Endo Reports Second-Quarter 2018 Financial Results

 

DUBLIN, Aug. 8, 2018 /PRNewswire/ --

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

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

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

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

 

    FINANCIAL PERFORMANCE
    (in thousands, except per share amounts)


                                                   Three Months Ended June 30,                          Six Months Ended June 30,

                                                2018                            2017     Change             2018                  2017   Change
                                                ----                            ----     ------             ----                  ----   ------

    Total Revenues                                      $714,696                          $875,731             (18)%                     $1,415,223       $1,913,331     (26)%

    Reported Loss from Continuing                      $(52,479)                       $(696,020)            (92)%                     $(550,217)      $(861,443)    (36)%
    Operations

    Reported Diluted Weighted Average        223,834                           223,158              - %                   223,677            223,086  -   %
    hares

    Reported Diluted Loss per Share                      $(0.23)                          $(3.12)            (93)%                        $(2.46)         $(3.86)    (36)%
    from Continuing Operations

    Adjusted Income from Continuing                     $172,195                          $207,201             (17)%                       $322,978         $482,446     (33)%
    Operations

    Adjusted Diluted Weighted Average        227,273                           223,785             2%                     226,114            223,560 1%
    Shares(1)

    Adjusted Diluted EPS from                              $0.76                             $0.93             (18)%                          $1.43            $2.16     (34)%
    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 were $715 million in second-quarter 2018 compared to $876 million in the same period in 2017. This performance was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals product ezetimibe tablets, the generic version of ZETIA®. Also contributing to the quarter's revenue performance versus prior year were the annualization of the impact from 2017 competitive entries and product discontinuances in the U.S. Generic Pharmaceuticals segment, the divestitures of the Company's South African and Mexican businesses, Litha and Somar, and the voluntary market withdrawal of OPANA® ER.

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

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

U.S. BRANDED - SPECIALTY & ESTABLISHED PHARMACEUTICALS

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

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

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

U.S. BRANDED - STERILE INJECTABLES

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

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

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

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

U.S. GENERIC PHARMACEUTICALS

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

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

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

INTERNATIONAL PHARMACEUTICALS

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

2018 FINANCIAL GUIDANCE

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

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

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

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

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

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

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

CONFERENCE CALL INFORMATION

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

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

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

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

 

 

    FINANCIAL SCHEDULES

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


                                                                                                             Three Months Ended June 30,         Percent            Six Months Ended June 30,  Percent
                                                                                                                                                 Growth                                       Growth
                                                                                                                                                                                              ------

                                                                                                          2018                     2017                      2018                     2017


    U.S. Branded - Specialty &
    Established Pharmaceuticals:

    Specialty Products:

       XIAFLEX(R)                                                                                                  $63,500                          $50,077                  27%                      $120,641              $99,602   21%

       SUPPRELIN(R) LA                                                                                  19,963                            23,649              (16)%                    40,540            42,830     (5)%

       Other Specialty (1)                                                                              36,429                            36,745               (1)%                    70,626            72,773     (3)%

    Total Specialty Products                                                                                      $119,892                         $110,471                   9%                      $231,807             $215,205    8%
                                                                                                                  --------                         --------                                           --------             --------

    Established Products:

       PERCOCET(R)                                                                                                 $30,833                          $30,889                    -   %                   $62,809              $61,834    2%

       VOLTAREN(R) Gel                                                                                  17,811                            20,270              (12)%                    29,128            34,544    (16)%

       OPANA(R) ER                                                                                           -                           31,582             (100)%                         -           67,300   (100)%

       Other Established (2)                                                                            44,101                            51,976              (15)%                    89,128           116,464    (23)%

    Total Established Products                                                                                     $92,745                         $134,717                (31)%                      $181,065             $280,142 (35)%

    Total U.S. Branded - Specialty &                                                                              $212,637                         $245,188                (13)%                      $412,872             $495,347 (17)%
    Established Pharmaceuticals (3)


    U.S. Branded - Sterile Injectables:

       VASOSTRICT(R)                                                                                              $106,329                          $95,750                  11%                      $220,054             $194,908   13%

       ADRENALIN(R)                                                                                     36,658                            19,032                93%                    66,398            25,129       NM

       Other Sterile Injectables (4)                                                                    74,856                            65,510                14%                   147,245           132,423      11%

    Total U.S. Branded - Sterile Injectables (3)                                                                  $217,843                         $180,292                  21%                      $433,697             $352,460   23%
                                                                                                                  --------                         --------                                           --------             --------

    Total U.S. Generic Pharmaceuticals                                                                            $241,236                         $383,020                (37)%                      $490,476             $932,835 (47)%

    Total International Pharmaceuticals                                                                            $42,980                          $67,231                (36)%                       $78,178             $132,689 (41)%

    Total Revenues                                                                                                $714,696                         $875,731                (18)%                    $1,415,223           $1,913,331 (26)%
                                                                                                                  --------                         --------                                         ----------           ----------

