Endo Reports Second Quarter 2016 Financial Results
- Second quarter 2016 reported revenues of
$921 million and diluted GAAP earnings per share (EPS) from continuing operations of$1.75 - Second quarter 2016 adjusted diluted EPS of
$0.86 - Company affirms full year 2016 revenue and adjusted diluted EPS financial guidance
- Company expands management capabilities, appointing
Joseph J. Ciaffoni to President,U.S. Branded Pharmaceuticals
- Revenues of
$921 million including the addition of sales from its 2015 acquisition of Par Pharmaceutical, a 25 percent increase compared to second quarter 2015 revenues of$735 million . - Reported net income from continuing operations of
$390 million compared to second quarter 2015 reported net loss from continuing operations of$(91) million . - Reported diluted EPS from continuing operations of
$1.75 compared to second quarter 2015 reported diluted loss per share from continuing operations of$(0.49) . - Adjusted net income from continuing operations of
$192 million , a 6 percent decrease compared to second quarter 2015 adjusted net income from continuing operations of$204 million .1 - Adjusted diluted EPS from continuing operations of
$0.86 compared to second quarter 2015 adjusted diluted EPS from continuing operations of$1.08 .1
"During the second quarter 2016, Endo remained focused on operational execution. We have delivered results across all of our businesses that are on-track or ahead of Company expectations for the quarter and today we are affirming our full year 2016 revenue and adjusted diluted EPS financial guidance while increasing investment in Branded and Generics R&D as well as BELBUCA™ and XIAFLEX® promotion," said
FINANCIAL PERFORMANCE |
|||||||||||||||||||||
(in thousands, except per share amounts) |
|||||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||
2016 |
2015 |
Change |
2016 |
2015 |
Change |
||||||||||||||||
Total Revenues |
$ |
920,887 |
$ |
735,166 |
25 |
% |
$ |
1,884,426 |
$ |
1,449,294 |
30 |
% |
|||||||||
Reported Income (Loss) from Continuing Operations |
$ |
389,812 |
$ |
(90,894) |
NM |
$ |
301,049 |
$ |
59,598 |
405 |
% |
||||||||||
Reported Diluted Weighted Average Shares |
222,863 |
185,328 |
20 |
% |
223,021 |
182,822 |
22 |
% |
|||||||||||||
Reported Diluted Income (Loss) per Share from Continuing Operations |
$ |
1.75 |
$ |
(0.49) |
NM |
$ |
1.35 |
$ |
0.33 |
309 |
% |
||||||||||
Adjusted Income from Continuing Operations |
$ |
192,341 |
$ |
204,335 |
1 |
(6) |
% |
$ |
433,072 |
$ |
411,695 |
1 |
5 |
% |
|||||||
Adjusted Diluted Weighted Average Shares |
222,863 |
188,819 |
18 |
% |
223,021 |
182,822 |
22 |
% |
|||||||||||||
Adjusted Diluted EPS from Continuing Operations |
$ |
0.86 |
$ |
1.08 |
1 |
(20) |
% |
$ |
1.94 |
$ |
2.25 |
1 |
(14) |
% |
(1) Refer to footnote 12 and 14 in the Reconciliation of GAAP and Non-GAAP Financial Measures tables for three and six months ended
CONSOLIDATED RESULTS
Total revenues increased by 25 percent to
Adjusted net income from continuing operations for second quarter 2016 decreased by 6 percent to
U.S. BRANDED PHARMACEUTICALS
During second quarter 2016, the
Second quarter 2016
- Revenues of
$288 million , a 9 percent decrease compared to second quarter 2015; this decrease was primarily attributable to a generic entrant for Voltaren® Gel inMarch 2016 . - Net sales of XIAFLEX® increased 6 percent compared to second quarter 2015; this increase reflects continued double-digit demand growth for the product, partially offset by customer de-stocking in the quarter.
- Net sales of Voltaren® Gel decreased 46 percent compared to second quarter 2015; this decrease was attributable to a decrease in both volume and price as a result of the entrance of a generic competitor in
March 2016 .
U.S. GENERIC PHARMACEUTICALS
During second quarter 2016, the
Second quarter 2016
- Revenues of
$565 million , a 67 percent increase compared to second quarter 2015; this increase was primarily attributable to growth from the addition of sales by Par. - Secured a patent (expiration
January 2035 ) for Vasostrict®, the only vasopressin injection currently approved by theFDA . - As expected and previously communicated by the Company, the Generics Base business revenues declined approximately 5 percent sequentially compared to the first quarter 2016, due to consortium pricing pressures and additional competitive entrants.
