Endo Reports Second-Quarter 2020 Financial Results
-- Revenues decreased 2% to $688 million compared to prior year --
-- On July 6, 2020, U.S. FDA approved Qwo(TM) (collagenase clostridium histolyticum-aaes), the first injectable treatment for cellulite --
DUBLIN, Aug. 5, 2020 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported financial results for the second quarter ended June 30, 2020.
"I'm proud of what our team delivered in the second quarter. Our Branded Pharmaceuticals segment performed better than previously guided as COVID-19 related restrictions and physician office closures began easing throughout the quarter. Additionally, our Sterile Injectables segment delivered strong revenue growth versus prior year as customers built significant inventory levels of products used to treat certain COVID-19 patients," said Blaise Coleman, President and Chief Executive Officer at Endo. "I want to thank our team members for their tireless work and dedication to meeting our customers' needs in a challenging environment."
Mr. Coleman continued, "With the recent FDA approval of QWO and Endo's impending entry into the US medical aesthetics market, we are ready to embark on the next phase of our transformation. We have evolved our strategic priorities to focus on expanding and enhancing our portfolio of life-enhancing products while accelerating new ways to better serve our customers and to improve productivity. We look forward to executing against these priorities as we seek to realize Endo's full potential."
SECOND-QUARTER FINANCIAL PERFORMANCE
(
in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 (1) Change 2020 2019 (1) Change
Total Revenues, Net $
687,588 $
699,727 (2)
%
% $
1,507,993 $
1,420,138 6
Reported Income (Loss) from
Continuing Operations $
17,610 $
(98,052) NM $
175,191 $
(110,664) NM
Reported Diluted Weighted Average 233,681 226,221 3 233,348 225,408 4
Shares % %
Reported Diluted Net Income
(Loss) per Share from Continuing
Operations $
0.08 $
(0.43) NM $
0.75 $
(0.49) NM
Reported Net Income (Loss) $
10,558 $
(106,005) NM $
140,488 $
(124,578) NM
Adjusted Income from Continuing $
151,700 $
139,388 9 $
372,100 $
278,161 34
Operations % %
Adjusted Diluted Weighted Average 233,681 232,713
% 233,348 232,174 1
Shares (2) %
Adjusted Diluted Net Income per $
0.65 $
0.60 8 $
1.59 $
1.20 33
Share from Continuing Operations % %
Adjusted EBITDA $
336,481 $
326,084 3 $
757,607 $
677,180 12
% %
(1) Certain prior period adjusted
amounts have been revised as a
result of a change in the Company's
definition of its adjusted
financial metrics. Refer to the
"Supplemental Financial
Information" section below for
additional discussion.
(2) Reported Diluted Net Income (Loss)
per Share from continuing
operations 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 $688 million in second-quarter 2020, a decrease of 2% compared to $700 million during the same period in 2019. This result was primarily attributable to decreased Branded Pharmaceuticals segment revenues due to reduced physician office activity and patient office visits compared to prior year because of the COVID-19 pandemic. This decrease was largely offset by an increase in Sterile Injectables segment revenues due to significant channel inventory stocking of products used to treat certain patients infected with COVID-19.
Reported income from continuing operations in second-quarter 2020 was $18 million compared to reported loss from continuing operations of $98 million during the same period in 2019. This result was primarily attributable to lower asset impairment charges. Reported diluted net income per share from continuing operations in second-quarter 2020 was $0.08 compared to reported diluted net loss per share from continuing operations of $0.43 in second-quarter 2019.
Adjusted income from continuing operations in second-quarter 2020 was $152 million compared to $139 million in second-quarter 2019. This increase was primarily attributable to lower second-quarter 2020 operating expenses. Adjusted diluted net income per share from continuing operations in second-quarter 2020 was $0.65 compared to $0.60 in second-quarter 2019.
BRANDED PHARMACEUTICALS SEGMENT
Second-quarter 2020 Branded Pharmaceuticals segment revenues were $130 million, a decrease of 38% compared to $209 million during second-quarter 2019. This decrease was primarily attributable to reduced volumes caused by the COVID-19 pandemic.
Specialty Products revenues decreased 45% to $69 million in second-quarter 2020 compared to $124 million in second-quarter 2019, with sales of XIAFLEX(®) decreasing 55% to $34 million compared to $75 million in second-quarter 2019. This decrease was primarily a result of physician office closures and a decline in patients electing to be treated because of the COVID-19 pandemic. Established Products revenues decreased 28% to $61 million in second-quarter 2020 compared to $85 million in second-quarter 2019 due to competitive pressures and a temporary product supply disruption, which has been resolved.
