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Endo Reports Fourth-Quarter And Full-Year 2017 Financial Results

February 27, 2018

DUBLIN, Feb. 27, 2018 /PRNewswire/ -- 

  • Fourth-quarter 2017 revenues of $769 million; Full-year 2017 revenues of $3,469 million
  • Fourth-quarter 2017 Sterile Injectables revenues increased 16 percent to $167 million; Full-year 2017 Sterile Injectables revenues increased 23 percent to $654 million
  • Fourth-quarter 2017 Branded Specialty Products revenues increased 8 percent to $124 million; Full-year 2017 Branded Specialty Products revenues increased 11 percent to $453 million
  • Fourth-quarter 2017 reported $1.22 diluted (GAAP) loss per share from continuing operations; Full-year 2017 reported $5.52 diluted (GAAP) loss per share from continuing operations
  • Fourth-quarter 2017 adjusted diluted earnings per share (EPS) from continuing operations of $0.77; Full-year 2017 adjusted diluted EPS from continuing operations exceeded upper end of guidance at $3.84
  • Fourth-quarter 2017 reported (GAAP) consolidated net loss of $368 million; Full-year 2017 reported (GAAP) consolidated net loss of $2,035 million
  • Fourth-quarter 2017 adjusted EBITDA of $327 million; Full-year 2017 adjusted EBITDA of $1,568 million exceeded upper end of guidance
  • Company expects 2018 revenues to range between $2.6 billion and $2.8 billion; Company expects 2018 adjusted EBITDA between $1.2 billion and $1.3 billion

Endo International plc (NASDAQ: ENDP) today reported fourth-quarter 2017 financial results, including:

  • Revenues of $769 million, a 38 percent decrease compared to fourth-quarter 2016 revenues of $1,242 million.
  • Reported net loss from continuing operations of $272 million compared to fourth-quarter 2016 reported net loss from continuing operations of $3,333 million.
  • Reported diluted loss per share from continuing operations of $1.22 compared to fourth-quarter 2016 reported diluted loss per share from continuing operations of $14.96.
  • Adjusted income from continuing operations of $174 million compared to fourth-quarter 2016 adjusted income from continuing operations of $396 million.
  • Adjusted diluted EPS from continuing operations of $0.77 compared to fourth-quarter 2016 adjusted diluted EPS from continuing operations of $1.77.
  • Adjusted EBITDA of $327 million compared to fourth-quarter 2016 adjusted EBITDA of $556 million.

"Despite the challenges impacting the U.S. generics industry, Endo delivered solid operating results in 2017, including strong adjusted EBITDA generation," said Paul Campanelli, President and CEO of Endo. "Importantly, those core areas of focus where we continue to invest outperformed in 2017, as Sterile Injectables and Branded Specialty Products both achieved double-digit growth. We enter 2018 leaner and better positioned for the future, and the year has already been marked by a pivotal event. Earlier this month, we began our Phase 3 clinical trials of CCH for the treatment of cellulite. We view this as a major milestone for a new and important potential growth driver for our Company."

FINANCIAL PERFORMANCE

(in thousands, except per share amounts)

 
 

Three Months Ended December 31,

     

Year Ended December 31,

   
 

2017

 

2016

 

Change

 

2017

 

2016

 

Change

Total Revenues

$

768,640

   

$

1,241,513

   

(38)

%

 

$

3,468,858

   

$

4,010,274

   

(14)

%

Reported Loss from Continuing
Operations

$

(271,581)

   

$

(3,333,325)

   

(92)

%

 

$

(1,232,711)

   

$

(3,223,772)

   

(62)

%

Reported Diluted Weighted Average
Shares

223,322

   

222,870

   

%

 

223,198

   

222,651

   

%

Reported Diluted Loss per Share
from Continuing Operations

$

(1.22)

   

$

(14.96)

   

(92)

%

 

$

(5.52)

   

$

(14.48)

   

(62)

%

Adjusted Income from Continuing
Operations

$

173,863

   

$

395,791

   

(56)

%

 

$

860,361

   

$

1,054,382

   

(18)

%

Adjusted Diluted Weighted Average
Shares1

224,577

   

223,178

   

1

%

 

223,978

   

223,090

   

%

Adjusted Diluted EPS from
Continuing Operations

$

0.77

   

$

1.77

   

(56)

%

 

$

3.84

   

$

4.73

   

(19)

%

__________

(1)

Diluted per share data is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.