__________

 

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

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

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

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

 

 

 

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


                                                                                                                                    Three Months Ended June 30,                       Six Months Ended June 30,

                                                                                                                                 2018                               2017           2018                         2017
                                                                                                                                 ----                               ----           ----                         ----

    TOTAL REVENUES                                                                                                                       $714,696                               $875,731                               $1,415,223       $1,913,331

    COSTS AND EXPENSES:

    Cost of revenues                                                                                                          381,905                              539,401                    785,503                    1,208,363

    Selling, general and administrative                                                                                       148,157                              155,555                    314,824                      332,795

    Research and development                                                                                                   82,102                               40,869                    120,748                       83,878

    Litigation-related and other contingencies, net                                                                            19,620                              (2,600)                    17,120                      (1,664)

    Asset impairment charges                                                                                                   22,767                              725,044                    471,183                      929,006

    Acquisition-related and integration items                                                                                   5,161                                4,190                     11,996                       15,070
                                                                                                                                -----                                -----                     ------                       ------

    OPERATING INCOME (LOSS) FROM CONTINUING                                                                                               $54,984                             $(586,728)                              $(306,151)      $(654,117)
    OPERATIONS


    INTEREST EXPENSE, NET                                                                                                     130,059                              121,747                    254,049                      233,746

    LOSS ON EXTINGUISHMENT OF DEBT                                                                                                  -                              51,734                          -                      51,734

    OTHER INCOME, NET                                                                                                        (28,831)                             (6,709)                  (31,709)                     (8,746)

    LOSS FROM CONTINUING OPERATIONS BEFORE                                                                                              $(46,244)                            $(753,500)                              $(528,491)      $(930,851)
    INCOME TAX


    INCOME TAX EXPENSE (BENEFIT)                                                                                                6,235                             (57,480)                    21,726                     (69,408)

    LOSS FROM CONTINUING OPERATIONS                                                                                                     $(52,479)                            $(696,020)                              $(550,217)      $(861,443)
                                                                                                                                         --------                              ---------                                ---------        ---------

    DISCONTINUED OPERATIONS, NET OF TAX                                                                                       (8,388)                           (700,498)                   (16,139)                   (708,903)
                                                                                                                               ------                             --------                    -------                     --------

    NET LOSS                                                                                                                            $(60,867)                          $(1,396,518)                              $(566,356)    $(1,570,346)
                                                                                                                                         ========                            ===========                                =========      ===========

    NET LOSS PER SHARE-BASIC:

    Continuing operations                                                                                                                 $(0.23)                               $(3.12)                                 $(2.46)         $(3.86)

    Discontinued operations                                                                                                    (0.04)                              (3.14)                    (0.07)                      (3.18)

    Basic                                                                                                                                 $(0.27)                               $(6.26)                                 $(2.53)         $(7.04)
                                                                                                                                           ======                                 ======                                   ======           ======

    NET LOSS PER SHARE-DILUTED:

    Continuing operations                                                                                                                 $(0.23)                               $(3.12)                                 $(2.46)         $(3.86)

    Discontinued operations                                                                                                    (0.04)                              (3.14)                    (0.07)                      (3.18)

    Diluted                                                                                                                               $(0.27)                               $(6.26)                                 $(2.53)         $(7.04)
                                                                                                                                           ======                                 ======                                   ======           ======

    WEIGHTED AVERAGE SHARES:

    Basic                                                                                                                     223,834                              223,158                    223,677                      223,086

    Diluted                                                                                                                   223,834                              223,158                    223,677                      223,086

 

 

 

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


                                                                                                          June 30, 2018             December 31,
                                                                                                                                              2017
                                                                                                                                              ----

    ASSETS

    CURRENT ASSETS:

    Cash and cash equivalents                                                                                            $1,098,788                      $986,605

    Restricted cash and cash equivalents                                                                        358,211                       320,453

    Accounts receivable                                                                                         451,240                       517,436

    Inventories, net                                                                                            343,318                       391,437

    Other current assets                                                                                         57,341                        55,146

       Total current assets                                                                                              $2,308,898                    $2,271,077
                                                                                                                         ----------                    ----------

    TOTAL NON-CURRENT ASSETS                                                                                  8,549,137                     9,364,503

    TOTAL ASSETS                                                                                                        $10,858,035                   $11,635,580
                                                                                                                        ===========                   ===========

    LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

    CURRENT LIABILITIES:

    Accounts payable and accrued expenses, including legal settlement accruals                                           $2,117,079                    $2,184,618

    Other current liabilities                                                                                    35,987                        36,291

       Total current liabilities                                                                                         $2,153,066                    $2,220,909
                                                                                                                         ----------                    ----------

    LONG-TERM DEBT, LESS CURRENT PORTION, NET                                                                 8,233,005                     8,242,032

    OTHER LIABILITIES                                                                                           534,041                       687,759

    SHAREHOLDERS' (DEFICIT) EQUITY                                                                             (62,077)                      484,880
                                                                                                                -------                       -------

    TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY                                                                $10,858,035                   $11,635,580
                                                                                                                        ===========                   ===========

 

 

 

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


                                                                                                                                 Six Months Ended June 30,

                                                                                                                            2018                              2017
                                                                                                                            ----                              ----

    OPERATING ACTIVITIES:

    Net loss                                                                                                                        $(566,356)                       $(1,570,346)

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

      Depreciation and amortization                                                                                      379,646                             499,656

      Asset impairment charges                                                                                           471,183                             929,006

      Other, including cash payments to claimants from Qualified Settlement Funds                                       (65,341)                            480,770

      Net cash provided by operating activities                                                                                       $219,132                            $339,086
                                                                                                                                      --------                            --------

    INVESTING ACTIVITIES:

    Purchases of property, plant and equipment, excluding capitalized interest                                                       $(41,960)                          $(59,729)

    Proceeds from sale of business and other assets, net                                                                  37,971                              18,531

    Other                                                                                                                (4,999)                                  -
                                                                                                                          ------                                 ---

      Net cash used in investing activities                                                                                           $(8,988)                          $(41,198)
                                                                                                                                       -------                            --------

    FINANCING ACTIVITIES:

    Payments on borrowings, net                                                                                                      $(19,650)                           $(2,550)

    Other                                                                                                               (21,143)                           (97,033)

      Net cash used in financing activities                                                                                          $(40,793)                          $(99,583)
                                                                                                                                      --------                            --------

    Effect of foreign exchange rate                                                                                      (1,010)                              2,926

    Movement in cash held for sale                                                                                             -                           (21,125)

    NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND                                                                       $168,341                            $180,106
    RESTRICTED CASH EQUIVALENTS


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


    CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH                                                                     $1,479,355                            $985,286
    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 U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.

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

 

 

    Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

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


                                                                                                                                Three Months Ended June 30,                     Six Months Ended June 30,

                                                                                                                             2018                             2017           2018                     2017
                                                                                                                             ----                             ----           ----                     ----

    Net loss (GAAP)                                                                                                                 $(60,867)                        $(1,396,518)                          $(566,356)    $(1,570,346)

    Income tax expense (benefit)                                                                                            6,235                           (57,480)                    21,726                 (69,408)

    Interest expense, net                                                                                                 130,059                            121,747                    254,049                  233,746

    Depreciation and amortization (15)                                                                                    170,011                            212,801                    344,469                  496,910

    EBITDA (non-GAAP)                                                                                                                $245,438                         $(1,119,450)                             $53,888       $(909,098)
                                                                                                                                     --------                          -----------                              -------        ---------


    Inventory step-up and other cost savings (2)                                                                                         $124                                 $100                                 $190             $215

    Upfront and milestone-related payments (3)                                                                             36,964                              3,082                     38,296                    6,177

    Inventory reserve increase from restructuring (4)                                                                         202                              7,899                      2,590                    7,899

    Separation benefits and other restructuring (5)                                                                        28,951                             16,715                     75,550                   39,385

    Certain litigation-related and other contingencies, net (6)                                                            19,620                            (2,600)                    17,120                  (1,664)

    Asset impairment charges (7)                                                                                           22,767                            725,044                    471,183                  929,006

    Acquisition-related and integration costs (8)                                                                           1,034                              2,240                      1,034                    6,936

    Fair value of contingent consideration (9)                                                                              4,127                              1,950                     10,962                    8,134

    Loss on extinguishment of debt (10)                                                                                         -                            51,734                          -                  51,734

    Share-based compensation                                                                                               12,096                              7,512                     29,986                   27,005

    Other income, net (16)                                                                                               (28,831)                           (6,709)                  (31,709)                 (8,746)

    Other adjustments                                                                                                        (10)                             (114)                     (708)                    (17)

    Discontinued operations, net of tax (13)                                                                                8,388                            700,498                     16,139                  708,903

    Adjusted EBITDA (non-GAAP)                                                                                                       $350,870                             $387,901                             $684,521         $865,869
                                                                                                                                     ========                             ========                             ========         ========

 

 

 

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

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


                                                                                                                                   Three Months Ended June 30,                     Six Months Ended June 30,

                                                                                                                                2018                              2017         2018                     2017
                                                                                                                                ----                              ----         ----                     ----

    Loss from continuing operations (GAAP)                                                                                             $(52,479)                         $(696,020)                          $(550,217)    $(861,443)

    Non-GAAP adjustments:

      Amortization of intangible assets (1)                                                                                  153,215                             190,943                  310,387                  454,077

      Inventory step-up and other cost savings (2)                                                                               124                                 100                      190                      215

      Upfront and milestone-related payments (3)                                                                              36,964                               3,082                   38,296                    6,177

      Inventory reserve increase from restructuring (4)                                                                          202                               7,899                    2,590                    7,899

      Separation benefits and other restructuring (5)                                                                         28,951                              16,715                   75,550                   39,385