On July 6, 2020, the U.S. Food and Drug Administration (FDA) approved QWO (collagenase clostridium histolyticum-aaes) for the treatment of moderate to severe cellulite in the buttocks of adult women. QWO is the first FDA-approved injectable treatment for cellulite and is expected to be available throughout the United States beginning in spring 2021.
STERILE INJECTABLES SEGMENT
Second-quarter 2020 Sterile Injectables segment revenues were $319 million, an increase of 31% compared to $244 million during second-quarter 2019. This increase was primarily driven by significant channel inventory stocking of VASOSTRICT(®) in anticipation of treating vasodilatory shock in patients infected with COVID-19.
GENERIC PHARMACEUTICALS SEGMENT
Second-quarter 2020 Generic Pharmaceuticals segment revenues were $216 million, a decrease of 1% compared to $218 million during second-quarter 2019. This decrease was primarily attributable to continued competitive pressures on certain key products, which were partially offset by recent product launches.
INTERNATIONAL PHARMACEUTICALS SEGMENT
Second-quarter 2020 International Pharmaceuticals segment revenues decreased 20% to $23 million compared to $29 million during second-quarter 2019.
THIRD-QUARTER AND FULL YEAR 2020 GUIDANCE
Endo is providing financial guidance for third-quarter and full year 2020. The third-quarter financial guidance reflects the anticipated unfavorable impact of new competitive events in Endo's Generic Pharmaceuticals segment and significant VASOSTRICT channel destocking. The outlook ranges below also reflect a number of other assumptions that are subject to change including, among other things, uncertainties related to the COVID-19 pandemic and the Company's expectation of a return to more normalized customer purchasing patterns during the fourth-quarter 2020. The Company estimates:
Third-Quarter 2020 Full Year 2020
Total
Revenues,
Net
$515M to $550M
$2.60B to $2.70B
Adjusted
EBITDA
$175M to $200M
$1.19B to $1.23B
Adjusted
Diluted
Net Income
per Share
from
Continuing
Operations
$0.08 to $0.13
$2.00 to $2.15
Adjusted
Gross
Margin ~64.0% to ~65.0% ~66.5% to ~67.0%
Adjusted
Operating
Expenses
as a
Percentage
of Total
Revenues,
Net ~34.0% ~25.0% to ~25.5%
Adjusted
Interest
Expense
~$140M ~$530M to ~$535M
Adjusted
Effective
Tax Rate ~7.5% to ~8.5% ~14.0% to ~15.0%
Adjusted
Diluted
Weighted
Average
Shares
~234M
~234M
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of June 30, 2020, the Company had approximately $1.8 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 4.5.
Second-quarter 2020 cash provided by operating activities was $304 million, compared to $177 million of net cash provided by operating activities during second-quarter 2019.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release tomorrow at 7:00 a.m. EDT. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 2058864. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from August 6, 2020 at 10:00 a.m. ET until 10:00 a.m. ET on August 13, 2020 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 2058864.
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, 2020 and 2019 (dollars in thousands):
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
Growth Growth
2020 2019 2020 2019
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX(R) $
33,783 $
74,855 (55) $
122,855 $
143,362 (14)
% %
SUPPRELIN(R) LA 15,395 23,714 (35) 35,115 45,770 (23)
% %
Other Specialty (1) 19,566 25,524 (23) 45,071 49,927 (10)
% %
Total Specialty Products $
68,744 $
124,093 (45) $
203,041 $
239,059 (15)
% %
Established Products:
PERCOCET(R) $
27,578 $
28,878 (5) $
55,281 $
59,638 (7)
% %
LIDODERM(R) 7,056 9,051 (22) 14,279 17,120 (17)
% %
EDEX(R) 6,604 7,662 (14) 15,172 13,633 11
% %
Other Established (2) 19,539 39,329 (50) 45,821 83,088 (45)
% %
Total Established Products $
60,777 $
84,920 (28) $
130,553 $
173,479 (25)
% %
Total Branded Pharmaceuticals (3) $
129,521 $
209,013 (38) $
333,594 $
412,538 (19)
% %
Sterile Injectables:
VASOSTRICT(R) $
214,214 $
116,026 85 $
417,118 $
255,163 63
% %
ADRENALIN(R) 33,161 45,835 (28) 89,673 93,157 (4)
% %
Ertapenem for injection 11,990 25,547 (53) 29,864 57,766 (48)
% %
APLISOL(R) 6,511 15,530 (58) 16,378 27,911 (41)
% %
Other Sterile Injectables (4) 53,338 41,342 29 102,571 80,331 28
% %
Total Sterile Injectables (3) $
319,214 $
244,280 31 $
655,604 $
514,328 27
% %
Total Generic Pharmaceuticals $
215,879 $
217,784 (1) $
467,162 $
436,310 7
% %
Total International Pharmaceuticals $
22,974 $
28,650 (20) $
51,633 $
56,962 (9)
% %
Total revenues, net $
687,588 $
699,727 (2) $
1,507,993 $
1,420,138 6
% %
__________
(1) Products included within Other
Specialty are NASCOBAL(R) Nasal
Spray and AVEED(R).
