           ==========                                           ==========
 

 

 

    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 twelve months ended December 31, 2017 and 2016 (in thousands):


                                                                                                                                                        Three Months Ended December 31,                                    Year Ended December 31,

                                                                                                                                                      2017                                2016                         2017                        2016
                                                                                                                                                      ----                                ----                         ----                        ----

    Loss from continuing operations (GAAP)                                                                                                                   $(271,581)                                        $(3,333,325)                             $(1,232,711)    $(3,223,772)

    Non-GAAP adjustments:

       Amortization of intangible assets (1)                                                                                                       158,276                               240,390                                  773,766                       876,451

       Inventory step-up and other cost savings (2)                                                                                                    109                                13,912                                      390                       125,699

       Upfront and milestone-related payments (3)                                                                                                    2,531                                 2,455                                    9,483                         8,330

       Inventory reserve increase (decrease) from restructuring (4)                                                                                  5,779                                 (137)                                  13,678                        24,455

       Royalty obligations (5)                                                                                                                           -                                    -                                       -                      (7,750)

       Separation benefits and other restructuring (6)                                                                                              78,692                                37,216                                  198,770                        83,036

       Certain litigation-related and other contingencies, net (7)                                                                                 200,006                               (4,765)                                 185,990                        23,950

       Asset impairment charges (8)                                                                                                                130,446                             3,518,085                                1,154,376                     3,781,165

       Acquisition-related and integration costs (9)                                                                                                     -                                8,356                                    8,137                        63,778

       Fair value of contingent consideration (10)                                                                                                  26,375                                 (956)                                  49,949                        23,823

       Loss on extinguishment of debt (11)                                                                                                               -                                    -                                  51,734                             -

       Non-cash and penalty interest charges (12)                                                                                                        -                                    -                                       -                        4,092

       Other (13)                                                                                                                                  (7,487)                              (1,836)                                 (8,620)                      (7,273)

       Tax adjustments (14)                                                                                                                      (149,283)                             (83,604)                               (344,581)                     (721,602)
                                                                                                                                                  --------                               -------                                 --------                      --------

       Adjusted income from continuing operations (non-GAAP)                                                                                                   $173,863                                             $395,791                                  $860,361       $1,054,382
                                                                                                                                                               ========                                             ========                                  ========       ==========

 

 

    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 twelve months ended December 31, 2017 and 2016 (in thousands, except per share data):


                                                                                                                                                                                                                                                                                                             Three Months Ended December 31, 2017
                                                                                                                                                                                                                                                                                                             ------------------------------------

                                                                Total                  Cost of                   Gross                   Gross                    Total                 Operating                     Operating                 Operating            Other         (Loss)            Income            Effective                       (Loss)                Discontinued            Net (loss)              Diluted
                                                              revenues                revenues                  margin                   margin                operating                expense to                   (loss)                    margin %           non-         income         tax benefit           tax rate                     income               operations,               income                 (loss)
                                                                                                                                         %                    expenses                 revenue %                  income                                     operating        from                                                              from                 net of tax           attributable               income
                                                                                                                                                                                                                    from                                      expense,      continuing                                                        continuing                                      to Endo               per share
                                                                                                                                                                                                                 continuing                                      net        operations                                                        operations                                   International               from
                                                                                                                                                                                                                 operations                                                   before                                                                                                         plc (16)               continuing
                                                                                                                                                                                                                                                                            income tax                                                                                                                              operations
                                                                                                                                                                                                                                                                                                                                                                                                                          (17)
                                                                                                                                                                                                                                                                                                                                                                                                                            ----

    Reported (GAAP)                                                        $768,640                                          $505,645                                          $262,995                              34%                                  $566,571                        74%                             $(303,576)                          (39)%                                       $120,781                                $(424,357)             $(152,776)           36%              $(271,581)    $(96,836)   $(368,417)    $(1.22)

    Items impacting
    comparability:

    Amortization of                                                   -                           (158,276)                               158,276                                                                   -                                               158,276                                        -                              158,276                               -                                                 158,276                      -              158,276             0.70
    intangible assets (1)

    Inventory step-up and                                             -                               (109)                                  109                                                                   -                                                   109                                        -                                  109                               -                                                     109                      -                  109                -
    other cost savings (2)

