6.30.2018 Earnings Release 8-K Shell


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 8-K
_______________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 8, 2018

_______________________________
ENDO INTERNATIONAL PLC
(Exact Name of Registrant as Specified in Its Charter)
_______________________________
Ireland
001-36326
68-0683755
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)

First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland
Not Applicable
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 011-353-1-268-2000
Not Applicable
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
o    Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 2.02.    Results of Operations and Financial Condition.
On August 8, 2018, Endo International plc (the “Company,” “Endo,” or “we”) issued an earnings release announcing its financial results for the three and six months ended June 30, 2018 (the “Earnings Release”). A copy of the Earnings Release is attached as Exhibit 99.1 hereto and is incorporated herein by reference.
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"). The Company utilizes these financial measures, commonly referred to as “non-GAAP,” because (i) they are used by the Company, along with financial measures in accordance with GAAP, to evaluate the Company's operating performance; (ii) the Company believes that they will be used by certain investors to measure the Company’s operating results; (iii) the Compensation Committee of the Company's Board of Directors uses adjusted diluted EPS and Adjusted EBITDA, or measures derived from such, in assessing the performance and compensation of substantially all of the Company's employees, including executive officers and (iv) the Company’s leverage ratio, as defined by the Company’s credit agreement, is calculated based on non-GAAP financial measures. The Company believes that presenting these non-GAAP measures provides useful information about the Company's performance across reporting periods on a consistent basis by excluding certain items, which may be favorable or unfavorable, pursuant to the procedure as described in the succeeding paragraph.
The initial identification and review of the non-GAAP adjustments necessary to arrive at these non-GAAP financial measures are performed by a team of finance professionals that include the Chief Accounting Officer and segment finance leaders in accordance with the Company’s Adjusted Income Statement Policy, which is reviewed and approved by the Company’s Audit Committee. Company tax professionals, including the Vice President of Tax, review and determine the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments as described below. Proposed adjustments, along with any items considered but excluded, are presented to the Chief Accounting Officer, Chief Executive Officer and/or the Chief Financial Officer for their consideration. In turn, the non-GAAP adjustments are presented to the Audit Committee on a quarterly basis as part of the Company’s standard procedures for preparation and review of the earnings release and other quarterly materials.
These non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The Company's definition of these non-GAAP measures may differ from similarly titled measures used by others. The definitions of the most commonly used non-GAAP financial measures are presented below:
Adjusted income from continuing operations
Adjusted income from continuing operations represents income (loss) from continuing operations, prepared in accordance with GAAP, adjusted for certain items. Adjustments to GAAP amounts may include, but are not limited to, certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs, earn-out payments or adjustments, changes in the fair value of contingent consideration and bridge financing costs; cost reduction and integration-related initiatives such as separation benefits, retention payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; gains or losses from early termination of debt; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; and certain other items; further adjusted for the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments as described below.
Adjusted diluted earnings per share from continuing operations and adjusted diluted weighted average shares
Adjusted diluted earnings per share from continuing operations represent adjusted income from continuing operations divided by the number of adjusted diluted weighted average shares.
Both GAAP and non-GAAP diluted per share data is computed based on weighted average shares outstanding and, if there is net income from continuing operations (rather than net loss) during the period, the dilutive impact of share equivalents outstanding during the period. Diluted weighted average shares outstanding and adjusted diluted weighted average shares outstanding are calculated on the same basis except for the net income or loss figure used in determining whether to include such dilutive impact.
Adjusted gross margin
Adjusted gross margin represents total revenues less cost of revenues, prepared in accordance with GAAP, adjusted for the items enumerated above under the heading "Adjusted income from continuing operations," to the extent such items relate to cost of revenues. Such items may include, but are not limited to, amortization of intangible assets and inventory step-up recorded as part of our acquisitions, certain excess inventory reserves resulting from restructuring initiatives and separation benefits.