      Certain litigation-related and other contingencies, net (6)                                                             19,620                             (2,600)                  17,120                  (1,664)

      Asset impairment charges (7)                                                                                            22,767                             725,044                  471,183                  929,006

      Acquisition-related and integration costs (8)                                                                            1,034                               2,240                    1,034                    6,936

      Fair value of contingent consideration (9)                                                                               4,127                               1,950                   10,962                    8,134

      Loss on extinguishment of debt (10)                                                                                          -                             51,734                        -                  51,734

      Other (11)                                                                                                            (28,007)                            (3,233)                (31,261)                 (4,168)

      Tax adjustments (12)                                                                                                  (14,323)                           (90,653)                (22,856)               (153,842)
                                                                                                                             -------                             -------                  -------                 --------

    Adjusted income from continuing operations (non-GAAP)                                                                               $172,195                            $207,201                             $322,978       $482,446
                                                                                                                                        ========                            ========                             ========       ========

 

 

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

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


                                                                                                                                                                                               Three Months Ended June 30, 2018
                                                                                                                                                                                               --------------------------------

                                                                                     Total revenues                                    Cost of revenues                                 Gross margin                            Gross margin %    Total operating expenses          Operating expense to      Operating income from continuing      Operating margin %       Other non-operating expense,         (Loss) income from continuing operations               Income tax expense               Effective tax rate             (Loss) income from continuing            Discontinued operations, net of             Net (loss) income                     Diluted (loss) income per share from
                                                                                                                                                                                                                                                                                                revenue %                operations                                                        net                                before income tax                                                                                                     operations                                    tax                                                                     continuing operations (14)
                                                                                               --------------                                   ----------------                                   ------------                  -------------          ------------------------    ---------------------     --------------------------------        -----------------       -----------------------------        ----------------------------------------                     ------------------             ------------------         ------------------------------           --------------------------------                      -----------------           ------------------------------------

    Reported (GAAP)                                                                                  $714,696                                            $381,905                                        $332,791                            47 %                          $277,807                      39 %                               $54,984                      8 %                             $101,228                                        $(46,244)                                $6,235                          (13)%                                $(52,479)                                   $(8,388)                             $(60,867)                                         $(0.23)

    Items impacting comparability:

    Amortization of intangible assets (1)                                                                   -                                          (153,215)                                        153,215                                                                 -                                                        153,215                                                             -                                         153,215                                      -                                                                153,215                                           -                               153,215                                             0.67

    Inventory step-up and other cost savings (2)                                                            -                                              (124)                                            124                                                                 -                                                            124                                                             -                                             124                                      -                                                                    124                                           -                                   124                                                -

    Upfront and milestone-related payments (3)                                                              -                                              (694)                                            694                                                          (36,270)                                                         36,964                                                             -                                          36,964                                      -                                                                 36,964                                           -                                36,964                                             0.17

    Inventory reserve increase from restructuring (4)                                                       -                                              (202)                                            202                                                                 -                                                            202                                                             -                                             202                                      -                                                                    202                                           -                                   202                                                -

    Separation benefits and other restructuring (5)                                                         -                                           (26,613)                                         26,613                                                           (2,338)                                                         28,951                                                             -                                          28,951                                      -                                                                 28,951                                           -                                28,951                                             0.13

    Certain litigation-related and                                                                          -                                                  -                                              -                                                         (19,620)                                                         19,620                                                             -                                          19,620                                      -                                                                 19,620                                           -                                19,620                                             0.09
    other contingencies, net (6)

    Asset impairment charges (7)                                                                            -                                                  -                                              -                                                         (22,767)                                                         22,767                                                             -                                          22,767                                      -                                                                 22,767                                           -                                22,767                                             0.10

    Acquisition-related and integration costs (8)                                                           -                                                  -                                              -                                                          (1,034)                                                          1,034                                                             -                                           1,034                                      -                                                                  1,034                                           -                                 1,034                                                -

    Fair value of contingent consideration (9)                                                              -                                                  -                                              -                                                          (4,127)                                                          4,127                                                             -                                           4,127                                      -                                                                  4,127                                           -                                 4,127                                             0.02

    Other (11)                                                                                              -                                                  -                                              -                                                                -                                                              -                                                       28,007                                         (28,007)                                     -                                                               (28,007)                                          -                              (28,007)                                          (0.13)

    Tax adjustments (12)                                                                                    -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                14,323                                                                (14,323)                                          -                              (14,323)                                          (0.06)

    Exclude discontinued operations, net of tax (13)                                                        -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                     -                                                                      -                                      8,388                                  8,388                                                -


    After considering items (non-GAAP)                                                               $714,696                                            $201,057                                        $513,639                            72 %                          $191,651                      27 %                              $321,988                     45 %                             $129,235                                         $192,753                                $20,558                           11 %                                 $172,195                             $             -                              $172,195                                            $0.76
                                                                                                     ========                                            ========                                        ========                                                          ========                                                        ========                                                      ========                                         ========                                =======                                                                ========                             ===============                              ========                                            =====



