Endo Reports Third-Quarter 2020 Financial Results And Raises Full Year 2020 Financial Guidance
DUBLIN, Nov. 5, 2020 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported financial results for the third-quarter ended September 30, 2020.
"Our third-quarter 2020 results reflect growth in our Branded Pharmaceuticals segment as utilization of physician administered products continues returning toward pre-COVID-19 levels. Additionally, our Sterile Injectables segment performed better than expected during the quarter driven by both favorable customer purchasing patterns and higher underlying utilization for certain critical-care products," said Blaise Coleman, President and Chief Executive Officer at Endo. "Given our year to date performance, we are raising our full-year 2020 financial guidance."
Mr. Coleman continued, "Our recently announced actions to further optimize our Company's operations and to acquire BioSpecifics support the advancement of our key strategic priorities and better position us to create long-term sustainable value."
THIRD-QUARTER FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 (1) Change 2020 2019 (1) Change
---
Total Revenues, Net $
634,860 $
729,426 (13)
% $
2,142,853 $
2,149,564
%
Reported (Loss) Income from $
(68,974) $
(41,431) 66
Continuing Operations % $
106,217 $
(152,095) NM
Reported Diluted Weighted Average 230,040 226,598 2 233,379 225,804 3
Shares %
%
Reported Diluted Net (Loss)
Income per Share from Continuing %
Operations $
(0.30) $
(0.18) 67 $
0.46 $
(0.67) NM
Reported Net (Loss) Income $
(75,887) $
(79,415) (4)
% $
64,601 $
(203,993) NM
Adjusted Income from Continuing $
122,275 $
152,686 (20) $
494,375 $
430,847 15
Operations %
%
Adjusted Diluted Weighted Average 233,442 230,907 1 233,379 231,751 1
Shares (2) %
%
Adjusted Diluted Net Income per $
0.52 $
0.66 (21) $
2.12 $
1.86 14
Share from Continuing Operations %
%
Adjusted EBITDA $
286,700 $
335,656 (15) $
1,044,307 $
1,012,836 3
%
%
__________
(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 (Loss) Income
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 $635 million in third-quarter 2020, a decrease of 13% compared to $729 million during the same period in 2019. This result was primarily attributable to decreased Generic Pharmaceuticals segment revenues.
Reported loss from continuing operations in third-quarter 2020 was $69 million compared to reported loss from continuing operations of $41 million during the same period in 2019. This result was driven by severance and other restructuring charges related to the previously announced strategic initiatives to further optimize Endo's operations. Reported diluted net loss per share from continuing operations in third-quarter 2020 was $0.30 compared to reported diluted net loss per share from continuing operations of $0.18 in third-quarter 2019.
Adjusted income from continuing operations in third-quarter 2020 was $122 million compared to $153 million in third-quarter 2019. This decrease was primarily attributable to lower adjusted gross margin in the Generic Pharmaceuticals segment due to a decline in revenues. Adjusted diluted net income per share from continuing operations in third-quarter 2020 was $0.52 compared to $0.66 in third-quarter 2019.
BRANDED PHARMACEUTICALS SEGMENT
Third-quarter 2020 Branded Pharmaceuticals segment revenues were $224 million, an increase of 3% compared to $217 million during third-quarter 2019.
Specialty Products revenues increased 6% to $140 million in third-quarter 2020 compared to $132 million in third-quarter 2019, with sales of XIAFLEX(®) increasing 7% to $88 million compared to $83 million in third-quarter 2019. Established Products revenues decreased 2% to $84 million in third-quarter 2020 compared to $85 million in third-quarter 2019 due to ongoing competitive pressures in the portfolio.
STERILE INJECTABLES SEGMENT
Third-quarter 2020 Sterile Injectables segment revenues were $251 million, a decrease of 5% compared to $264 million during third-quarter 2019. This decrease was primarily driven by reduced APLISOL(®) revenues due to a nonrecurring resupply benefit which occurred during third-quarter 2019 and ongoing competitive pressures on certain products. The foregoing decrease was significantly offset by increased VASOSTRICT(®) revenues.
During the quarter, Endo also announced a fill-finish manufacturing and services agreement for Novavax's COVID-19 vaccine candidate, NVX-CoV2373.
GENERIC PHARMACEUTICALS SEGMENT
Third-quarter 2020 Generic Pharmaceuticals segment revenues were $136 million, a decrease of 38% compared to $218 million during third-quarter 2019. This decrease was primarily attributable to continued competitive pressures on certain key products.