 

CONSOLIDATED RESULTS

Total revenues decreased by 38 percent to $769 million in fourth-quarter 2017 compared to the same period in 2016. The decline was primarily due to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals products ezetimibe tablets, the generic version of ZETIA®, and quetiapine extended-release (ER) tablets, the generic version of SEROQUEL XR®, both of which launched in fourth-quarter 2016. Also contributing to the decline in total revenues were previously announced U.S. Generic Pharmaceuticals product discontinuances, pricing pressure from increased competition primarily impacting the U.S. Generics Base business, the divestitures of Litha and Somar, as well as the cessation of OPANA® ER shipments to customers by September 1, 2017.

GAAP net loss from continuing operations in fourth-quarter 2017 was $272 million compared to GAAP net loss from continuing operations of $3,333 million during the same period in 2016. This decrease included the impact of lower asset impairment charges and intangible asset amortization in fourth-quarter 2017. GAAP diluted net loss per share from continuing operations for fourth-quarter 2017 was $1.22, compared to GAAP diluted net loss per share from continuing operations of $14.96 in fourth-quarter 2016.

Adjusted income from continuing operations in fourth-quarter 2017 was $174 million compared to $396 million in fourth-quarter 2016. This decrease resulted primarily from lower revenues of ezetimibe tablets, quetiapine ER tablets, Base business generic products and OPANA® ER as well as an increase in interest expense, mainly due to the refinancing of the Company's secured debt in April 2017, which enhanced operational flexibility and extended the Company's maturity schedule. Adjusted diluted EPS from continuing operations in fourth-quarter 2017 was $0.77 compared to $1.77 in fourth-quarter 2016.

U.S. GENERIC PHARMACEUTICALS

During fourth-quarter 2017, the U.S. Generic Pharmaceuticals segment launched six products and submitted two regulatory filings. In 2017, the U.S. Generic Pharmaceuticals segment launched 17 new generic products and the Company made 12 regulatory submissions. As of December 31, 2017, the Company had approximately 100 Abbreviated New Drug Applications pending with the U.S. Food and Drug Administration.

Fourth-quarter 2017 U.S. Generic Pharmaceuticals results include:

  • Revenues of $499 million, a 43 percent decrease compared to fourth-quarter 2016; this decline was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file products ezetimibe tablets and quetiapine ER tablets. Also contributing to the decline were previously announced product discontinuances and pricing pressure from increased competition primarily impacting the Base business.
  • Sterile Injectables revenue increased 16 percent compared to fourth-quarter 2016; this increase was driven primarily by ADRENALIN®.
  • New Launches and Alternative Dosages revenue decreased 67 percent compared to fourth-quarter 2016; this decrease was driven primarily by the expiration of the marketing exclusivity periods for ezetimibe tablets and quetiapine ER tablets.
  • The U.S. Generics Base business revenues decreased 37 percent compared to fourth-quarter 2016; this decrease primarily resulted from the impact of 2016 and 2017 competitive events, previously announced product discontinuances and the continued impact of pricing due to consolidation among our trade accounts.

U.S. BRANDED PHARMACEUTICALS

In February 2018, Endo announced the initiation of two Phase 3 clinical trials of collagenase clostridium histolyticum (or "CCH") for the treatment of cellulite.

Fourth-quarter 2017 U.S. Branded Pharmaceuticals results include:

  • Revenues of $228 million, a 21 percent decrease compared to fourth-quarter 2016; this decrease was primarily attributable to the decline in revenues of OPANA® ER resulting from the cessation of product shipments by September 1, 2017 and generic competition adversely impacting the Company's Established Products portfolio.
  • Specialty Products revenues increased 8 percent in fourth-quarter 2017 versus the same period in 2016, driven by strong performance from XIAFLEX® and other products within our Specialty Products portfolio. Sales of XIAFLEX®, our flagship Branded product, increased 10 percent compared to fourth-quarter 2016; this increase was primarily attributable to volume growth that was driven, in part, by a full year of direct-to-consumer initiatives intended to increase patient awareness of XIAFLEX® as a possible treatment option for Dupuytren's Contracture and Peyronie's Disease.

