Endo Reports Fourth-Quarter And Full-Year 2016 Financial Results
- Fourth-quarter 2016 revenues of
$1,242 million brings full-year 2016 revenues of$4,010 million to top end of guidance - Company reports
$3.5 billion of asset impairment charges in fourth-quarter 2016 associated with the write-down of goodwill and intangible assets primarily related to the Company's Generics reporting unit - Fourth-quarter reported
$14.96 diluted (GAAP) loss per share from continuing operations; Full-year 2016 reported$14.48 diluted (GAAP) loss per share from continuing operations - Fourth-quarter
$1.77 adjusted diluted EPS from continuing operations; Full-year 2016 adjusted diluted EPS of$4.73 at top end of guidance - Company expects 2017 revenues to range from
$3.45 billion to $3.60 billion - Company expects 2017 Adjusted EBITDA from
$1.50 billion to $1.58 billion - Company also announces divestiture of
Litha Healthcare Group for$100 million
- Revenues of
$1,242 million , a 16 percent increase compared to fourth-quarter 2015 revenues of$1,074 million . - Reported net loss from continuing operations of
$3,333 million compared to fourth-quarter 2015 reported net income from continuing operations of$444 million . - Reported diluted loss per share from continuing operations of
$14.96 compared to fourth-quarter 2015 reported diluted earnings per share (EPS) from continuing operations of$1.97 . - Adjusted net income from continuing operations of
$396 million , a 29 percent increase compared to fourth-quarter 2015 adjusted net income from continuing operations of$307 million .1 - Adjusted diluted EPS from continuing operations of
$1.77 , a 30 percent increase compared to fourth-quarter 2015 adjusted diluted EPS from continuing operations of$1.36 .1
EXECUTIVE COMMENTARY
"After I was named CEO last September, Endo began a comprehensive strategic review that has resulted in a series of definitive actions. First, we streamlined our global supply chain and restructured our Pain franchise, including the divestiture of BELBUCA™. We then executed a Corporate restructuring and have begun divesting non-core businesses with today's announced sale of
"Endo's core assets include a Generics business, which is the fourth largest in the U.S. based on sales, that possesses a growing sterile injectables portfolio and a promising ANDA pipeline. Complementing our generics unit is a revamped specialty Branded business focusing on our flagship product XIAFLEX®. Despite industry headwinds and other challenges, we are excited about our future and have the people, products, and pipeline in place that we believe will enable us, in time, to create value for our shareholders," Mr. Campanelli concluded.
FINANCIAL PERFORMANCE |
|||||||||||||||||||||
(in thousands, except per share amounts) |
|||||||||||||||||||||
Three Months Ended |
Year Ended December 31, |
||||||||||||||||||||
2016 |
2015 |
Change |
2016 |
2015 |
Change |
||||||||||||||||
Total Revenues |
$ |
1,241,513 |
$ |
1,073,697 |
16 |
% |
$ |
4,010,274 |
$ |
3,268,718 |
23 |
% |
|||||||||
Reported Income (Loss) from |
$ |
(3,333,325) |
$ |
443,709 |
NM |
$ |
(3,223,772) |
$ |
(300,399) |
NM |
|||||||||||
Reported Diluted Weighted |
222,870 |
225,321 |
(1) |
% |
222,651 |
197,100 |
13 |
% |
|||||||||||||
Reported Diluted Income (Loss) |
$ |
(14.96) |
$ |
1.97 |
NM |
$ |
(14.48) |
$ |
(1.52) |
NM |
|||||||||||
Adjusted Income from |
$ |
395,791 |
$ |
307,430 |
1 |
29 |
% |
$ |
1,054,382 |
$ |
933,235 |
1 |
13 |
% |
|||||||
Adjusted Diluted Weighted |
223,178 |
225,321 |
(1) |
% |
223,090 |
200,438 |
11 |
% |
|||||||||||||
Adjusted Diluted EPS from |
$ |
1.77 |
$ |
1.36 |
1 |
30 |
% |
$ |
4.73 |
$ |
4.66 |
1 |
2 |
% |
|||||||
(1) Refer to footnote 14 in the Reconciliation of GAAP and Non-GAAP Financial Measures tables for the twelve months ended December 31, 2016 and 2015, for further discussion. |
CONSOLIDATED RESULTS
Total revenues increased by 16 percent to
Adjusted net income from continuing operations in fourth-quarter 2016 increased by 29 percent to
U.S. GENERIC PHARMACEUTICALS
During fourth-quarter 2016, the
Fourth-quarter 2016
- Revenues of
$882 million , a 45 percent increase compared to fourth-quarter 2015; this increase was primarily attributable to the launches of quetiapine extended-release tablets, the generic version of SEROQUEL XR®, and ezetimibe tablets, the generic equivalent of ZETIA®. Par has first-to-file status and associated marketing exclusivity for each product. The introduction of ezetimibe tablets represented the largest product launch in Par Pharmaceutical's history. - Sterile injectables increased 43 percent compared to fourth-quarter 2015; this increase was driven primarily by VASOSTRICT®, which benefited from the market withdrawal of its only competitor's product in 2015.
- Generics base business decreased 23 percent compared to fourth-quarter 2015; this decrease resulted from continued pricing pressure due to increased competition, particularly among Solid Oral Immediate Release (IR) products.