INTERNATIONAL PHARMACEUTICALS SEGMENT
Third-quarter 2020 International Pharmaceuticals segment revenues decreased 20% to $24 million compared to $30 million during third-quarter 2019.
FULL YEAR 2020 GUIDANCE
Endo is raising financial guidance for full-year 2020. The outlook ranges below reflect a number of assumptions that are subject to change including, among other things, uncertainties related to the COVID-19 pandemic.
Full-Year 2020
Prior Guidance Current Guidance
Total Revenues,
Net
$2.60B to $2.70B
$2.75B to $2.80B
Adjusted EBITDA
$1.19B to $1.23B
$1.30B to $1.32B
Adjusted Diluted
Net Income per
Share from
Continuing
Operations
$2.00 to $2.15
$2.50 to $2.55
Adjusted Gross
Margin ~66.5% to ~67.0% ~67.0%
Adjusted
Operating
Expenses as a
Percentage of
Total Revenues,
Net ~25.0% to ~25.5% ~23.5%
Adjusted
Interest
Expense
~$530M to ~$535M
~$525M
Adjusted
Effective Tax
Rate ~14.0% to ~15.0% ~13.5%
Adjusted Diluted
Weighted
Average Shares
~234M
~234M
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of September 30, 2020, the Company had approximately $1.7 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 4.7.
Third-quarter 2020 cash used in operating activities was $77 million, compared to $33 million of net cash provided by operating activities during third-quarter 2019.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release tomorrow, November 6, 2020, at 7:30 a.m. EST. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 4073637. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from November 6, 2020 at 10:30 a.m. ET until 10:30 a.m. ET on November 13, 2020 by dialing U.S./Canada (855) 859-2056 International (404) 537-3406, and entering the passcode 4073637.
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 nine months ended September 30, 2020 and 2019 (dollars in thousands):
Three Months Ended September 30, Percent Nine Months Ended September 30, Percent
Growth Growth
2020 2019 2020 2019
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX(R) $
88,167 $
82,756 7 $
211,022 $
226,118 (7)
%
%
SUPPRELIN(R) LA 28,229 20,772 36 63,344 66,542 (5)
%
%
Other Specialty (1) 23,724 28,470 (17) 68,795 78,397 (12)
% %
Total Specialty Products $
140,120 $
131,998 6 $
343,161 $
371,057 (8)
%
%
Established Products:
PERCOCET(R) $
27,508 $
28,561 (4) $
82,789 $
88,199 (6)
% %
TESTOPEL(R) 18,068 13,236 37 26,877 40,830 (34)
%
%
Other Established (2) 37,986 43,518 (13) 104,449 129,765 (20)
% %
Total Established Products $
83,562 $
85,315 (2) $
214,115 $
258,794 (17)
% %
Total Branded Pharmaceuticals $
223,682 $
217,313 3 $
557,276 $
629,851 (12)
(3) %
%
Sterile Injectables:
VASOSTRICT(R) $
155,412 $
129,691 20 $
572,530 $
384,854 49
% %
ADRENALIN(R) 30,662 40,311 (24) 120,335 133,468 (10)
% %
Ertapenem for injection 16,784 21,853 (23) 46,648 79,619 (41)
% %
APLISOL(R) 9,443 28,085 (66) 25,821 55,996 (54)
% %
Other Sterile Injectables (4) 39,092 43,695 (11)
%
% 141,663 124,026 14
Total Sterile Injectables (3) $
251,393 $
263,635 (5)
%
% $
906,997 $
777,963 17
Total Generic Pharmaceuticals $
135,508 $
218,012 (38) $
602,670 $
654,322 (8)
% %
Total International $
24,277 $
30,466 (20) $
75,910 $
87,428 (13)
Pharmaceuticals
% %
Total revenues, net $
634,860 $
729,426 (13)
% $
2,142,853 $
2,149,564 %
__________
(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, EDEX(R) and
LIDODERM(R).