INTERNATIONAL PHARMACEUTICALS

Fourth-quarter 2017 International Pharmaceuticals revenues were $41 million, compared to $70 million in the same period in 2016. The decline is primarily attributable to the sale of the Company's South African Litha business to Acino Pharma AG, which closed on July 3, 2017, and the sale of the Company's Mexican Somar business to Advent International, which closed on October 25, 2017.

2018 FINANCIAL GUIDANCE

For the full twelve months ending December 31, 2018, at current exchange rates, Endo is providing guidance on revenue, adjusted diluted EPS from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:

  • Total revenues to be between $2.6 billion and $2.8 billion;
  • Adjusted diluted EPS from continuing operations to be between $2.15 and $2.55; and
  • Adjusted EBITDA from continuing operations to be between $1.2 billion and $1.3 billion.

The Company's 2018 non-GAAP financial guidance is based on the following assumptions:

  • Adjusted gross margin of approximately 67.0% to 68.0%;
  • Adjusted operating expenses as a percentage of revenues of approximately 25.5% to 26.5%;
  • Adjusted interest expense of approximately $530 million to $540 million;
  • Adjusted effective tax rate of approximately 11.0% to 12.0%; and
  • Adjusted diluted weighted average shares outstanding of approximately 226 million.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of December 31, 2017, the Company had $987 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.3 billion and a net debt to adjusted EBITDA ratio of 4.6.

Fourth-quarter 2017 cash provided by operating activities was $132 million, compared to $84 million of net cash provided by operating activities in the comparable 2016 period. The 2016 period was impacted by higher payments related to U.S. mesh product liability claims.

During fourth-quarter 2017, the Company recorded pre-tax, non-cash asset impairment charges of $130 million, $126 million of which related to in-process research and development and developed technology intangible assets in its U.S. Generic Pharmaceuticals segment.

In addition, the Company recorded a total increase of approximately $200 million to its legal reserves relating to both LIDODERM® antitrust matters and Testosterone Replacement Therapy (TRT) product liability matters after determining that a loss is probable and reasonably estimable. The LIDODERM® portion of the reserve increase includes an estimated loss for, among other matters, a settlement in principle of all remaining claims filed against the Company's subsidiary, Endo Pharmaceuticals Inc., in In re Lidoderm Antitrust Litigation, MDL No. 2521, pending in the U.S. District Court for the Northern District of California. The TRT portion of the reserve increase includes an estimated loss for, among other matters, all testosterone-related product liability cases filed against the Company's subsidiaries in In Re Testosterone Replacement Therapy Products Liability Litigation, MDL No. 2545, pending in the U.S. District Court for the Northern District of Illinois, and in other courts. In February 2018 the court in MDL No. 2545 entered a case management order reporting that the parties had entered into a memorandum of understanding regarding a potential global settlement and directing that all proceedings involving the Company's subsidiaries be temporarily stayed so that the parties may devote their efforts to finalizing a master settlement agreement.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release today at 7:30 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 4978556. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from February 27, 2018 at 10:30 a.m. ET until 10:30 a.m. ET on March 2, 2018 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 4978556.

A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.

 

FINANCIAL SCHEDULES

 

The following table presents Endo's unaudited Total Revenues for the three and twelve months ended December 31, 2017 and 2016 (in thousands):

 
 

Three Months Ended December 31,

 

Percent

 

Year Ended December 31,

 

Percent

 

2017

 

2016

 

Growth

 

2017

 

2016

 

Growth

U.S. Generic Pharmaceuticals:

                     

U.S. Generics Base

$

182,314

   

$

288,142

   

(37)

%

 

$

829,729

   

$

1,230,097

   

(33)

%

Sterile Injectables

167,342

   

143,905

   

16

%

 

654,270

   

530,805

   

23

%

New Launches and Alternative Dosages

149,396

   

450,127

   

(67)

%

 

797,002

   

803,711

   

(1)

%

Total U.S. Generic Pharmaceuticals

$

499,052

   

$

882,174

   

(43)

%

 

$

2,281,001

   

$

2,564,613

   

(11)

%

U.S. Branded Pharmaceuticals:

                     

Specialty Products:

                     

XIAFLEX®

$

61,265

   

$

55,530

   

10

%

 

$

213,378

   

$

189,689

   

12

%

SUPPRELIN® LA

22,743

   

20,793

   

9

%

 

86,211

   

78,648

   

10

%

Other Specialty (1)

39,977

   

38,243

   

5

%

 

153,384

   

138,483

   

