Endo Reports Second-Quarter 2019 Financial Results
- Operating Performance Led by Year-over-Year Double-Digit-Percentage Growth in Revenues of Sterile Injectables Segment and Specialty Products Portfolio of Branded Pharmaceuticals Segment -
- Endo Reaffirms Full-Year 2019 Financial Guidance -
DUBLIN, Aug. 5, 2019 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported second-quarter 2019 financial results, including:
-- Revenues of $700 million, a decrease of 2 percent compared to
second-quarter 2018 revenues of $715 million.
-- Branded Pharmaceuticals - Specialty Products revenues increased 17
percent to $124 million compared to second-quarter 2018 revenues of $106
million.
-- Sterile Injectables revenues increased 12 percent to $244 million
compared to second-quarter 2018 revenues of $218 million.
-- Reported net loss from continuing operations of $98 million compared to
second-quarter 2018 reported net loss from continuing operations of $52
million.
-- Reported diluted loss per share from continuing operations of $0.43
compared to second-quarter 2018 reported diluted loss per share from
continuing operations of $0.23.
-- Adjusted income from continuing operations of $120 million compared to
second-quarter 2018 adjusted income from continuing operations of $172
million.
-- Adjusted diluted earnings per share from continuing operations of $0.52
compared to second-quarter 2018 adjusted diluted earnings per share from
continuing operations of $0.76.
-- Adjusted EBITDA of $307 million compared to second-quarter 2018 adjusted
EBITDA of $351 million.
"I am pleased with our second-quarter 2019 operating performance, led by continued year-over-year double-digit percentage growth in revenues of our Sterile Injectables segment and in the Specialty Products portfolio of our Branded Pharmaceuticals segment. XIAFLEX(®) grew 18 percent in the quarter, reflecting continued demand growth as a result of successful commercial execution and promotional investment," said Paul Campanelli, President and Chief Executive Officer of Endo. "We are on target to meet our previously provided full-year financial guidance and remain highly focused on the continued execution of our multiyear turnaround plan in a challenging external environment."
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 Change 2019 2018 Change
---
Total Revenues, Net $
699,727 $
714,696 (2)
% $
1,420,138 $
1,415,223
%
Reported Loss from Continuing $
(98,052) $
(52,479) 87 $
(110,664) $
(550,217) (80)
% %
Operations
Reported Diluted Weighted Average 226,221 223,834 1 225,408 223,677 1
% %
Shares
Reported Diluted Loss per Share $
(0.43) $
(0.23) 87 $
(0.49) $
(2.46) (80)
% %
from Continuing Operations
Adjusted Income from Continuing $
120,405 $
172,195 (30) $
242,488 $
322,978 (25)
% %
Operations
Adjusted Diluted Weighted Average 232,713 227,273 2 232,174 226,114 3
% %
Shares(1)
Adjusted Diluted Income per Share $
0.52 $
0.76 (32) $
1.04 $
1.43 (27)
% %
from 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 ordinary share
equivalents outstanding
during the period. In the
case of Adjusted Diluted
Weighted Average Shares,
Adjusted Income from
Continuing Operations is used
in determining whether to
include such dilutive impact.
CONSOLIDATED RESULTS
Total revenues were $700 million in second-quarter 2019 compared to $715 million during the same period in 2018. This decrease was primarily attributable to competitive pressures in the Generic Pharmaceuticals segment, the Established Products portfolio of the Branded Pharmaceuticals segment, and the International segment, partially offset by continued strong growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.
GAAP net loss from continuing operations in second-quarter 2019 was $98 million compared to GAAP net loss from continuing operations of $52 million during the same period in 2018. This result was primarily attributable to an increase in asset impairment charges and a decrease in gains on the sale of certain assets, partially offset by a decrease in research and development spending. GAAP diluted net loss per share from continuing operations in second-quarter 2019 was $0.43 compared to GAAP diluted net loss per share from continuing operations of $0.23 in second-quarter 2018.
Adjusted income from continuing operations in second-quarter 2019 was $120 million compared to $172 million in second-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin in our Generic Pharmaceuticals segment due to a decline in revenue and an unfavorable change in product mix. Adjusted diluted income per share from continuing operations in second-quarter 2019 was $0.52 compared to $0.76 in second-quarter 2018.