INTERNATIONAL PHARMACEUTICALS
During second quarter 2016, the
Second quarter 2016
- Revenues of
$67 million , a 17 percent decrease compared to second quarter 2015. - Paladin revenues of
$26 million , a 14 percent decrease compared to second quarter 2015, due primarily to the previously expected loss of exclusivity for two products. During second quarter 2016, Paladin filed a submission for BELBUCA™ withHealth Canada , acquired the Canadian rights to XIAFLEX® and launched Metadol D 1L. - Emerging market revenues from Litha and
Somar of$37 million , a 23 percent decrease compared to second quarter 2015, driven primarily by a decrease in Litha revenues as it manages its recent divestiture of non-core assets and integrates its new portfolio of products and pipeline programs acquired fromAspen .
2016 Financial Guidance
For the full twelve months ended December 31, 2016, at current exchange rates, Endo is affirming its full year revenue and adjusted diluted EPS financial guidance issued in
- Total revenues to be between
$3.87 billion and $4.03 billion ; - Diluted GAAP EPS from continuing operations is now expected to be between
$1.86 and $2.16 ; and - Adjusted diluted EPS from continuing operations to be between
$4.50 and $4.80 .
The Company's 2016 financial guidance is based on the following assumptions:
- Adjusted gross margin of approximately 59 percent to 60 percent;
- Adjusted operating expenses as a percentage of revenues to be approximately 21.5 percent to 22 percent;
- Adjusted interest expense of approximately
$455 million ; - Adjusted effective tax rate of approximately zero to 2 percent; and
- Adjusted diluted EPS from continuing operations assumes full year adjusted diluted shares outstanding of approximately 223 million shares.
Balance Sheet, Liquidity and Other Updates
As of June 30, 2016, the Company had
Second quarter 2016 reported cash provided by operating activities was
During second quarter 2016, the Company recorded pre-tax, non-cash impairment charges of
As part of the continued integration of the legacy Qualitest and Par businesses, Endo initiated a legal entity reorganization that moved the Generics business to a new U.S. holding company structure that is separate from the legacy Branded business structure. The reorganization provides operating flexibility and benefits and reduces the potential impact related to any future limits that could apply to the use of tax attributes by utilizing most of the Company's attributes to offset the gain that was created in the intercompany sale. This reorganization resulted in stepped-up tax basis of the U.S. Generics business assets to their fair value.
The reorganization also gave rise to a discrete net GAAP tax benefit of
On an adjusted basis, the elimination of tax benefits from acquired attributes is offset by an improved mix of jurisdictional adjusted pre-tax income resulting primarily from the reorganization.
As a result of the
Management Team Updates
In a separate press release issued today, Endo announced the appointment of
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
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 six months ended June 30, 2016 and 2015:
Endo International plc Net Revenues (unaudited) (in thousands) |
|||||||||||||||||||||
Three Months Ended June 30, |
Percent |
Six Months Ended June 30, |
Percent |
||||||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||||||||
U.S. Branded Pharmaceuticals: |
|||||||||||||||||||||
Pain Management: |
|||||||||||||||||||||
LIDODERM® |
$ |
27,039 |
$ |
30,186 |
(10)% |
$ |
46,751 |
$ |
55,346 |
(16)% |
|||||||||||
OPANA® ER |
38,554 |
43,097 |
(11)% |
83,224 |
89,956 |
(7)% |
|||||||||||||||
PERCOCET® |
35,708 |
32,444 |
10 |
% |
69,301 |
68,743 |
1 |
% |
|||||||||||||
Voltaren® Gel |
27,290 |
51,006 |
(46)% |
63,037 |
96,477 |
(35)% |
|||||||||||||||
$ |
128,591 |
$ |
156,733 |
(18)% |
$ |
262,313 |
$ |
310,522 |
(16)% |
||||||||||||
Specialty Pharmaceuticals: |
|||||||||||||||||||||
SUPPRELIN® LA |
$ |
21,211 |
$ |
17,796 |
19 |
% |
$ |
38,463 |
$ |
34,078 |
13 |
% |
|||||||||
XIAFLEX® |