                                                                                                                                                                                         Three Months Ended June 30, 2017
                                                                                                                                                                                         --------------------------------

                                                                                     Total revenues                                    Cost of revenues                                 Gross margin                            Gross margin %    Total operating expenses          Operating expense to        Operating (loss) income from        Operating margin %       Other non-operating expense,         (Loss) income from continuing operations         Income tax (benefit) expense           Effective tax rate             (Loss) income from continuing            Discontinued operations, net of             Net (loss) income                     Diluted (loss) income per share from
                                                                                                                                                                                                                                                                                                revenue %          continuing operations                                                   net                                before income tax                                                                                                     operations                                    tax                                                                     continuing operations (14)
                                                                                               --------------                                   ----------------                                   ------------                  -------------          ------------------------    ---------------------       -----------------------------         -----------------       -----------------------------        ----------------------------------------           ----------------------------             ------------------         ------------------------------           --------------------------------                      -----------------           ------------------------------------

    Reported (GAAP)                                                                                  $875,731                                            $539,401                                        $336,330                            38 %                          $923,058                     105 %                            $(586,728)                   (67)%                             $166,772                                       $(753,500)                             $(57,480)                           8 %                               $(696,020)                                 $(700,498)                          $(1,396,518)                                         $(3.12)

    Items impacting comparability:

    Amortization of intangible assets (1)                                                                   -                                          (190,943)                                        190,943                                                                 -                                                        190,943                                                             -                                         190,943                                      -                                                                190,943                                           -                               190,943                                             0.86

    Inventory step-up and other cost savings (2)                                                            -                                              (100)                                            100                                                                 -                                                            100                                                             -                                             100                                      -                                                                    100                                           -                                   100                                                -

    Upfront and milestone-related payments (3)                                                              -                                              (682)                                            682                                                           (2,400)                                                          3,082                                                             -                                           3,082                                      -                                                                  3,082                                           -                                 3,082                                             0.01

    Inventory reserve increase from restructuring (4)                                                       -                                            (7,899)                                          7,899                                                                 -                                                          7,899                                                             -                                           7,899                                      -                                                                  7,899                                           -                                 7,899                                             0.04

    Separation benefits and other restructuring (5)                                                         -                                            (5,026)                                          5,026                                                          (11,689)                                                         16,715                                                             -                                          16,715                                      -                                                                 16,715                                           -                                16,715                                             0.07

    Certain litigation-related and                                                                          -                                                  -                                              -                                                            2,600                                                         (2,600)                                                            -                                         (2,600)                                     -                                                                (2,600)                                          -                               (2,600)                                          (0.01)
    other contingencies, net (6)

    Asset impairment charges (7)                                                                            -                                                  -                                              -                                                        (725,044)                                                        725,044                                                             -                                         725,044                                      -                                                                725,044                                           -                               725,044                                             3.25

    Acquisition-related and integration costs (8)                                                           -                                                  -                                              -                                                          (2,240)                                                          2,240                                                             -                                           2,240                                      -                                                                  2,240                                           -                                 2,240                                             0.01

    Fair value of contingent consideration (9)                                                              -                                                  -                                              -                                                          (1,950)                                                          1,950                                                             -                                           1,950                                      -                                                                  1,950                                           -                                 1,950                                             0.01

    Loss on extinguishment of debt (10)                                                                     -                                                  -                                              -                                                                -                                                              -                                                     (51,734)                                          51,734                                      -                                                                 51,734                                           -                                51,734                                             0.23

    Other (11)                                                                                              -                                                  -                                              -                                                                -                                                              -                                                        3,233                                          (3,233)                                     -                                                                (3,233)                                          -                               (3,233)                                          (0.01)

    Tax adjustments (12)                                                                                    -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                90,653                                                                (90,653)                                          -                              (90,653)                                          (0.41)

    Exclude discontinued operations, net of tax (13)                                                        -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                     -                                                                      -                                    700,498                                700,498                                                -


    After considering items (non-GAAP)                                                               $875,731                                            $334,751                                        $540,980                            62 %                          $182,335                      21 %                              $358,645                     41 %                             $118,271                                         $240,374                                $33,173                           14 %                                 $207,201                             $             -                              $207,201                                            $0.93
                                                                                                     ========                                            ========                                        ========                                                          ========                                                        ========                                                      ========                                         ========                                =======                                                                ========                             ===============                              ========                                            =====



                                                                                                                                                                                          Six Months Ended June 30, 2018
                                                                                                                                                                                          ------------------------------