BRANDED PHARMACEUTICALS
Second-quarter 2019 Branded Pharmaceuticals revenues were $209 million compared to $213 million in second-quarter 2018. This decrease was primarily attributable to ongoing generic competition in our Established Products portfolio, offset by continued strong growth of our Specialty Products portfolio.
Specialty Products revenues increased 17 percent to $124 million in second-quarter 2019 compared to second-quarter 2018, primarily driven by the continued strong performance of XIAFLEX(®). Sales of XIAFLEX(®) increased 18 percent to $75 million compared to second-quarter 2018, primarily attributable to demand growth in both the Peyronie's Disease and Dupuytren's Contracture indications driven by continued commercial execution and investment in promotional activities.
With regards to Collagenase Clostridium Histolyticum (CCH) for the treatment of cellulite, Phase 3 data was presented in May at the American Society for Aesthetic Plastic Surgery Hot Topics session by clinical investigator Dr. Lawrence Bass. Additionally, Phase 2 and Phase 3 data was presented by multiple physicians, including clinical investigator Dr. Michael Gold, throughout the Vegas Cosmetic Surgery meeting held in June.
STERILE INJECTABLES
Second-quarter 2019 Sterile Injectables revenues were $244 million, an increase of 12 percent compared to second-quarter 2018. This increase reflects the third-quarter 2018 launch of ertapenem for injection, the authorized generic of INVANZ(®), as well as the continued strong growth of VASOSTRICT(®) and ADRENALIN(®). As anticipated, second-quarter 2019 Sterile Injectables revenue declined versus first-quarter 2019 primarily as a result of the non-recurrence of the first-quarter stocking benefit and the expected destocking in the second quarter.
GENERIC PHARMACEUTICALS
Second-quarter 2019 Generic Pharmaceuticals revenues were $218 million compared to $241 million in second-quarter 2018. This performance was primarily attributable to increased competitive pressure on certain generic products. Partially offsetting the decrease was the impact of certain 2018 product launches including, among others, colchicine tablets, the authorized generic of Colcrys(®). During second-quarter 2019, the Generic Pharmaceuticals segment launched three products.
INTERNATIONAL PHARMACEUTICALS
Second-quarter 2019 International Pharmaceuticals revenues were $29 million, compared to $43 million in the same period in 2018.
2019 FINANCIAL GUIDANCE
For the twelve months ending December 31, 2019, at current exchange rates, Endo is reaffirming its previously provided guidance on revenue, adjusted diluted earnings per share from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:
-- Total revenues to be between $2.76 billion and $2.96 billion;
-- Adjusted diluted earnings per share from continuing operations to be
between $2.00 and $2.25; and
-- Adjusted EBITDA from continuing operations to be between $1.24 billion
and $1.34 billion.
The Company's 2019 non-GAAP financial guidance is based on the following assumptions:
-- Adjusted gross margin of approximately 65.0% to 66.0%;
-- Adjusted operating expenses as a percentage of revenues of approximately
24.5% to 25.0%;
-- Adjusted interest expense of approximately $550 million to $560 million;
-- Adjusted effective tax rate of approximately 17.5% to 18.5%; and
-- Adjusted diluted weighted average shares outstanding of approximately
234 million.
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
In June 2019, the Company borrowed $300.0 million under its existing $1,000.0 million revolving credit facility. The Company expects to use the proceeds from this borrowing for purposes consistent with the Company's previously stated capital allocation priorities, including for general corporate purposes.
As of June 30, 2019, the Company had approximately $1.4 billion in unrestricted cash; debt of $8.4 billion; net debt of approximately $7.0 billion and a net debt to adjusted EBITDA ratio of 5.3.
Second-quarter 2019 cash provided by operating activities was $177 million, compared to $170 million of net cash provided by operating activities during second-quarter 2018.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release tomorrow 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 4344119. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from August 6, 2019 at 10:30 a.m. ET until 10:30 a.m. ET on August 13, 2019 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 4344119.
A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.
FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total revenues, net for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
Growth Growth
2019 2018 2019 2018
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX(R) $
74,855 $
63,500 18
%
% $
143,362 $
120,641 19
SUPPRELIN(R) LA 23,714 19,963 19
%
% 45,770 40,540 13
Other Specialty (1) 25,524 22,585 13
%
% 49,927 41,612 20
Total Specialty Products $
124,093 $
106,048 17
%
% $
239,059 $
202,793 18
Established Products:
PERCOCET(R) $
28,878 $
30,833 (6) $
59,638 $
62,809 (5)
% %
TESTOPEL(R) 11,780 13,844 (15) 27,594 29,014 (5)
% %
Other Established (2) 44,262 61,912 (29) 86,247 118,256 (27)
% %
Total Established Products $
84,920 $
106,589 (20) $
173,479 $
210,079 (17)
% %
Total Branded Pharmaceuticals (3) $
209,013 $
212,637 (2)
% $
412,538 $
412,872 %
Sterile Injectables:
VASOSTRICT(R) $
116,026 $
106,329 9
%
% $
255,163 $
220,054 16
ADRENALIN(R) 45,835 36,658 25
%
% 93,157 66,398 40
Ertapenem for injection 25,547 NM 57,766 NM
Other Sterile Injectables (4) 56,872 74,856 (24) 108,242 147,245 (26)
% %
Total Sterile Injectables (3) $
244,280 $
217,843 12
%
% $
514,328 $
433,697 19
Total Generic Pharmaceuticals $
217,784 $
241,236 (10) $
436,310 $
490,476 (11)
% %
Total International Pharmaceuticals $
28,650 $
42,980 (33) $
56,962 $
78,178 (27)
% %
Total revenues, net $
699,727 $
714,696 (2)
% $
1,420,138 $
1,415,223 %
__________
(1) Products included within Other
Specialty are NASCOBAL(R) Nasal
Spray and AVEED(R). Beginning with
our first-quarter 2019 reporting,
TESTOPEL(R), which was previously
included in Other Specialty, has
been reclassified and is now
included in the Established
Products portfolio for all periods
presented.
(2) Products included within Other
Established include, but are not
limited to, LIDODERM(R),
VOLTAREN(R) Gel, EDEX(R),
FORTESTA(R) Gel, and TESTIM(R),
including the authorized generics
of TESTIM(R) and FORTESTA(R) Gel.
(3) Individual products presented above
represent the top two performing
products in each product category
for either the three or six months
ended June 30, 2019 and/or any
product having revenues in excess
of $25 million during any
quarterly period in 2019 or 2018.
(4) Products included within Other
Sterile Injectables include, but
are not limited to, APLISOL(R) and
ephedrine sulfate injection.
The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share data):
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
TOTAL REVENUES, NET $
699,727 $
714,696 $
1,420,138 $
1,415,223
COSTS AND EXPENSES:
Cost of revenues 388,208 381,905 780,117 785,503
Selling, general and administrative 152,297 148,157 303,420 314,824
Research and development 26,348 82,102 59,834 120,748
Litigation-related and other contingencies, net 10,315 19,620 10,321 17,120
Asset impairment charges 88,438 22,767 253,886 471,183
Acquisition-related and integration items (5,507) 5,161 (43,008) 11,996
Interest expense, net 134,809 130,059 267,484 254,049
Gain on extinguishment of debt (119,828)
Other (income) expense, net (597) (28,831) 4,205 (31,709)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX $
(94,584) $
(46,244) $
(96,293) $
(528,491)
INCOME TAX EXPENSE 3,468 6,235 14,371 21,726
LOSS FROM CONTINUING OPERATIONS $
(98,052) $
(52,479) $
(110,664) $
(550,217)
DISCONTINUED OPERATIONS, NET OF TAX (7,953) (8,388) (13,914) (16,139)
NET LOSS $
(106,005) $
(60,867) $
(124,578) $
(566,356)
NET LOSS PER SHARE-BASIC:
Continuing operations $
(0.43) $
(0.23) $
(0.49) $
(2.46)
Discontinued operations (0.04) (0.04) (0.06) (0.07)
Basic $
(0.47) $
(0.27) $
(0.55) $
(2.53)
NET LOSS PER SHARE-DILUTED:
Continuing operations $
(0.43) $
(0.23) $
(0.49) $
(2.46)
Discontinued operations (0.04) (0.04) (0.06) (0.07)
Diluted $
(0.47) $
(0.27) $
(0.55) $
(2.53)
WEIGHTED AVERAGE SHARES:
Basic 226,221 223,834 225,408 223,677