42,419 |
39,952 |
6 |
% |
86,464 |
67,918 |
27 |
% |
|||||||||||||
$ |
63,630 |
$ |
57,748 |
10 |
% |
$ |
124,927 |
$ |
101,996 |
22 |
% |
||||||||||
Branded Other Revenues (1) |
96,121 |
101,432 |
(5)% |
209,915 |
187,902 |
12 |
% |
||||||||||||||
Total U.S. Branded Pharmaceuticals (2) |
$ |
288,342 |
$ |
315,913 |
(9)% |
$ |
597,155 |
$ |
600,420 |
(1)% |
|||||||||||
U.S. Generic Pharmaceuticals: |
|||||||||||||||||||||
U.S. Generics Base |
$ |
331,095 |
$ |
214,241 |
55 |
% |
$ |
678,524 |
$ |
458,511 |
48 |
% |
|||||||||
Sterile Injectables |
126,245 |
— |
NM |
249,934 |
— |
NM |
|||||||||||||||
New Launches and Alternative Dosages |
108,018 |
124,085 |
(13)% |
220,290 |
236,777 |
(7)% |
|||||||||||||||
Total U.S. Generic Pharmaceuticals |
$ |
565,358 |
$ |
338,326 |
67 |
% |
$ |
1,148,748 |
$ |
695,288 |
65 |
% |
|||||||||
Total International Pharmaceuticals |
$ |
67,187 |
$ |
80,927 |
(17)% |
$ |
138,523 |
$ |
153,586 |
(10)% |
|||||||||||
Total Revenues |
$ |
920,887 |
$ |
735,166 |
25 |
% |
$ |
1,884,426 |
$ |
1,449,294 |
30 |
% |
(1) |
Products included within Branded Other Revenues in the table above include, but are not limited to, TESTOPEL®, Testim®, Fortesta® Gel, including authorized generic, BELBUCATM, Sumavel® DosePro® and Nascobal® Nasal Spray. |
||
(2) |
Individual products presented above represent the top two performing products in each segment plus any product having revenues in excess of $25.0 million during the three months ended June 30, 2016. |
The following table presents unaudited consolidated Statement of Operations data for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share data):
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
TOTAL REVENUES |
$ |
920,887 |
$ |
735,166 |
$ |
1,884,426 |
$ |
1,449,294 |
|||||||
COSTS AND EXPENSES: |
|||||||||||||||
Cost of revenues |
632,218 |
438,858 |
1,320,923 |
823,124 |
|||||||||||
Selling, general and administrative |
193,070 |
154,491 |
371,425 |
366,069 |
|||||||||||
Research and development |
50,589 |
18,984 |
92,281 |
36,881 |
|||||||||||
Litigation-related and other contingencies, net |
5,259 |
6,875 |
10,459 |
19,875 |
|||||||||||
Asset impairment charges |
39,951 |
70,243 |
169,576 |
77,243 |
|||||||||||
Acquisition-related and integration items |
48,171 |
44,225 |
60,725 |
78,865 |
|||||||||||
OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS |
$ |
(48,371) |
$ |
1,490 |
$ |
(140,963) |
$ |
47,237 |
|||||||
INTEREST EXPENSE, NET |
111,919 |
80,611 |
228,712 |
153,750 |
|||||||||||
LOSS ON EXTINGUISHMENT OF DEBT |
— |
— |
— |
980 |
|||||||||||
OTHER EXPENSE, NET |
5,175 |
24,493 |
3,268 |
12,498 |
|||||||||||
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX |
$ |
(165,465) |
$ |
(103,614) |
$ |
(372,943) |
$ |
(119,991) |
|||||||
INCOME TAX BENEFIT |
(555,277) |
(12,720) |
(673,992) |
(179,589) |
|||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS |
$ |
389,812 |
$ |
(90,894) |
$ |
301,049 |
$ |
59,598 |
|||||||
DISCONTINUED OPERATIONS, NET OF TAX |
(46,216) |
(159,632) |
(91,324) |
(385,842) |
|||||||||||
CONSOLIDATED NET INCOME (LOSS) |
$ |
343,596 |
$ |
(250,526) |
$ |
209,725 |
$ |
(326,244) |
|||||||
Less: Net income (loss) attributable to noncontrolling interests |
18 |
(107) |
16 |
(107) |
|||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ENDO INTERNATIONAL PLC |
$ |
343,578 |
$ |
(250,419) |
$ |
209,709 |
$ |
(326,137) |
|||||||
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—BASIC: |
|||||||||||||||
Continuing operations |
$ |
1.75 |
$ |
(0.49) |
$ |
1.35 |
$ |
0.34 |
|||||||
Discontinued operations |
(0.21) |
(0.86) |
(0.41) |
(2.18) |
|||||||||||
Basic |
$ |
1.54 |
$ |
(1.35) |
$ |
0.94 |
$ |
(1.84) |
|||||||
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—DILUTED: |
|||||||||||||||
Continuing operations |
$ |
1.75 |
$ |
(0.49) |
$ |
1.35 |
$ |
0.33 |
|||||||
Discontinued operations |
(0.21) |
(0.86) |
(0.41) |
(2.11) |
|||||||||||
Diluted |
$ |
1.54 |
$ |
(1.35) |
$ |
0.94 |
$ |
(1.78) |
|||||||
WEIGHTED AVERAGE SHARES: |
|||||||||||||||
Basic |
222,667 |
185,328 |
222,485 |
177,490 |