U.S. BRANDED PHARMACEUTICALS
During fourth-quarter 2016, Endo announced highly statistically significant Phase 2b study results on the primary composite endpoint and all secondary endpoints for XIAFLEX® in patients with cellulite. The Company also announced its intention to return the BELBUCA™ (buprenorphine) buccal film product to its developer, eliminate its U.S. Branded pain sales field force and manage the Company's legacy pain portfolio as mature brands. Endo's U.S. Branded segment will now focus on its core Specialty products, including its flagship product XIAFLEX®, as well as SUPPRELIN® LA, TESTOPEL®, and AVEED®.
Fourth-quarter 2016
- Revenues of
$289 million , a 24 percent decrease compared to fourth-quarter 2015; this decrease was primarily attributable to generic erosion adversely impacting the Company's Pain and Established Products portfolios, including VOLTAREN® Gel, LIDODERM® and FROVA®, along with the divestiture of STENDRA®. - Among Endo's Specialty products, net sales of XIAFLEX® increased 11 percent compared to fourth-quarter 2015; this increase was primarily attributable to double-digit demand growth for the product. Net sales of SUPPRELIN® LA increased 23 percent, driven, in part, by continued demand growth.
- In
January 2017 , theU.S. Food and Drug Administration announced that it will hold an advisory committee meeting inMarch 2017 to discuss certain pre- and post-marketing data relating to OPANA® ER, and the overall risk-benefit of that product. The advisory committees will also discuss generic oxymorphone extended-release and oxymorphone immediate-release products.
INTERNATIONAL PHARMACEUTICALS
As with Endo's U.S. businesses,
Endo's
Fourth-quarter 2016
- Revenues of
$70 million , an 18 percent decrease compared to fourth-quarter 2015. - Paladin revenues of
$28 million , a 2 percent decrease compared to fourth-quarter 2015, due to expected competition on certain products. In the fourth quarter, Paladin began promoting XIAFLEX® and NUCYNTA® inCanada . Paladin also retains Canadian marketing rights to serelaxin and looks forward to the results of a Phase III clinical trial expected in 2017. - Emerging market revenues from Litha and
Somar of$38 million , a 25 percent decrease compared to fourth-quarter 2015, attributable, in part, to a decrease in Litha revenues as the result of the divestiture of non-core assets in first-quarter 2016. Revenues were also impacted by lower demand for certain products inMexico and the unfavorable impact of foreign exchange.
2017 FINANCIAL GUIDANCE
For the full twelve months ended December 31, 2017, at current exchange rates, Endo is providing guidance on revenue, GAAP and adjusted diluted EPS guidance from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:
- Total revenues to be between
$3.45 billion to $3.60 billion ; - Reported diluted GAAP EPS from continuing operations to be between
$0.04 and $0.34 ; - Adjusted diluted EPS from continuing operations to be between
$3.45 to $3.75 ; and - Adjusted EBITDA from continuing operations to be between
$1.50 billion to $1.58 billion .
The Company's 2017 non-GAAP financial guidance is based on the following assumptions:
- Adjusted gross margin of approximately 62.0% to 63.0%;
- Adjusted operating expenses as a percentage of revenues to be approximately 22.5% to 23.0%;
- Adjusted interest expense of approximately
$470 million to $480 million ; - Adjusted effective tax rate of approximately 13.0% to 14.0%;
- Adjusted diluted EPS from continuing operations assumes full-year adjusted diluted shares outstanding of approximately 224 million shares; and
- Adoption of Accounting Standard Update 2016-09 ("ASU 2016-09") in the first quarter of 2017, changing the GAAP reporting of excess tax benefits and deficiencies associated with employee stock-based compensation. The Company estimates there could be at least a
$10 million tax detriment (~$0.04 GAAP and Adjusted diluted earnings per share estimated impact) recognized primarily in the first quarter of 2017 when most employee stock awards vest or expire during the year.
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of December 31, 2016, the Company had
Fourth-quarter 2016 cash provided by operating activities was
During fourth-quarter 2016, the Company conducted an annual goodwill impairment assessment, resulting in a pre-tax, non-cash impairment charge of
$2,342.5 million related to the Generics reporting unit, which represents the difference between the estimated implied fair value of the reporting unit's goodwill and its book value. The impairment charge was driven by a reduction in the expected future cash flows in the Generics reporting unit primarily due to a change in pricing expectations partly driven by an expected increased level of competition and increased buying power from the continued consolidation of the generic business customer base. These charges are primarily due to industry and competitive pressures in the sector, which resulted in a reduction of the Generics reporting unit's fair value.$272.6 million related to the Paladin Canada reporting unit, was driven primarily by a reduction in pricing expectations and additional generic competitors for several of Paladin's products.$33.0 million and$26.3 million related to theSomar and Litha reporting units, respectively.
In addition to the Company's goodwill assessment, the Company also incurred pre-tax, non-cash intangible asset impairment charges in the fourth-quarter of approximately
$507.2 million and$285.5 million in our U.S. Generic Pharmaceutical and International Pharmaceutical segments, respectively, resulting from certain market conditions impacting the commercial potential of definite and indefinite-lived intangible assets.$37.6 million in the U.S.Branded Pharmaceuticals segment primarily resulting from the termination of BELBUCA™ and the return of this product toBioDelivery Sciences International, Inc.