Diluted 226,221 223,834 225,408 223,677
The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2019 and December 31, 2018 (in thousands):
June 30, 2019 December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $
1,446,949 $
1,149,113
Restricted cash and cash equivalents 307,587 305,368
Accounts receivable 442,078 470,570
Inventories, net 335,890 322,179
Other current assets 222,548 95,920
Total current assets $
2,755,052 $
2,343,150
TOTAL NON-CURRENT ASSETS 7,319,237 7,789,243
TOTAL ASSETS $
10,074,289 $
10,132,393
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses, including legal settlement accruals $
1,786,054 $
1,914,285
Other current liabilities 49,766 35,811
Total current liabilities $
1,835,820 $
1,950,096
LONG-TERM DEBT, LESS CURRENT PORTION, NET 8,369,972 8,224,269
OTHER LIABILITIES 458,969 456,311
SHAREHOLDERS' DEFICIT (590,472) (498,283)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $
10,074,289 $
10,132,393
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2019 and 2018 (in thousands):
Six Months Ended June 30,
2019 2018
OPERATING ACTIVITIES:
Net loss $
(124,578) $
(566,356)
Adjustments to reconcile
Net loss to Net cash
provided by operating
activities:
Depreciation and
amortization 320,788 379,646
Asset impairment charges 253,886 471,183
Other, including cash
payments to claimants
from Qualified
Settlement Funds (363,494) (65,341)
Net cash provided by
operating activities $
86,602 $
219,132
INVESTING ACTIVITIES:
Purchases of property,
plant and equipment,
excluding capitalized
interest $
(23,632) $
(41,960)
Proceeds from sale of
business and other
assets, net 2,594 37,971
Other (1,278) (4,999)
Net cash used in
investing activities $
(22,316) $
(8,988)
FINANCING ACTIVITIES:
Proceeds from (payments
on) borrowings, net $
257,605 $
(19,650)
Other (22,676) (21,143)
Net cash provided by
(used in) financing
activities $
234,929 $
(40,793)
Effect of foreign
exchange rate 841 (1,010)
NET INCREASE IN CASH,
CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS $
300,056 $
168,341
CASH, CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS, BEGINNING
OF PERIOD 1,476,837 1,311,014
CASH, CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS, END OF
PERIOD $
1,776,893 $
1,479,355
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, 2019 and 2018 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Net loss (GAAP) $
(106,005) $
(60,867) $
(124,578) $
(566,356)
Income tax expense 3,468 6,235 14,371 21,726
Interest expense, net 134,809 130,059 267,484 254,049
Depreciation and amortization (15) 158,055 170,011 320,788 344,469
EBITDA (non-GAAP) $
190,327 $
245,438 $
478,065 $
53,888
Inventory step-up and other cost savings (2)
$ $
124
$ $
190
Upfront and milestone-related payments (3) 1,444 36,964 2,383 38,296
Inventory reserve increase from restructuring (4) 202 2,590
Separation benefits and other restructuring (5) 2,124 28,951 4,149 75,550
Certain litigation-related and other contingencies, net (6) 10,315 19,620 10,321 17,120
Asset impairment charges (7) 88,438 22,767 253,886 471,183
Acquisition-related and integration costs (8) 1,034 1,034
Fair value of contingent consideration (9) (5,507) 4,127 (43,008) 10,962
Gain on extinguishment of debt (10) (119,828)
Share-based compensation 12,600 12,096 37,333 29,986
Other (income) expense, net (16) (597) (28,831) 4,205 (31,709)
Other adjustments 3 (10) 87 (708)
Discontinued operations, net of tax (13) 7,953 8,388 13,914 16,139
Adjusted EBITDA (non-GAAP) $
307,100 $
350,870 $
641,507 $
684,521
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, 2019 and 2018 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Loss from continuing operations (GAAP) $
(98,052) $
(52,479) $
(110,664) $
(550,217)
Non-GAAP adjustments:
Amortization of intangible assets (1) 140,418 153,215 286,017 310,387