|||||||||||
Diluted |
222,863 |
185,328 |
223,021 |
182,822 |
The following table presents unaudited condensed consolidated Balance Sheet data at June 30, 2016 and December 31, 2015 (in thousands):
June 30, |
December 31, |
||||||
ASSETS |
|||||||
CURRENT ASSETS: |
|||||||
Cash and cash equivalents |
$ |
667,822 |
$ |
272,348 |
|||
Restricted cash and cash equivalents |
388,560 |
585,379 |
|||||
Accounts receivable |
875,058 |
1,014,808 |
|||||
Inventories, net |
626,320 |
752,493 |
|||||
Assets held for sale |
— |
36,522 |
|||||
Other assets |
92,656 |
790,987 |
|||||
Total current assets |
$ |
2,650,416 |
$ |
3,452,537 |
|||
TOTAL NON-CURRENT ASSETS |
15,285,119 |
15,897,799 |
|||||
TOTAL ASSETS |
$ |
17,935,535 |
$ |
19,350,336 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
CURRENT LIABILITIES: |
|||||||
Accounts payable and accrued expenses |
$ |
2,814,237 |
$ |
3,116,841 |
|||
Liabilities held for sale |
— |
20,215 |
|||||
Other current liabilities |
124,603 |
337,256 |
|||||
Total current liabilities |
$ |
2,938,840 |
$ |
3,474,312 |
|||
LONG-TERM DEBT, LESS CURRENT PORTION, NET |
8,199,888 |
8,251,657 |
|||||
OTHER LIABILITIES |
535,269 |
1,656,391 |
|||||
STOCKHOLDERS' EQUITY: |
|||||||
Total Endo International plc shareholders' equity |
$ |
6,261,538 |
$ |
5,968,030 |
|||
Noncontrolling interests |
— |
(54) |
|||||
Total shareholders' equity |
$ |
6,261,538 |
$ |
5,967,976 |
|||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
17,935,535 |
$ |
19,350,336 |
The following table presents unaudited condensed consolidated Statement of Cash Flow data for the six months ended June 30, 2016 and 2015 (in thousands):
Six Months Ended June 30, |
|||||||
2016 |
2015 |
||||||
OPERATING ACTIVITIES: |
|||||||
Consolidated net income (loss) |
$ |
209,725 |
$ |
(326,244) |
|||
Adjustments to reconcile consolidated net income (loss) to Net cash provided by (used in) operating activities |
|||||||
Depreciation and amortization |
476,911 |
249,181 |
|||||
Asset impairment charges |
190,904 |
318,865 |
|||||
Deferred income taxes |
(670,615) |
(244,152) |
|||||
Other |
153,899 |
118,247 |
|||||
Changes in assets and liabilities which provided (used) cash |
193,876 |
(193,383) |
|||||
Net cash provided by (used in) operating activities |
$ |
554,700 |
$ |
(77,486) |
|||
INVESTING ACTIVITIES: |
|||||||
Purchases of property, plant and equipment, net |
(51,182) |
(38,621) |
|||||
Acquisitions, net of cash acquired |
— |
(915,945) |
|||||
Proceeds from sale of business, net |
4,108 |
4,712 |
|||||
Increase in restricted cash and cash equivalents, net |
(327,359) |
(381,223) |
|||||
Decrease in restricted cash and cash equivalents |
524,438 |
424,695 |
|||||
Other |
(13,000) |
41 |
|||||
Net cash provided by (used in) investing activities |
$ |
137,005 |
$ |
(906,341) |
|||
FINANCING ACTIVITIES: |
|||||||
(Payments on) proceeds from borrowings, net |
(276,740) |
922,821 |
|||||
Issuance of ordinary shares |
2,729 |
2,302,281 |
|||||
Other |
(23,679) |
(108,694) |
|||||
Net cash (used in) provided by financing activities |
$ |
(297,690) |
$ |
3,116,408 |
|||
Effect of foreign exchange rate |
$ |
1,459 |
$ |
(11,599) |
|||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
$ |
395,474 |
$ |
2,120,982 |
|||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
272,348 |
408,753 |
|||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
667,822 |
$ |
2,529,735 |
The following schedule presents the significant pre-tax cash outlays and cash receipts impacting our Net cash provided by (used in) operating activities for the six months ended June 30, 2016 and 2015 (in thousands):
Six Months Ended June 30, |
|||||||
2016 |
2015 |
||||||
Payments for mesh-related product liability and other litigation matters (1) |
$ |
557,523 |
$ |
395,916 |
|||
Unused commitment fees |
— |
14,071 |
|||||
Separation and restructuring payments |
55,793 |
31,550 |
|||||
Transaction costs and certain integration charges paid in connection with acquisitions |
49,033 |
78,089 |
|||||
U.S. Federal tax refunds received |
(707,303) |
(70,300) |
|||||
Total |