(3) Individual products presented above
represent the top two performing
products in each product category
for either the three or nine
months ended September 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 nine months ended September 30, 2020 and 2019 (in thousands, except per share data):
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
TOTAL REVENUES, NET $
634,860 $
729,426 $
2,142,853 $
2,149,564
COSTS AND EXPENSES:
Cost of revenues 348,077 389,165 1,072,972 1,169,282
Selling, general and administrative 182,259 168,329 522,285 471,749
Research and development 32,055 36,519 94,165 96,353
Litigation-related and other contingencies,
net 1,810 (14,414) (23,938) (4,093)
Asset impairment charges 8,412 4,766 106,197 258,652
Acquisition-related and integration items,
net (1,407) 16,025 17,100 (26,983)
Interest expense, net 135,648 136,903 397,689 404,387
Gain on extinguishment of debt (119,828)
Other (income) expense, net (7,194) 16,203 (25,318) 20,408
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAX $
(64,800) $
(24,070) $
(18,299) $
(120,363)
INCOME TAX EXPENSE (BENEFIT) 4,174 17,361 (124,516) 31,732
(LOSS) INCOME FROM CONTINUING OPERATIONS $
(68,974) $
(41,431) $
106,217 $
(152,095)
DISCONTINUED OPERATIONS, NET OF TAX (6,913) (37,984) (41,616) (51,898)
NET (LOSS) INCOME $
(75,887) $
(79,415) $
64,601 $
(203,993)
NET (LOSS) INCOME PER SHARE-BASIC:
Continuing operations $
(0.30) $
(0.18) $
0.46 $
(0.67)
Discontinued operations (0.03) (0.17) (0.18) (0.23)
Basic $
(0.33) $
(0.35) $
0.28 $
(0.90)
NET (LOSS) INCOME PER SHARE-DILUTED:
Continuing operations $
(0.30) $
(0.18) $
0.46 $
(0.67)
Discontinued operations (0.03) (0.17) (0.18) (0.23)
Diluted $
(0.33) $
(0.35) $
0.28 $
(0.90)
WEIGHTED AVERAGE SHARES:
Basic 230,040 226,598 228,985 225,804
Diluted 230,040 226,598 233,379 225,804
The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020 December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $
1,679,738 $
1,454,531
Restricted cash and cash
equivalents 162,648 247,457
Accounts receivable 473,368 467,953
Inventories, net 354,903 327,865
Other current assets 132,163 88,412
Total current assets $
2,802,820 $
2,586,218
TOTAL NON-CURRENT ASSETS 6,362,423 6,803,309
TOTAL ASSETS $
9,165,243 $
9,389,527
LIABILITIES AND SHAREHOLDERS'
DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses, including legal
settlement accruals $
1,243,158 $
1,412,954
Other current liabilities 47,840 47,335
Total current liabilities $
1,290,998 $
1,460,289
LONG-TERM DEBT, LESS CURRENT
PORTION, NET 8,286,351 8,359,899
OTHER LIABILITIES 370,376 435,883
SHAREHOLDERS' DEFICIT (782,482) (866,544)
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $
9,165,243 $
9,389,527
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2020 and 2019 (in thousands):
Nine Months Ended September 30,
2020 2019
OPERATING ACTIVITIES:
Net income (loss) $
64,601 $
(203,993)
Adjustments to reconcile
Net income (loss) to Net
cash provided by
operating activities:
Depreciation and
amortization 391,463 468,409
Asset impairment charges 106,197 258,652
Other, including cash
payments to claimants
from Qualified
Settlement Funds (272,818) (403,824)
Net cash provided by
operating activities $
289,443 $
119,244
INVESTING ACTIVITIES:
Purchases of property,
plant and equipment,
excluding capitalized
interest $
(52,692) $
(47,812)
Proceeds from sale of
business and other
assets, net 6,377 4,780
Other (3,915) (2,295)
Net cash used in
investing activities $
(50,230) $
(45,327)
FINANCING ACTIVITIES:
(Payments on) proceeds
from borrowings, net $
(86,887) $
247,897
Other (11,470) (28,333)
Net cash (used in)
provided by financing
activities $
(98,357) $
219,564
Effect of foreign
exchange rate (458) 780
NET INCREASE IN CASH,
CASH EQUIVALENTS,
RESTRICTED CASH AND
RESTRICTED CASH
EQUIVALENTS $
140,398 $
294,261
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 $
1,860,786 $
1,771,098
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 nine months ended September 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 (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Net (loss) income (GAAP) $
(75,887) $
(79,415) $
64,601 $
(203,993)
Income tax expense (benefit) 4,174 17,361 (124,516) 31,732
Interest expense, net 135,648 136,903 397,689 404,387
Depreciation and amortization (13) 120,974 147,621 376,787 468,409
EBITDA (non-GAAP) $
184,909 $
222,470 $
714,561 $
700,535
Upfront and milestone-related payments (2) 275 1,672 2,469 4,055
Continuity and separation benefits and other cost reductions