Inventory step-up and other cost savings (2) 124 190
Upfront and milestone-related payments (3) 1,444 36,964 2,383 38,296
Inventory reserve increase from restructuring (4) 202 2,590
Separation benefits and other restructuring (5) 2,124 28,951 4,149 75,550
Certain litigation-related and other contingencies, net (6) 10,315 19,620 10,321 17,120
Asset impairment charges (7) 88,438 22,767 253,886 471,183
Acquisition-related and integration costs (8) 1,034 1,034
Fair value of contingent consideration (9) (5,507) 4,127 (43,008) 10,962
Gain on extinguishment of debt (10) (119,828)
Other (11) 86 (28,007) 1,620 (31,261)
Tax adjustments (12) (18,861) (14,323) (42,388) (22,856)
Adjusted income from continuing operations (non-GAAP) $
120,405 $
172,195 $
242,488 $
322,978
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, 2019 and 2018 (in thousands, except per share data):
Three Months Ended June 30, 2019
---
Total
Cost of
Gross
Gross
Total
Operating
Operating
Operating
Other
(Loss)
Income
Effective
(Loss)
Discontinued
Net (loss)
Diluted
revenues, revenues margin margin operating expense to income margin % non- income tax tax rate income operations, income (loss)
net % expenses revenue % from operating from expense from net of tax income
continuing expense, continuing continuing per share
operations net operations operations from
before continuing
income tax operations (14)
Reported (GAAP) $699,727 $388,208 $311,519 44.5 % $271,891 38.9 % $39,628 5.7 % $134,212 $(94,584) $3,468 (3.7)% $(98,052) $(7,953) $(106,005) $(0.43)
Items impacting
comparability:
Amortization of (140,418) 140,418 140,418 140,418 140,418 140,418
intangible assets (1)
Upfront and (739) 739 (705) 1,444 1,444 1,444 1,444
milestone-related
payments (3)
Separation benefits (2,124) 2,124 2,124 2,124 2,124
and other
restructuring (5)
Certain litigation- (10,315) 10,315 10,315 10,315 10,315
related and other
contingencies, net (6)
Asset impairment (88,438) 88,438 88,438 88,438 88,438
charges (7)
Fair value of 5,507 (5,507) (5,507) (5,507) (5,507)
contingent
consideration (9)
Other (11) 175 (175) (261) 86 86 86
Tax adjustments (12) 18,861 (18,861) (18,861)
Exclude discontinued 7,953 7,953
operations, net of tax
(13)
After considering items $699,727 $247,051 $452,676 64.7 % $175,991 25.2 % $276,685 39.5 % $133,951 $142,734 $22,329 15.6 % $120,405
$ - $120,405 $0.52
(non-GAAP)
Three Months Ended June 30, 2018
---
Total
Cost of
Gross
Gross
Total
Operating
Operating
Operating
Other non-
(Loss)
Income
Effective
(Loss)
Discontinued
Net (loss)
Diluted
revenues, revenues margin margin operating expense to income margin % operating income tax tax rate income operations, income (loss)
net % expenses revenue % from expense, from expense from net of tax income
continuing net continuing continuing per share
operations operations operations from
before continuing
income tax operations (14)
Reported (GAAP) $714,696 $381,905 $332,791 46.6 % $277,807 38.9 % $54,984 7.7 % $101,228 $(46,244) $6,235 (13.5)% $(52,479) $(8,388) $(60,867) $(0.23)
Items impacting
comparability:
Amortization of (153,215) 153,215 153,215 153,215 153,215 153,215
intangible assets (1)
Inventory step-up and (124) 124 124 124 124 124
other cost savings (2)
Upfront and (694) 694 (36,270) 36,964 36,964 36,964 36,964
milestone-related
payments (3)
Inventory reserve (202) 202 202 202 202 202
increase from
restructuring (4)
Separation benefits (26,613) 26,613 (2,338) 28,951 28,951 28,951 28,951
and other
restructuring (5)
Certain litigation- (19,620) 19,620 19,620 19,620 19,620
related and other
contingencies, net (6)
Asset impairment (22,767) 22,767 22,767 22,767 22,767
charges (7)
Acquisition-related (1,034) 1,034 1,034 1,034 1,034
and integration costs
(8)
Fair value of (4,127) 4,127 4,127 4,127 4,127
contingent
consideration (9)
