Endo Reports First-Quarter 2018 Financial Results
Endo Reports First-Quarter 2018 Financial Results
DUBLIN, May 8, 2018 /PRNewswire/ --
-- First-quarter 2018 revenues of $701 million
-- First-quarter 2018 Branded Specialty Products revenues increased 7
percent versus first-quarter 2017 to $112 million
-- First-quarter 2018 XIAFLEX(®) franchise revenues increased 15 percent
versus first-quarter 2017 to $57 million
-- First-quarter 2018 Sterile Injectables revenues increased 25 percent
versus first-quarter 2017 to $216 million
-- First-quarter 2018 reported (GAAP) net loss of $505 million driven by
pre-tax, non-cash asset impairment charges of $448 million
-- First-quarter 2018 adjusted EBITDA of $334 million
-- Company affirms 2018 full-year revenues, adjusted EBITDA and adjusted
EPS guidance
Endo International plc (NASDAQ: ENDP) today reported first-quarter 2018 financial results, including:
-- Revenues of $701 million, a 32 percent decrease compared to
first-quarter 2017 revenues of $1,038 million.
-- Reported net loss from continuing operations of $498 million compared to
first-quarter 2017 reported net loss from continuing operations of $165
million.
-- Reported diluted loss per share from continuing operations of $2.23
compared to first-quarter 2017 reported diluted loss per share from
continuing operations of $0.74.
-- Adjusted income from continuing operations of $151 million compared to
first-quarter 2017 adjusted income from continuing operations of $275
million.
-- Adjusted diluted EPS from continuing operations of $0.67 compared to
first-quarter 2017 adjusted diluted EPS from continuing operations of
$1.23.
-- Adjusted EBITDA of $334 million compared to first-quarter 2017 adjusted
EBITDA of $478 million.
"Endo delivered strong first-quarter operating results in our core focus areas as revenue growth accelerated for both our XIAFLEX(®) franchise and Sterile Injectable business. We are currently on target to meet the full-year financial guidance we provided earlier this year," said Paul Campanelli, President and CEO of Endo. "Importantly, we continue to execute our multi-year turnaround plan and build our portfolio for the future by advancing our CCH cellulite treatment development program with the initiation of and recruitment for two pivotal Phase 3 trials. In addition, as we recently announced, we expect to significantly enhance our Sterile Injectables pipeline through the acquisition of Somerset Therapeutics."
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
Three Months Ended March 31,
2018 2017 Change
---- ---- ------
Total Revenues $700,527 $1,037,600 (32)%
Reported Loss from Continuing Operations $(497,738) $(165,423) NM
Reported Diluted Weighted Average Shares 223,521 223,014 -%
Reported Diluted Loss per Share from Continuing Operations $(2.23) $(0.74) NM
Adjusted Income from Continuing Operations $150,783 $275,245 (45)%
Adjusted Diluted Weighted Average Shares(1) 224,955 223,335 1%
Adjusted Diluted EPS from Continuing Operations $0.67 $1.23 (46)%
(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
As anticipated, total revenues decreased by 32 percent to $701 million in first-quarter 2018 compared to the same period in 2017. The decline was primarily due to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals products ezetimibe tablets, the generic version of ZETIA(®), and quetiapine extended-release (ER) tablets, the generic version of SEROQUEL XR(®), both of which launched in fourth-quarter 2016. Also contributing to the decline in total revenues were 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 withdrawal of OPANA(®) ER.
GAAP net loss from continuing operations in first-quarter 2018 was $498 million compared to GAAP net loss from continuing operations of $165 million during the same period in 2017. This increase was primarily due to an increase of $244 million in pre-tax, non-cash asset impairment charges in first-quarter 2018. GAAP diluted net loss per share from continuing operations for first-quarter 2018 was $2.23, compared to GAAP diluted net loss per share from continuing operations of $0.74 in first-quarter 2017.
Adjusted income from continuing operations in first-quarter 2018 was $151 million compared to $275 million in first-quarter 2017. This decrease resulted primarily from lower revenues of ezetimibe tablets and quetiapine ER tablets, the divestitures of Litha and Somar, the voluntary withdrawal of OPANA(®) ER and an increase of $12 million in net interest expense. Adjusted diluted EPS from continuing operations in first-quarter 2018 was $0.67 compared to $1.23 in first-quarter 2017.