Adjusted operating expenses
Adjusted operating expenses represent operating expenses, prepared in accordance with GAAP, adjusted for the items enumerated above under the heading "Adjusted income from continuing operations," to the extent such items relate to operating expenses. Such items may include, but are not limited to, certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs, earn-out payments or adjustments, changes in the fair value of contingent consideration and bridge financing costs; cost reduction and integration-related initiatives such as separation benefits, retention payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; litigation-related and other contingent matters; and certain other items.
Adjusted interest expense
Adjusted interest expense represents interest expense, net, prepared in accordance with GAAP, adjusted for certain non-cash interest expense and penalty interest.
Adjusted income taxes
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. Adjustments are then made for certain items relating to prior years and for tax planning actions that are expected to be distortive to the underlying effective tax rate and trend in the effective tax rate. The most directly comparable GAAP financial measure for Adjusted income taxes is income tax expense (benefit), prepared in accordance with GAAP. The adjusted effective tax rate represents the rate generated when dividing adjusted income tax expense or benefit by the amount of adjusted pre-tax income.
EBITDA and Adjusted EBITDA
EBITDA represents net income (loss) before interest expense, net; income tax; depreciation; and amortization, each prepared in accordance with GAAP. Adjusted EBITDA further adjusts EBITDA by excluding other (income) expense, net; share-based compensation; certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs, earn-out payments or adjustments, changes in the fair value of contingent consideration and bridge financing costs; cost reduction and integration-related initiatives such as separation benefits, retention payments, excess inventory reserves, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; gains or losses from early termination of debt; gains or losses from the sales of businesses and other assets; discontinued operations, net of tax; and certain other items.
Net Debt and Net Debt Leverage Ratio
Net debt is calculated as the aggregate carrying amount of debt outstanding less unrestricted cash and cash equivalents.
The net debt leverage ratio is calculated as net debt divided by adjusted EBITDA for the trailing twelve-month period.
Because adjusted financial measures exclude the effect of items that will increase or decrease the Company's reported results of operations, the Company strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety. Investors are also encouraged to review the reconciliation of the non-GAAP financial measures used in the Earnings Release to their most directly comparable GAAP financial measures as included in the Earnings Release and within the quarterly earnings presentation available in the Investor Relations section of the Registrant’s website at http://www.endo.com. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amount of which could be significant.
The information in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be incorporated into any registration statement or other document filed by the Registrant with the U.S. Securities and Exchange Commission under the Securities Act of 1933, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.





Item 9.01.    Financial Statements and Exhibits.
(d)
Exhibits.
Number
Description
99.1





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 
 
ENDO INTERNATIONAL PLC
 
 
By:
/s/ Matthew J. Maletta
Name:
Matthew J. Maletta
Title:
Executive Vice President,
 
Chief Legal Officer
Dated: August 8, 2018


Ex 99.1 - 6.30.2018-Earnings Release


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12395973&doc=3
ENDO REPORTS SECOND-QUARTER 2018 FINANCIAL RESULTS

Second-quarter 2018 revenues of $715 million compared to second-quarter 2017 revenues of $876 million
Second-quarter 2018 XIAFLEX® franchise revenues increased 27 percent versus second-quarter 2017 to $64 million
Second-quarter 2018 Sterile Injectables revenues increased 21 percent versus second-quarter 2017 to $218 million
Entered exclusive licensing agreement with Nevakar for the development of five 505(b)(2) injectable products
Company raises 2018 financial guidance
Phase 3 trials for collagenase clostridium histolyticum (CCH) for the treatment of cellulite now expected to have top-line results in fourth-quarter 2018
DUBLIN, August 8, 2018 -- Endo International plc (NASDAQ: ENDP) today reported second-quarter 2018 financial results, including:
Revenues of $715 million, an 18 percent decrease compared to second-quarter 2017 revenues of $876 million; revenues increased two percent compared to first-quarter 2018.
Reported net loss from continuing operations of $52 million compared to second-quarter 2017 reported net loss from continuing operations of $696 million.
Reported diluted loss per share from continuing operations of $0.23 compared to second-quarter 2017 reported diluted loss per share from continuing operations of $3.12.
Adjusted income from continuing operations of $172 million compared to second-quarter 2017 adjusted income from continuing operations of $207 million.
Adjusted diluted EPS from continuing operations of $0.76 compared to second-quarter 2017 adjusted diluted EPS from continuing operations of $0.93.
Adjusted EBITDA of $351 million compared to second-quarter 2017 adjusted EBITDA of $388 million.
"Throughout 2018, we successfully executed on our strategic initiatives. We continued to reinvest into our Specialty segment, which delivered record Xiaflex sales in the second-quarter. The recent growth of our U.S. Branded Sterile Injectables business has focused our efforts on completing the Somerset/Wintac acquisition, which remains on track to close in the fourth quarter. Additionally, we are proud to announce a new collaboration with Nevakar, Inc. We believe this collaboration will bring several critical care

1



products to our sterile portfolio," said Paul Campanelli, President and CEO of Endo. "Lastly, while our U.S. Generic Pharmaceuticals segment has faced a challenging market environment, we are cautiously optimistic that the portfolio decisions we made over the past 18 months position us well for the future."
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
 
Three Months Ended June 30,
 
 
 
Six Months Ended June 30,
 
 
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Total Revenues
$
714,696

 
$
875,731

 
(18
)%
 
$
1,415,223

 
$
1,913,331

 
(26
)%
Reported Loss from Continuing Operations
$
(52,479
)
 
$
(696,020
)
 
(92
)%
 
$
(550,217
)
 
$
(861,443
)
 
