Endo Reports Second-Quarter 2017 Financial Results

August 8, 2017

DUBLIN, Aug. 8, 2017 /PRNewswire/ --

Second-quarter 2017 revenues of $876 million and reported $3.12 diluted (GAAP) loss per share from continuing operations
Second-quarter 2017 Branded Specialty Products revenues increased 16 percent to $110 million
Second-quarter 2017 Sterile Injectables revenues increased 27 percent to $161 million
Second-quarter 2017 adjusted diluted earnings per share (EPS) from continuing operations increased 8 percent to $0.93
Second-quarter 2017 reported (GAAP) consolidated net loss of $1,397 million, including $775 million to increase the mesh product liability accrual primarily related to the resolution of virtually all known U.S. mesh product liability claims
Second-quarter 2017 adjusted income from continuing operations increased 8 percent to $207 million
Second-quarter 2017 adjusted EBITDA increased 11 percent to $388 million
Company updates 2017 financial guidance to reflect the previously announced Somar divestiture, OPANA^®ER withdrawal and manufacturing network restructuring
Company reports $725 million of impairment charges relating primarily to market and competitive factors impacting certain products, its manufacturing network restructuring, Somar divestiture and the market withdrawal of OPANA^®ER

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

Revenues of $876 million, a 5 percent decrease compared to second-quarter 2016 revenues of $921 million.
Reported net loss from continuing operations of $696 million compared to second-quarter 2016 reported net income from continuing operations of $390 million.
Reported diluted loss per share from continuing operations of $3.12 compared to second-quarter 2016 reported diluted earnings per share from continuing operations of $1.75.
Adjusted income from continuing operations of $207 million, an 8 percent increase compared to second-quarter 2016 adjusted income from continuing operations of $192 million.
Adjusted diluted EPS from continuing operations of $0.93, an 8 percent increase compared to second-quarter 2016 adjusted diluted EPS from continuing operations of $0.86.
Adjusted EBITDA of $388 million, an 11 percent increase compared to second-quarter 2016 adjusted EBITDA of $350 million.

"We are very pleased to report another solid quarter of operating performance, with impressive contributions from our core growth areas. Sterile Injectables and Branded Specialty Products continue to perform well, as each unit again achieved strong double-digit growth," said Paul Campanelli, President and CEO of Endo. This performance provides evidence of the progress we are making on the strategic priorities we outlined earlier this year.

"In addition to solid quarterly execution, we continue to make significant progress across an array of strategic initiatives, including settling mesh litigation, divesting Litha, signing a definitive agreement to divest Somar, and the restructuring of our manufacturing network. Through these actions, we continue to position Endo to compete and succeed in the future," Mr. Campanelli added.

FINANCIAL PERFORMANCE
(in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017		2016		Change		2017		2016		Change
Total Revenues	$	875,731	$	920,887	(5)	%	$	1,913,331	$	1,884,426	2	%
Reported (Loss) Income from Continuing Operations	$	(696,020)	$	389,812	NM		$	(861,443)	$	301,049	NM
Reported Diluted Weighted Average Shares	223,158		222,863		—	%	223,086		223,021		—	%
Reported Diluted (Loss) Income per Share from Continuing Operations	$	(3.12)	$	1.75	NM		$	(3.86)	$	1.35	NM
Adjusted Income from Continuing Operations	$	207,201	$	192,341	8	%	$	482,446	$	433,072	11	%
Adjusted Diluted Weighted Average Shares¹	223,785		222,863		—	%	223,560		223,021		—	%
Adjusted Diluted EPS from Continuing Operations	$	0.93	$	0.86	8	%	$	2.16	$	1.94	11	%


(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 5 percent to $876 million in second-quarter 2017 compared to the same period in 2016 primarily due to generic competition adversely impacting the Branded Established Products portfolio. GAAP net loss from continuing operations in second-quarter 2017 was $696 million compared to GAAP net income from continuing operations of $390 million during the same period in 2016. This decrease was primarily attributable to charges associated with the Company's manufacturing network restructuring; after-tax impairment charges associated with market and competitive factors impacting certain products' revenues, the pending Somar divestiture and the market removal of OPANA^® ER; and second-quarter 2016 recognition of certain net tax benefits. GAAP net loss per share from continuing operations for the second-quarter 2017 was $3.12, compared to diluted GAAP EPS from continuing operations of $1.75 in second-quarter 2016.