Conference Call Information
Endo will conduct a conference call with financial analysts to discuss this press release today at
A replay of the call will be available from February 28, 2017 at 11:30 a.m. ET until 12:30 p.m. ET on March 14, 2017 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 58581981.
A simultaneous webcast of the call can be accessed by visiting www.endo.com. In addition, a replay of the webcast will be available until
The following table presents Endo's unaudited Net Revenues for the three and twelve months ended December 31, 2016 and 2015:
Endo International plc |
|||||||||||||||||||||
Net Revenues (unaudited) |
|||||||||||||||||||||
(in thousands) |
|||||||||||||||||||||
Three Months Ended December 31, |
Percent |
Year Ended December 31, |
Percent |
||||||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||||||||
U.S. Generic Pharmaceuticals: |
|||||||||||||||||||||
U.S. Generics Base |
$ |
288,142 |
$ |
372,417 |
(23) |
% |
$ |
1,230,097 |
$ |
1,083,809 |
13 |
% |
|||||||||
Sterile Injectables |
143,905 |
100,511 |
43 |
% |
530,805 |
107,592 |
393 |
% |
|||||||||||||
New Launches and Alternative Dosages |
450,127 |
136,267 |
230 |
% |
803,711 |
481,015 |
67 |
% |
|||||||||||||
Total U.S. Generic Pharmaceuticals |
$ |
882,174 |
$ |
609,195 |
45 |
% |
$ |
2,564,613 |
$ |
1,672,416 |
53 |
% |
|||||||||
U.S. Branded Pharmaceuticals: |
|||||||||||||||||||||
Pain Management: |
|||||||||||||||||||||
LIDODERM® |
$ |
21,122 |
$ |
40,234 |
(48) |
% |
$ |
87,577 |
$ |
125,269 |
(30) |
% |
|||||||||
OPANA® ER |
38,880 |
43,610 |
(11) |
% |
158,938 |
175,772 |
(10) |
% |
|||||||||||||
PERCOCET® |
36,029 |
35,181 |
2 |
% |
139,211 |
135,822 |
2 |
% |
|||||||||||||
Voltaren® Gel |
18,612 |
62,169 |
(70) |
% |
100,642 |
207,161 |
(51) |
% |
|||||||||||||
$ |
114,643 |
$ |
181,194 |
(37) |
% |
$ |
486,368 |
$ |
644,024 |
(24) |
% |
||||||||||
Specialty Pharmaceuticals: |
|||||||||||||||||||||
SUPPRELIN® LA |
$ |
20,793 |
$ |
16,926 |
23 |
% |
$ |
78,648 |
$ |
70,099 |
12 |
% |
|||||||||
XIAFLEX® |
55,530 |
50,197 |
11 |
% |
189,689 |
158,115 |
20 |
% |
|||||||||||||
$ |
76,323 |
$ |
67,123 |
14 |
% |
$ |
268,337 |
$ |
228,214 |
18 |
% |
||||||||||
Branded Other Revenues (1) |
98,330 |
131,092 |
(25) |
% |
411,589 |
412,369 |
— |
% |
|||||||||||||
Total U.S. Branded Pharmaceuticals (2) |
$ |
289,296 |
$ |
379,409 |
(24) |
% |
$ |
1,166,294 |
$ |
1,284,607 |
(9) |
% |
|||||||||
Total International Pharmaceuticals |
$ |
70,043 |
$ |
85,093 |
(18) |
% |
$ |
279,367 |
$ |
311,695 |
(10) |
% |
|||||||||
Total Revenues |
$ |
1,241,513 |
$ |
1,073,697 |
16 |
% |
$ |
4,010,274 |
$ |
3,268,718 |
23 |
% |
__________ |
|
(1) |
Products included within Branded Other Revenues in the table above include, but are not limited to, TESTOPEL®, Testim®, Fortesta® Gel, including authorized generic, and Nascobal® Nasal Spray. |
(2) |
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 the three months ended December 31, 2016 or December 31, 2015. |
The following table presents unaudited consolidated Statement of Operations data for the three and twelve months ended December 31, 2016 and 2015 (in thousands, except per share data):
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
TOTAL REVENUES |
$ |
1,241,513 |
$ |
1,073,697 |
$ |
4,010,274 |
$ |
3,268,718 |
|||||||
COSTS AND EXPENSES: |
|||||||||||||||
Cost of revenues |
756,578 |
810,068 |
2,634,973 |
2,075,651 |
|||||||||||
Selling, general and administrative |
212,568 |
212,014 |
770,728 |
741,304 |
|||||||||||
Research and development |
46,206 |
43,989 |
183,372 |
102,197 |
|||||||||||
Litigation-related and other contingencies, net |
(4,765) |
17,207 |
23,950 |
37,082 |
|||||||||||
Asset impairment charges |
3,518,085 |
139,859 |
3,781,165 |
1,140,709 |
|||||||||||
Acquisition-related and integration items |
7,400 |
54,073 |
87,601 |
105,250 |
|||||||||||
OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS |
$ |
(3,294,559) |
$ |
(203,513) |
$ |
(3,471,515) |
$ |
(933,475) |
|||||||
INTEREST EXPENSE, NET |
111,783 |
123,018 |
452,679 |
373,214 |
|||||||||||
LOSS ON EXTINGUISHMENT OF DEBT |
— |
25,595 |
— |
67,484 |
|||||||||||
OTHER (INCOME) EXPENSE, NET |
(740) |
1,102 |
(338) |
63,691 |
|||||||||||
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX |
$ |
(3,405,602) |
$ |
(353,228) |
$ |
(3,923,856) |
$ |
(1,437,864) |
|||||||
INCOME TAX (BENEFIT) EXPENSE |
(72,277) |
(796,937) |
(700,084) |
(1,137,465) |