    Upfront and                                                       -                               (712)                                  712                                                              (1,819)                                                 2,531                                        -                                2,531                               -                                                   2,531                      -                2,531             0.01
    milestone-related
    payments (3)

    Inventory reserve                                                 -                             (5,779)                                5,779                                                                   -                                                 5,779                                        -                                5,779                               -                                                   5,779                      -                5,779             0.03
    increase from
    restructuring (4)

    Separation benefits                                               -                            (76,764)                               76,764                                                              (1,928)                                                78,692                                        -                               78,692                               -                                                  78,692                      -               78,692             0.35
    and other
    restructuring (6)

    Certain litigation-                                               -                                   -                                    -                                                           (200,006)                                               200,006                                        -                              200,006                               -                                                 200,006                      -              200,006             0.90
    related and other
    contingencies, net (7)

    Asset impairment                                                  -                                   -                                    -                                                           (130,446)                                               130,446                                        -                              130,446                               -                                                 130,446                      -              130,446             0.58
    charges (8)

    Acquisition-related                                               -                                   -                                    -                                                                  -                                                     -                                       -                                    -                              -                                                       -                      -                   -               -
    and integration costs
    (9)

    Fair value of                                                     -                                   -                                    -                                                            (26,375)                                                26,375                                        -                               26,375                               -                                                  26,375                      -               26,375             0.12
    contingent
    consideration (10)

    Other (13)                                                        -                                   -                                    -                                                                  -                                                     -                                   7,487                               (7,487)                              -                                                 (7,487)                      -             (7,487)          (0.03)

    Tax adjustments (14)                                              -                                   -                                    -                                                                  -                                                     -                                       -                                    -                        149,283                                                (149,283)                      -           (149,283)           (0.67)

    Exclude discontinued                                              -                                   -                                    -                                                                  -                                                     -                                       -                                    -                              -                                                       -                 96,836               96,836                -
    operations, net of tax
    (15)


    After considering items                                                $768,640                                          $264,005                                          $504,635                              66%                                  $205,997                        27%                               $298,638                             39%                                       $128,268                                  $170,370                $(3,493)          (2)%                $173,863 $          -      $173,863       $0.77
    (non-GAAP)

 

 

                                                                                                                                                                                                             Three Months Ended December 31, 2016

                              Total               Cost of            Gross          Gross       Total           Operating               Operating  Operating               Other         (Loss)      Income                    Effective                 (Loss)               Discontinued             Net (loss)                     Diluted
                            revenues             revenues           margin          margin   operating          expense to                           margin %              non-         income        tax                     tax rate                  income               operations,                income                       (loss)
                                                                                      %       expenses           revenue %               (loss)                         operating        from     (benefit)                                              from                 net of tax             attributable                    income
                                                                                                                                          income                         expense,      continuing    expense                                           continuing                                        to Endo                     per share
                                                                                                                                           from                             net        operations                                                      operations                                     International                    from
                                                                                                                                        continuing                                                                                                                                                      plc (16)                    continuing
                                                                                                                                        operations                                       before                                                                                                                                     operations
                                                                                                                                                                                       income tax                                                                                                                                          (17)
                                                                                                                                                                                  ----------                                                                                                                                    ---

    Reported (GAAP)                   $1,241,513                           $756,578                    $484,935                        39%                    $3,779,494              304%                        $(3,294,559)                      (265)%                                 $111,043                                 $(3,405,602)            $(72,277)           2%               $(3,333,325)    $(4,531)   $(3,337,856)     $(14.96)

    Items impacting
    comparability:

    Amortization of                 -                     (240,390)                  240,390                                          -                                   240,390                          -                                240,390                        -                                            240,390                           -             240,390             1.08
    intangible assets (1)

    Inventory step-up and           -                      (13,912)                  13,912                                          -                                    13,912                          -                                 13,912                        -                                             13,912                           -              13,912             0.06
    other cost savings (2)

    Upfront and                     -                         (655)                     655                                     (1,800)                                     2,455                          -                                  2,455                        -                                              2,455                           -               2,455             0.01
    milestone-related
    payments (3)