U.S. BRANDED - SPECIALTY & ESTABLISHED PHARMACEUTICALS
During the first-quarter, Endo advanced its cellulite treatment development program. In February, the Company initiated two Phase 3 clinical trials of collagenase clostridium histolyticum (or "CCH") for the treatment of cellulite. In April, CCH for the treatment of cellulite was presented during the Hot Topics Symposium, a highlight of The Aesthetics Meeting 2018, the annual meeting of the American Society for Aesthetic Plastic Surgery.
First-quarter 2018 U.S. Branded - Specialty & Established Pharmaceuticals results include:
-- Revenues of $200 million, a 20 percent decrease compared to
first-quarter 2017; this decrease was primarily attributable to the
voluntary cessation of OPANA(®) ER shipments in the third-quarter of
2017.
-- Specialty Products revenues increased 7 percent in first-quarter 2018
compared to the same period in 2017, driven by strong performance from
XIAFLEX(® )and other products within our Specialty Products portfolio.
Sales of XIAFLEX(®) increased 15 percent compared to first-quarter
2017; this increase was primarily attributable to volume growth in both
Dupuytren's Contracture and Peyronie's Disease.
U.S. BRANDED - STERILE INJECTABLES
In April, Endo announced that it entered into definitive agreements to acquire Somerset Therapeutics, LLC, a specialty pharmaceutical company that develops and markets sterile injectable and ophthalmic drugs for the U.S. marketplace, and the business of its affiliate Wintac Limited, which operates as Somerset Therapeutics' contract developer and manufacturer, for approximately $190 million. Somerset Therapeutics' portfolio includes 8 commercial products and a pipeline of more than 40 products, of which over 25 have been filed with the U.S. Food and Drug Administration. In May, the Company launched glycopyrrolate injection, the generic version of ROBINUL(®), as Somerset Therapeutics' exclusive distributor.
First-quarter 2018 U.S. Branded - Sterile Injectables results include:
-- Revenues of $216 million, a 25 percent increase compared to
first-quarter 2017; this increase was primarily attributable to strong
growth of ADRENALIN(®) and VASOSTRICT(®).
U.S. GENERIC PHARMACEUTICALS
During first-quarter 2018, the U.S. Generic Pharmaceuticals segment launched two products and submitted two regulatory filings. In April, the segment launched praziquantel tablets, the first-to-market generic version of BILTRICIDE(®).
First-quarter 2018 U.S. Generic Pharmaceuticals results include:
-- Revenues of $249 million, a 55 percent decrease compared to
first-quarter 2017; this decline was primarily attributable to the loss
of marketing exclusivity in the first half of 2017 for the first-to-file
products ezetimibe tablets and quetiapine ER tablets. Also contributing
to the decline was the annualization of the impact from 2017 competitive
entries and previously announced product discontinuances.
INTERNATIONAL PHARMACEUTICALS
First-quarter 2018 International Pharmaceuticals revenues were $35 million, compared to $65 million in the same period in 2017. The decline is primarily attributable to the sales of Litha and Somar in the second-half of 2017.
2018 FINANCIAL GUIDANCE
For the full twelve months ending December 31, 2018, at current exchange rates, Endo affirms its previously provided guidance on revenue, adjusted diluted EPS from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:
-- Total revenues to be between $2.6 billion and $2.8 billion;
-- Adjusted diluted EPS from continuing operations to be between $2.15 and
$2.55; and
-- Adjusted EBITDA from continuing operations to be between $1.2 billion
and $1.3 billion.
The Company's 2018 non-GAAP financial guidance is based on the following assumptions:
-- Adjusted gross margin of approximately 67.0% to 68.0%;
-- Adjusted operating expenses as a percentage of revenues of approximately
25.5% to 26.5%;
-- Adjusted interest expense of approximately $530 million to $540 million;
-- Adjusted effective tax rate of approximately 11.0% to 12.0%; and
-- Adjusted diluted weighted average shares outstanding of approximately
226 million.
