Second-quarter 2018 revenues of $715 million compared to second-quarter 2017 revenues of $876 million
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