    Inventory reserve               -                           137                    (137)                                         -                                     (137)                         -                                  (137)                       -                                              (137)                           -              (137)               -
    decrease from
    restructuring (4)

    Separation benefits             -                       (9,284)                   9,284                                    (27,932)                                    37,216                          -                                 37,216                        -                                             37,216                           -              37,216             0.17
    and other
    restructuring (6)

    Certain litigation-             -                             -                       -                                     4,765                                    (4,765)                         -                                (4,765)                       -                                            (4,765)                           -            (4,765)          (0.02)
    related and other
    contingencies, net (7)

    Asset impairment                -                             -                       -                                (3,518,085)                                 3,518,085                          -                              3,518,085                        -                                          3,518,085                           -           3,518,085            15.79
    charges (8)

    Acquisition-related             -                             -                       -                                    (8,356)                                     8,356                          -                                  8,356                        -                                              8,356                           -               8,356             0.04

    and integration costs
    (9)

    Fair value of                   -                             -                       -                                       956                                      (956)                         -                                  (956)                       -                                              (956)                           -              (956)               -
    contingent
    consideration (10)

    Other (13)                      -                             -                       -                                         -                                         -                     1,836                                 (1,836)                       -                                            (1,836)                           -            (1,836)          (0.01)

    Tax adjustments (14)            -                             -                       -                                         -                                         -                         -                                      -                  83,604                                            (83,604)                           -           (83,604)          (0.38)

    Exclude discontinued            -                             -                       -                                         -                                         -                         -                                      -                       -                                                  -                       4,531               4,531                -
    operations, net of tax

    (15)


    After considering items           $1,241,513                           $492,474                    $749,039                        60%                      $229,042               18%                            $519,997                          42%                                 $112,879                                     $407,118               $11,327            3%                   $395,791 $        -         $395,791         $1.77
    (non-GAAP)

 

 

                                                                                                                                                                                              Year Ended December 31, 2017

                              Total               Cost of         Gross            Gross    Total     Operating           Operating  Operating               Other      (Loss)       Income                  Effective                    (Loss)     Discontinued             Net (loss)          Diluted
                            revenues             revenues         margin           margin operating   expense to            (loss)     margin %              non-      income         tax                   tax rate                     income     operations,                income            (loss)
                                                                                     %     expenses    revenue %           income                         operating     from      (benefit)                                               from       net of tax             attributable         income
                                                                                                                             from                          expense,   continuing     expense                                            continuing                              to Endo          per share
                                                                                                                          continuing                          net     operations                                                        operations                           International         from
                                                                                                                          operations                                    before                                                                                                 plc (16)         continuing
                                                                                                                                                                      income tax                                                                                                                operations
                                                                                                                                                                                                                                                                                                       (17)
                                                                                                                                                                                                                                                                                            ---

    Reported (GAAP)                   $3,468,858                $2,228,530                 $1,240,328                 36%                       $2,200,393           63%                          $(960,065)                         (28)%                        $522,939                      $(1,483,004)                $(250,293)                 17%                $(1,232,711)    $(802,722)   $(2,035,433)     $(5.52)

    Items impacting
    comparability:

    Amortization of                 -                 (773,766)            773,766                                   -                                      773,766                        -                                  773,766                        -                                  773,766                  -                    773,766               3.47
    intangible assets (1)

    Inventory step-up and           -                     (390)               390                                   -                                          390                        -                                      390                        -                                      390                  -                        390                  -
    other cost savings (2)

    Upfront and                     -                   (2,751)             2,751                              (6,732)                                        9,483                        -                                    9,483                        -                                    9,483                  -                      9,483               0.04

    milestone-related
    payments (3)

    Inventory reserve               -                  (13,678)            13,678                                   -                                       13,678                        -                                   13,678                        -                                   13,678                  -                     13,678               0.06
    increase from
    restructuring (4)

    Separation benefits             -                 (162,131)            162,131                             (36,639)                                      198,770                        -                                  198,770                        -                                  198,770                  -                    198,770               0.89
    and other
    restructuring (6)

    Certain litigation-             -                         -                 -                           (185,990)                                      185,990                        -                                  185,990                        -                                  185,990                  -                    185,990               0.83
    related and other
    contingencies, net (7)