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of March 31, 2018, the Company had $980 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.3 billion and a net debt to adjusted EBITDA ratio of 5.1.
First-quarter 2018 cash provided by operating activities was $49 million, compared to $168 million of net cash provided by operating activities in the comparable 2017 period. The 2017 period included the impact of cash receipts for ezetimibe tablets and quetiapine ER tablets, which did not reoccur during the 2018 period, and higher payments related to U.S. mesh product liability claims.
During first-quarter 2018, the Company recorded pre-tax, non-cash asset impairment charges of $448 million, $391 million of which related to goodwill and $54 million of which related to other intangible assets.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release today at 7:30 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 4839597. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from May 8, 2018 at 10:30 a.m. ET until 10:30 a.m. ET on May 11, 2018 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 4839597.
A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.
FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total Revenues for the three months ended March 31, 2018 and 2017 (dollars in thousands):
Three Months Ended March 31, Percent
Growth
2018 2017
---- ----
U.S. Branded - Specialty & Established Pharmaceuticals:
Specialty Products:
XIAFLEX(R) $57,141 $49,525 15%
SUPPRELIN(R) LA 20,577 19,181 7%
Other Specialty (1) 34,197 36,028 (5)%
Total Specialty Products $111,915 $104,734 7%
-------- --------
Established Products:
PERCOCET(R) $31,976 $30,945 3%
VOLTAREN(R) Gel 11,317 14,274 (21)%
OPANA(R) ER - 35,718 (100)%
Other Established (2) 45,027 64,488 (30)%
Total Established Products $88,320 $145,425 (39)%
Total U.S. Branded - Specialty & Established Pharmaceuticals (3) $200,235 $250,159 (20)%
-------- --------
U.S. Branded - Sterile Injectables:
VASOSTRICT(R) $113,725 $99,158 15%
ADRENALIN(R) 29,740 6,097 NM
Other Sterile Injectables (4) 72,389 66,913 8%
Total U.S. Branded - Sterile Injectables (3) $215,854 $172,168 25%
-------- --------
Total U.S. Generic Pharmaceuticals $249,240 $549,815 (55)%
Total International Pharmaceuticals $35,198 $65,458 (46)%
Total Revenues $700,527 $1,037,600 (32)%
-------- ----------
(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), 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 months ended March 31, 2018 and 2017 (in thousands, except per share data):
Three Months Ended March 31,
2018 2017
---- ----
TOTAL REVENUES $700,527 $1,037,600
COSTS AND EXPENSES:
Cost of revenues 403,598 668,962
Selling, general and administrative 166,667 177,240
Research and development 38,646 43,009
Litigation-related and other contingencies, net (2,500) 936
Asset impairment charges 448,416 203,962
Acquisition-related and integration items 6,835 10,880
----- ------
OPERATING LOSS FROM CONTINUING OPERATIONS $(361,135) $(67,389)
--------- --------
INTEREST EXPENSE, NET 123,990 111,999
OTHER INCOME, NET (2,878) (2,037)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX $(482,247) $(177,351)
--------- ---------
INCOME TAX EXPENSE (BENEFIT) 15,491 (11,928)
LOSS FROM CONTINUING OPERATIONS $(497,738) $(165,423)
--------- ---------
DISCONTINUED OPERATIONS, NET OF TAX (7,751) (8,405)
------ ------
NET LOSS $(505,489) $(173,828)
========= =========
NET LOSS PER SHARE-BASIC:
Continuing operations $(2.23) $(0.74)
Discontinued operations (0.03) (0.04)
Basic $(2.26) $(0.78)
====== ======
NET LOSS PER SHARE-DILUTED:
Continuing operations $(2.23) $(0.74)
Discontinued operations (0.03) (0.04)
Diluted $(2.26) $(0.78)
====== ======
WEIGHTED AVERAGE SHARES:
Basic 223,521 223,014
Diluted 223,521 223,014
The following table presents unaudited Condensed Consolidated Balance Sheet data at March 31, 2018 and December 31, 2017 (in thousands):
March 31, 2018 December 31, 2017
-------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $980,412 $986,605
Restricted cash and cash equivalents 335,858 320,453
Accounts receivable 460,019 517,436
Inventories, net 376,650 391,437
Other current assets 55,515 55,146
Total current assets $2,208,454 $2,271,077
---------- ----------
TOTAL NON-CURRENT ASSETS 8,725,291 9,364,503
TOTAL ASSETS $10,933,745 $11,635,580