(3) 67,692 11,023 100,356 15,172
Certain litigation-related and other contingencies, net (4) 1,810 (14,414) (23,938) (4,093)
Certain legal costs (5) 18,343 14,556 51,884 50,229
Asset impairment charges (6) 8,412 4,766 106,197 258,652
Fair value of contingent consideration (7) (1,407) 16,025 17,100 (26,983)
Gain on extinguishment of debt (8) (119,828)
Share-based compensation (13) 6,585 11,576 28,262 48,909
Other (income) expense, net (14) (7,194) 16,203 (25,318) 20,408
Other (9) 362 13,795 31,118 13,882
Discontinued operations, net of tax (11) 6,913 37,984 41,616 51,898
Adjusted EBITDA (non-GAAP) $
286,700 $
335,656 $
1,044,307 $
1,012,836
Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)
The following table provides a reconciliation of the Company's (Loss) income from continuing operations (GAAP) to Adjusted income from continuing operations (non-GAAP) for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(Loss) income from continuing operations (GAAP) $
(68,974) $
(41,431) $
106,217 $
(152,095)
Non-GAAP adjustments:
Amortization of intangible assets (1) 104,066 131,932 325,801 417,949
Upfront and milestone-related payments (2) 275 1,672 2,469 4,055
Continuity and separation benefits and other cost reductions (3) 67,692 11,023 100,356 15,172
Certain litigation-related and other contingencies, net (4) 1,810 (14,414) (23,938) (4,093)
Certain legal costs (5) 18,343 14,556 51,884 50,229
Asset impairment charges (6) 8,412 4,766 106,197 258,652
Fair value of contingent consideration (7) (1,407) 16,025 17,100 (26,983)
Gain on extinguishment of debt (8) (119,828)
Other (9) (1,898) 28,634 13,437 30,254
Tax adjustments (10) (6,044) (77) (205,148) (42,465)
Adjusted income from continuing operations (non-GAAP) $
122,275 $
152,686 $
494,375 $
430,847
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 nine months ended September 30, 2020 and 2019 (in thousands, except per share data):
Three Months Ended September 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, (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) $634,860 $348,077 $286,783 45.2 % $223,129 35.1 % $63,654 10.0 % $128,454 $(64,800) $4,174 (6.4)% $(68,974) $(6,913) $(75,887) $(0.30)
Items impacting
comparability:
Amortization of intangible
assets (1) (104,066) 104,066 104,066 104,066 104,066 104,066
Upfront and milestone-
related payments (2) (125) 125 (150) 275 275 275 275
Continuity and separation
benefits and other cost
reductions (3) (36,550) 36,550 (31,142) 67,692 67,692 67,692 67,692
Certain litigation-related
and other contingencies,
net (4) (1,810) 1,810 1,810 1,810 1,810
Certain legal costs (5) (18,343) 18,343 18,343 18,343 18,343
Asset impairment charges
(6) (8,412) 8,412 8,412 8,412 8,412
Fair value of contingent
consideration (7) 1,407 (1,407) (1,407) (1,407) (1,407)
Other (9) (369) 369 2,267 (1,898) (1,898) (1,898)
Tax adjustments (10) 6,044 (6,044) (6,044)
Exclude discontinued
operations, net of tax
(11) 6,913 6,913
After considering items
(non-GAAP) $634,860 $207,336 $427,524 67.3 % $164,310 25.9 % $263,214 41.5 % $130,721 $132,493 $10,218 7.7 % $122,275
$ - $122,275 $0.52
Three Months Ended September 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) $729,426 $389,165 $340,261 46.6 % $211,225 29.0 % $129,036 17.7 % $153,106 $(24,070) $17,361 (72.1)% $(41,431) $(37,984) $(79,415) $(0.18)
Items impacting
comparability:
Amortization of intangible
assets (1) (131,932) 131,932 131,932 131,932 131,932 131,932
Upfront and milestone-
related payments (2) (542) 542 (1,130) 1,672 1,672 1,672 1,672
Continuity and separation
benefits and other cost
reductions (3) (1,004) 1,004 (10,019) 11,023 11,023 11,023 11,023
Certain litigation-related
and other contingencies,
net (4) 14,414 (14,414) (14,414) (14,414) (14,414)
Certain legal costs (5) (14,556) 14,556 14,556 14,556 14,556
Asset impairment charges
(6) (4,766) 4,766 4,766 4,766 4,766
Fair value of contingent
consideration (7) (16,025) 16,025 16,025 16,025 16,025
Other (9) (14,053) 14,053 (14,581) 28,634 28,634 28,634
Tax adjustments (10) 77 (77) (77)
Exclude discontinued
operations, net of tax
(11) 37,984 37,984
After considering items
(non-GAAP) $729,426 $255,687 $473,739 64.9 % $165,090 22.6 % $308,649 42.3 % $138,525 $170,124 $17,438 10.3 % $152,686
$ - $152,686 $0.66
Nine Months Ended September 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, (Loss) income from continuing 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 operations before income tax operations continuing operations (12)