    Asset impairment                -                         -                 -                         (1,154,376)                                    1,154,376                        -                                1,154,376                        -                                1,154,376                  -                  1,154,376               5.17
    charges (8)

    Acquisition-related             -                         -                 -                             (8,137)                                        8,137                        -                                    8,137                        -                                    8,137                  -                      8,137               0.04
    and integration costs
    (9)

    Fair value of                   -                         -                 -                            (49,949)                                       49,949                        -                                   49,949                        -                                   49,949                  -                     49,949               0.22
    contingent
    consideration (10)

    Loss on                         -                         -                 -                                  -                                            -                (51,734)                                   51,734                        -                                   51,734                  -                     51,734               0.23
    extinguishment
    of debt (11)

    Other (13)                      -                         -                 -                                  -                                            -                   8,620                                    (8,620)                       -                                  (8,620)                 -                     (8,620)            (0.04)

    Tax adjustments (14)            -                         -                 -                                  -                                            -                       -                                        -                 344,581                                 (344,581)                 -                   (344,581)            (1.54)

    Exclude discontinued            -                         -                 -                                  -                                            -                       -                                        -                       -                                        -           802,722                     802,722                  -
    operations, net of tax
    (15)

    After considering items           $3,468,858                $1,275,814                 $2,193,044                 63%                         $758,570           22%                          $1,434,474                            41%                        $479,825                          $954,649                    $94,288                  10%                    $860,361 $          -         $860,361        $3.84
    (non-GAAP)

 

 

                                                                                                                                                                                             Year Ended December 31, 2016

                              Total               Cost of         Gross            Gross    Total     Operating           Operating  Operating               Other      (Loss)      Income                 Effective                     (Loss)     Discontinued             Net (loss)          Diluted
                            revenues             revenues         margin           margin operating   expense to            (loss)     margin %              non-      income        tax                  tax rate                      income     operations,                income            (loss)
                                                                                     %     expenses    revenue %           income                         operating     from     (benefit)                                               from       net of tax             attributable         income
                                                                                                                             from                          expense,   continuing    expense                                            continuing                              to Endo          per share
                                                                                                                          continuing                          net     operations                                                       operations                           International         from
                                                                                                                          operations                                    before                                                                                                plc (16)         continuing
                                                                                                                                                                      income tax                                                                                                               operations
                                                                                                                                                                                                                                                                                                      (17)
                                                                                                                                                                                                                                                                                           ---

    Reported (GAAP)                   $4,010,274                $2,634,973                 $1,375,301                 34%                       $4,846,816           121%                     $(3,471,515)                          (87)%                        $452,341                      $(3,923,856)                $(700,084)                 18%                $(3,223,772)    $(123,278)   $(3,347,066)     $(14.48)

    Items impacting
    comparability:

    Amortization of                 -                 (876,451)            876,451                                   -                                      876,451                       -                                  876,451                        -                                  876,451                  -                    876,451               3.94
    intangible assets (1)

    Inventory step-up and           -                 (124,349)            124,349                              (1,350)                                      125,699                       -                                  125,699                        -                                  125,699                  -                    125,699               0.56
    other cost savings (2)

    Upfront and                     -                   (2,628)             2,628                              (5,702)                                        8,330                       -                                    8,330                        -                                    8,330                  -                      8,330               0.04
    milestone-related
    payments (3)

    Inventory reserve               -                  (24,455)            24,455                                   -                                       24,455                       -                                   24,455                        -                                   24,455                  -                     24,455               0.11
    increase from
    restructuring (4)

    Royalty obligations             -                     7,750            (7,750)                                  -                                      (7,750)                      -                                   (7,750)                       -                                  (7,750)                 -                     (7,750)            (0.03)
    (5)

    Separation benefits             -                  (28,678)            28,678                             (54,358)                                       83,036                       -                                   83,036                        -                                   83,036                  -                     83,036               0.37
    and other
    restructuring (6)

    Certain litigation-             -                         -                 -                            (23,950)                                       23,950                       -                                   23,950                        -                                   23,950                  -                     23,950               0.11
    related and other
    contingencies, net (7)

    Asset impairment                -                         -                 -                         (3,781,165)                                    3,781,165                       -                                3,781,165                        -                                3,781,165                  -                  3,781,165              16.98
    charges (8)