(36
)%
Reported Diluted Weighted Average Shares
223,834

 
223,158

 
 %
 
223,677

 
223,086

 
 %
Reported Diluted Loss per Share from Continuing Operations
$
(0.23
)
 
$
(3.12
)
 
(93
)%
 
$
(2.46
)
 
$
(3.86
)
 
(36
)%
Adjusted Income from Continuing Operations
$
172,195

 
$
207,201

 
(17
)%
 
$
322,978

 
$
482,446

 
(33
)%
Adjusted Diluted Weighted Average Shares1
227,273

 
223,785

 
2
 %
 
226,114

 
223,560

 
1
 %
Adjusted Diluted EPS from Continuing Operations
$
0.76

 
$
0.93

 
(18
)%
 
$
1.43

 
$
2.16

 
(34
)%
__________
(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 were $715 million in second-quarter 2018 compared to $876 million in the same period in 2017. This performance was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file U.S. Generic Pharmaceuticals product ezetimibe tablets, the generic version of ZETIA®. Also contributing to the quarter's revenue performance versus prior year were the annualization of the impact from 2017 competitive entries and product discontinuances in the U.S. Generic Pharmaceuticals segment, the divestitures of the Company's South African and Mexican businesses, Litha and Somar, and the voluntary market withdrawal of OPANA® ER.
GAAP net loss from continuing operations in second-quarter 2018 was $52 million compared to GAAP net loss from continuing operations of $696 million during the same period in 2017. This was primarily attributable to lower pre-tax, non-cash asset impairment charges. GAAP diluted net loss per share from continuing operations for second-quarter 2018 was $0.23, compared to GAAP diluted net loss per share from continuing operations of $3.12 in second-quarter 2017.

2


Adjusted income from continuing operations in second-quarter 2018 was $172 million compared to $207 million in second-quarter 2017. This performance was primarily attributable to lower revenues of ezetimibe tablets, the divestitures of Litha and Somar and the voluntary withdrawal of OPANA® ER. Adjusted diluted EPS from continuing operations in second-quarter 2018 was $0.76 compared to $0.93 in second-quarter 2017.
U.S. BRANDED - SPECIALTY & ESTABLISHED PHARMACEUTICALS
During second-quarter 2018, Endo accelerated the recruitment for two Phase 3 clinical trials of collagenase clostridium histolyticum (or “CCH”) for the treatment of cellulite and now expects topline results in fourth-quarter 2018.
Second-quarter 2018 U.S. Branded - Specialty & Established Pharmaceuticals results include:
Revenues of $213 million compared to $245 million in second-quarter 2017; this performance was primarily attributable to the voluntary cessation of OPANA® ER shipments in third-quarter 2017. Excluding OPANA® ER and SUMAVEL™ DosePro™, which was discontinued in first-quarter 2018, revenues increased two percent compared to second-quarter 2017.
Specialty Products revenues increased 9 percent in second-quarter 2018 compared to second-quarter 2017, primarily driven by strong performance from XIAFLEX®. Sales of XIAFLEX® increased 27 percent compared to second-quarter 2017; this increase was primarily attributable to volume growth in both Dupuytren’s Contracture and Peyronie’s Disease.
U.S. BRANDED - STERILE INJECTABLES
During second-quarter 2018, the U.S. Branded Sterile Injectables segment launched glycopyrrolate injection, the generic version of ROBINUL®, as Somerset Therapeutics' exclusive distributor.
Also in second-quarter 2018, Endo entered into an exclusive licensing agreement with Nevakar, a specialty pharmaceutical company developing multiple assets in the ophthalmic and injectable areas, for the development of five differentiated, sterile injectable products in the U.S. and Canada. Nevakar will develop and seek U.S. Food and Drug Administration (FDA) approval for these products and Endo's Par Pharmaceuticals Sterile Products division will launch and distribute them upon approval. In July, the segment launched ertapenem for injection, the authorized generic of INVANZ®.
Second-quarter 2018 U.S. Branded - Sterile Injectables results include:
Revenues of $218 million, a 21 percent increase compared to second-quarter 2017; this increase was primarily attributable to strong growth of ADRENALIN® and VASOSTRICT®.