$ |
(44,954) |
$ |
449,326 |
(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 six months ended
Six Months Ended June 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Impact on CFO (1) |
Impact on CFI |
Impact on CFO (1) |
Impact on CFI |
||||||||||||
Cash contributions to Qualified Settlement Funds |
$ |
— |
$ |
(326,795) |
$ |
— |
$ |
(377,074) |
|||||||
Cash payments to claimants from Qualified Settlement Funds |
(524,438) |
524,438 |
(385,087) |
385,087 |
|||||||||||
Cash payments made directly to claimants |
(5,438) |
— |
(10,829) |
— |
|||||||||||
Total |
$ |
(529,876) |
$ |
197,643 |
$ |
(395,916) |
$ |
8,013 |
(1) These amounts are included in Changes in assets and liabilities which provided (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 six months ended
ENDO INTERNATIONAL PLC Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (In thousands) |
|||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
Income (loss) from continuing operations (GAAP) |
$ |
389,812 |
$ |
(90,894) |
$ |
301,049 |
$ |
59,598 |
|||||||
Non-GAAP adjustments: |
|||||||||||||||
Amortization of intangible assets |
212,844 |
116,987 |
424,513 |
212,256 |
|||||||||||
Inventory step-up and other cost savings |
29,103 |
48,948 |
97,579 |
88,864 |
|||||||||||
Upfront and milestone related payments |
2,688 |
2,135 |
4,105 |
4,802 |
|||||||||||
Inventory reserve increase from restructuring |
6,706 |
— |
33,633 |
— |
|||||||||||
Royalty obligations |
— |
— |
(7,750) |
— |
|||||||||||
Separation benefits and other restructuring |
15,468 |
5,780 |
18,647 |
47,587 |
|||||||||||
Acceleration of Auxilium employee equity awards |
— |
— |
— |
37,603 |
|||||||||||
Charges for litigation and other legal matters |
5,259 |
6,875 |
10,459 |
19,875 |
|||||||||||
Asset impairment charges |
39,951 |
70,243 |
169,576 |
77,243 |
|||||||||||
Acquisition-related and integration costs |
24,287 |
46,745 |
47,515 |
82,193 |
|||||||||||
Fair value of contingent consideration |
23,884 |
(2,520) |
13,210 |
(3,328) |
|||||||||||
Non-cash and penalty interest charges |
— |
2,999 |
4,092 |
4,378 |
|||||||||||
Other |
1,541 |
24,729 |
2,860 |
15,575 |
|||||||||||
Tax adjustments |
(559,202) |
(27,692) |
(686,416) |
(234,951) |
|||||||||||
Adjusted income from continuing operations (non-GAAP) |
192,341 |
204,335 |
433,072 |
411,695 |
Refer to the following tables for additional information regarding non-GAAP financial measures. |
ENDO INTERNATIONAL PLC
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 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 |
Income from continuing operations |
Discontinued operations, net of tax |
Net income attributable to Endo International plc (14) |
Diluted earnings per share (15) |
||||||||||||||||||||||||||||||||||||||||||||
Reported (GAAP) |
$ |
920,887 |
$ |
632,218 |
$ |
288,669 |
31 |
% |
$ |
337,040 |
37 |
% |
$ |
(48,371) |
(5)% |
$ |
117,094 |
$ |
(165,465) |
$ |
(555,277) |
336 |
% |
$ |
389,812 |
$ |
(46,216) |
$ |
343,578 |
$ |
1.75 |
||||||||||||||||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(212,844) |
212,844 |
— |
212,844 |
— |
212,844 |
— |
212,844 |
— |
212,844 |
0.95 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(29,103) |
29,103 |
— |
29,103 |
— |
29,103 |
— |
29,103 |
— |
29,103 |
0.13 |
|||||||||||||||||||||||||||||||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(642) |
642 |
(2,046) |
2,688 |
— |
2,688 |
— |
2,688 |
— |
2,688 |
0.01 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory reserve increase from restructuring (4) |
— |
(6,706) |
6,706 |
— |
6,706 |
— |
6,706 |
— |
6,706 |
— |
6,706 |
0.03 |
|||||||||||||||||||||||||||||||||||||||||||||||
Separation benefits and other restructuring (5) |
— |
(6,405) |
6,405 |
(9,063) |
15,468 |
— |
15,468 |
— |
15,468 |
— |
15,468 |
0.07 |
|||||||||||||||||||||||||||||||||||||||||||||||
Charges for litigation and other legal matters (6) |
— |
— |
— |
(5,259) |
5,259 |
— |
5,259 |
— |
5,259 |
— |
5,259 |
0.02 |
|||||||||||||||||||||||||||||||||||||||||||||||
Asset impairment charges (7) |
— |
— |
— |
(39,951) |
39,951 |
— |
39,951 |