    Acquisition-related             -                         -                 -                            (63,778)                                       63,778                       -                                   63,778                        -                                   63,778                  -                     63,778               0.29
    and integration costs
    (9)

    Fair value of                   -                         -                 -                            (23,823)                                       23,823                       -                                   23,823                        -                                   23,823                  -                     23,823               0.11
    contingent
    consideration (10)

    Non-cash and penalty            -                         -                 -                                  -                                            -                (4,092)                                    4,092                        -                                    4,092                  -                      4,092               0.02
    interest charges (12)

    Other (13)                      -                         -                 -                              8,350                                       (8,350)                (1,077)                                   (7,273)                       -                                  (7,273)                 -                     (7,273)            (0.03)

    Tax adjustments (14)            -                         -                 -                                  -                                            -                      -                                        -                 721,602                                 (721,602)                 -                   (721,602)            (3.25)

    Exclude discontinued            -                         -                 -                                  -                                            -                      -                                        -                       -                                        -           123,278                     123,278                  -
    operations, net of tax
    (15)

    After considering items           $4,010,274                $1,586,162                 $2,424,112                 60%                         $901,040            22%                       $1,523,072                             38%                        $447,172                        $1,075,900                    $21,518                   2%                  $1,054,382 $          -       $1,054,366         $4.73
    (non-GAAP)

 

 

    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 twelve months ended December 31, 2017 and 2016 are as follows:


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


                                                                                                                                                      Three Months Ended December 31,                                       Year Ended December 31,

                                                                                                                                                      2017                       2016                            2017                     2016
                                                                                                                                                      ----                       ----                            ----                     ----

                       Amortization of intangible assets excluding fair value                                                                                   $148,120                                                $228,876                                $733,145           $834,966
                       step-up from contingent consideration

                       Amortization of intangible assets related to fair value step-up from contingent consideration                                  10,156                                 11,514                                      40,621                    41,485


                       Total                                                                                                                                    $158,276                                                $240,390                                $773,766           $876,451
                                                                                                                                          ===


    (2)                Adjustments for inventory step-up and other cost savings included the following (in thousands):


                                                                                                                                                                            Three Months Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                          Cost of revenues                Operating                Cost of revenues              Operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                          ----------------               ----------                ----------------             ----------

                       Fair value step-up of inventory sold                                                                                                         $109                                             $         -                                 $9,669       $          -

                       Excess manufacturing costs that will be eliminated pursuant to integration plans                                                    -                                     -                                      4,243                         -

                       Total                                                                                                                                        $109                                             $         -                                $13,912       $          -
                       =====                                                                                                                                                                                      ===                                                     ===


                                                                                                                                                                                Year Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                          Cost of revenues                Operating                Cost of revenues              Operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                          ----------------               ----------                ----------------             ----------

                       Fair value step-up of inventory sold                                                                                                         $390                                             $         -                               $108,768               $957

                       Excess manufacturing costs that will be eliminated pursuant to integration plans                                                    -                                     -                                     15,581                       393

                       Total                                                                                                                                        $390                                             $         -                               $124,349             $1,350
                       =====                                                                                                                                                                                      ===


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


                                                                                                                                                                            Three Months Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                          Cost of revenues                Operating                Cost of revenues              Operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                          ----------------               ----------                ----------------             ----------

                       Sales-based milestones                                                                                                                       $712                                             $         -                                   $655       $          -

                       Development-based milestones                                                                                                        -                                 1,819                                           -                    1,800

                       Total                                                                                                                                        $712                                                  $1,819                                    $655             $1,800
                                                                                                                                          ===


                                                                                                                                                                                Year Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                          Cost of revenues                Operating                Cost of revenues              Operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                          ----------------               ----------                ----------------             ----------

                       Sales-based milestones                                                                                                                     $2,751                                             $         -                                 $2,628       $          -

                       Development-based milestones                                                                                                        -                                 6,732                                           -                    5,702

                       Total                                                                                                                                      $2,751                                                  $6,732                                  $2,628             $5,702
                                                                                                                                          ===


    (4)                 To exclude charges reflecting adjustments to excess inventory reserves related to the 2017 U.S. Generic Pharmaceuticals
                        Restructuring Initiative and 2016 U.S. Generic Pharmaceuticals Restructuring Initiative during the three and twelve months
                        ended December 31, 2017 and twelve months ended December 31, 2016 and to exclude decreases of excess inventory reserves
                        recorded during the three months ended December 31, 2016, primarily related to the 2016 U.S. Generic Pharmaceuticals
                        Restructuring Initiative. The 2016 adjustment resulted from the sell-through of certain inventory previously reserved.