3


U.S. GENERIC PHARMACEUTICALS
During second-quarter 2018, the U.S. Generic Pharmaceuticals segment launched praziquantel tablets, the first-to-market generic version of BILTRICIDE®. In July, the segment launched colchicine tablets, the authorized generic of COLCRYS®.
Second-quarter 2018 U.S. Generic Pharmaceuticals results include:
Revenues of $241 million compared to $383 million in second-quarter 2017; this performance was primarily attributable to the loss of marketing exclusivity in the first half of 2017 for the first-to-file product ezetimibe tablets. Also contributing were the annualization of the impact from 2017 competitive entries and previously announced product discontinuances, including the authorized generic of metoprolol.
INTERNATIONAL PHARMACEUTICALS
Second-quarter 2018 International Pharmaceuticals revenues were $43 million, compared to $67 million in the same period in 2017. This performance is primarily attributable to the sale of Litha and Somar in the second-half of 2017. Excluding Litha and Somar, which were divested in 2017, International Pharmaceuticals second-quarter 2018 revenues increased 25 percent compared to second-quarter 2017.
2018 FINANCIAL GUIDANCE
For the full twelve months ending December 31, 2018, at current exchange rates, Endo is raising its financial guidance. The Company now estimates:
Total revenues to be between $2.75 billion and $2.85 billion;
Adjusted diluted EPS from continuing operations to be between $2.50 and $2.60; and
Adjusted EBITDA from continuing operations to be between $1.27 billion and $1.33 billion.
The Company’s 2018 non-GAAP financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 68.5% to 69.5%;
Adjusted operating expenses as a percentage of revenues of approximately 26.0% to 27.0%;
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 229 million.

4


BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of June 30, 2018, the Company had $1,099 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.2 billion and a net debt to adjusted EBITDA ratio of 5.2.
Second-quarter 2018 cash provided by operating activities was $170 million, compared to $171 million of net cash provided by operating activities in the comparable 2017 period.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release today at 9:00 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 1586569. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from August 8, 2018 at 12:00 p.m. ET until 12:00 p.m. ET on August 11, 2018 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 1586569.
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.


ZETIA is a U.S. registered trademark of MSD International GMBH LLC
DOSEPRO is a U.S. registered trademark of Zogenix, Inc.
ROBINUL is a U.S. registered trademark of Wyeth LLC.
VOLTAREN is a registered trademark of Novartis Corporation
COLCRYS is a registered trademark of Takeda Pharmaceuticals U.S.A., Inc. 
BILTRICIDE is a registered trademark of Bayer Intellectual Property GmbH 
INVANZ is a registered trademark of Merck Sharp & Dohme Corp.


5


FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total Revenues for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):
 
Three Months Ended June 30,
 
Percent Growth
 
Six Months Ended June 30,
 
Percent Growth
 
2018
 
2017
 
 
2018
 
2017
 
U.S. Branded - Specialty & Established Pharmaceuticals:
 
 
 
 
 
 
 
 
 
 
 
Specialty Products:


 


 


 
 
 
 
 
 
XIAFLEX®
$
63,500

 
$
50,077

 
27
 %
 
$
120,641

 
$
99,602

 
21
 %
SUPPRELIN® LA
19,963

 
23,649

 
(16
)%
 
40,540

 
42,830

 
(5
)%
Other Specialty (1)
36,429

 
36,745

 
(1
)%
 
70,626

 
72,773

 
(3
)%
Total Specialty Products
$
119,892

 
$
110,471

 
9
 %
 
$
231,807

 
$
215,205

 
8
 %
Established Products:


 


 


 
 
 
 
 
 
PERCOCET®
$
30,833

 
$
30,889

 
 %
 
$
62,809

 
$
61,834

 
2
 %
VOLTAREN® Gel
17,811

 
20,270

 
(12
)%
 
29,128

 
34,544

 
(16
)%
OPANA® ER

 
31,582

 
(100
)%
 

 
67,300

 
(100
)%
Other Established (2)
44,101

 
51,976

 
(15
)%
 
89,128

 
116,464

 
(23
)%
Total Established Products
$
92,745

 
$
134,717

 
(31
)%
 
$
181,065

 
$
280,142

 
(35
)%
Total U.S. Branded - Specialty & Established Pharmaceuticals (3)
$
212,637

 
$
245,188

 
(13
)%
 
$
412,872

 
$
495,347

 
(17
)%
U.S. Branded - Sterile Injectables:
 
 
 
 
 
 
 
 
 
 
 
VASOSTRICT®
$
106,329

 
$
95,750

 
11
 %
 
$
220,054

 
$
194,908

 
13
 %
ADRENALIN®
36,658

 
19,032

 
93
 %
 
66,398

 
25,129

 
NM

Other Sterile Injectables (4)
74,856

 
65,510

 
14
 %
 
147,245

 
132,423

 
11
 %
Total U.S. Branded - Sterile Injectables (3)
$
217,843

 
$
180,292

 
21
 %
 
$
433,697

 
$
352,460

 
23
 %
Total U.S. Generic Pharmaceuticals
$
241,236

 
$
383,020

 
(37
)%
 
$
490,476

 
$
932,835

 
(47
)%
Total International Pharmaceuticals
$
42,980

 
$
67,231

 
(36
)%
 
$
78,178

 
$
132,689

 
(41
)%
Total Revenues
$
714,696

 
$
875,731

 
(18
)%
 
$
1,415,223

 
$
1,913,331

 
(26
)%
__________
(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, LIDODERM®, EDEX®, TESTIM® and FORTESTA® Gel, including the authorized generics.
(3)
Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $25 million during any quarterly period in 2018 or 2017.
(4)
Products included within Other Sterile Injectables include, but are not limited to, APLISOL®, ephedrine sulfate injection and neostigmine methylsulfate injection.