Adjusted income from continuing operations in second-quarter 2017 increased by 8 percent to $207 million compared to second-quarter 2016. This increase was driven primarily by improved adjusted gross margin, which resulted, in part, from strong revenue growth in Sterile Injectables and Branded Specialty Products, as well as lower operating expenses. Adjusted EPS from continuing operations in second-quarter 2017 increased 8 percent to $0.93 compared to second-quarter 2016.

U.S. GENERIC PHARMACEUTICALS

During second-quarter 2017, the U.S. Generic Pharmaceuticals segment launched neostigmine methylsulfate injection following approval of its Abbreviated New Drug Application (ANDA) by the U.S. Food and Drug Administration (FDA). The Company also received FDA approval of its ANDA for vigabatrin for oral solution and expects to launch the product in the third-quarter of 2017.

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

Revenues of $563 million, virtually unchanged from second-quarter 2016, as decline in the Generics Base business was substantially offset by strong growth in Sterile Injectables and New Launches and Alternative Dosages.
Sterile Injectables increased 27 percent compared to second-quarter 2016; this increase was driven primarily by VASOSTRICT^®and ADRENALIN^®.
The Generics Base business decreased 34 percent compared to second-quarter 2016; this decrease primarily resulted from the impact on second-quarter 2017 related to 2016 competitive events and previously announced product discontinuances.

U.S. BRANDED PHARMACEUTICALS

During second-quarter 2017, the FDA requested that Endo voluntarily withdraw OPANA^® ER from the market. After careful consideration and consultation with the FDA, the Company announced it would voluntarily remove the product from the market. In an effort to minimize treatment disruption for patients and allow patients sufficient time to seek guidance from their healthcare professionals, the Company has agreed with the FDA to cease shipments to customers by September 1, 2017.

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

Revenues of $245 million, a 15 percent decrease compared to second-quarter 2016; this decrease was primarily attributable to generic competition adversely impacting the Company's established products portfolio, including VOLTAREN^® Gel, LIDODERM^®and OPANA^®ER , along with the divestiture of STENDRA^®.
Specialty Products increased 16 percent in second-quarter 2017 versus the same period in 2016, driven by strong performance from XIAFLEX^®, SUPPRELIN^® LA and AVEED^®. Sales of XIAFLEX^®, our flagship Branded product, increased 18 percent compared to second-quarter 2016; this increase was primarily attributable to strong volume growth.

INTERNATIONAL PHARMACEUTICALS

Endo's previously announced sale of its South African business, Litha Healthcare Group, to Acino Pharma AG closed on July 3, 2017. Also in July, the Company announced it had entered into a definitive agreement to sell its Mexican subsidiary, Somar, to Advent International. The transaction is expected to close in the beginning of the fourth quarter of 2017, subject to customary conditions, including the expiration or termination of any waiting periods under applicable laws.

Second-quarter 2017 International Pharmaceuticals revenues were $67 million, virtually unchanged from the same period in 2016.

2017 FINANCIAL GUIDANCE

For the full twelve months ended December 31, 2017, at current exchange rates, Endo is providing updated guidance on revenue, GAAP and adjusted diluted income (loss) per share from continuing operations and adjusted EBITDA from continuing operations, along with certain assumptions used in determining these measures, to reflect the planned divestiture of Somar, the market removal of OPANA^® ER and the recently announced manufacturing network restructuring. The Company estimates:

Total revenues to be between $3.38 billion to $3.53 billion;
Reported diluted GAAP loss per share from continuing operations to be between $4.76 and $4.46;
Adjusted diluted EPS from continuing operations to be between $3.35 to $3.65; and
Adjusted EBITDA from continuing operations to be between $1.48 billion to $1.56 billion.