Other (11) 28,007 (28,007) (28,007) (28,007)
Tax adjustments (12) 14,323 (14,323) (14,323)
Exclude discontinued 8,388 8,388
operations, net of tax
(13)
After considering items $714,696 $201,057 $513,639 71.9 % $191,651 26.8 % $321,988 45.1 % $129,235 $192,753 $20,558 10.7 % $172,195
$ - $172,195 $0.76
(non-GAAP)
Six Months Ended June 30, 2019
---
Total
Cost of
Gross
Gross
Total
Operating
Operating
Operating
Other
(Loss)
Income
Effective
(Loss)
Discontinued
Net (loss)
Diluted
revenues, revenues margin margin operating expense to income margin % non- income tax tax rate income operations, income (loss)
net % expenses revenue % from operating from expense from net of tax income
continuing expense, continuing continuing per share
operations net operations operations from
before continuing
income tax operations (14)
Reported (GAAP) $1,420,138 $780,117 $640,021 45.1 % $584,453 41.2 % $55,568 3.9 % $151,861 $(96,293) $14,371 (14.9)% $(110,664) $(13,914) $(124,578) $(0.49)
Items impacting
comparability:
Amortization of (286,017) 286,017 286,017 286,017 286,017 286,017
intangible assets (1)
Upfront and (1,400) 1,400 (983) 2,383 2,383 2,383 2,383
milestone-related
payments (3)
Separation benefits (4,149) 4,149 4,149 4,149 4,149
and other
restructuring (5)
Certain litigation- (10,321) 10,321 10,321 10,321 10,321
related and other
contingencies, net (6)
Asset impairment (253,886) 253,886 253,886 253,886 253,886
charges (7)
Fair value of 43,008 (43,008) (43,008) (43,008) (43,008)
contingent
consideration (9)
Gain on 119,828 (119,828) (119,828) (119,828)
extinguishment of
debt (10)
Other (11) 175 (175) (1,795) 1,620 1,620 1,620
Tax adjustments (12) 42,388 (42,388) (42,388)
Exclude discontinued 13,914 13,914
operations, net of tax
(13)
After considering items $1,420,138 $492,700 $927,438 65.3 % $358,297 25.2 % $569,141 40.1 % $269,894 $299,247 $56,759 19.0 % $242,488
$ - $242,488 $1.04
(non-GAAP)
Six Months Ended June 30, 2018
---
Total
Cost of
Gross
Gross
Total
Operating
Operating
Operating
Other
(Loss)
Income
Effective
(Loss)
Discontinued
Net (loss)
Diluted
revenues, revenues margin margin % operating expense to (loss) margin % non- income tax tax rate income operations, income (loss)
net expenses revenue % income operating from expense from net of tax income
from expense, continuing continuing per share
continuing net operations operations from
operations before continuing
income tax operations (14)
Reported (GAAP) $1,415,223 $785,503 $629,720 44.5 % $935,871 66.1 % $(306,151) (21.6)% $222,340 $(528,491) $21,726 (4.1)% $(550,217) $(16,139) $(566,356) $(2.46)
Items impacting
comparability:
Amortization of (310,387) 310,387 310,387 310,387 310,387 310,387
intangible assets (1)
Inventory step-up and (190) 190 190 190 190 190
other cost savings (2)
Upfront and (1,350) 1,350 (36,946) 38,296 38,296 38,296 38,296
milestone-related
payments (3)
Inventory reserve (2,590) 2,590 2,590 2,590 2,590 2,590
increase from
restructuring (4)
Separation benefits (53,831) 53,831 (21,719) 75,550 75,550 75,550 75,550
and other
restructuring (5)
Certain litigation- (17,120) 17,120 17,120 17,120 17,120
related and other
contingencies, net (6)
Asset impairment (471,183) 471,183 471,183 471,183 471,183
charges (7)
Acquisition-related (1,034) 1,034 1,034 1,034 1,034
and integration costs
(8)
Fair value of (10,962) 10,962 10,962 10,962 10,962
contingent
consideration (9)
Other (11) 630 (630) 30,631 (31,261) (31,261) (31,261)
Tax adjustments (12) 22,856 (22,856) (22,856)
Exclude discontinued 16,139 16,139
operations, net of tax
(13)
After considering items $1,415,223 $417,155 $998,068 70.5 % $377,537 26.7 % $620,531 43.8 % $252,971 $367,560 $44,582 12.1 % $322,978
$ - $322,978 $1.43
(non-GAAP)
Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures
Notes to certain line items included in the reconciliations of the GAAP financial measures to the Non-GAAP financial measures for the three and six months ended June 30, 2019 and 2018 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,
2019 2018 2019 2018
Amortization of intangible assets excluding fair value $
134,473 $
146,906 $
271,338 $
296,766
step-up from contingent consideration
Amortization of intangible assets related to fair value 5,945 6,309 14,679 13,621
step-up from contingent consideration
Total $
140,418 $
153,215 $
286,017 $
310,387
(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,
2019 2018
Cost of revenues Operating Cost of revenues Operating
expenses expenses
Sales-based $
739
$ $
694
$
Development-based 705 36,270
Total $
739 $
705 $
694 $
36,270
Six Months Ended June 30,
2019 2018
Cost of revenues Operating Cost of revenues Operating
expenses expenses
Sales-based $
1,400
$ $
1,350
$
Development-based 983 36,946
Total $
1,400 $
983 $
1,350 $
36,946
(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,
2019 2018
Cost of revenues Operating Cost of revenues Operating
expenses expenses
Separation benefits
$ $
410 $
3,983 $
1,440
Accelerated depreciation and product discontinuation 18,045
charges
Other 1,714 4,585 898
Total
$ $
2,124 $
26,613 $
2,338
Six Months Ended June 30,
2019 2018
Cost of revenues Operating Cost of revenues Operating
expenses expenses
Separation benefits
$ $
2,212 $
13,768 $
16,836
Accelerated depreciation and product discontinuation 35,177
charges
Other 1,937 4,886 4,883
Total
$ $
4,149 $
53,831 $
21,719
To exclude litigation-related
settlement charges and certain
settlements proceeds related to
suits filed by our
(6) subsidiaries.
(7) Adjustments for asset impairment
charges included the following
(in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Goodwill impairment charges $
65,108
$ $
151,108 $
391,000
Other intangible asset impairment charges 21,699 22,767 100,399 76,967
Property, plant and equipment impairment charges 1,631 2,379 3,216
Total asset impairment charges $
88,438 $
22,767 $
253,886 $
471,183
(8) Adjustments for acquisition and
integration items primarily relate
to various acquisitions.
(9) To exclude the impact of changes in
the fair value of contingent
consideration liabilities resulting
from changes to our estimates
regarding the timing and amount of
the future revenues of the
underlying products and changes in
other assumptions impacting the
probability of, and extent to which
we will incur related contingent
obligations.
(10) To exclude the gain on the
extinguishment of debt associated
with our March 2019 refinancing.
(11) Other adjustments included the
following (in thousands):
Three Months Ended June 30,
2019 2018
Operating Other non- Operating Other non-
expenses operating expenses operating
expenses expenses
Foreign currency impact related to the re-measurement
$ $
2,262
$ $
(574)
of intercompany debt instruments
(Gain) loss on sale of business and other assets (2,001) (23,837)
Other miscellaneous (175) (3,596)
Total $
(175) $
261
$ $
(28,007)
Six Months Ended June 30,
2019 2018
Operating Other non- Operating Other non-
expenses operating expenses operating
expenses expenses
Foreign currency impact related to the re-measurement
$ $
3,796
$ $
(3,088)
of intercompany debt instruments
(Gain) loss on sale of business and other assets (2,001) (23,837)
Other miscellaneous (175) (630) (3,706)
Total $
(175) $
1,795 $
(630) $
(30,631)
(12) Adjusted income taxes are calculated
by tax effecting adjusted pre-tax
income and permanent book-tax
differences at the applicable
effective tax rate that will be
determined by reference to
statutory tax rates in the relevant
jurisdictions in which the Company
operates. Adjusted income taxes
include current and deferred income
tax expense commensurate with the
non-GAAP measure of profitability.