    (5)                 To adjust for the reversal of the remaining VOLTAREN(R) Gel minimum royalty obligations as a result of a generic entrant during
                        the first quarter of 2016.


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


                                                                                                                                                                            Three Months Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                          Cost of revenues                Operating                Cost of revenues              Operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                          ----------------               ----------                ----------------             ----------

                       Separation benefits                                                                                                                       $10,087                                                  $1,622                                  $6,150            $21,772

                       Accelerated depreciation and product discontinuation charges                                                                   63,508                                      -                                      3,134                     5,729

                       Other                                                                                                                           3,169                                    306                                           -                      431

                       Total                                                                                                                                     $76,764                                                  $1,928                                  $9,284            $27,932
                                                                                                                                          ===


                                                                                                                                                                                Year Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                          Cost of revenues                Operating                Cost of revenues              Operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                          ----------------               ----------                ----------------             ----------

                       Separation benefits                                                                                                                       $31,892                                                 $21,161                                 $18,119            $39,780

                       Accelerated depreciation and product discontinuation charges                                                                  123,313                                    398                                      10,559                     8,532

                       Other                                                                                                                           6,926                                 15,080                                           -                    6,046

                       Total                                                                                                                                    $162,131                                                 $36,639                                 $28,678            $54,358
                                                                                                                                          ===


    (7)                 To exclude litigation-related settlement charges, reimbursements and certain settlements related to intellectual property
                        suits previously filed by our subsidiaries.


    (8)                To exclude pre-tax, non-cash goodwill, intangible asset and property, plant and equipment impairment charges.


                        During the fourth quarter of 2017, we recorded total pre-tax, non-cash impairment charges of $130 million. Approximately $125
                        million was largely the result of market conditions impacting the recoverability of certain indefinite and finite-lived
                        intangible assets in our U.S. Generic Pharmaceuticals segment. The remaining charges during the fourth quarter were related to
                        plant, property and equipment impairments.


                       During the third quarter of 2017, we recorded total pre-tax, non-cash impairment charges of $95 million. Approximately $17
                        million was related to property, plant and equipment charges related to our previously announced restructuring initiatives and
                        held-for-sale accounting for Somar. The remaining charges during the third quarter were largely the result of market
                        conditions impacting the recoverability of certain indefinite and finite-lived intangible assets in our U.S. Generic
                        Pharmaceuticals and U.S. Branded Pharmaceuticals segments.


                       During the second quarter of 2017, we recorded total pre-tax, non-cash impairment charges of $725 million. We announced the
                        2017 U.S. Generic Pharmaceuticals Restructuring Initiative in July 2017, which includes the discontinuation of certain
                        commercial products. As a result, we assessed the recoverability of the impacted products, resulting in pre-tax, non-cash
                        intangible asset impairment charges of approximately $58 million. We also recorded property, plant and equipment impairments
                        related to this restructuring totaling $32 million. As a result of the decision to withdraw OPANA(R) ER, we determined that
                        the carrying amount of this intangible asset was no longer recoverable, resulting in a pre-tax, non-cash impairment charge
                        of $21 million, representing the remaining carrying amount. As a result of the aforementioned actions related to OPANA(R) ER
                        and the continued erosion of its U.S. Branded Pharmaceuticals segment's Established Products portfolio, we initiated an
                        interim goodwill impairment analysis of our Branded reporting unit. We recorded a pre-tax, non-cash asset impairment charge
                        of $180 million for the amount by which the carrying amount exceeded the reporting unit's fair value. We entered into a
                        definitive agreement to sell Somar on June 30, 2017, which resulted in Somar's assets and liabilities being classified as held
                        for sale. The initiation of held-for-sale accounting, together with the agreed upon sale price, triggered an impairment
                        review. Accordingly, we performed an impairment analysis using a market approach and determined that impairment charges were
                        required. We recorded pre-tax non-cash impairment charges of $26 million, $90 million and $10 million related to Somar's
                        goodwill, other intangible assets and property, plant and equipment, respectively. The remaining charges during the second
                        quarter were largely the result of market conditions impacting the recoverability of certain indefinite and finite-lived
                        intangible assets in our U.S. Generic Pharmaceuticals, U.S. Branded Pharmaceuticals and International Pharmaceuticals
                        segments.