                                                                                     Total revenues                                    Cost of revenues                                 Gross margin                            Gross margin %    Total operating expenses          Operating expense to        Operating (loss) income from        Operating margin %       Other non-operating expense,         (Loss) income from continuing operations               Income tax expense               Effective tax rate             (Loss) income from continuing            Discontinued operations, net of             Net (loss) income                     Diluted (loss) income per share from
                                                                                                                                                                                                                                                                                                revenue %          continuing operations                                                   net                                before income tax                                                                                                     operations                                    tax                                                                     continuing operations (14)
                                                                                               --------------                                   ----------------                                   ------------                  -------------          ------------------------    ---------------------       -----------------------------         -----------------       -----------------------------        ----------------------------------------                     ------------------             ------------------         ------------------------------           --------------------------------                      -----------------           ------------------------------------

    Reported (GAAP)                                                                                $1,415,223                                            $785,503                                        $629,720                            44 %                          $935,871                      66 %                            $(306,151)                   (22)%                             $222,340                                       $(528,491)                               $21,726                           (4)%                               $(550,217)                                  $(16,139)                            $(566,356)                                         $(2.46)

    Items impacting comparability:

    Amortization of intangible assets (1)                                                                   -                                          (310,387)                                        310,387                                                                 -                                                        310,387                                                             -                                         310,387                                      -                                                                310,387                                           -                               310,387                                             1.38

    Inventory step-up and other cost savings (2)                                                            -                                              (190)                                            190                                                                 -                                                            190                                                             -                                             190                                      -                                                                    190                                           -                                   190                                                -

    Upfront and milestone-related payments (3)                                                              -                                            (1,350)                                          1,350                                                          (36,946)                                                         38,296                                                             -                                          38,296                                      -                                                                 38,296                                           -                                38,296                                             0.17

    Inventory reserve increase from restructuring (4)                                                       -                                            (2,590)                                          2,590                                                                 -                                                          2,590                                                             -                                           2,590                                      -                                                                  2,590                                           -                                 2,590                                             0.01

    Separation benefits and other restructuring (5)                                                         -                                           (53,831)                                         53,831                                                          (21,719)                                                         75,550                                                             -                                          75,550                                      -                                                                 75,550                                           -                                75,550                                             0.34

    Certain litigation-related and                                                                          -                                                  -                                              -                                                         (17,120)                                                         17,120                                                             -                                          17,120                                      -                                                                 17,120                                           -                                17,120                                             0.08
    other contingencies, net (6)

    Asset impairment charges (7)                                                                            -                                                  -                                              -                                                        (471,183)                                                        471,183                                                             -                                         471,183                                      -                                                                471,183                                           -                               471,183                                             2.10

    Acquisition-related and integration costs (8)                                                           -                                                  -                                              -                                                          (1,034)                                                          1,034                                                             -                                           1,034                                      -                                                                  1,034                                           -                                 1,034                                                -

    Fair value of contingent consideration (9)                                                              -                                                  -                                              -                                                         (10,962)                                                         10,962                                                             -                                          10,962                                      -                                                                 10,962                                           -                                10,962                                             0.05

    Other (11)                                                                                              -                                                  -                                              -                                                              630                                                           (630)                                                       30,631                                         (31,261)                                     -                                                               (31,261)                                          -                              (31,261)                                          (0.14)

    Tax adjustments (12)                                                                                    -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                22,856                                                                (22,856)                                          -                              (22,856)                                          (0.10)

    Exclude discontinued operations, net of tax (13)                                                        -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                     -                                                                      -                                     16,139                                 16,139                                                -


    After considering items (non-GAAP)                                                             $1,415,223                                            $417,155                                        $998,068                            71 %                          $377,537                      27 %                              $620,531                     44 %                             $252,971                                         $367,560                                $44,582                           12 %                                 $322,978                             $             -                              $322,978                                            $1.43
                                                                                                   ==========                                            ========                                        ========                                                          ========                                                        ========                                                      ========                                         ========                                =======                                                                ========                             ===============                              ========                                            =====



                                                                                                                                                                                          Six Months Ended June 30, 2017
                                                                                                                                                                                          ------------------------------

                                                                                     Total revenues                                    Cost of revenues                                 Gross margin                            Gross margin %    Total operating expenses          Operating expense to        Operating (loss) income from        Operating margin %       Other non-operating expense,         (Loss) income from continuing operations         Income tax (benefit) expense           Effective tax rate             (Loss) income from continuing            Discontinued operations, net of             Net (loss) income                     Diluted (loss) income per share from
                                                                                                                                                                                                                                                                                                revenue %          continuing operations                                                   net                                before income tax                                                                                                     operations                                    tax                                                                     continuing operations (14)
                                                                                               --------------                                   ----------------                                   ------------                  -------------          ------------------------    ---------------------       -----------------------------         -----------------       -----------------------------        ----------------------------------------           ----------------------------             ------------------         ------------------------------           --------------------------------                      -----------------           ------------------------------------

    Reported (GAAP)                                                                                $1,913,331                                          $1,208,363                                        $704,968                            37 %                        $1,359,085                      71 %                            $(654,117)                   (34)%                             $276,734                                       $(930,851)                             $(69,408)                           7 %                               $(861,443)                                 $(708,903)                          $(1,570,346)                                         $(3.86)