6


The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share data):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
TOTAL REVENUES
$
714,696

 
$
875,731

 
$
1,415,223

 
$
1,913,331

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of revenues
381,905

 
539,401

 
785,503

 
1,208,363

Selling, general and administrative
148,157

 
155,555

 
314,824

 
332,795

Research and development
82,102

 
40,869

 
120,748

 
83,878

Litigation-related and other contingencies, net
19,620

 
(2,600
)
 
17,120

 
(1,664
)
Asset impairment charges
22,767

 
725,044

 
471,183

 
929,006

Acquisition-related and integration items
5,161

 
4,190

 
11,996

 
15,070

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS
$
54,984

 
$
(586,728
)
 
$
(306,151
)
 
$
(654,117
)
INTEREST EXPENSE, NET
130,059

 
121,747

 
254,049

 
233,746

LOSS ON EXTINGUISHMENT OF DEBT

 
51,734

 

 
51,734

OTHER INCOME, NET
(28,831
)
 
(6,709
)
 
(31,709
)
 
(8,746
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(46,244
)
 
$
(753,500
)
 
$
(528,491
)
 
$
(930,851
)
INCOME TAX EXPENSE (BENEFIT)
6,235

 
(57,480
)
 
21,726

 
(69,408
)
LOSS FROM CONTINUING OPERATIONS
$
(52,479
)
 
$
(696,020
)
 
$
(550,217
)
 
$
(861,443
)
DISCONTINUED OPERATIONS, NET OF TAX
(8,388
)
 
(700,498
)
 
(16,139
)
 
(708,903
)
NET LOSS
$
(60,867
)
 
$
(1,396,518
)
 
$
(566,356
)
 
$
(1,570,346
)
NET LOSS PER SHARE—BASIC:
 
 
 
 
 
 
 
Continuing operations
$
(0.23
)
 
$
(3.12
)
 
$
(2.46
)
 
$
(3.86
)
Discontinued operations
(0.04
)
 
(3.14
)
 
(0.07
)
 
(3.18
)
Basic
$
(0.27
)
 
$
(6.26
)
 
$
(2.53
)
 
$
(7.04
)
NET LOSS PER SHARE—DILUTED:
 
 
 
 
 
 
 
Continuing operations
$
(0.23
)
 
$
(3.12
)
 
$
(2.46
)
 
$
(3.86
)
Discontinued operations
(0.04
)
 
(3.14
)
 
(0.07
)
 
(3.18
)
Diluted
$
(0.27
)
 
$
(6.26
)
 
$
(2.53
)
 
$
(7.04
)
WEIGHTED AVERAGE SHARES:
 
 
 
 
 
 
 
Basic
223,834

 
223,158

 
223,677

 
223,086

Diluted
223,834

 
223,158

 
223,677

 
223,086


7


The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2018 and December 31, 2017 (in thousands):
 
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
1,098,788

 
$
986,605

Restricted cash and cash equivalents
358,211

 
320,453

Accounts receivable
451,240

 
517,436

Inventories, net
343,318

 
391,437

Other current assets
57,341

 
55,146

Total current assets
$
2,308,898

 
$
2,271,077

TOTAL NON-CURRENT ASSETS
8,549,137

 
9,364,503

TOTAL ASSETS
$
10,858,035

 
$
11,635,580

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable and accrued expenses, including legal settlement accruals
$
2,117,079

 
$
2,184,618

Other current liabilities
35,987

 
36,291

Total current liabilities
$
2,153,066

 
$
2,220,909

LONG-TERM DEBT, LESS CURRENT PORTION, NET
8,233,005

 
8,242,032

OTHER LIABILITIES
534,041

 
687,759

SHAREHOLDERS' (DEFICIT) EQUITY
(62,077
)
 
484,880

TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
$
10,858,035

 
$
11,635,580


8


The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2018 and 2017 (in thousands):
 
Six Months Ended June 30,
 
2018

2017
OPERATING ACTIVITIES:
 
 
 
Net loss
$
(566,356
)
 
$
(1,570,346
)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
 
 
 
Depreciation and amortization
379,646

 
499,656

Asset impairment charges
471,183

 
929,006

Other, including cash payments to claimants from Qualified Settlement Funds
(65,341
)
 
480,770

Net cash provided by operating activities
$
219,132

 
$
339,086

INVESTING ACTIVITIES:
 
 
 