|||||||||||
(LOSS) INCOME FROM CONTINUING OPERATIONS |
$ |
(3,333,325) |
$ |
443,709 |
$ |
(3,223,772) |
$ |
(300,399) |
|||||||
DISCONTINUED OPERATIONS, NET OF TAX |
(4,531) |
(562,302) |
(123,278) |
(1,194,926) |
|||||||||||
CONSOLIDATED NET LOSS |
$ |
(3,337,856) |
$ |
(118,593) |
$ |
(3,347,050) |
$ |
(1,495,325) |
|||||||
Less: Net income (loss) attributable to noncontrolling interests |
— |
(130) |
16 |
(283) |
|||||||||||
NET LOSS ATTRIBUTABLE TO ENDO INTERNATIONAL PLC |
$ |
(3,337,856) |
$ |
(118,463) |
$ |
(3,347,066) |
$ |
(1,495,042) |
|||||||
NET LOSS PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—BASIC: |
|||||||||||||||
Continuing operations |
$ |
(14.96) |
$ |
1.98 |
$ |
(14.48) |
$ |
(1.52) |
|||||||
Discontinued operations |
(0.02) |
(2.51) |
(0.55) |
(6.07) |
|||||||||||
Basic |
$ |
(14.98) |
$ |
(0.53) |
$ |
(15.03) |
$ |
(7.59) |
|||||||
NET LOSS PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—DILUTED: |
|||||||||||||||
Continuing operations |
$ |
(14.96) |
$ |
1.97 |
$ |
(14.48) |
$ |
(1.52) |
|||||||
Discontinued operations |
(0.02) |
(2.50) |
(0.55) |
(6.07) |
|||||||||||
Diluted |
$ |
(14.98) |
$ |
(0.53) |
$ |
(15.03) |
$ |
(7.59) |
|||||||
WEIGHTED AVERAGE SHARES: |
|||||||||||||||
Basic |
222,870 |
224,147 |
222,651 |
197,100 |
|||||||||||
Diluted |
222,870 |
225,321 |
222,651 |
197,100 |
The following table presents unaudited condensed consolidated Balance Sheet data at December 31, 2016 and December 31, 2015 (in thousands):
December 31, |
December 31, |
||||||
ASSETS |
|||||||
CURRENT ASSETS: |
|||||||
Cash and cash equivalents |
$ |
517,250 |
$ |
272,348 |
|||
Restricted cash and cash equivalents |
282,074 |
585,379 |
|||||
Accounts receivable |
992,153 |
1,014,808 |
|||||
Inventories, net |
555,671 |
752,493 |
|||||
Assets held for sale |
116,985 |
36,522 |
|||||
Other assets |
125,326 |
790,987 |
|||||
Total current assets |
$ |
2,589,459 |
$ |
3,452,537 |
|||
TOTAL NON-CURRENT ASSETS |
11,685,650 |
15,897,799 |
|||||
TOTAL ASSETS |
$ |
14,275,109 |
$ |
19,350,336 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
CURRENT LIABILITIES: |
|||||||
Accounts payable and accrued expenses |
$ |
2,470,016 |
$ |
3,116,841 |
|||
Liabilities held for sale |
24,338 |
20,215 |
|||||
Other current liabilities |
140,391 |
337,256 |
|||||
Total current liabilities |
$ |
2,634,745 |
$ |
3,474,312 |
|||
LONG-TERM DEBT, LESS CURRENT PORTION, NET |
8,141,378 |
8,251,657 |
|||||
OTHER LIABILITIES |
797,397 |
1,656,391 |
|||||
STOCKHOLDERS' EQUITY: |
|||||||
Total Endo International plc shareholders' equity |
$ |
2,701,589 |
$ |
5,968,030 |
|||
Noncontrolling interests |
— |
(54) |
|||||
Total shareholders' equity |
$ |
2,701,589 |
$ |
5,967,976 |
|||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
14,275,109 |
$ |
19,350,336 |
The following table presents unaudited condensed consolidated Statement of Cash Flow data for the year ended December 31, 2016 and 2015 (in thousands):
Year Ended December 31, |
|||||||
2016 |
2015 |
||||||
OPERATING ACTIVITIES: |
|||||||
Consolidated net loss |
$ |
(3,347,050) |
$ |
(1,495,325) |
|||
Adjustments to reconcile consolidated net loss to Net cash provided by operating activities |
|||||||
Depreciation and amortization |
983,309 |
632,756 |
|||||
Asset impairment charges |
3,802,493 |
1,390,281 |
|||||
Other |
(914,313) |
(465,686) |
|||||
Net cash provided by operating activities |
$ |
524,439 |
$ |
62,026 |
|||
INVESTING ACTIVITIES: |
|||||||
Purchases of property, plant and equipment, net |
$ |
(132,094) |
$ |
(81,774) |
|||
Acquisitions, net of cash acquired |
(30,394) |
(7,650,404) |
|||||
Proceeds from sale of business, net |
4,108 |
1,588,779 |
|||||
Increase in restricted cash and cash equivalents, net |
(831,321) |
(747,649) |
|||||
Decrease in restricted cash and cash equivalents |
1,134,734 |
688,999 |
|||||
Other |
(19,172) |
(42,721) |
|||||
Net cash provided by (used in) investing activities |
$ |
125,861 |
$ |
(6,244,770) |
|||
FINANCING ACTIVITIES: |
|||||||
(Payments on) proceeds from borrowings, net |
$ |
(336,361) |
$ |
4,228,919 |
|||
Issuance of ordinary shares |
— |
2,300,000 |
|||||
Other |
(57,621) |
(473,452) |
|||||
Net cash (used in) provided by financing activities |
$ |
(393,982) |
$ |
6,055,467 |
|||
Effect of foreign exchange rate |
$ |
328 |
$ |
(7,068) |
|||
Movement in cash held for sale |
(11,744) |
997 |
|||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