                       During the first quarter of 2017, we recorded total pre-tax, non-cash impairment charges of $204 million. Pursuant to an
                        existing agreement with Novartis AG, Endo's subsidiary, Paladin Labs Inc., licensed the Canadian rights to commercialize
                        serelaxin, an investigational drug for the treatment of acute heart failure (AHF). On March 22, 2017, Novartis announced that
                        a Phase III study of serelaxin in patients with AHF failed to meet its primary endpoints. As a result, Endo has concluded that
                        its serelaxin in-process research and development intangible asset is fully impaired resulting in a $45 million non-cash
                        impairment charge. As a result of the serelaxin intangible impairment, Endo assessed the recoverability of its Paladin
                        goodwill balance and determined that the estimated fair value of the Paladin reporting unit was below its book value,
                        resulting in a non-cash goodwill impairment charge of $83 million. The remaining charges were largely the result of certain
                        market conditions impacting the recoverability of developed technology intangible assets in Endo's U.S. Generic
                        Pharmaceuticals segment.


                       During the fourth quarter of 2016, in connection with our annual goodwill impairment assessment, we recorded pre-tax, non-
                        cash goodwill impairment charges of $2,343 million, $273 million, $33 million and $26 million for our U.S. Generics, Paladin,
                        Somar and Litha reporting units, respectively. Additionally, we recorded pre-tax, non-cash intangible asset impairment
                        charges of $830 million, including: (i) approximately $507 million and $285 million related our U.S. Generic Pharmaceuticals
                        and International Pharmaceuticals segments, respectively, resulting from certain market conditions, including price erosion
                        and increased competition and (ii) $38 million related to our U.S. Branded Pharmaceuticals segment, resulting primarily from
                        the termination of our BELBUCA(TM) product. As a result of unfavorable formulary changes and generic competition for
                        sumatriptan, we experienced a downturn in the performance of our SUMAVEL(R) DOSEPRO(R) product, resulting in a non-cash
                        impairment charge of $73 million during the third quarter of 2016. Also during the third quarter of 2016, we determined that
                        we would not pursue commercialization of a product in certain international markets, resulting in a non-cash asset impairment
                        charge of $16 million. As a result of the 2016 U.S. Generic Pharmaceuticals Restructuring Initiative, we recorded $100 million
                        of non-cash impairment charges during the first quarter of 2016 resulting from the discontinuation of certain commercial
                        products and the abandonment of certain IPR&D projects. The remaining charges during the first nine months of 2016 were
                        largely the result of market and regulatory conditions impacting the recoverability certain indefinite and finite-lived
                        intangible assets in our U.S. Generic Pharmaceuticals segment.


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


                                                                                                                                                   Three Months Ended December 31,                                      Year Ended December 31,

                                                                                                                                                      2017                       2016                            2017                     2016
                                                                                                                                                      ----                       ----                            ----                     ----

                       Integration costs (primarily third-party consulting fees)                                                                           $           -                                                 $6,441                                  $4,476            $44,752

                       Transition services                                                                                                                 -                                     -                                          -                    9,729

                       Other                                                                                                                               -                                 1,915                                       3,661                     9,297

                       Total                                                                                                                               $           -                                                 $8,356                                  $8,137            $63,778
                       =====                                                                                                                             ===


    (10)                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.


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


    (12)               To exclude penalty interest charges.