    Items impacting comparability:

    Amortization of intangible assets (1)                                                                   -                                          (454,077)                                        454,077                                                                 -                                                        454,077                                                             -                                         454,077                                      -                                                                454,077                                           -                               454,077                                             2.03

    Inventory step-up and other cost savings (2)                                                            -                                              (215)                                            215                                                                 -                                                            215                                                             -                                             215                                      -                                                                    215                                           -                                   215                                                -

    Upfront and milestone-related payments (3)                                                              -                                            (1,351)                                          1,351                                                           (4,826)                                                          6,177                                                             -                                           6,177                                      -                                                                  6,177                                           -                                 6,177                                             0.03

    Inventory reserve increase from restructuring (4)                                                       -                                            (7,899)                                          7,899                                                                 -                                                          7,899                                                             -                                           7,899                                      -                                                                  7,899                                           -                                 7,899                                             0.04

    Separation benefits and other restructuring (5)                                                         -                                            (6,687)                                          6,687                                                          (32,698)                                                         39,385                                                             -                                          39,385                                      -                                                                 39,385                                           -                                39,385                                             0.18

    Certain litigation-related and                                                                          -                                                  -                                              -                                                            1,664                                                         (1,664)                                                            -                                         (1,664)                                     -                                                                (1,664)                                          -                               (1,664)                                          (0.01)
    other contingencies, net (6)

    Asset impairment charges (7)                                                                            -                                                  -                                              -                                                        (929,006)                                                        929,006                                                             -                                         929,006                                      -                                                                929,006                                           -                               929,006                                             4.16

    Acquisition-related and integration costs (8)                                                           -                                                  -                                              -                                                          (6,936)                                                          6,936                                                             -                                           6,936                                      -                                                                  6,936                                           -                                 6,936                                             0.03

    Fair value of contingent consideration (9)                                                              -                                                  -                                              -                                                          (8,134)                                                          8,134                                                             -                                           8,134                                      -                                                                  8,134                                           -                                 8,134                                             0.04

    Loss on extinguishment of debt (10)                                                                     -                                                  -                                              -                                                                -                                                              -                                                     (51,734)                                          51,734                                      -                                                                 51,734                                           -                                51,734                                             0.23

    Other (11)                                                                                              -                                                  -                                              -                                                                -                                                              -                                                        4,168                                          (4,168)                                     -                                                                (4,168)                                          -                               (4,168)                                          (0.02)

    Tax adjustments (12)                                                                                    -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                               153,842                                                               (153,842)                                          -                             (153,842)                                          (0.69)

    Exclude discontinued operations, net of tax (13)                                                        -                                                  -                                              -                                                                -                                                              -                                                            -                                               -                                     -                                                                      -                                    708,903                                708,903                                                -


    After considering items (non-GAAP)                                                             $1,913,331                                            $738,134                                      $1,175,197                            61 %                          $379,149                      20 %                              $796,048                     42 %                             $229,168                                         $566,880                                $84,434                           15 %                                 $482,446                             $             -                              $482,446                                            $2.16
                                                                                                   ==========                                            ========                                      ==========                                                          ========                                                        ========                                                      ========                                         ========                                =======                                                                ========                             ===============                              ========                                            =====

 

 

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

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


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

 

                                                               Three Months Ended June 30,             Six Months Ended June 30,

                                                             2018                          2017      2018                 2017
                                                             ----                          ----      ----                 ----

    Amortization of intangible assets excluding fair value           $146,906                     $180,886                       $296,766  $433,775
    step-up from contingent consideration

    Amortization of intangible assets related to fair value 6,309                          10,057              13,621               20,302
    step-up from contingent consideration


    Total                                                            $153,215                     $190,943                       $310,387  $454,077
                                                                     ========                     ========                       ========  ========

 

             (2)    To exclude adjustments for
                     inventory step-up.


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

 

                                        Three Months Ended June 30,

                                          2018                           2017

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

    Sales-based                   $694                                 $         -              $682  $     -

    Development-based         -                      36,270                                 -  2,400

    Total                         $694                                     $36,270               $682   $2,400
                                  ====                                     =======               ====   ======


                                       Six Months Ended June 30,

                                          2018                           2017

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

    Sales-based                 $1,350                                 $         -            $1,351  $     -

    Development-based         -                      36,946                                 -  4,826

    Total                       $1,350                                     $36,946             $1,351   $4,826
                                ======                                     =======             ======   ======

 

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


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

 

                                                              Three Months Ended June 30,

                                                                      2018                                 2017

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

    Separation benefits                             $3,983                                 $1,440                 $609     $128

    Accelerated depreciation and product    18,045                            -                            -        -
    discontinuation charges

    Other                                    4,585                          898                         4,417    11,561

    Total                                          $26,613                                 $2,338               $5,026  $11,689
                                                   =======                                 ======               ======  =======