$ |
244,902 |
$ |
(133,348) |
|||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
272,348 |
405,696 |
|||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
517,250 |
$ |
272,348 |
The following schedule presents the significant pre-tax cash outlays and cash receipts impacting our Net cash provided by operating activities for the years ended December 31, 2016 and 2015 (in thousands):
Year Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Payments for mesh-related product liability and other litigation matters (1) |
$ |
1,195,932 |
$ |
699,347 |
|||||||||||
Redemption fees paid in connection with debt retirements |
— |
31,496 |
|||||||||||||
Unused commitment fees |
— |
78,352 |
|||||||||||||
Separation and restructuring payments |
97,869 |
73,655 |
|||||||||||||
Transaction costs and certain integration charges paid in connection with acquisitions |
68,249 |
191,195 |
|||||||||||||
U.S. Federal tax refunds received |
(759,950) |
(155,814) |
|||||||||||||
Total |
$ |
602,100 |
$ |
918,231 |
|||||||||||
(1) Cash payments into QSFs result in a cash outflow for investing activities (CFI). Cash releases from QSFs result in a cash inflow for investing activities and a corresponding outflow for cash provided by (used in) operating activities (CFO). The following table reflects the mesh-related payment activities for the twelve months ended December 31, 2016 and 2015 by cash flow component: |
|||||||||||||||
Year Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Impact on CFO (1) |
Impact on CFI |
Impact on CFO (1) |
Impact on CFI |
||||||||||||
Cash contributions to Qualified Settlement Funds |
$ |
— |
(831,131) |
$ |
— |
$ |
(743,132) |
||||||||
Cash payments to claimants from Qualified Settlement Funds |
(1,134,734) |
1,134,734 |
(649,391) |
649,391 |
|||||||||||
Cash payments made directly to claimants |
(7,830) |
— |
(27,379) |
— |
|||||||||||
Total |
$ |
(1,142,564) |
$ |
303,603 |
$ |
(676,770) |
$ |
(93,741) |
|||||||
(1) These amounts are included in Changes in assets and liabilities which used cash in the table above. |
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
The table below provides reconciliations of our consolidated income (loss) from continuing operations (GAAP) to our adjusted income from continuing operations (non-GAAP) for the three and twelve months ended
ENDO INTERNATIONAL PLC |
|||||||||||||||
Reconciliation of GAAP and Non-GAAP Financial Measures |
|||||||||||||||
(UNAUDITED) |
|||||||||||||||
(In thousands) |
|||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
(Loss) Income from continuing operations (GAAP) |
$ |
(3,333,325) |
$ |
443,709 |
$ |
(3,223,772) |
$ |
(300,399) |
|||||||
Non-GAAP adjustments: |
|||||||||||||||
Amortization of intangible assets |
240,390 |
227,543 |
876,451 |
561,302 |
|||||||||||
Inventory step-up and other cost savings |
13,912 |
117,681 |
125,699 |
249,464 |
|||||||||||
Upfront and milestone related payments |
2,455 |
2,092 |
8,330 |
16,155 |
|||||||||||
Inventory reserve (decrease) increase from restructuring |
(137) |
— |
24,455 |
— |
|||||||||||
Royalty obligations |
— |
— |
(7,750) |
— |
|||||||||||
Separation benefits and other restructuring |
37,216 |
55,151 |
83,036 |
125,407 |
|||||||||||
Acceleration of Auxilium employee equity awards |
— |
— |
— |
37,603 |
|||||||||||
Charges for litigation and other legal matters |
(4,765) |
17,207 |
23,950 |
37,082 |
|||||||||||
Asset impairment charges |
3,518,085 |
139,859 |
3,781,165 |
1,140,709 |
|||||||||||
Acquisition-related and integration costs |
8,356 |
36,112 |
63,778 |
170,890 |
|||||||||||
Fair value of contingent consideration |
(956) |
17,961 |
23,823 |
(65,640) |
|||||||||||
Non-cash and penalty interest charges |
— |
1,965 |
4,092 |
8,267 |
|||||||||||
Other |
(1,836) |
27,501 |
(7,273) |
130,165 |
|||||||||||
Tax adjustments |
(83,604) |
(779,351) |
(721,602) |
(1,177,770) |
|||||||||||
Adjusted income from continuing operations (non-GAAP) |
$ |
395,791 |
$ |
307,430 |
$ |
1,054,382 |
$ |
933,235 |
|||||||
__________ |
|||||||||||||||
Refer to the following tables for additional information regarding non-GAAP financial measures. |
ENDO INTERNATIONAL PLC |
|||||||||||||||||||||||||||||||
Reconciliation of GAAP and Non-GAAP Financial Measures |
|||||||||||||||||||||||||||||||
(UNAUDITED) |
|||||||||||||||||||||||||||||||
(In thousands, except per share data) |
|||||||||||||||||||||||||||||||
Three Months Ended December 31, 2016 |