11

%

   Total Specialty Products

$

123,985

   

$

114,566

   

8

%

 

$

452,973

   

$

406,820

   

11

%

Established Products:

                     

OPANA® ER

$

1,770

   

$

38,880

   

(95)

%

 

$

83,826

   

$

158,938

   

(47)

%

PERCOCET®

32,048

   

36,029

   

(11)

%

 

125,231

   

139,211

   

(10)

%

VOLTAREN® Gel

15,134

   

18,612

   

(19)

%

 

68,780

   

100,642

   

(32)

%

LIDODERM®

13,924

   

21,122

   

(34)

%

 

51,629

   

87,577

   

(41)

%

Other Established (2)

41,514

   

60,087

   

(31)

%

 

175,086

   

273,106

   

(36)

%

   Total Established Products

$

104,390

   

$

174,730

   

(40)

%

 

$

504,552

   

$

759,474

   

(34)

%

Total U.S. Branded Pharmaceuticals (3)

$

228,375

   

$

289,296

   

(21)

%

 

$

957,525

   

$

1,166,294

   

(18)

%

Total International Pharmaceuticals

$

41,213

   

$

70,043

   

(41)

%

 

$

230,332

   

$

279,367

   

(18)

%

Total Revenues

$

768,640

   

$

1,241,513

   

(38)

%

 

$

3,468,858

   

$

4,010,274

   

(14)

%

__________

(1)

Products included within Other Specialty include TESTOPEL®, NASCOBAL® Nasal Spray, and AVEED®.

(2)

Products included within Other Established include, but are not limited to, TESTIM® and FORTESTA® Gel, including the authorized generic.

(3)

Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $25 million during any quarterly period in 2017 or 2016. LIDODERM® is separately presented as its revenues exceeded $25 million in certain quarterly periods in 2016.

 

 

 

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and twelve months ended December 31, 2017 and 2016 (in thousands, except per share data):

 

Three Months Ended December 31,

 

Year Ended December 31,

 

2017

 

2016

 

2017

 

2016

TOTAL REVENUES

$

768,640

   

$

1,241,513

   

$

3,468,858

   

$

4,010,274

 

COSTS AND EXPENSES:

             

Cost of revenues

505,645

   

756,578

   

2,228,530

   

2,634,973

 

Selling, general and administrative

161,199

   

212,568

   

629,874

   

770,728

 

Research and development

48,545

   

46,206

   

172,067

   

183,372

 

Litigation-related and other contingencies, net

200,006

   

(4,765)

   

185,990

   

23,950

 

Asset impairment charges

130,446

   

3,518,085

   

1,154,376

   

3,781,165

 

Acquisition-related and integration items

26,375

   

7,400

   

58,086

   

87,601

 

OPERATING LOSS FROM CONTINUING
OPERATIONS

$

(303,576)

   

$

(3,294,559)

   

$

(960,065)

   

$

(3,471,515)

 

INTEREST EXPENSE, NET

126,961

   

111,783

   

488,228

   

452,679

 

LOSS ON EXTINGUISHMENT OF DEBT

   

   

51,734

   

 

OTHER INCOME, NET

(6,180)

   

(740)

   

(17,023)

   

(338)

 

LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAX

$

(424,357)

   

$

(3,405,602)

   

$

(1,483,004)

   

$

(3,923,856)

 

INCOME TAX BENEFIT

(152,776)

   

(72,277)

   

(250,293)

   

(700,084)

 

LOSS FROM CONTINUING OPERATIONS

$

(271,581)

   

$

(3,333,325)

   

$

(1,232,711)

   

$

(3,223,772)

 

DISCONTINUED OPERATIONS, NET OF TAX

(96,836)

   

(4,531)

   

(802,722)

   

(123,278)

 

CONSOLIDATED NET LOSS

$

(368,417)

   

$

(3,337,856)

   

$

(2,035,433)

   

$

(3,347,050)

 

Less: Net income attributable to noncontrolling interests

   

   

   

16

 

NET LOSS ATTRIBUTABLE TO ENDO
INTERNATIONAL PLC

$

(368,417)

   

$

(3,337,856)

   

$

(2,035,433)

   

$

(3,347,066)

 

NET LOSS PER SHARE ATTRIBUTABLE TO ENDO
INTERNATIONAL PLC ORDINARY
SHAREHOLDERS—BASIC:

             