(2) Products included within Other
Established include, but are not
limited to, TESTOPEL(R).
(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, 2020 and/or any
product having revenues in excess
of $25 million during any
quarterly period in 2020 or 2019.
(4) Products included within Other
Sterile Injectables include
ephedrine sulfate injection and
others.
The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share data):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
TOTAL REVENUES, NET $
687,588 $
699,727 $
1,507,993 $
1,420,138
COSTS AND EXPENSES:
Cost of revenues 336,096 388,208 724,895 780,117
Selling, general and administrative 173,258 152,297 340,026 303,420
Research and development 30,495 26,348 62,110 59,834
Litigation-related and other contingencies,
net (8,572) 10,315 (25,748) 10,321
Asset impairment charges 88,438 97,785 253,886
Acquisition-related and integration items,
net 6,045 (5,507) 18,507 (43,008)
Interest expense, net 129,164 134,809 262,041 267,484
Gain on extinguishment of debt (119,828)
Other (income) expense, net (4,150) (597) (18,124) 4,205
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX $
25,252 $
(94,584) $
46,501 $
(96,293)
INCOME TAX EXPENSE (BENEFIT) 7,642 3,468 (128,690) 14,371
INCOME (LOSS) FROM CONTINUING OPERATIONS $
17,610 $
(98,052) $
175,191 $
(110,664)
DISCONTINUED OPERATIONS, NET OF TAX (7,052) (7,953) (34,703) (13,914)
NET INCOME (LOSS) $
10,558 $
(106,005) $
140,488 $
(124,578)
NET INCOME (LOSS) PER SHARE-BASIC:
Continuing operations $
0.08 $
(0.43) $
0.77 $
(0.49)
Discontinued operations (0.03) (0.04) (0.16) (0.06)
Basic $
0.05 $
(0.47) $
0.61 $
(0.55)
NET INCOME (LOSS) PER SHARE-DILUTED:
Continuing operations $
0.08 $
(0.43) $
0.75 $
(0.49)
Discontinued operations (0.03) (0.04) (0.15) (0.06)
Diluted $
0.05 $
(0.47) $
0.60 $
(0.55)
WEIGHTED AVERAGE SHARES:
Basic 229,716 226,221 228,457 225,408
Diluted 233,681 226,221 233,348 225,408
The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020 December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $
1,780,087 $
1,454,531
Restricted cash and cash
equivalents 180,730 247,457
Accounts receivable 271,893 467,953
Inventories, net 330,540 327,865
Other current assets 122,894 88,412
Total current assets $
2,686,144 $
2,586,218
TOTAL NON-CURRENT ASSETS 6,478,990 6,803,309
TOTAL ASSETS $
9,165,134 $
9,389,527
LIABILITIES AND SHAREHOLDERS'
DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses, including legal
settlement accruals $
1,175,241 $
1,412,954
Other current liabilities 47,170 47,335
Total current liabilities $
1,222,411 $
1,460,289
LONG-TERM DEBT, LESS CURRENT
PORTION, NET 8,302,595 8,359,899
OTHER LIABILITIES 354,995 435,883
SHAREHOLDERS' DEFICIT (714,867) (866,544)
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $
9,165,134 $
9,389,527
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2020 and 2019 (in thousands):
Six Months Ended June 30,
2020 2019
OPERATING ACTIVITIES:
Net income (loss) $
140,488 $
(124,578)
Adjustments to reconcile
Net income (loss) to Net
cash provided by
operating activities:
Depreciation and
amortization 264,198 320,788
Asset impairment charges 97,785 253,886
Other, including cash
payments to claimants
from Qualified
Settlement Funds (135,583) (363,494)
Net cash provided by
operating activities $
366,888 $
86,602
INVESTING ACTIVITIES:
Purchases of property,
plant and equipment,
excluding capitalized
interest $
(36,305) $
(23,632)
Proceeds from sale of
business and other
assets, net 6,017 2,594
Other (1,125) (1,278)
Net cash used in
investing activities $
(31,413) $
(22,316)
FINANCING ACTIVITIES:
(Payments on) proceeds
from borrowings, net $
(66,685) $
257,605
Other (9,046) (22,676)
Net cash (used in)
provided by financing
activities $
(75,731) $
234,929
Effect of foreign
exchange rate (915) 841
NET INCREASE IN CASH,
CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS $
258,829 $
300,056
CASH, CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS, BEGINNING
OF PERIOD 1,720,388 1,476,837
CASH, CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS, END OF
PERIOD $
1,979,217 $
1,776,893
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 the Company's 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.