Reported (GAAP) $2,142,853 $1,072,972 $1,069,881 49.9 % $715,809 33.4 % $354,072 16.5 % $372,371 $(18,299) $(124,516) 680.5 % $106,217 $(41,616) $64,601 $0.46
Items impacting
comparability:
Amortization of intangible
assets (1) (325,801) 325,801 325,801 325,801 325,801 325,801
Upfront and milestone-
related payments (2) (792) 792 (1,677) 2,469 2,469 2,469 2,469
Continuity and separation
benefits and other cost
reductions (3) (43,692) 43,692 (56,664) 100,356 100,356 100,356 100,356
Certain litigation-related
and other contingencies,
net (4) 23,938 (23,938) (23,938) (23,938) (23,938)
Certain legal costs (5) (51,884) 51,884 51,884 51,884 51,884
Asset impairment charges
(6) (106,197) 106,197 106,197 106,197 106,197
Fair value of contingent
consideration (7) (17,100) 17,100 17,100 17,100 17,100
Other (9) (31,118) 31,118 17,681 13,437 13,437 13,437
Tax adjustments (10) 205,148 (205,148) (205,148)
Exclude discontinued
operations, net of tax
(11) 41,616 41,616
After considering items
(non-GAAP) $2,142,853 $702,687 $1,440,166 67.2 % $475,107 22.2 % $965,059 45.0 % $390,052 $575,007 $80,632 14.0 % $494,375
$ - $494,375 $2.12
Nine Months Ended September 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) $2,149,564 $1,169,282 $980,282 45.6 % $795,678 37.0 % $184,604 8.6 % $304,967 $(120,363) $31,732 (26.4)% $(152,095) $(51,898) $(203,993) $(0.67)
Items impacting
comparability:
Amortization of intangible
assets (1) (417,949) 417,949 417,949 417,949 417,949 417,949
Upfront and milestone-
related payments (2) (1,942) 1,942 (2,113) 4,055 4,055 4,055 4,055
Continuity and separation
benefits and other cost
reductions (3) (1,004) 1,004 (14,168) 15,172 15,172 15,172 15,172
Certain litigation-related
and other contingencies,
net (4) 4,093 (4,093) (4,093) (4,093) (4,093)
Certain legal costs (5) (50,229) 50,229 50,229 50,229 50,229
Asset impairment charges
(6) (258,652) 258,652 258,652 258,652 258,652
Fair value of contingent
consideration (7) 26,983 (26,983) (26,983) (26,983) (26,983)
Gain on extinguishment of
debt (8) 119,828 (119,828) (119,828) (119,828)
Other (9) (13,878) 13,878 (16,376) 30,254 30,254 30,254
Tax adjustments (10) 42,465 (42,465) (42,465)
Exclude discontinued
operations, net of tax
(11) 51,898 51,898
After considering items
(non-GAAP) $2,149,564 $748,387 $1,401,177 65.2 % $487,714 22.7 % $913,463 42.5 % $408,419 $505,044 $74,197 14.7 % $430,847
$ - $430,847 $1.86
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 nine months ended September 30, 2020 and 2019 are as follows:
(1) Adjustments for amortization of commercial intangible assets included the following (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
---
2020 2019 2020 2019
---
Amortization of intangible assets excluding fair value $
103,249 $
128,865 $
323,350 $
400,203
step-up from contingent consideration
Amortization of intangible assets related to fair value 817 3,067 2,451 17,746
step-up from contingent consideration
Total $
104,066 $
131,932 $
325,801 $
417,949
(2) Adjustments for upfront and milestone-related payments to partners included the following (in thousands):
Three Months Ended September 30,
2020 2019
---
Cost of revenues Operating expenses Cost of revenues Operating
expenses
---
Sales-based $
125
$ $
542
$
Development-based - 150 1,130
Total $
125 $
150 $
542 $
1,130
Nine Months Ended September 30,
2020 2019
---
Cost of revenues Operating expenses Cost of revenues Operating
expenses
---
Sales-based $
792
$ $
1,942
$
Development-based - 1,677 2,113
Total $
792 $
1,677 $
1,942 $
2,113
(3) Adjustments for continuity and separation benefits and other cost reductions included the following (in thousands):
Three Months Ended September 30,
2020 2019
---
Cost of revenues Operating expenses Cost of revenues Operating
expenses
---
Continuity and separation benefits $
32,048 $
25,906 $
1,004 $
5,672
Accelerated depreciation charges 4,502 1,789
Other - 3,447 4,347
Total $
36,550 $
31,142 $
1,004 $
10,019
Nine Months Ended September 30,
2020 2019
---
Cost of revenues Operating expenses Cost of revenues Operating
expenses
---
Continuity and separation benefits $
33,190 $
42,681 $
1,004 $
7,884
Accelerated depreciation charges 10,528 4,148
Other (26) 9,835 6,284
Total $
43,692 $
56,664 $
1,004 $
14,168
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. Additionally, amounts during the three and nine months ended September 30, 2020 include severance and other
restructuring charges related to the previously announced strategic initiatives to further optimize Endo's operations.