Continuing operations

$

(1.22)

   

$

(14.96)

   

$

(5.52)

   

$

(14.48)

 

Discontinued operations

(0.43)

   

(0.02)

   

(3.60)

   

(0.55)

 

Basic

$

(1.65)

   

$

(14.98)

   

$

(9.12)

   

$

(15.03)

 

NET LOSS PER SHARE ATTRIBUTABLE TO ENDO
INTERNATIONAL PLC ORDINARY

SHAREHOLDERS—DILUTED:

             

Continuing operations

$

(1.22)

   

$

(14.96)

   

$

(5.52)

   

$

(14.48)

 

Discontinued operations

(0.43)

   

(0.02)

   

(3.60)

   

(0.55)

 

Diluted

$

(1.65)

   

$

(14.98)

   

$

(9.12)

   

$

(15.03)

 

WEIGHTED AVERAGE SHARES:

             

Basic

223,322

   

222,870

   

223,198

   

222,651

 

Diluted

223,322

   

222,870

   

223,198

   

222,651

 
 

 

 

The following table presents unaudited Condensed Consolidated Balance Sheet data at December 31, 2017 and December 31, 2016 (in thousands):

 
 

December 31,
2017

 

December 31,
2016

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

$

986,605

   

$

517,250

 

Restricted cash and cash equivalents

320,453

   

282,074

 

Accounts receivable

517,436

   

992,153

 

Inventories, net

391,437

   

555,671

 

Assets held for sale

   

116,985

 

Other current assets

55,146

   

125,326

 

   Total current assets

$

2,271,077

   

$

2,589,459

 

TOTAL NON-CURRENT ASSETS

9,364,503

   

11,685,650

 

TOTAL ASSETS

$

11,635,580

   

$

14,275,109

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

CURRENT LIABILITIES:

     

Accounts payable and accrued expenses, including legal settlement accruals

$

2,184,618

   

$

2,470,016

 

Liabilities held for sale

   

24,338

 

Other current liabilities

36,291

   

140,391

 

   Total current liabilities

$

2,220,909

   

$

2,634,745

 

LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,242,032

   

8,141,378

 

OTHER LIABILITIES

687,759

   

797,397

 

TOTAL SHAREHOLDERS' EQUITY

484,880

   

2,701,589

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

11,635,580

   

$

14,275,109

 
 

 

 

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the year ended December 31, 2017 and 2016 (in thousands):

 
 

Year Ended December 31,

 

2017

 

2016

OPERATING ACTIVITIES:

     

Consolidated net loss

$

(2,035,433)

   

$

(3,347,050)

 

Adjustments to reconcile consolidated net loss to Net cash provided by operating activities:

     

   Depreciation and amortization

983,765

   

983,309

 

   Asset impairment charges

1,154,376

   

3,802,493

 

   Other, including cash payments to claimants from Qualified Settlement Funds

451,277

   

(910,609)

 

   Net cash provided by operating activities

$

553,985

   

$

528,143

 

INVESTING ACTIVITIES:

     

Purchases of property, plant and equipment

$

(125,654)

   

$

(138,856)

 

Acquisitions, net of cash acquired

   

(30,394)

 

Proceeds from sale of business and other assets, net

223,237

   

10,870

 

Other

7,000

   

(19,172)

 

   Net cash provided by (used in) investing activities

$

104,583

   

$

(177,552)

 

FINANCING ACTIVITIES:

     

Payments on borrowings, net

$

(22,105)

   

$

(336,361)

 

Other

(144,888)

   

(60,825)

 

   Net cash (used in) provided by financing activities

$

(166,993)

   

$

(397,186)

 

Effect of foreign exchange rate

2,515

   

436

 

Movement in cash held for sale

11,744

   

(11,744)

 

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH
AND RESTRICTED CASH EQUIVALENTS

$

505,834

   

$

(57,903)

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS, BEGINNING OF PERIOD

805,180

   

863,083

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS, END OF PERIOD

$

1,311,014

   

$

805,180

 
 

 

 

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 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, both historical and forward-looking, 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 attributable to Endo International plc (GAAP) to Adjusted EBITDA (non-GAAP) for the three and twelve months ended December 31, 2017 and 2016 (in thousands):

 
 

Three Months Ended December 31,

 

Year Ended December 31,

 

2017

 

2016

 

2017

 