|||||||||||||||||||||||||||||||
Total revenues |
Cost of revenues |
Gross margin |
Gross margin % |
Total operating expenses |
Operating expense to revenue % |
Operating loss from continuing operations |
Operating margin % |
Other non-operating expense, net |
Loss from continuing operations before income tax |
Income tax benefit |
Effective tax rate |
Loss from continuing operations |
Discontinued operations, net of tax |
Net loss attributable to Endo International plc (14) |
Diluted loss per share (15) |
||||||||||||||||
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 costs 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 (5) |
— |
(9,284) |
9,284 |
(27,932) |
37,216 |
— |
37,216 |
— |
37,216 |
— |
37,216 |
0.17 |
|||||||||||||||||||
Charges for litigation and other legal matters (6) |
— |
— |
— |
4,765 |
(4,765) |
— |
(4,765) |
— |
(4,765) |
— |
(4,765) |
(0.02) |
|||||||||||||||||||
Asset impairment charges (7) |
— |
— |
— |
(3,518,085) |
3,518,085 |
— |
3,518,085 |
— |
3,518,085 |
— |
3,518,085 |
15.79 |
|||||||||||||||||||
Acquisition-related and integration costs (8) |
— |
— |
— |
(8,356) |
8,356 |
— |
8,356 |
— |
8,356 |
— |
8,356 |
0.04 |
|||||||||||||||||||
Fair value of contingent consideration (9) |
— |
— |
— |
956 |
(956) |
— |
(956) |
— |
(956) |
— |
(956) |
— |
|||||||||||||||||||
Other (11) |
— |
— |
— |
— |
— |
1,836 |
(1,836) |
— |
(1,836) |
— |
(1,836) |
(0.01) |
|||||||||||||||||||
Tax adjustments (12) |
— |
— |
— |
— |
— |
— |
— |
83,604 |
(83,604) |
— |
(83,604) |
(0.38) |
|||||||||||||||||||
Exclude discontinued operations, net of tax (13) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
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 |
|||||||||||||||
Three Months Ended December 31, 2015 |
|||||||||||||||||||||||||||||||
Total revenues |
Cost of revenues |
Gross margin |
Gross margin % |
Total operating expenses |
Operating expense to revenue % |
Operating loss from continuing operations |
Operating margin % |
Other non-operating expense, net |
Loss from continuing operations before income tax |
Income tax benefit |
Effective tax rate |
Income from continuing operations |
Discontinued operations, net of tax |
Net loss attributable to Endo International plc (14) |
Diluted earnings per share (15) |
||||||||||||||||
Reported (GAAP) |
$ 1,073,697 |
$ 810,068 |
$ 263,629 |
25 % |
$ 467,142 |
44 % |
$ (203,513) |
(19)% |
$ 149,715 |
$ (353,228) |
$ (796,937) |
226 % |
$ 443,709 |
$ (562,302) |
$ (118,463) |
$ 1.97 |
|||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(227,543) |
227,543 |
— |
227,543 |
— |
227,543 |
— |
227,543 |
— |
227,543 |
1.02 |
|||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(117,681) |
117,681 |
— |
117,681 |
— |
117,681 |
— |
117,681 |
— |
117,681 |
0.52 |
|||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(1,089) |
1,089 |
(1,003) |
2,092 |
— |
2,092 |
— |
2,092 |
— |
2,092 |
0.01 |
|||||||||||||||||||
Separation benefits and other restructuring (5) |
— |
(40,304) |
40,304 |
(14,847) |
55,151 |
— |
55,151 |
— |
55,151 |
— |
55,151 |
0.24 |
|||||||||||||||||||
Charges for litigation and other legal matters (6) |
— |
— |
— |
(17,207) |
17,207 |
— |
17,207 |
— |
17,207 |
— |
17,207 |
0.08 |
|||||||||||||||||||
Asset impairment charges (7) |
— |
— |
— |
(139,859) |
139,859 |
— |
139,859 |
— |
139,859 |
— |
139,859 |
0.62 |
|||||||||||||||||||
Acquisition-related and integration costs (8) |
— |
— |
— |
(36,112) |
36,112 |
— |
36,112 |
— |
36,112 |
— |
36,112 |
0.16 |
|||||||||||||||||||
Fair value of contingent consideration (9) |
— |
— |
— |
(17,961) |
17,961 |
— |
17,961 |
— |
17,961 |
— |
17,961 |
0.08 |
|||||||||||||||||||
Non-cash and penalty interest charges (10) |
— |
— |
— |
— |
— |
(1,965) |
1,965 |
— |
1,965 |
— |
1,965 |
0.01 |
|||||||||||||||||||
Other (11) |
— |
— |
— |
(3,079) |
3,079 |
(24,422) |
27,501 |
— |
27,501 |
— |
27,501 |
0.12 |
|||||||||||||||||||
Tax adjustments (12) |
— |
— |
— |
— |
— |
— |
— |
779,351 |
(779,351) |
— |
(779,351) |
(3.47) |
|||||||||||||||||||
Exclude discontinued operations, net of tax (13) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
560,762 |
560,762 |
— |
|||||||||||||||||||
After considering items (non-GAAP) |
$ 1,073,697 |
$ 423,451 |
$ 650,246 |
61 % |
$ 237,074 |
22 % |
$ 413,172 |
38 % |
$ 123,328 |
$ 289,844 |
$ (17,586) |
(6)% |
$ 307,430 |
$ (1,540) |
$ 306,020 |
$ 1.36 |