— |
39,951 |
— |
39,951 |
0.18 |
|||||||||||||||||||||||||||||||||||||||||||||||
Acquisition-related and integration costs (8) |
— |
— |
— |
(24,287) |
24,287 |
— |
24,287 |
— |
24,287 |
— |
24,287 |
0.11 |
|||||||||||||||||||||||||||||||||||||||||||||||
Fair value of contingent consideration (9) |
— |
— |
— |
(23,884) |
23,884 |
— |
23,884 |
— |
23,884 |
— |
23,884 |
0.11 |
|||||||||||||||||||||||||||||||||||||||||||||||
Non-cash and penalty interest charges (10) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||||||||||||||||
Other (11) |
— |
— |
— |
— |
— |
(1,541) |
1,541 |
— |
1,541 |
— |
1,541 |
0.01 |
|||||||||||||||||||||||||||||||||||||||||||||||
Tax adjustments (12) |
— |
— |
— |
— |
— |
— |
— |
559,202 |
(559,202) |
— |
(559,202) |
(2.51) |
|||||||||||||||||||||||||||||||||||||||||||||||
Exclude discontinued operations, net of tax (13) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
46,216 |
46,216 |
— |
|||||||||||||||||||||||||||||||||||||||||||||||
After considering items (non-GAAP) |
$ |
920,887 |
$ |
376,518 |
$ |
544,369 |
59 |
% |
$ |
232,550 |
25 |
% |
$ |
311,819 |
34 |
% |
$ |
115,553 |
$ |
196,266 |
$ |
3,925 |
2 |
% |
$ |
192,341 |
$ |
— |
$ |
192,323 |
$ |
0.86 |
Three Months Ended June 30, 2015 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 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 earnings per share (15) |
||||||||||||||||||||||||||||||||||||||||||||
Reported (GAAP) |
$ |
735,166 |
$ |
438,858 |
$ |
296,308 |
40 |
% |
$ |
294,818 |
40 |
% |
$ |
1,490 |
— |
% |
$ |
105,104 |
$ |
(103,614) |
$ |
(12,720) |
12 |
% |
$ |
(90,894) |
$ |
(159,632) |
$ |
(250,419) |
$ |
(0.49) |
|||||||||||||||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(116,987) |
116,987 |
— |
116,987 |
— |
116,987 |
— |
116,987 |
— |
116,987 |
0.61 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(48,948) |
48,948 |
— |
48,948 |
— |
48,948 |
— |
48,948 |
— |
48,948 |
0.26 |
|||||||||||||||||||||||||||||||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(623) |
623 |
(1,512) |
2,135 |
— |
2,135 |
— |
2,135 |
— |
2,135 |
0.01 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory reserve increase from restructuring (4) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||||||||||||||||
Separation benefits and other restructuring (5) |
— |
— |
— |
(5,780) |
5,780 |
— |
5,780 |
— |
5,780 |
— |
5,780 |
0.03 |
|||||||||||||||||||||||||||||||||||||||||||||||
Charges for litigation and other legal matters (6) |
— |
— |
— |
(6,875) |
6,875 |
— |
6,875 |
— |
6,875 |
— |
6,875 |
0.04 |
|||||||||||||||||||||||||||||||||||||||||||||||
Asset impairment charges (7) |
— |
— |
— |
(70,243) |
70,243 |
— |
70,243 |
— |
70,243 |
— |
70,243 |
0.38 |
|||||||||||||||||||||||||||||||||||||||||||||||
Acquisition-related and integration costs (8) |
— |
— |
— |
(46,745) |
46,745 |
— |
46,745 |
— |
46,745 |
— |
46,745 |
0.25 |
|||||||||||||||||||||||||||||||||||||||||||||||
Fair value of contingent consideration (9) |
— |
— |
— |
2,520 |
(2,520) |
— |
(2,520) |
— |
(2,520) |
— |
(2,520) |
(0.01) |
|||||||||||||||||||||||||||||||||||||||||||||||
Non-cash and penalty interest charges (10) |
— |
— |
— |
— |
— |
(2,999) |
2,999 |
— |
2,999 |
— |
2,999 |
0.02 |
|||||||||||||||||||||||||||||||||||||||||||||||
Other (11) |
— |
— |
— |
(800) |
800 |
(23,929) |
24,729 |
— |
24,729 |
— |
24,729 |
0.13 |
|||||||||||||||||||||||||||||||||||||||||||||||
Tax adjustments (12) |
— |
— |
— |
— |
— |
— |
— |
27,692 |
(27,692) |
— |
(27,692) |
(0.15) |
|||||||||||||||||||||||||||||||||||||||||||||||
Exclude discontinued operations, net of tax (13) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
181,771 |
181,771 |
— |
|||||||||||||||||||||||||||||||||||||||||||||||
After considering items (non-GAAP) |
$ |
735,166 |
$ |
272,300 |
$ |
462,866 |
63 |
% |
$ |
165,383 |
22 |
% |
$ |
297,483 |
40 |
% |
$ |
78,176 |
$ |
219,307 |
$ |
14,972 |
7 |
% |
$ |
204,335 |
$ |
22,139 |
$ |
226,581 |
$ |
1.08 |
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 June 30, |
|||||||
2016 |
2015 |
||||||