2016

Net loss attributable to Endo International plc (GAAP)

$

(368,417)

   

$

(3,337,856)

   

$

(2,035,433)

   

$

(3,347,066)

 

Income tax benefit

(152,776)

   

(72,277)

   

(250,293)

   

(700,084)

 

Interest expense, net

126,961

   

111,783

   

488,228

   

452,679

 

Depreciation and amortization (18)

177,321

   

260,370

   

857,706

   

955,802

 

EBITDA (non-GAAP)

$

(216,911)

   

$

(3,037,980)

   

$

(939,792)

   

$

(2,638,669)

 
               

Inventory step-up and other cost savings (2)

$

109

   

$

13,912

   

$

390

   

$

125,699

 

Upfront and milestone-related payments (3)

2,531

   

2,455

   

9,483

   

8,330

 

Inventory reserve increase (decrease) from restructuring (4)

5,779

   

(137)

   

13,678

   

24,455

 

Royalty obligations (5)

   

   

   

(7,750)

 

Separation benefits and other restructuring (6)

78,692

   

37,216

   

198,770

   

83,036

 

Certain litigation-related and other contingencies, net (7)

200,006

   

(4,765)

   

185,990

   

23,950

 

Asset impairment charges (8)

130,446

   

3,518,085

   

1,154,376

   

3,781,165

 

Acquisition-related and integration costs (9)

   

8,356

   

8,137

   

63,778

 

Fair value of contingent consideration (10)

26,375

   

(956)

   

49,949

   

23,823

 

Loss on extinguishment of debt (11)

   

   

51,734

   

 

Share-based compensation

9,897

   

15,183

   

50,149

   

58,656

 

Other income, net (19)

(6,180)

   

(740)

   

(17,023)

   

(338)

 

Other adjustments

(151)

   

781

   

(226)

   

 

Discontinued operations, net of tax (15)

96,836

   

4,531

   

802,722

   

123,278

 

Net income attributable to noncontrolling interests (16)

   

   

   

16

 

Adjusted EBITDA (non-GAAP)

$

327,429

   

$

555,941

   

$

1,568,337

   

$

1,669,429

 
 

 

 

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 twelve months ended December 31, 2017 and 2016 (in thousands):

 
 

Three Months Ended December 31,

 

Year Ended December 31,

 

2017

 

2016

 

2017

 

2016

Loss from continuing operations (GAAP)

$

(271,581)

   

$

(3,333,325)

   

$

(1,232,711)

   

$

(3,223,772)

 

Non-GAAP adjustments:

             

   Amortization of intangible assets (1)

158,276

   

240,390

   

773,766

   

876,451

 

   Inventory step-up and other cost savings (2)

109

   

13,912

   

390

   

125,699

 

   Upfront and milestone-related payments (3)

2,531

   

2,455

   

9,483

   

8,330

 

   Inventory reserve increase (decrease) from restructuring (4)

5,779

   

(137)

   

13,678

   

24,455

 

   Royalty obligations (5)

   

   

   

(7,750)

 

   Separation benefits and other restructuring (6)

78,692

   

37,216

   

198,770

   

83,036

 

   Certain litigation-related and other contingencies, net (7)

200,006

   

(4,765)

   

185,990

   

23,950

 

   Asset impairment charges (8)

130,446

   

3,518,085

   

1,154,376

   

3,781,165

 

   Acquisition-related and integration costs (9)

   

8,356

   

8,137

   

63,778

 

   Fair value of contingent consideration (10)

26,375

   

(956)

   

49,949

   

23,823

 

   Loss on extinguishment of debt (11)

   

   

51,734

   

 

   Non-cash and penalty interest charges (12)

   

   

   

4,092

 

   Other (13)

(7,487)

   

(1,836)

   

(8,620)

   

(7,273)

 

   Tax adjustments (14)

(149,283)

   

(83,604)

   

(344,581)

   

(721,602)

 

   Adjusted income from continuing operations (non-GAAP)

$

173,863

   

$

395,791

   

$

860,361

   

$

1,054,382

 

  

 

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 twelve months ended December 31, 2017 and 2016 (in thousands, except per share data):

 

Three Months Ended December 31, 2017

 

Total
revenues

 

Cost of
revenues

 

Gross
margin

 

Gross
margin
%

 

Total
operating
expenses

 

Operating
expense to
revenue %

 

Operating
(loss)
income
from
continuing
operations

 