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses, including legal settlement accruals $2,052,014 $2,184,618
Other current liabilities 35,585 36,291
Total current liabilities $2,087,599 $2,220,909
---------- ----------
LONG-TERM DEBT, LESS CURRENT PORTION, NET 8,237,487 8,242,032
OTHER LIABILITIES 615,752 687,759
SHAREHOLDERS' (DEFICIT) EQUITY (7,093) 484,880
------ -------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $10,933,745 $11,635,580
=========== ===========
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the three months ended March 31, 2018 and 2017 (in thousands):
Three Months Ended March 31,
2018 2017
---- ----
OPERATING ACTIVITIES:
Net loss $(505,489) $(173,828)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
Depreciation and amortization 191,590 286,855
Asset impairment charges 448,416 203,962
Other, including cash payments to claimants from Qualified Settlement Funds (85,671) (149,226)
Net cash provided by operating activities $48,846 $167,763
------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, excluding capitalized interest $(24,874) $(27,202)
Proceeds from sale of business and other assets, net 13,350 16,217
Other (4,073) -
------ ---
Net cash used in investing activities $(15,597) $(10,985)
-------- --------
FINANCING ACTIVITIES:
Payments on borrowings, net $(9,821) $(28,894)
Other (13,589) (24,300)
Net cash used in financing activities $(23,410) $(53,194)
-------- --------
Effect of foreign exchange rate (627) 1,483
Movement in cash held for sale - (8,553)
NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS $9,212 $96,514
------ -------
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD 1,311,014 805,180
---------
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD $1,320,226 $901,694
========== ========
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 months ended March 31, 2018 and 2017 (in thousands):
Three Months Ended March 31,
2018 2017
---- ----
Net loss (GAAP) $(505,489) $(173,828)
Income tax expense (benefit) 15,491 (11,928)
Interest expense, net 123,990 111,999
Depreciation and amortization (14) 174,458 284,109
EBITDA (non-GAAP) $(191,550) $210,352
--------- --------
Inventory step-up and other cost savings (2) $66 $115
Upfront and milestone-related payments (3) 1,332 3,095
Inventory reserve increase from restructuring (4) 2,388 -
Separation benefits and other restructuring (5) 46,599 22,670
Certain litigation-related and other contingencies, net (6) (2,500) 936
Asset impairment charges (7) 448,416 203,962
Acquisition-related and integration costs (8) - 4,696
Fair value of contingent consideration (9) 6,835 6,184
Share-based compensation 17,890 19,493
Other income, net (15) (2,878) (2,037)
Other adjustments (698) 97
Discontinued operations, net of tax (12) 7,751 8,405
Adjusted EBITDA (non-GAAP) $333,651 $477,968
======== ========
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 months ended March 31, 2018 and 2017 (in
thousands):
Three Months Ended March 31,
2018 2017
---- ----
Loss from continuing operations (GAAP) $(497,738) $(165,423)
Non-GAAP adjustments:
Amortization of intangible assets (1) 157,172 263,134
Inventory step-up and other cost savings (2) 66 115
Upfront and milestone-related payments (3) 1,332 3,095
Inventory reserve increase from restructuring (4) 2,388 -
Separation benefits and other restructuring (5) 46,599 22,670
Certain litigation-related and other contingencies, net (6) (2,500) 936
Asset impairment charges (7) 448,416 203,962
Acquisition-related and integration costs (8) - 4,696
Fair value of contingent consideration (9) 6,835 6,184
Other (10) (3,254) (935)
Tax adjustments (11) (8,533) (63,189)
------ -------
Adjusted income from continuing operations (non-GAAP) $150,783 $275,245
======== ========
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 months ended March 31, 2018 and 2017 (in thousands, except per share data):
Three Months Ended March 31, 2018
---------------------------------
Total revenues Cost of revenues Gross margin Gross margin % Total operating expenses Operating 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
continuing operations net before income tax operations tax continuing operations (13)
expense to
revenue %
---
Reported (GAAP) $700,527 $403,598 $296,929 42 % $658,064 94 % $(361,135) (52)% $121,112 $(482,247) $15,491 (3)% $(497,738) $(7,751) $(505,489) $(2.23)
Items impacting comparability:
Amortization of - (157,172) 157,172 - 157,172 - 157,172 - 157,172 - 157,172 0.70
intangible assets (1)
Inventory step-up and - (66) 66 - 66 - 66 - 66 - 66 -
other cost savings (2)
Upfront and - (656) 656 (676) 1,332 - 1,332 - 1,332 - 1,332 0.01
milestone-related
payments (3)
Inventory reserve - (2,388) 2,388 - 2,388 - 2,388 - 2,388 - 2,388 0.01
increase from
restructuring (4)
Separation benefits - (27,218) 27,218 (19,381) 46,599 - 46,599 - 46,599 - 46,599 0.21
and other
restructuring (5)
Certain litigation- - - - 2,500 (2,500) - (2,500) - (2,500) - (2,500) (0.01)
related and other
contingencies, net (6)
Asset impairment - - - (448,416) 448,416 - 448,416 - 448,416 - 448,416 2.00
charges (7)
Fair value of - - - (6,835) 6,835 - 6,835 - 6,835 - 6,835 0.03
contingent
consideration (9)
Other (10) - - - 630 (630) 2,624 (3,254) - (3,254) - (3,254) (0.01)
Tax adjustments (11) - - - - - - - 8,533 (8,533) - (8,533) (0.04)
Exclude discontinued - - - - - - - - - 7,751 7,751 -
operations, net of tax (12)
After considering items $700,527 $216,098 $484,429 69 % $185,886 27 % $298,543 43 % $123,736 $174,807 $24,024 14 % $150,783 $ - $150,783 $0.67
(non-GAAP)
===
Three Months Ended March 31, 2017
---------------------------------
Total revenues Cost of revenues Gross margin Gross margin % Total operating expenses Operating expense to revenue 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
% continuing operations net before income tax operations tax continuing operations (13)
-------------- ---------------- ------------ ------------- ------------------------ ---------------------------- ---------------------------- ----------------- ---------------------------- ---------------------------------------- ---------------------------- ------------------ ----------------------------- ------------------------------- ----------------- ------------------------------------
Reported (GAAP) $1,037,600 $668,962 $368,638 36 % $436,027 42 % $(67,389) (6)% $109,962 $(177,351) $(11,928) 7 % $(165,423) $(8,405) $(173,828) $(0.74)
Items impacting comparability:
Amortization of - (263,134) 263,134 - 263,134 - 263,134 - 263,134 - 263,134 1.18
intangible assets (1)
Inventory step-up and - (115) 115 - 115 - 115 - 115 - 115 -
other cost savings (2)
Upfront and - (669) 669 (2,426) 3,095 - 3,095 - 3,095 - 3,095 0.01
milestone-related
payments (3)
Separation benefits - (1,661) 1,661 (21,009) 22,670 - 22,670 - 22,670 - 22,670 0.10
and other
restructuring (5)
Certain litigation- - - - (936) 936 - 936 - 936 - 936 -
related and other
contingencies, net (6)
Asset impairment - - - (203,962) 203,962 - 203,962 - 203,962 - 203,962 0.91
charges (7)
Acquisition-related - - - (4,696) 4,696 - 4,696 - 4,696 - 4,696 0.02
and integration costs (8)
Fair value of - - - (6,184) 6,184 - 6,184 - 6,184 - 6,184 0.03
contingent
consideration (9)
Other (10) - - - - - 935 (935) - (935) - (935) -
Tax adjustments (11) - - - - - - - 63,189 (63,189) - (63,189) (0.28)
Exclude discontinued - - - - - - - - - 8,405 8,405 -
operations, net of tax (12)
After considering items (non-GAAP) $1,037,600 $403,383 $634,217 61 % $196,814 19 % $437,403 42 % $110,897 $326,506 $51,261 16 % $275,245 $ - $275,245 $1.23
========== ======== ======== ======== ======== ======== ======== ======= ======== =============== ======== =====
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 months ended March 31, 2018 and 2017 are as follows:
(1) Adjustments for amortization of commercial intangible assets included the following (in thousands):
Three Months Ended March 31,
2018 2017
---- ----
Amortization of intangible assets excluding fair value step-up from
contingent consideration $149,860 $252,889
Amortization of intangible assets related to fair value step-up from
contingent consideration 7,312 10,245
Total $157,172 $263,134
=====
(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 March 31,
2018 2017
Cost of revenues Operating Cost of revenues Operating
expenses expenses
---------------- ---------- ---------------- ----------
Sales-based milestones $656 $ - $669 $ -
Development-based milestones - 676 - 2,426
Total $656 $676 $669 $2,426
===
(4) To exclude charges reflecting adjustments to excess inventory reserves related to the 2017 U.S. Generic
Pharmaceuticals Restructuring Initiative and January 2018 Restructuring Initiative during the three months ended
March 31, 2018.