Effective January 1, 2020, the Company revised its definition of its adjusted financial metrics to exclude certain legal costs. The Company believes that such costs are not indicative of business performance and that excluding them more accurately reflects the Company's results and better enables management to compare financial results between periods. As a result of this change, the Company's adjusted financial metrics now exclude opioid-related legal expenses. Prior period adjusted results throughout this document have also been adjusted to reflect this change. The impact of excluding these costs during the three and six months ended June 30, 2020 and 2019 is reflected in the Certain legal costs lines of each of the following reconciliation tables.
Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)
The following table provides a reconciliation of Net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net income (loss) (GAAP) $
10,558 $
(106,005) $
140,488 $
(124,578)
Income tax expense (benefit) 7,642 3,468 (128,690) 14,371
Interest expense, net 129,164 134,809 262,041 267,484
Depreciation and amortization (13) 120,855 158,055 255,813 320,788
EBITDA (non-GAAP) $
268,219 $
190,327 $
529,652 $
478,065
Upfront and milestone-related
payments (2) 444 1,444 2,194 2,383
Continuity and separation benefits and
other cost reductions (3) 9,444 2,124 32,664 4,149
Certain litigation-related and other
contingencies, net (4) (8,572) 10,315 (25,748) 10,321
Certain legal costs (5) 18,005 18,984 33,541 35,673
Asset impairment charges (6) 88,438 97,785 253,886
Fair value of contingent consideration
(7) 6,045 (5,507) 18,507 (43,008)
Gain on extinguishment of debt (8) (119,828)
Share-based compensation (13) 9,222 12,600 21,677 37,333
Other (income) expense, net (14) (4,150) (597) (18,124) 4,205
Other (9) 30,772 3 30,756 87
Discontinued operations, net of tax
(11) 7,052 7,953 34,703 13,914
Adjusted EBITDA (non-GAAP) $
336,481 $
326,084 $
757,607 $
677,180
Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)
The following table provides a reconciliation of the Company's Income (loss) from continuing operations (GAAP) to Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Income (loss) from continuing operations
(GAAP) $
17,610 $
(98,052) $
175,191 $
(110,664)
Non-GAAP adjustments:
Amortization of intangible assets (1) 104,498 140,418 221,735 286,017
Upfront and milestone-related payments (2) 444 1,444 2,194 2,383
Continuity and separation benefits and other
cost reductions (3) 9,444 2,124 32,664 4,149
Certain litigation-related and other
contingencies, net (4) (8,572) 10,315 (25,748) 10,321
Certain legal costs (5) 18,005 18,984 33,541 35,673
Asset impairment charges (6) 88,438 97,785 253,886
Fair value of contingent consideration (7) 6,045 (5,507) 18,507 (43,008)
Gain on extinguishment of debt (8) (119,828)
Other (9) 29,755 86 15,335 1,620
Tax adjustments (10) (25,529) (18,862) (199,104) (42,388)
Adjusted income from continuing operations
(non-GAAP) $
151,700 $
139,388 $
372,100 $
278,161
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, 2020 and 2019 (in thousands, except per share data):
Three Months Ended June 30, 2020
Total revenues, net Cost of revenues Gross margin Gross margin % Total operating expenses Operating expense to revenue Operating income from continuing Operating margin % Other non-operating expense, Income from continuing operations Income tax expense Effective tax rate Income from continuing Discontinued operations, net of tax
Net income Diluted net income per share from
% operations net before income tax operations continuing operations (12)
Reported (GAAP) $687,588 $336,096 $351,492 51.1 % $201,226 29.3 % $150,266 21.9 % $125,014 $25,252 $7,642 30.3 % $17,610 $(7,052) $10,558 $0.08
