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

February 27, 2018

Q4 2017 Earnings Release 1.3 MB

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

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