Operating
margin %

 

Other
non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income
tax benefit

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income
attributable
to Endo
International
plc (16)

 

Diluted
(loss)
income
per share
from
continuing
operations
(17)

Reported (GAAP)

$

768,640

   

$

505,645

   

$

262,995

   

34

%

 

$

566,571

   

74

%

 

$

(303,576)

   

(39)

%

 

$

120,781

   

$

(424,357)

   

$

(152,776)

   

36

%

 

$

(271,581)

   

$

(96,836)

   

$

(368,417)

   

$

(1.22)

 

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

   

(158,276)

   

158,276

       

       

158,276

       

   

158,276

   

       

158,276

   

   

158,276

   

0.70

 

Inventory step-up and
other cost savings (2)

   

(109)

   

109

       

       

109

       

   

109

   

       

109

   

   

109

   

 

Upfront and
milestone-related
payments (3)

   

(712)

   

712

       

(1,819)

       

2,531

       

   

2,531

   

       

2,531

   

   

2,531

   

0.01

 

Inventory reserve
increase from
restructuring (4)

   

(5,779)

   

5,779

       

       

5,779

       

   

5,779

   

       

5,779

   

   

5,779

   

0.03

 

Separation benefits
and other
restructuring (6)

   

(76,764)

   

76,764

       

(1,928)

       

78,692

       

   

78,692

   

       

78,692

   

   

78,692

   

0.35

 

Certain litigation-
related and other
contingencies, net (7)

   

   

       

(200,006)

       

200,006

       

   

200,006

   

       

200,006

   

   

200,006

   

0.90

 

Asset impairment
charges (8)

   

   

       

(130,446)

       

130,446

       

   

130,446

   

       

130,446

   

   

130,446

   

0.58

 

Acquisition-related
and integration costs
(9)

   

   

       

       

       

   

   

       

   

   

   

 

Fair value of
contingent
consideration (10)

   

   

       

(26,375)

       

26,375

       

   

26,375

   

       

26,375

   

   

26,375

   

0.12

 

Other (13)

   

   

       

       

       

7,487

   

(7,487)

   

       

(7,487)

   

   

(7,487)

   

(0.03)

 

Tax adjustments (14)

   

   

       

       

       

   

   

149,283

       

(149,283)

   

   

(149,283)

   

(0.67)

 

Exclude discontinued
operations, net of tax
(15)

   

   

       

       

       

   

   

       

   

96,836

   

96,836

   

 

After considering items
(non-GAAP)

$

768,640

   

$

264,005

   

$

504,635

   

66

%

 

$

205,997

   

27

%

 

$

298,638

   

39

%

 

$

128,268

   

$

170,370

   

$

(3,493)

   

(2)

%

 

$

173,863

   

$

   

$

173,863

   

$

0.77

 

 

 

Three Months Ended December 31, 2016

 

Total
revenues

 

Cost of
revenues

 

Gross
margin

 

Gross
margin
%

 

Total
operating
expenses

 

Operating
expense to
revenue %

 

Operating

(loss)
income
from
continuing
operations

 

Operating
margin %

 

Other
non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations

before
income tax

 

Income
tax
(benefit)
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income
attributable
to Endo
International
plc (16)

 

Diluted
(loss)
income
per share
from
continuing
operations
(17)

Reported (GAAP)

$

1,241,513

   

$

756,578

   

$

484,935

   

39

%

 

$

3,779,494

   

304

%

 

$

(3,294,559)

   

(265)

%

 

$

111,043

   

$

(3,405,602)

   

$

(72,277)

   

2

%

 

$

(3,333,325)

   

$

(4,531)

   

$

(3,337,856)

   

$

(14.96)

 

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

   

(240,390)

   

240,390

       

       

240,390

       

   

240,390

   

       

240,390

   

   

240,390

   

1.08

 

Inventory step-up and
other cost savings (2)

   

(13,912)

   

13,912

       

       

13,912

       

   

13,912

   

       

13,912

   

   

13,912

   

0.06

 

Upfront and
milestone-related
payments (3)

   

(655)

   

655

       

(1,800)

       

2,455

       

   

2,455

   

       

2,455

   

   

2,455

   

0.01

 

Inventory reserve
decrease from
restructuring (4)

   

137

   

(137)

       

       

(137)

       

   

(137)

   

       

(137)