Purchases of property, plant and equipment, excluding capitalized interest
$
(41,960
)
 
$
(59,729
)
Proceeds from sale of business and other assets, net
37,971

 
18,531

Other
(4,999
)
 

Net cash used in investing activities
$
(8,988
)
 
$
(41,198
)
FINANCING ACTIVITIES:
 
 
 
Payments on borrowings, net
$
(19,650
)
 
$
(2,550
)
Other
(21,143
)
 
(97,033
)
Net cash used in financing activities
$
(40,793
)
 
$
(99,583
)
Effect of foreign exchange rate
(1,010
)
 
2,926

Movement in cash held for sale

 
(21,125
)
NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
$
168,341

 
$
180,106

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD
1,311,014

 
805,180

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD
$
1,479,355

 
$
985,286


9


SUPPLEMENTAL FINANCIAL INFORMATION
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo’s Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.
The tables below provide reconciliations of certain of our non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.
Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)
The following table provides a reconciliation of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2018 and 2017 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018

2017
 
2018
 
2017
Net loss (GAAP)
$
(60,867
)
 
$
(1,396,518
)
 
$
(566,356
)
 
$
(1,570,346
)
Income tax expense (benefit)
6,235

 
(57,480
)
 
21,726

 
(69,408
)
Interest expense, net
130,059

 
121,747

 
254,049

 
233,746

Depreciation and amortization (15)
170,011

 
212,801

 
344,469

 
496,910

EBITDA (non-GAAP)
$
245,438

 
$
(1,119,450
)
 
$
53,888

 
$
(909,098
)
 


 


 
 
 
 
Inventory step-up and other cost savings (2)
$
124

 
$
100

 
$
190

 
$
215

Upfront and milestone-related payments (3)
36,964

 
3,082

 
38,296

 
6,177

Inventory reserve increase from restructuring (4)
202

 
7,899

 
2,590

 
7,899

Separation benefits and other restructuring (5)
28,951

 
16,715

 
75,550

 
39,385

Certain litigation-related and other contingencies, net (6)
19,620

 
(2,600
)
 
17,120

 
(1,664
)
Asset impairment charges (7)
22,767

 
725,044

 
471,183

 
929,006

Acquisition-related and integration costs (8)
1,034

 
2,240

 
1,034

 
6,936

Fair value of contingent consideration (9)
4,127

 
1,950

 
10,962

 
8,134

Loss on extinguishment of debt (10)

 
51,734

 

 
51,734

Share-based compensation
12,096

 
7,512

 
29,986

 
27,005

Other income, net (16)
(28,831
)
 
(6,709
)
 
(31,709
)
 
(8,746
)
Other adjustments
(10
)
 
(114
)
 
(708
)
 
(17
)
Discontinued operations, net of tax (13)
8,388

 
700,498

 
16,139

 
708,903

Adjusted EBITDA (non-GAAP)
$
350,870

 
$
387,901

 
$
684,521

 
$
865,869


10


Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)
The following table provides a reconciliation of our Loss from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2018 and 2017 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Loss from continuing operations (GAAP)
$
(52,479
)
 
$
(696,020
)
 
$
(550,217
)
 
$
(861,443
)
Non-GAAP adjustments:


 


 


 


Amortization of intangible assets (1)
153,215

 
190,943

 
310,387

 
454,077

Inventory step-up and other cost savings (2)
124

 
100

 
190

 
215

Upfront and milestone-related payments (3)
36,964

 
3,082

 
38,296

 
6,177

Inventory reserve increase from restructuring (4)
202

 
7,899

 
2,590

 
7,899

Separation benefits and other restructuring (5)
28,951

 
16,715

 
75,550

 
39,385

Certain litigation-related and other contingencies, net (6)
19,620

 
(2,600
)
 
17,120

 
(1,664
)
Asset impairment charges (7)
22,767

 
725,044

 
471,183

 
929,006

Acquisition-related and integration costs (8)
1,034

 
2,240

 
1,034

 
6,936

Fair value of contingent consideration (9)
4,127

 
1,950

 
10,962

 
8,134

Loss on extinguishment of debt (10)

 
51,734

 

 
51,734

Other (11)
(28,007
)
 
(3,233
)
 
(31,261
)
 
(4,168
)
Tax adjustments (12)
(14,323
)
 
(90,653
)
 
(22,856
)
 
(153,842
)
Adjusted income from continuing operations (non-GAAP)
$
172,195

 
$
207,201

 
$
322,978

 
$
482,446


11


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, 2018 and 2017 (in thousands, except per share data):
Three Months Ended June 30, 2018
 