Notes to the reconciliation of certain line items included in the GAAP Statements of Operations to the Non-GAAP line items are as follows:
(1) Adjustments for amortization of commercial intangible assets included the following: |
|||||||||||||||
Three Months Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Amortization of intangible assets excluding fair value step-up from contingent consideration |
$ |
228,876 |
$ |
218,491 |
|||||||||||
Amortization of intangible assets related to fair value step-up from contingent consideration |
11,514 |
9,052 |
|||||||||||||
Total |
$ |
240,390 |
$ |
227,543 |
|||||||||||
(2) Adjustments for inventory step-up and other cost savings included the following: |
|||||||||||||||
Three Months Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Fair value step-up of inventory sold |
$ |
9,669 |
$ |
109,746 |
|||||||||||
Excess manufacturing costs that will be eliminated pursuant to integration plans |
4,243 |
7,935 |
|||||||||||||
Total |
$ |
13,912 |
$ |
117,681 |
|||||||||||
(3) Adjustments for upfront and milestone-related payments to partners included the following: |
|||||||||||||||
Three Months Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of |
Operating |
Cost of |
Operating |
||||||||||||
Sales-based milestones |
$ |
655 |
$ |
— |
$ |
1,089 |
$ |
— |
|||||||
Development-based milestones |
— |
1,800 |
— |
1,003 |
|||||||||||
Total |
$ |
655 |
$ |
1,800 |
$ |
1,089 |
$ |
1,003 |
|||||||
(4) To exclude decreases of restructuring related excess inventory reserves of $0.1 million recorded during the three months ended December 31, 2016. |
|||||||||||||||
(5) Adjustments for separation benefits and other restructuring included the following: |
|||||||||||||||
Three Months Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of |
Operating |
Cost of |
Operating |
||||||||||||
Separation benefits |
$ |
6,150 |
$ |
21,772 |
$ |
40,304 |
$ |
1,828 |
|||||||
Accelerated depreciation |
3,134 |
5,729 |
— |
10,361 |
|||||||||||
Other |
— |
431 |
— |
2,658 |
|||||||||||
Total |
$ |
9,284 |
$ |
27,932 |
$ |
40,304 |
$ |
14,847 |
|||||||
(6) To exclude litigation settlement charges or reimbursements. |
|||||||||||||||
(7) To exclude goodwill and intangible asset impairment charges. During the three months ended December 31, 2016, we recorded total impairment charges of $3.5 billion. These charges primarily related to the Company's annual goodwill impairment assessment, which resulted in non-cash impairment charges of $2,343 million, $273 million, $33 million and $26 million for its U.S. Generics, Paladin, Somar and Litha reporting units, respectively. Intangible asset impairment charges of $830 million primarily included non-cash impairment charges of $507 million and $285 million in the Company's U.S. Generic Pharmaceuticals and International Pharmaceuticals segments, respectively, resulting from certain market conditions, including price erosion and increased competition, and $38 million in our U.S. Branded Pharmaceuticals segment resulting primarily from the termination of our BELBUCA™ product. During the three months ended December 31, 2015, we recorded impairment charges of $140 million resulting primarily from a non-cash goodwill impairment charge of $86 million related to our Paladin reporting unit, non-cash intangible asset impairment charges of $38 million related to our U.S. Generic Pharmaceuticals segment and $10 million related to our U.S. Branded Pharmaceuticals segment. |
|||||||||||||||
(8) Adjustments for acquisition and integration items primarily relate to various acquisitions, including Par Pharmaceuticals and Auxilium Pharmaceuticals, and included the following: |
|||||||||||||||
Three Months Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Integration costs (primarily third-party consulting fees) |
$ |
6,441 |
$ |
17,892 |
|||||||||||
Transaction costs |
— |
8,498 |
|||||||||||||
Transition services |
— |
8,858 |
|||||||||||||
Other |
1,915 |
864 |
|||||||||||||
Total |
$ |
8,356 |
$ |
36,112 |
|||||||||||
(9) To exclude the impact of the change in fair value of contingent consideration resulting from certain market conditions impacting the commercial potential of the underlying products. |
|||||||||||||||
(10) To exclude penalty interest charges of $1,965. |
|||||||||||||||
(11) Adjustments to other included the following: |
|||||||||||||||
Three Months Ended December 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Operating |
Other |