Amortization of intangible assets excluding fair value step-up from contingent consideration |
$ |
204,593 |
$ |
109,393 |
|||
Amortization of intangible assets related to fair value step-up from contingent consideration |
8,251 |
7,594 |
|||||
Total |
$ |
212,844 |
$ |
116,987 |
(2) Adjustments for inventory step-up and other cost savings included the following:
Three Months Ended June 30, |
|||||||
2016 |
2015 |
||||||
Fair value step-up of inventory sold |
$ |
26,600 |
$ |
46,699 |
|||
Excess manufacturing costs that will be eliminated pursuant to integration plans |
2,503 |
2,249 |
|||||
Total |
$ |
29,103 |
$ |
48,948 |
(3) Adjustments for upfront and milestone-related payments to partners included the following:
Three Months Ended June 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Sales-based milestones |
$ |
642 |
$ |
— |
$ |
623 |
$ |
— |
|||||||
Development-based milestones |
— |
2,046 |
— |
1,512 |
|||||||||||
Total |
642 |
2,046 |
623 |
1,512 |
(4) To exclude charges due to increased inventory reserves related to the 2016
(5) Adjustments for separation benefits and other restructuring included the following:
Three Months Ended June 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Separation benefits |
$ |
6,405 |
$ |
2,014 |
$ |
— |
$ |
4,818 |
|||||||
Accelerated depreciation |
— |
3,402 |
— |
(192) |
|||||||||||
Other |
— |
3,647 |
— |
1,154 |
|||||||||||
Total |
$ |
6,405 |
$ |
9,063 |
$ |
— |
$ |
5,780 |
(6) To exclude litigation settlement charges.
(7) To exclude asset impairment charges. During the three months ended
(8) Adjustments for acquisition and integration items primarily relate to various acquisitions, including
Three Months Ended June 30, |
|||||||
2016 |
2015 |
||||||
Integration costs (primarily third-party consulting fees) |
$ |
18,731 |
$ |
7,856 |
|||
Transaction costs |
— |
28,159 |
|||||
Transition services |
3,621 |
5,475 |
|||||
Other |
1,935 |
5,255 |
|||||
Total |
$ |
24,287 |
$ |
46,745 |
(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
(11) Adjustments to other included the following:
Three Months Ended June 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Operating expenses |
Other non- |
Operating expenses |
Other non- |
||||||||||||
Costs associated with unused financing commitments |
$ |
— |
$ |
— |
$ |
800 |
$ |
2,261 |
|||||||
Other than temporary equity investment |
— |
— |
— |
18,869 |
|||||||||||
Foreign currency impact related to the re-measurement of intercompany debt instruments |
— |
417 |
— |
2,792 |
|||||||||||
Other miscellaneous |
— |
1,124 |
— |
7 |
|||||||||||
Total |
$ |
— |
$ |
1,541 |
$ |
800 |
$ |
23,929 |
(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 jurisdiction in which the Company operates and includes current and deferred income tax expense commensurate with the non-GAAP measure of profitability.
As part of the continued integration of our Qualitest and Par businesses, Endo initiated a legal entity reorganization that moved the Generics business to a new U.S. holding company structure that is separate from the legacy Branded business structure. The reorganization also provides operating flexibility and benefits and reduces the potential impact related to any future limits that could apply to the use of tax attributes by utilizing most of the Company's attributes to offset the gain in the intercompany sale that stepped-up the tax basis of the U.S. Generics business assets. The utilization of acquired attributes in the reorganization would have had an unfavorable impact of
Separately, as a result of the
Three |
Three |
Three |
Three |
Twelve |
Three |
||||||||||||||||||
Adjusted Diluted EPS from Continuing Operations |
$ |
1.17 |
$ |
1.08 |
$ |
1.02 |
$ |
1.36 |
$ |
4.66 |
$ |
1.08 |
|||||||||||
Amount attributable to the change in approach to Non-GAAP income taxes |
(0.11) |
(0.09) |
(0.16) |
(0.18) |
(0.56) |
(0.16) |
|||||||||||||||||
Adjusted Diluted EPS from Continuing Operations - As Revised |
$ |
1.06 |
$ |
0.99 |
$ |
0.86 |
$ |
1.18 |
$ |
4.10 |
$ |
0.92 |
(13) To exclude the results of the Astora business reported as discontinued operations, net of tax.