Total revenues
 
Cost of revenues
 
Gross margin
 
Gross margin %
 
Total operating expenses
 
Operating expense to revenue %
 
Operating income from continuing operations
 
Operating margin %
 
Other non-operating expense, net
 
(Loss) income from continuing operations before income tax
 
Income tax expense
 
Effective tax rate
 
(Loss) income from continuing operations
 
Discontinued operations, net of tax
 
Net (loss) income
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
714,696

 
$
381,905

 
$
332,791

 
47
%
 
$
277,807

 
39
%
 
$
54,984

 
8
%
 
$
101,228

 
$
(46,244
)
 
$
6,235

 
(13
)%
 
$
(52,479
)
 
$
(8,388
)
 
$
(60,867
)
 
$
(0.23
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(153,215
)
 
153,215

 
 
 

 
 
 
153,215

 
 
 

 
153,215

 

 
 
 
153,215

 

 
153,215

 
0.67

Inventory step-up and other cost savings (2)

 
(124
)
 
124

 
 
 

 
 
 
124

 
 
 

 
124

 

 
 
 
124

 

 
124

 

Upfront and milestone-related payments (3)

 
(694
)
 
694

 
 
 
(36,270
)
 
 
 
36,964

 
 
 

 
36,964

 

 
 
 
36,964

 

 
36,964

 
0.17

Inventory reserve increase from restructuring (4)

 
(202
)
 
202

 
 
 

 
 
 
202

 
 
 

 
202

 

 
 
 
202

 

 
202

 

Separation benefits and other restructuring (5)

 
(26,613
)
 
26,613

 
 
 
(2,338
)
 
 
 
28,951

 
 
 

 
28,951

 

 
 
 
28,951

 

 
28,951

 
0.13

Certain litigation-related and other contingencies, net (6)

 

 

 
 
 
(19,620
)
 
 
 
19,620

 
 
 

 
19,620

 

 
 
 
19,620

 

 
19,620

 
0.09

Asset impairment charges (7)

 

 

 
 
 
(22,767
)
 
 
 
22,767

 
 
 

 
22,767

 

 
 
 
22,767

 

 
22,767

 
0.10

Acquisition-related and integration costs (8)

 

 

 
 
 
(1,034
)
 
 
 
1,034

 
 
 

 
1,034

 

 
 
 
1,034

 

 
1,034

 

Fair value of contingent consideration (9)

 

 

 
 
 
(4,127
)
 
 
 
4,127

 
 
 

 
4,127

 

 
 
 
4,127

 

 
4,127

 
0.02

Other (11)

 

 

 
 
 

 
 
 

 
 
 
28,007

 
(28,007
)
 

 
 
 
(28,007
)
 

 
(28,007
)
 
(0.13
)
Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
14,323

 
 
 
(14,323
)
 

 
(14,323
)
 
(0.06
)
Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
8,388

 
8,388

 

After considering items (non-GAAP)
$
714,696

 
$
201,057

 
$
513,639

 
72
%
 
$
191,651

 
27
%
 
$
321,988

 
45
%
 
$
129,235

 
$
192,753

 
$
20,558

 
11
 %
 
$
172,195

 
$

 
$
172,195

 
$
0.76

Three Months Ended June 30, 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
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
875,731

 
$
539,401

 
$
336,330

 
38
%
 
$
923,058

 
105
%
 
$
(586,728
)
 
(67
)%
 
$
166,772

 
$
(753,500
)
 
$
(57,480
)
 
8
%
 
$
(696,020
)
 
$
(700,498
)
 
$
(1,396,518
)
 
$
(3.12
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(190,943
)
 
190,943

 
 
 

 
 
 
190,943

 
 
 

 
190,943

 

 
 
 
190,943

 

 
190,943

 
0.86

Inventory step-up and other cost savings (2)

 
(100
)
 
100

 
 
 

 
 
 
100

 
 
 

 
100

 

 
 
 
100

 

 
100

 

Upfront and milestone-related payments (3)

 
(682
)
 
682

 
 
 
(2,400
)
 
 
 
3,082

 
 
 

 
3,082

 

 
 
 
3,082

 

 
3,082

 
0.01

Inventory reserve increase from restructuring (4)

 
(7,899
)
 
7,899

 
 
 

 
 
 
7,899

 
 
 

 
7,899

 

 
 
 
7,899

 

 
7,899

 
0.04

Separation benefits and other restructuring (5)

 
(5,026
)
 
5,026

 
 
 
(11,689
)
 
 
 
16,715

 
 
 

 
16,715

 

 
 
 
16,715

 

 
16,715

 
0.07

Certain litigation-related and other contingencies, net (6)

 

 

 
 
 
2,600

 
 
 
(2,600
)
 
 
 

 
(2,600
)
 

 
 
 
(2,600
)
 

 
(2,600
)
 
(0.01
)
Asset impairment charges (7)

 

 

 
 
 
(725,044
)
 
 
 
725,044

 
 
 