(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 September 30, Nine Months Ended September 30,
---
2020 2019 2020 2019
---
Goodwill impairment charges
$
$ $
32,786 $
151,108
Other intangible asset impairment charges 2,020 4,261 65,771 104,660
Property, plant and equipment impairment charges - 505 1,248 2,884
Operating lease right-of-use asset impairment charges 6,392 6,392
Total asset impairment charges $
8,412 $
4,766 $
106,197 $
258,652
(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 (loss) income (GAAP) to Adjusted EBITDA (non-GAAP)) includes the following (in thousands):
Three Months Ended September 30,
2020 2019
---
Operating Other non- Operating Other non-
expenses operating expenses expenses operating
expenses
---
Foreign currency impact related to the re-measurement of intercompany debt instruments
$ $
1,663
$ $
(922)
(Gain) loss on sale of business and other assets - 1
Debt modification costs 369
Other miscellaneous - (3,930) 14,053 15,502
Total $
369 $
(2,267) $
14,053 $
14,581
Nine Months Ended September 30,
2020 2019
---
Operating Other non- Operating Other non-
expenses operating expenses expenses operating
expenses
---
Foreign currency impact related to the re-measurement of intercompany debt instruments
$ $
(2,426)
$ $
2,874
(Gain) loss on sale of business and other assets - (11,325) (2,000)
Debt modification costs 31,118
Other miscellaneous - (3,930) 13,878 15,502
Total $
31,118 $
(17,681) $
13,878 $
16,376
The Other row included in the reconciliations of Net (loss) income (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 Nine Months Ended September
September 30, 30,
---
2020 2019 2020 2019
---
GAAP 230,040 226,598 233,379 225,804
Non-GAAP Adjusted 233,442 230,907 233,379 231,751
(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 (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) for the twelve months ended September 30, 2020 (in thousands) and the calculation of the Company's Net Debt Leverage Ratio (non-GAAP):
Twelve Months Ended
September 30, 2020
Net loss
(GAAP) $
(154,042)
Income
tax
benefit (140,568)
Interest
expense,
net 532,036
Depreciation
and
amortization
(13) 521,240
EBITDA
(non-
GAAP) $
758,666
Upfront
and
milestone-
related
payments $
5,037
Continuity
and
separation
benefits
and
other
cost
reductions 119,782
Certain
litigation-
related
and
other
contingencies,
net (8,634)
Certain
legal
costs 66,937
Asset
impairment
charges 373,627
Fair
value
of
contingent
consideration (2,015)
Share-
based
compensation
(13) 38,495
Other
income,
net (29,049)
Other 31,027
Discontinued
operations,
net of
tax 51,770
Adjusted
EBITDA
(non-
GAAP) $
1,405,643
Calculation
of Net
Debt:
Debt $
8,320,501
Cash
(excluding
Restricted
Cash) 1,679,738
Net Debt
(non-
GAAP) $
6,640,763
Calculation
of Net
Debt
Leverage:
Net Debt
Leverage
Ratio
(non-
GAAP) 4.7
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. Learn more at www.endo.com or connect with us on LinkedIn.
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, regulatory approvals and the proposed acquisition of BioSpecifics Technologies Corp., 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 any strategic and/or optimization 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; the 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