Items impacting
comparability:
Amortization of intangible
assets (1) (104,498) 104,498 104,498 104,498 104,498 104,498
Upfront and milestone-
related payments (2) (125) 125 (319) 444 444 444 444
Continuity and separation
benefits and other cost
reductions (3) (904) 904 (8,540) 9,444 9,444 9,444 9,444
Certain litigation-related
and other contingencies,
net (4) 8,572 (8,572) (8,572) (8,572) (8,572)
Certain legal costs (5) (18,005) 18,005 18,005 18,005 18,005
Fair value of contingent
consideration (7) (6,045) 6,045 6,045 6,045 6,045
Other (9) (30,749) 30,749 994 29,755 29,755 29,755
Tax adjustments (10) 25,529 (25,529) (25,529)
Exclude discontinued
operations, net of tax
(11) 7,052 7,052
After considering items
(non-GAAP) $687,588 $230,569 $457,019 66.5 % $146,140 21.3 % $310,879 45.2 % $126,008 $184,871 $33,171 17.9 % $151,700
$ - $151,700 $0.65
Three Months Ended June 30, 2019
Total revenues, net Cost of revenues Gross margin Gross margin % Total operating expenses Operating expense to revenue Operating income from continuing Operating margin % Other non-operating expense, (Loss) income from continuing Income tax expense Effective tax rate (Loss) income from continuing Discontinued operations, net of tax Net (loss) income Diluted net (loss) income per share
% operations net operations before income tax operations from continuing operations (12)
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 intangible
assets (1) (140,418) 140,418 140,418 140,418 140,418 140,418
Upfront and milestone-
related payments (2) (739) 739 (705) 1,444 1,444 1,444 1,444
Continuity and separation
benefits and other cost
reductions (3) (2,124) 2,124 2,124 2,124 2,124
Certain litigation-related
and other contingencies,
net (4) (10,315) 10,315 10,315 10,315 10,315
Certain legal costs (5) (18,984) 18,984 18,984 18,984 18,984
Asset impairment charges
(6) (88,438) 88,438 88,438 88,438 88,438
Fair value of contingent
consideration (7) 5,507 (5,507) (5,507) (5,507) (5,507)
Other (9) 175 (175) (261) 86 86 86
Tax adjustments (10) 18,862 (18,862) (18,862)
Exclude discontinued
operations, net of tax
(11) 7,953 7,953
After considering items
(non-GAAP) $699,727 $247,051 $452,676 64.7 % $157,007 22.4 % $295,669 42.3 % $133,951 $161,718 $22,330 13.8 % $139,388
$ - $139,388 $0.60
Six Months Ended June 30, 2020
Total revenues, net Cost of revenues Gross margin Gross margin % Total operating expenses Operating expense to revenue Operating income from continuing Operating margin % Other non-operating expense, Income from continuing operations Income tax (benefit) expense Effective tax rate Income from continuing Discontinued operations, net of tax
Net income Diluted net income per share from
% operations net before income tax operations continuing operations (12)
Reported (GAAP) $1,507,993 $724,895 $783,098 51.9 % $492,680 32.7 % $290,418 19.3 % $243,917 $46,501 $(128,690) (276.7)% $175,191 $(34,703) $140,488 $0.75
Items impacting
comparability:
Amortization of intangible
assets (1) (221,735) 221,735 221,735 221,735 221,735 221,735
Upfront and milestone-
related payments (2) (667) 667 (1,527) 2,194 2,194 2,194 2,194
Continuity and separation
benefits and other cost
reductions (3) (7,142) 7,142 (25,522) 32,664 32,664 32,664 32,664
Certain litigation-related
and other contingencies,
net (4) 25,748 (25,748) (25,748) (25,748) (25,748)
Certain legal costs (5) (33,541) 33,541 33,541 33,541 33,541
Asset impairment charges
(6) (97,785) 97,785 97,785 97,785 97,785
Fair value of contingent
consideration (7) (18,507) 18,507 18,507 18,507 18,507
Other (9) (30,749) 30,749 15,414 15,335 15,335 15,335
Tax adjustments (10) 199,104 (199,104) (199,104)
Exclude discontinued