(13) To exclude the results of the
businesses reported as discontinued
operations, net of tax.
(14) Calculated as Net (loss) income from
continuing operations divided by
the applicable weighted average
share number. The applicable
weighted average share numbers are
as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
GAAP 226,221 223,834 225,408 223,677
Non-
GAAP
Adjusted 232,713 227,273 232,174 226,114
(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) expense,
net per the Condensed Consolidated
Statements of Operations.
Reconciliation of Net Debt Leverage Ratio (non-GAAP)
The following table provides a reconciliation of our Net loss (GAAP) to our Adjusted EBITDA (non-GAAP) for the twelve months ended June 30, 2019 (in thousands) and the calculation of our Net Debt Leverage Ratio (non-GAAP):
Twelve Months
Ended June 30,
2019
Net loss
(GAAP) $
(589,691)
Income tax
expense 15,580
Interest
expense, net 535,091
Depreciation
and
amortization
(15) 664,849
EBITDA (non-
GAAP) $
625,829
Inventory
step-up and
other cost
savings $
71
Upfront and
milestone-
related
payments 9,195
Inventory
reserve
increase from
restructuring 357
Separation
benefits and
other
restructuring 11,947
Certain
litigation-
related and
other
contingencies,
net 7,010
Asset
impairment
charges 699,642
Acquisition-
related and
integration
costs 970
Fair value of
contingent
consideration (34,060)
Gain on
extinguishment
of debt (119,828)
Share-based
compensation 61,418
Other income,
net (16,039)
Other
adjustments 58
Discontinued
operations,
net of tax 67,477
Adjusted
EBITDA (non-
GAAP) $
1,314,047
Calculation of
Net Debt:
Debt $
8,404,122
Cash
(excluding
Restricted
Cash) 1,446,949
Net Debt (non-
GAAP) $
6,957,173
Calculation of
Net Debt
Leverage:
Net Debt
Leverage
Ratio (non-
GAAP) 5.3
Non-GAAP Financial Measures
The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These Non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP net income and its components and diluted 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, gain / loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amounts of which could be significant.
See Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission for an explanation of Endo's non-GAAP financial measures.
About Endo International plc
Endo International plc (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; changes in legislation; Endo's ability to obtain and maintain adequate protection for its intellectual property rights; the timing and uncertainty of the results of both the research and development and regulatory processes, including regulatory decisions, product recalls, withdrawals and other unusual items; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; technological advances and patents obtained by competitors; the performance, including the approval, introduction, and consumer and physician acceptance of new products and the continuing acceptance of currently marketed products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; the timing or results of any pending or future litigation, investigations or claims or actual or contingent liabilities, settlement discussions, negotiations or other adverse proceedings; unfavorable publicity regarding the misuse of opioids; timing and uncertainty of any acquisition, including the possibility that various closing conditions may not be satisfied or waived, uncertainty surrounding the successful integration of any acquired business and failure to achieve the expected financial and commercial results from such acquisition; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; and Endo's ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, U.S. and international economic conditions, including higher unemployment, political instability, financial hardship, consumer confidence and debt levels, taxation, changes in interest and currency exchange rates, international relations, capital and credit availability, the status of financial markets and institutions, fluctuations or devaluations in the value of sovereign government debt, as well as the general impact of continued economic volatility, can materially affect Endo's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Endo expressly disclaims any intent or obligation to update these forward-looking statements except as required to do so by law.
Additional information concerning the above-referenced risk factors and other risk factors can be found in press releases issued by Endo, as well as Endo's public periodic filings with the U.S. Securities and Exchange Commission and with securities regulators in Canada, including the discussion under the heading "Risk Factors" in Endo's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Endo's press releases and additional information about Endo are available at www.endo.com or you can contact the Endo Investor Relations Department by calling 845-364-4833.
View original content:http://www.prnewswire.com/news-releases/endo-reports-second-quarter-2019-financial-results-300896589.html
SOURCE Endo Pharmaceuticals Inc.