(14) This amount includes non-controlling interest of
(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
ENDO INTERNATIONAL PLC Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (In thousands, except per share data)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 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 |
Income from continuing operations |
Discontinued operations, net of tax |
Net income attributable to Endo International plc (16) |
Diluted earnings per share (17) |
||||||||||||||||||||||||||||||||||||||||||||
Reported (GAAP) |
$ |
1,884,426 |
$ |
1,320,923 |
$ |
563,503 |
30 |
% |
$ |
704,466 |
37 |
% |
$ |
(140,963) |
(7)% |
$ |
231,980 |
$ |
(372,943) |
$ |
(673,992) |
181 |
% |
$ |
301,049 |
$ |
(91,324) |
$ |
209,709 |
$ |
1.35 |
||||||||||||||||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(424,513) |
424,513 |
— |
424,513 |
— |
424,513 |
— |
424,513 |
— |
424,513 |
1.90 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(96,229) |
96,229 |
(1,350) |
97,579 |
— |
97,579 |
— |
97,579 |
— |
97,579 |
0.44 |
|||||||||||||||||||||||||||||||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(1,309) |
1,309 |
(2,796) |
4,105 |
— |
4,105 |
— |
4,105 |
— |
4,105 |
0.02 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory reserve increase from restructuring (4) |
— |
(33,633) |
33,633 |
— |
33,633 |
— |
33,633 |
— |
33,633 |
— |
33,633 |
0.15 |
|||||||||||||||||||||||||||||||||||||||||||||||
Royalty obligations (5) |
— |
7,750 |
(7,750) |
— |
(7,750) |
— |
(7,750) |
— |
(7,750) |
— |
(7,750) |
(0.03) |
|||||||||||||||||||||||||||||||||||||||||||||||
Separation benefits and other restructuring (6) |
— |
(6,405) |
6,405 |
(12,242) |
18,647 |
— |
18,647 |
— |
18,647 |
— |
18,647 |
0.08 |
|||||||||||||||||||||||||||||||||||||||||||||||
Acceleration of Auxilium employee equity awards (7) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||||||||||||||||
Charges for litigation and other legal matters (8) |
— |
— |
— |
(10,459) |
10,459 |
— |
10,459 |
— |
10,459 |
— |
10,459 |
0.05 |
|||||||||||||||||||||||||||||||||||||||||||||||
Asset impairment charges (9) |
— |
— |
— |
(169,576) |
169,576 |
— |
169,576 |
— |
169,576 |
— |
169,576 |
0.76 |
|||||||||||||||||||||||||||||||||||||||||||||||
Acquisition-related and integration costs (10) |
— |
— |
— |
(47,515) |
47,515 |
— |
47,515 |
— |
47,515 |
— |
47,515 |
0.21 |
|||||||||||||||||||||||||||||||||||||||||||||||
Fair value of contingent consideration (11) |
— |
— |
— |
(13,210) |
13,210 |
— |
13,210 |
— |
13,210 |
— |
13,210 |
0.06 |
|||||||||||||||||||||||||||||||||||||||||||||||
Non-cash and penalty interest charges (12) |
— |
— |
— |
— |
— |
(4,092) |
4,092 |
— |
4,092 |
— |
4,092 |
0.02 |
|||||||||||||||||||||||||||||||||||||||||||||||
Other (13) |
— |
— |
— |
— |
— |
(2,860) |
2,860 |
— |
2,860 |
— |
2,860 |
0.01 |
|||||||||||||||||||||||||||||||||||||||||||||||
Tax adjustments (14) |
— |
— |
— |
— |
— |
— |
— |
686,416 |
(686,416) |
— |
(686,416) |
(3.08) |
|||||||||||||||||||||||||||||||||||||||||||||||
Exclude discontinued operations, net of tax (15) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
91,324 |
91,324 |
— |
|||||||||||||||||||||||||||||||||||||||||||||||
After considering items (non-GAAP) |
$ |
1,884,426 |
$ |
766,584 |
$ |
1,117,842 |
59 |
% |
$ |
447,318 |
24 |
% |
$ |
670,524 |
36 |
% |
$ |
225,028 |
$ |
445,496 |
$ |
12,424 |
3 |
% |
$ |
433,072 |
$ |
— |
$ |
433,056 |
$ |
1.94 |
Six Months Ended June 30, 2015 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 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 (16) |
Diluted earnings per share (17) |
||||||||||||||||||||||||||||||||||||||||||||
Reported (GAAP) |
$ |
1,449,294 |
$ |
823,124 |
$ |
626,170 |
43 |
% |
$ |
578,933 |
40 |
% |
$ |
47,237 |
3 |
% |
$ |
167,228 |
$ |
(119,991) |
$ |
(179,589) |
150 |
% |
$ |
59,598 |
$ |
(385,842) |
$ |
(326,137) |
$ |
0.33 |
|||||||||||||||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(212,256) |
212,256 |
— |
212,256 |
— |
212,256 |
— |
212,256 |
— |
212,256 |
1.15 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(88,864) |
88,864 |
— |
88,864 |
— |
88,864 |
— |
88,864 |
— |
88,864 |
0.49 |
|||||||||||||||||||||||||||||||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(1,227) |
1,227 |
(3,575) |
4,802 |
— |
4,802 |
— |
4,802 |
— |
4,802 |
0.03 |
|||||||||||||||||||||||||||||||||||||||||||||||
Inventory reserve increase from restructuring (4) |
— |