operations, net of tax
(11) 34,703 34,703
After considering items
(non-GAAP) $1,507,993 $495,351 $1,012,642 67.2 % $310,797 20.6 % $701,845 46.5 % $259,331 $442,514 $70,414 15.9 % $372,100
$ - $372,100 $1.59
Six Months Ended June 30, 2019
Total revenues, net Cost of revenues Gross margin Gross margin % Total operating expenses Operating expense to revenue Operating income from continuing Operating margin % Other non-operating expense, (Loss) income from continuing Income tax expense Effective tax rate (Loss) income from continuing Discontinued operations, net of tax Net (loss) income Diluted net (loss) income per share
% operations net operations before income tax operations from continuing operations (12)
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 intangible
assets (1) (286,017) 286,017 286,017 286,017 286,017 286,017
Upfront and milestone-
related payments (2) (1,400) 1,400 (983) 2,383 2,383 2,383 2,383
Continuity and separation
benefits and other cost
reductions (3) (4,149) 4,149 4,149 4,149 4,149
Certain litigation-related
and other contingencies,
net (4) (10,321) 10,321 10,321 10,321 10,321
Certain legal costs (5) (35,673) 35,673 35,673 35,673 35,673
Asset impairment charges
(6) (253,886) 253,886 253,886 253,886 253,886
Fair value of contingent
consideration (7) 43,008 (43,008) (43,008) (43,008) (43,008)
Gain on extinguishment of
debt (8) 119,828 (119,828) (119,828) (119,828)
Other (9) 175 (175) (1,795) 1,620 1,620 1,620
Tax adjustments (10) 42,388 (42,388) (42,388)
Exclude discontinued
operations, net of tax
(11) 13,914 13,914
After considering items
(non-GAAP) $1,420,138 $492,700 $927,438 65.3 % $322,624 22.7 % $604,814 42.6 % $269,894 $334,920 $56,759 16.9 % $278,161
$ - $278,161 $1.20
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, 2020 and 2019 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,
2020 2019 2020 2019
Amortization of
intangible assets
excluding fair
value step-up
from contingent
consideration $
103,681 $
134,473 $
220,101 $
271,338
Amortization of
intangible assets
related to fair
value step-up
from contingent
consideration 817 5,945 1,634 14,679
Total $
104,498 $
140,418 $
221,735 $
286,017
(2)
Adjustments for upfront and milestone-related payments to partners included the following (in thousands):
Three Months Ended June 30,
2020 2019
Cost of Operating Cost of Operating
revenues expenses revenues expenses
Sales-based $
125
$ $
739
$
Development-based 319 705
Total $
125 $
319 $
739 $
705
Six Months Ended June 30,
---
2020 2019
Cost of Operating Cost of Operating
revenues expenses revenues expenses
Sales-based $
667
$ $
1,400
$
Development-based 1,527 983
Total $
667 $
1,527 $
1,400 $
983
(3)
Adjustments for continuity and separation benefits and other cost reductions included the following (in thousands):
Three Months Ended June 30,
2020 2019
Cost of Operating Cost of Operating
revenues expenses revenues expenses
Continuity and
separation
benefits $
515 $
3,606
$ $
410
Accelerated
depreciation
charges 1,347 408
Other (958) 4,526 1,714
Total $
904 $
8,540
$ $
2,124
Six Months Ended June 30,
2020 2019
Cost of Operating Cost of Operating
revenues expenses revenues expenses
Continuity and
separation
benefits $
1,142 $
16,775
$ $
2,212
Accelerated
depreciation
charges 6,026 2,359
Other (26) 6,388 1,937
Total $
7,142 $
25,522
$ $
4,149
Included within the Continuity and
separation benefits line are costs
associated with certain continuity and
transitional compensation arrangements for
certain senior management of the Company.
(4) To exclude adjustments to
accruals for litigation-
related settlement charges and
certain settlement proceeds
related to suits filed by
subsidiaries.
(5) To exclude opioid-related legal
expenses.