(5) Adjustments for separation benefits and other restructuring included the following (in thousands):
Three Months Ended March 31,
2018 2017
Cost of revenues Operating Cost of revenues Operating
expenses expenses
---------------- ---------- ---------------- ----------
Separation benefits $9,785 $15,396 $1,661 $19,127
Accelerated depreciation and product discontinuation charges 17,132 - - 398
Other 301 3,985 - 1,484
Total $27,218 $19,381 $1,661 $21,009
===
(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 March 31,
2018 2017
---- ----
Goodwill impairment charges $391,000 $82,602
Other intangible asset impairment charges 54,200 118,906
Property, plant and equipment impairment charges 3,216 2,454
Total asset impairment charges $448,416 $203,962
==========
(8) Adjustments for acquisition and integration items primarily relate to various acquisitions. Amounts included the
following (in thousands):
Three Months Ended March 31,
2018 2017
---- ----
Integration costs (primarily third-party consulting fees) $ - $2,243
Other - 2,453
Total $ - $4,696
===== ===
(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) Adjustments to other included the following (in thousands):
Three Months Ended March 31,
2018 2017
Operating Other non- Operating Other non-
expenses operating expenses operating
expenses expenses
---------- ----------- ---------- -----------
Foreign currency impact related to the re-measurement of intercompany debt instruments $ - $(2,514) $ - $(2,694)
Other miscellaneous (630) (110) - 1,759
Total $(630) $(2,624) $ - $(935)
===== ===
(11) 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.
(12) To exclude the results of the businesses reported as discontinued operations, net of tax in the Condensed
Consolidated Statement of Operations.
(13) 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 March 31,
----------------------------
2018 2017
---- ----
GAAP EPS 223,521 223,014
Non-GAAP EPS 224,955 223,335
(14) 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.
(15) 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 March 31,
2018 (in thousands) and the calculation of our Net Debt Leverage Ratio
(non-GAAP):
Twelve Months
Ended March
31, 2018
--------
Net loss (GAAP) $(2,367,094)
Income tax benefit (222,874)
Interest expense, net 500,219
Depreciation and amortization
(14) 748,055
EBITDA (non-GAAP) $(1,341,694)
-----------
Inventory step-up and other
cost savings $341
Upfront and milestone-related
payments 7,720
Inventory reserve increase from
restructuring 16,066
Separation benefits and other
restructuring 222,699
Certain litigation-related and
other contingencies, net 182,554
Asset impairment charges 1,398,830
Acquisition-related and
integration costs 3,441
Fair value of contingent
consideration 50,600
Loss on extinguishment of debt 51,734
Share-based compensation 48,546
Other income, net (17,864)
Other adjustments (1,021)
Discontinued operations, net of
tax 802,068
Adjusted EBITDA (non-GAAP) $1,424,020
==========
Calculation of Net Debt:
Debt $8,271,692
Cash (excluding Restricted
Cash) 980,412
Net Debt (non-GAAP) $7,291,280
==========
Calculation of Net Debt Leverage:
Net Debt Leverage Ratio (non-
GAAP) 5.1
===
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.
CONTACT: Media: Heather Zoumas-Lubeski, (484) 216-6829; Investors: Nina Goworek, (484) 216-6657
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SOURCE Endo International plc