                                                             Six Months Ended June 30,

                                                                      2018                                 2017

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

    Separation benefits                            $13,768                                $16,836               $2,270  $19,255

    Accelerated depreciation and product    35,177                            -                            -      398
    discontinuation charges

    Other                                    4,886                        4,883                         4,417    13,045

    Total                                          $53,831                                $21,719               $6,687  $32,698
                                                   =======                                =======               ======  =======

 

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


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

 

                                                     Three Months Ended June 30,           Six Months Ended June 30,

                                                       2018                         2017                     2018           2017
                                                       ----                         ----                     ----           ----

    Goodwill impairment charges                           $                      -                       $206,143                $391,000   $288,745

    Other intangible asset impairment charges        22,767                        476,971                           76,967         595,877

    Property, plant and equipment impairment charges      -                        41,930                            3,216          44,384

    Total asset impairment charges                                         $22,767                        $725,044                $471,183   $929,006
                                                                           =======                        ========                ========   ========

 

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

 

                                                              Three Months Ended June 30,      Six Months Ended June 30,

                                                                 2018                     2017               2018             2017
                                                                 ----                     ----               ----             ----

    Integration costs (primarily third-party consulting fees)       $                   -                          $2,233          $     -  $4,476

    Acquisition costs                                           1,034                              -                       1,034          -

    Other                                                           -                             7                            -     2,460

    Total                                                                          $1,034                           $2,240           $1,034   $6,936
                                                                                   ======                           ======           ======   ======

 

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


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


               (11)    Other adjustments included the
                        following (in thousands):

 

                                                                      Three Months Ended June 30,

                                                                     2018                                          2017

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

    Foreign currency impact related to the re-measurement          $      -                                          $(574)                 $       -   $(3,233)
    of intercompany debt instruments

    (Gain) loss on sale of business and other assets               -                           (23,837)                                  -          -

    Other miscellaneous                                            -                            (3,596)                                  -          -

    Total                                                          $      -                                       $(28,007)                 $       -   $(3,233)
                                                                 ===    ===                                        ========                ===     ===    =======


                                                                      Six Months Ended June 30,

                                                                     2018                                          2017

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

    Foreign currency impact related to the re-measurement          $      -                                        $(3,088)                 $       -   $(5,927)
    of intercompany debt instruments

    (Gain) loss on sale of business and other assets               -                           (23,837)                                  -          -

    Other miscellaneous                                        (630)                            (3,706)                                  -      1,759

    Total                                                            $(630)                                       $(30,631)                 $       -   $(4,168)
                                                                      =====                                         ========                ===     ===    =======

 

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


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


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

 

                 Three Months Ended June 30,            Six Months Ended June 30,

                      2018                 2017              2018                   2017
                      ----                 ----              ----                   ----

    GAAP EPS       223,834                      223,158                         223,677  223,086

    Non-GAAP EPS   227,273                      223,785                         226,114  223,560

 

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


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

 

 

 

    Reconciliation of Net Debt Leverage Ratio (non-GAAP)

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


                                                                                                                          Twelve Months
                                                                                                                              Ended
                                                                                                                          June 30, 2018
                                                                                                                          -------------

    Net loss (GAAP)                                                                                                                      $(1,031,443)

    Income tax benefit                                                                                                         (159,159)

    Interest expense, net                                                                                                        508,531

    Depreciation and amortization (15)                                                                                           705,265

    EBITDA (non-GAAP)                                                                                                                         $23,194
                                                                                                                                              -------


    Inventory step-up and other cost savings                                                                                                     $365

    Upfront and milestone-related payments                                                                                        41,602

    Inventory reserve increase from restructuring                                                                                  8,369

    Separation benefits and other restructuring                                                                                  234,935

    Certain litigation-related and other contingencies, net                                                                      204,774

    Asset impairment charges                                                                                                     696,553

    Acquisition-related and integration costs                                                                                      2,235

    Fair value of contingent consideration                                                                                        52,777

    Loss on extinguishment of debt                                                                                                     -

    Share-based compensation                                                                                                      53,130

    Other income, net                                                                                                           (39,986)

    Other adjustments                                                                                                              (917)

    Discontinued operations, net of tax                                                                                          109,958

    Adjusted EBITDA (non-GAAP)                                                                                                             $1,386,989
                                                                                                                                           ==========


    Calculation of Net Debt:

    Debt                                                                                                                                   $8,267,210

    Cash (excluding Restricted Cash)                                                                                           1,098,788

    Net Debt (non-GAAP)                                                                                                                    $7,168,422
                                                                                                                                           ==========


    Calculation of Net Debt Leverage:

    Net Debt Leverage Ratio (non-GAAP)                                                                                               5.2
                                                                                                                                     ===

 

Non-GAAP Financial Measures

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

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

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

About Endo International plc

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

Cautionary Note Regarding Forward-Looking Statements

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

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

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

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SOURCE Endo International plc

Company Codes: NASDAQ-NMS:ENDP

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