(6) Adjustments for asset impairment
charges included the following
(in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Goodwill
impairment
charges
$ $
65,108 $
32,786 $
151,108
Other intangible
asset impairment
charges 21,699 63,751 100,399
Property, plant
and equipment
impairment
charges 1,631 1,248 2,379
Total asset
impairment
charges
$ $
88,438 $
97,785 $
253,886
(7) 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 incurring, and extent
to which the Company could incur,
related contingent obligations.
(8) To exclude the gain on the
extinguishment of debt associated
with the Company's March 2019
refinancing.
(9) The Other row included in each of the
above reconciliations of GAAP
financial measures to Non-GAAP
financial measures (except for the
reconciliations of Net income (loss)
(GAAP) to Adjusted EBITDA (non-
GAAP)) includes the following (in
thousands):
Three Months Ended June 30,
2020 2019
Operating Other non- Operating Other non-
expenses operating expenses operating
expenses expenses
Foreign currency
impact related to
the re-measurement
of intercompany
debt instruments
$ $
3,005
$ $
2,262
(Gain) loss on sale
of business and
other assets (3,999) (2,001)
Debt modification
costs 30,749
Other miscellaneous (175)
Total $
30,749 $
(994) $
(175) $
261
Six Months Ended June 30,
2020 2019
Operating Other non- Operating Other non-
expenses operating expenses operating
expenses expenses
Foreign currency
impact related to
the re-measurement
of intercompany
debt instruments
$ $
(4,089)
$ $
3,796
(Gain) loss on sale
of business and
other assets (11,325) (2,001)
Debt modification
costs 30,749
Other miscellaneous (175)
Total $
30,749 $
(15,414) $
(175) $
1,795
The Other row included in the reconciliations of
Net income (loss) (GAAP) to Adjusted EBITDA (non-
GAAP) primarily relates to the items enumerated in
the foregoing "Operating expenses" columns.
(10) 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.
(11) To exclude the results of the
businesses reported as discontinued
operations, net of tax.
(12) 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,
2020 2019 2020 2019
GAAP 233,681 226,221 233,348 225,408
Non-
GAAP
Adjusted 233,681 232,713 233,348 232,174
(13) Depreciation and amortization and
Share-based compensation per the
Adjusted EBITDA reconciliations do
not include amounts reflected in
other lines of the reconciliations,
including Continuity and separation
benefits and other cost reductions.
(14) 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 the Company's Net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the twelve months ended June 30, 2020 (in thousands) and the calculation of the Company's Net Debt Leverage Ratio (non-GAAP):
Twelve Months
Ended June 30,
2020
Net loss
(GAAP) $
(157,570)
Income tax
benefit (127,381)
Interest
expense, net 533,291
Depreciation
and
amortization
(13) 547,887
EBITDA (non-
GAAP) $
796,227
Upfront and
milestone-
related
payments $
6,434
Continuity
and
separation
benefits and
other cost
reductions 63,113
Certain
litigation-
related and
other
contingencies,
net (24,858)
Certain legal
costs 63,150
Asset
impairment
charges 369,981
Fair value of
contingent
consideration 15,417
Share-based
compensation
(13) 43,486
Other income,
net (5,652)
Other 44,460
Discontinued
operations,
net of tax 82,841
Adjusted
EBITDA (non-
GAAP) $
1,454,599
Calculation
of Net Debt:
Debt $
8,336,745
Cash
(excluding
Restricted
Cash) 1,780,087
Net Debt
(non-GAAP) $
6,556,658
Calculation
of Net Debt
Leverage:
Net Debt
Leverage
Ratio (non-
GAAP) 4.5
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 net income per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, the company stresses 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 specialty pharmaceutical company committed to helping everyone we serve live their best life through the delivery of quality, life-enhancing therapies. Our decades of proven success come from a global team of passionate employees collaborating to bring the best treatments forward. Together, we boldly transform insights into treatments benefiting those who need them, when they need them. Endo has global headquarters in Dublin, Ireland and U.S. headquarters in Malvern, Pennsylvania.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, including but not limited to the statements by Mr. Coleman, as well as other statements regarding product development, market potential, corporate strategy, optimization efforts, expected growth and regulatory approvals, together with Endo's net income per share from continuing operations amounts, product net sales, revenue forecasts, the impact of and response to the COVID-19 pandemic 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 manufacture, maintain and distribute 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, the impact of and response to the COVID-19 pandemic and the 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.
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SOURCE Endo International plc