Operating |
Other |
||||||||||||
Costs associated with unused financing commitments |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||
Foreign currency impact related to the re-measurement of intercompany debt instruments |
— |
(1,192) |
— |
(1,130) |
|||||||||||
Loss on extinguishment of debt |
— |
— |
— |
25,595 |
|||||||||||
Other miscellaneous |
— |
(644) |
3,079 |
(43) |
|||||||||||
Total |
$ |
— |
$ |
(1,836) |
$ |
3,079 |
$ |
24,422 |
|||||||
(12) Adjusted income taxes are calculated by tax effecting adjusted pre-tax income 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 and includes current and deferred income tax expense commensurate with the non-GAAP measure of profitability. |
|||||||||||||||
(13) To exclude the results of the Astora business reported as discontinued operations, net of tax. |
|||||||||||||||
(14) This amount includes non-controlling interest of $(130) for the three months ended December 31, 2015. |
|||||||||||||||
(15) Calculated as income (loss) from continuing operations divided by the applicable weighted average share number. The applicable weighted average share number for the three months ended December 31, 2016 is 222,870 and 223,178 for the GAAP and non-GAAP EPS calculations, respectively. The applicable weighted average share number for the three months ended December 31, 2015 is 225,321 for both the GAAP EPS calculation and the non-GAAP EPS calculations. |
ENDO INTERNATIONAL PLC |
|||||||||||||||||||||||||||||||
Reconciliation of GAAP and Non-GAAP Financial Measures |
|||||||||||||||||||||||||||||||
(UNAUDITED) |
|||||||||||||||||||||||||||||||
(In thousands, except per share data) |
|||||||||||||||||||||||||||||||
Year Ended December 31, 2016 |
|||||||||||||||||||||||||||||||
Total revenues |
Cost of revenues |
Gross margin |
Gross margin % |
Total operating expenses |
Operating expense to revenue % |
Operating loss from continuing operations |
Operating margin % |
Other non-operating expense, net |
Loss from continuing operations before income tax |
Income tax benefit |
Effective tax rate |
Loss from continuing operations |
Discontinued operations, net of tax |
Net loss attributable to Endo International plc (16) |
Diluted loss per share (17) |
||||||||||||||||
Reported (GAAP) |
$ 4,010,274 |
$ 2,634,973 |
$ 1,375,301 |
34 % |
$ 4,846,816 |
121 % |
$ (3,471,515) |
(87)% |
$ 452,341 |
$ (3,923,856) |
$ (700,084) |
18 % |
$ (3,223,772) |
$ (123,278) |
$ (3,347,066) |
$ (14.48) |
|||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(876,451) |
876,451 |
— |
876,451 |
— |
876,451 |
— |
876,451 |
— |
876,451 |
3.94 |
|||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(124,349) |
124,349 |
(1,350) |
125,699 |
— |
125,699 |
— |
125,699 |
— |
125,699 |
0.56 |
|||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(2,628) |
2,628 |
(5,702) |
8,330 |
— |
8,330 |
— |
8,330 |
— |
8,330 |
0.04 |
|||||||||||||||||||
Inventory reserve increase from restructuring (4) |
— |
(24,455) |
24,455 |
— |
24,455 |
— |
24,455 |
— |
24,455 |
— |
24,455 |
0.11 |
|||||||||||||||||||
Royalty obligations (5) |
— |
7,750 |
(7,750) |
— |
(7,750) |
— |
(7,750) |
— |
(7,750) |
— |
(7,750) |
(0.03) |
|||||||||||||||||||
Separation benefits and other restructuring (6) |
— |
(28,678) |
28,678 |
(54,358) |
83,036 |
— |
83,036 |
— |
83,036 |
— |
83,036 |
0.37 |
|||||||||||||||||||
Charges for litigation and other legal matters (8) |
— |
— |
— |
(23,950) |
23,950 |
— |
23,950 |
— |
23,950 |
— |
23,950 |
0.11 |
|||||||||||||||||||
Asset impairment charges (9) |
— |
— |
— |
(3,781,165) |
3,781,165 |
— |
3,781,165 |
— |
3,781,165 |
— |
3,781,165 |
16.98 |
|||||||||||||||||||
Acquisition-related and integration costs (10) |
— |
— |
— |
(63,778) |
63,778 |
— |
63,778 |
— |
63,778 |
— |
63,778 |
0.29 |
|||||||||||||||||||
Fair value of contingent consideration (11) |
— |
— |
— |
(23,823) |
23,823 |
— |
23,823 |
— |
23,823 |
— |
23,823 |
0.11 |
|||||||||||||||||||
Non-cash and penalty interest charges (12) |
— |
— |
— |
— |
— |
(4,092) |
4,092 |
— |
4,092 |
— |
4,092 |
0.02 |
|||||||||||||||||||
Other (13) |
— |
— |
— |
8,350 |
(8,350) |
(1,077) |
(7,273) |
— |
(7,273) |
— |
(7,273) |
(0.03) |
|||||||||||||||||||
Tax adjustments (14) |
— |
— |
— |
— |
— |
— |
— |
721,602 |
(721,602) |
— |
(721,602) |
(3.25) |
|||||||||||||||||||
Exclude discontinued operations, net of tax (15) |
— |
— |
— |
— |
— |
— |
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