   

   

(137)

   

 

Separation benefits
and other
restructuring (6)

   

(9,284)

   

9,284

       

(27,932)

       

37,216

       

   

37,216

   

       

37,216

   

   

37,216

   

0.17

 

Certain litigation-
related and other
contingencies, net (7)

   

   

       

4,765

       

(4,765)

       

   

(4,765)

   

       

(4,765)

   

   

(4,765)

   

(0.02)

 

Asset impairment
charges (8)

   

   

       

(3,518,085)

       

3,518,085

       

   

3,518,085

   

       

3,518,085

   

   

3,518,085

   

15.79

 

Acquisition-related

and integration costs
(9)

   

   

       

(8,356)

       

8,356

       

   

8,356

   

       

8,356

   

   

8,356

   

0.04

 

Fair value of
contingent
consideration (10)

   

   

       

956

       

(956)

       

   

(956)

   

       

(956)

   

   

(956)

   

 

Other (13)

   

   

       

       

       

1,836

   

(1,836)

   

       

(1,836)

   

   

(1,836)

   

(0.01)

 

Tax adjustments (14)

   

   

       

       

       

   

   

83,604

       

(83,604)

   

   

(83,604)

   

(0.38)

 

Exclude discontinued
operations, net of tax

(15)

   

   

       

       

       

   

   

       

   

4,531

   

4,531

   

 

After considering items
(non-GAAP)

$

1,241,513

   

$

492,474

   

$

749,039

   

60

%

 

$

229,042

   

18

%

 

$

519,997

   

42

%

 

$

112,879

   

$

407,118

   

$

11,327

   

3

%

 

$

395,791

   

$

   

$

395,791

   

$

1.77

 

 


 

Year Ended December 31, 2017

 

Total
revenues

 

Cost of
revenues

 

Gross
margin

 

Gross
margin
%

 

Total
operating
expenses

 

Operating
expense to
revenue %

 

Operating
(loss)
income
from
continuing
operations

 

Operating
margin %

 

Other
non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income
tax
(benefit)
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income
attributable
to Endo
International
plc (16)

 

Diluted
(loss)
income
per share
from
continuing
operations
(17)

Reported (GAAP)

$

3,468,858

   

$

2,228,530

   

$

1,240,328

   

36

%

 

$

2,200,393

   

63

%

 

$

(960,065)

   

(28)

%

 

$

522,939

   

$

(1,483,004)

   

$

(250,293)

   

17

%

 

$

(1,232,711)

   

$

(802,722)

   

$

(2,035,433)

   

$

(5.52)

 

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

   

(773,766)

   

773,766

       

       

773,766

       

   

773,766

   

       

773,766

   

   

773,766

   

3.47

 

Inventory step-up and
other cost savings (2)

   

(390)

   

390

       

       

390

       

   

390

   

       

390

   

   

390

   

 

Upfront and

milestone-related
payments (3)

   

(2,751)

   

2,751

       

(6,732)

       

9,483

       

   

9,483

   

       

9,483

   

   

9,483

   

0.04

 

Inventory reserve
increase from
restructuring (4)

   

(13,678)

   

13,678

       

       

13,678

       

   

13,678

   

       

13,678

   

   

13,678

   

0.06

 

Separation benefits
and other
restructuring (6)

   

(162,131)

   

162,131

       

(36,639)

       

198,770

       

   

198,770

   

       

198,770

   

   

198,770

   

0.89

 

Certain litigation-
related and other
contingencies, net (7)

   

   

       

(185,990)

       

185,990

       

   

185,990

   

       

185,990

   

   

185,990

   

0.83

 

Asset impairment
charges (8)

   

   

       

(1,154,376)

       

1,154,376

       

   

1,154,376

   

       

1,154,376

   

   

1,154,376

   

5.17

 

Acquisition-related
and integration costs
(9)

   

   

       

(8,137)

       

8,137

       

   

8,137

   

       

8,137

   

   

8,137

   

0.04

 

Fair value of
contingent
consideration (10)

   

   

       

(49,949)

       

49,949

       

   

49,949

   

       

49,949

   

   

49,949

   

0.22

 

Loss on
extinguishment
of debt (11)

   

   

       

       

       

(51,734)

   

51,734

   

       

51,734

   

   

51,734

   

0.23

 

Other (13)

   

   

       

       

       

8,620

   

(8,620)