 
725,044

 

 
 
 
725,044

 

 
725,044

 
3.25

Acquisition-related and integration costs (8)

 

 

 
 
 
(2,240
)
 
 
 
2,240

 
 
 

 
2,240

 

 
 
 
2,240

 

 
2,240

 
0.01

Fair value of contingent consideration (9)

 

 

 
 
 
(1,950
)
 
 
 
1,950

 
 
 

 
1,950

 

 
 
 
1,950

 

 
1,950

 
0.01

Loss on extinguishment of debt (10)

 

 

 
 
 

 
 
 

 
 
 
(51,734
)
 
51,734

 

 
 
 
51,734

 

 
51,734

 
0.23

Other (11)

 

 

 
 
 

 
 
 

 
 
 
3,233

 
(3,233
)
 

 
 
 
(3,233
)
 

 
(3,233
)
 
(0.01
)
Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
90,653

 
 
 
(90,653
)
 

 
(90,653
)
 
(0.41
)
Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
700,498

 
700,498

 

After considering items (non-GAAP)
$
875,731

 
$
334,751

 
$
540,980

 
62
%
 
$
182,335

 
21
%
 
$
358,645

 
41
 %
 
$
118,271

 
$
240,374

 
$
33,173

 
14
%
 
$
207,201

 
$

 
$
207,201

 
$
0.93


12


Six Months Ended June 30, 2018
 
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 expense
 
Effective tax rate
 
(Loss) income from continuing operations
 
Discontinued operations, net of tax
 
Net (loss) income
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
1,415,223

 
$
785,503

 
$
629,720

 
44
%
 
$
935,871

 
66
%
 
$
(306,151
)
 
(22
)%
 
$
222,340

 
$
(528,491
)
 
$
21,726

 
(4
)%
 
$
(550,217
)
 
$
(16,139
)
 
$
(566,356
)
 
$
(2.46
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(310,387
)
 
310,387

 
 
 

 
 
 
310,387

 
 
 

 
310,387

 

 
 
 
310,387

 

 
310,387

 
1.38

Inventory step-up and other cost savings (2)

 
(190
)
 
190

 
 
 

 
 
 
190

 
 
 

 
190

 

 
 
 
190

 

 
190

 

Upfront and milestone-related payments (3)

 
(1,350
)
 
1,350

 
 
 
(36,946
)
 
 
 
38,296

 
 
 

 
38,296

 

 
 
 
38,296

 

 
38,296

 
0.17

Inventory reserve increase from restructuring (4)

 
(2,590
)
 
2,590

 
 
 

 
 
 
2,590

 
 
 

 
2,590

 

 
 
 
2,590

 

 
2,590

 
0.01

Separation benefits and other restructuring (5)

 
(53,831
)
 
53,831

 
 
 
(21,719
)
 
 
 
75,550

 
 
 

 
75,550

 

 
 
 
75,550

 

 
75,550

 
0.34

Certain litigation-related and other contingencies, net (6)

 

 

 
 
 
(17,120
)
 
 
 
17,120

 
 
 

 
17,120

 

 
 
 
17,120

 

 
17,120

 
0.08

Asset impairment charges (7)

 

 

 
 
 
(471,183
)
 
 
 
471,183

 
 
 

 
471,183

 

 
 
 
471,183

 

 
471,183

 
2.10

Acquisition-related and integration costs (8)

 

 

 
 
 
(1,034
)
 
 
 
1,034

 
 
 

 
1,034

 

 
 
 
1,034

 

 
1,034

 

Fair value of contingent consideration (9)

 

 

 
 
 
(10,962
)
 
 
 
10,962

 
 
 

 
10,962

 

 
 
 
10,962

 

 
10,962

 
0.05

Other (11)

 

 

 
 
 
630

 
 
 
(630
)
 
 
 
30,631

 
(31,261
)
 

 
 
 
(31,261
)
 

 
(31,261
)
 
(0.14
)
Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
22,856

 
 
 
(22,856
)
 

 
(22,856
)
 
(0.10
)
Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
16,139

 
16,139

 

After considering items (non-GAAP)
$
1,415,223

 
$
417,155

 
$
998,068

 
71
%
 
$
377,537

 
27
%
 
$
620,531

 
44
 %
 
$
252,971

 
$
367,560

 
$
44,582

 
12
 %
 
$
322,978

 
$

 
$
322,978

 
$
1.43

Six Months Ended June 30, 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
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
1,913,331

 
$
1,208,363

 
$
704,968

 
37
%
 
$
1,359,085

 
71
%
 
$
(654,117
)
 
(34
)%
 
$
276,734

 
$
(930,851
)
 
$
(69,408
)
 
7
%
 
$
(861,443
)
 
$
(708,903
)
 
$
(1,570,346
)
 
$
(3.86
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)