    (13)               Adjustments to other included the following (in thousands):


                                                                                                                                                                            Three Months Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                              Operating                   Other non-                   Operating                 Other non-
                                                                                                                                                expenses                    operating                    expenses                  operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                                ----------               -----------                     ----------             -----------

                       Foreign currency impact related to the re-measurement of intercompany debt instruments                                              $           -                                                 $1,519                             $         -          $(1,192)

                       Other miscellaneous                                                                                                                 -                               (9,006)                                          -                    (644)

                       Total                                                                                                                               $           -                                               $(7,487)                            $         -          $(1,836)
                       =====                                                                                                                             ===                                                                                             ===


                                                                                                                                                                                Year Ended December 31,

                                                                                                                                                                                        2017                                                        2016

                                                                                                                                              Operating                   Other non-                   Operating                 Other non-
                                                                                                                                                expenses                    operating                    expenses                  operating
                                                                                                                                                                             expenses                                               expenses
                                                                                                                                                ----------               -----------                     ----------             -----------

                       Foreign currency impact related to the re-measurement of intercompany debt instruments                                              $           -                                               $(1,403)                            $         -              $366

                       Other miscellaneous expense (income)                                                                                                -                               (7,217)                                    (8,350)                      711

                       Total                                                                                                                               $           -                                               $(8,620)                               $(8,350)            $1,077
                       =====                                                                                                                             ===


    (14)                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.


                        As previously disclosed, during the second quarter of 2016, Endo recorded a discrete GAAP tax benefit of $636 million arising
                        from outside basis differences generated as part of a legal entity restructuring. This benefit and the associated component of
                        the 2016 U.S. federal return to provision adjustment recorded in the third quarter of 2017 were excluded from our adjusted
                        effective tax rate in accordance with the Company's non-GAAP accounting policy.


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


    (16)                Net income attributable to noncontrolling interests is excluded from Adjusted EBITDA (non-GAAP) and Net (loss) income
                        attributable to Endo International plc.


    (17)                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 December 31,                                      Year Ended December 31,

                                                                                                                                                      2017                       2016                            2017                     2016
                                                                                                                                                      ----                       ----                            ----                     ----

                       GAAP EPS                                                                                                                      223,322                                222,870                                     223,198                   222,651

                       Non-GAAP EPS                                                                                                                  224,577                                223,178                                     223,978                   223,090


    (18)                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.


    (19)               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 attributable to Endo International plc (GAAP) to our Adjusted EBITDA (non-GAAP) for
     the twelve months ended December 31, 2017 (in thousands) and the calculation of our Net Debt Leverage Ratio (non-GAAP):


                                                                                                                           Twelve Months
                                                                                                                           Ended December
                                                                                                                                 31, 2017
                                                                                                                                 --------

    Net loss attributable to Endo International plc (GAAP)                                                                                  $(2,035,433)

    Income tax benefit                                                                                                          (250,293)

    Interest expense, net                                                                                                         488,228

    Depreciation and amortization (18)                                                                                            857,706

    EBITDA (non-GAAP)                                                                                                                         $(939,792)
                                                                                                                                               ---------


    Inventory step-up and other cost savings                                                                                                        $390

    Upfront and milestone-related payments                                                                                          9,483

    Inventory reserve increase from restructuring                                                                                  13,678

    Separation benefits and other restructuring                                                                                   198,770

    Certain litigation-related and other contingencies, net                                                                       185,990

    Asset impairment charges                                                                                                    1,154,376

    Acquisition-related and integration costs                                                                                       8,137

    Fair value of contingent consideration                                                                                         49,949

    Loss on extinguishment of debt                                                                                                 51,734

    Share-based compensation                                                                                                       50,149

    Other income, net                                                                                                            (17,023)

    Other adjustments                                                                                                               (226)

    Discontinued operations, net of tax                                                                                           802,722

    Adjusted EBITDA (non-GAAP)                                                                                                                $1,568,337
                                                                                                                                              ==========


    Calculation of Net Debt:

    Debt                                                                                                                                      $8,276,237

    Cash (excluding Restricted Cash)                                                                                              986,605

    Net Debt (non-GAAP)                                                                                                                       $7,289,632
                                                                                                                                              ==========


    Calculation of Net Debt Leverage:

    Net Debt Leverage Ratio (non-GAAP)                                                                                                4.6
                                                                                                                                      ===
 

 

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 U.S. 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 U.S. 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 U.S. 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 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, 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 results of any pending or future litigation, investigations or claims; 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

 

Company Codes: NASDAQ-NMS:ENDP
 

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