The Company's 2017 non-GAAP financial guidance is based on the following assumptions:

Adjusted gross margin of approximately 62.5% to 63.5%;
Adjusted operating expenses as a percentage of revenues of approximately 22.5%;
Adjusted interest expense of approximately $490 million to $500 million;
Adjusted effective tax rate of approximately 14.0%; and
Adjusted diluted EPS from continuing operations assumes full-year adjusted diluted shares outstanding of approximately 224 million shares.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of June 30, 2017, the Company had $617 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.7 billion and a net debt to adjusted EBITDA ratio of 4.3.

Second-quarter 2017 cash provided by operating activities was $173 million, compared to $604 million of net cash provided by operating activities in the comparable 2016 period. The 2016 period benefited from the receipt of a significant federal income tax refund that did not reoccur to the same extent in the 2017 period. Mesh-related payments also decreased in second-quarter 2017 compared to the 2016 period based on timing.

The Company recently announced that it has reached agreements to resolve virtually all known U.S. mesh product liability claims. Endo agreed to make installment payments beginning in the fourth-quarter of 2017 and continuing through the fourth-quarter of 2019. The Company increased its mesh product liability accrual by $775 million which is expected to cover approximately 22,000 U.S. mesh claims, as well as all known international mesh product liability claims and other mesh-related matters.

During second-quarter 2017, the Company recorded total combined pre-tax, non-cash asset impairment charges of $725 million, which primarily consisted of intangible asset impairment charges of $477 million and goodwill impairment charges of $206 million, including the following items:

$501 million of non-restructuring goodwill and intangible asset impairments related to its U.S. Generic and Branded Pharmaceuticals segments, which included the market withdrawal of OPANA^® ER and $115 million of goodwill and other intangible assets related to the Company's planned Somar sale.
As part of its recently announced manufacturing network restructuring initiative, the Company will be ceasing operations and closing its manufacturing and distribution facilities in Huntsville, Alabama. The Company recorded an impairment charge of $90 million related to intangible assets and property, plant and equipment associated with the planned closure.

As previously announced, the Company expects to pay approximately $60 million in cash related to the manufacturing network restructuring over the next 12 to 18 months. As a result of these restructuring actions, Endo expects to redeploy as an investment into its core growth areas approximately $55 million to $65 million in annual net run rate pre-tax cost savings that it expects to realize by the fourth quarter of 2018.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release today at 8:30 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 45397076. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from August 8, 2017 at 11:30 a.m. ET until 11:59 p.m. ET on August 22, 2017 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 45397076.

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 11:59 p.m. ET on August 22, 2017. The replay can be accessed by clicking on the Investor Relations section of the Endo website.

FINANCIAL SCHEDULES

The following table presents Endo's unaudited Total Revenues for the three and six months ended June 30, 2017 and 2016 (in thousands):

	Three Months Ended June 30,				Percent Growth		Six Months Ended June 30,				Percent Growth
	2017		2016		Percent Growth		2017		2016		Percent Growth
U.S. Generic Pharmaceuticals:
U.S. Generics Base	$	218,935	$	331,095	(34)	%	$	455,082	$	678,524	(33)	%
Sterile Injectables	160,597		126,245		27	%	311,946		249,934		25	%
New Launches and Alternative Dosages	183,780		108,018		70	%	518,267		220,290		135	%
Total U.S. Generic Pharmaceuticals	$	563,312	$	565,358	—	%	$	1,285,295	$	1,148,748	12	%
U.S. Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®	$	50,077	$	42,419	18	%	$	99,602	$	86,464	15	%
SUPPRELIN® LA	23,649		21,211		11	%	42,830		38,463		11	%
Other Specialty (1)	36,745		31,973		15	%	72,773		64,942		12	%
Total Specialty Products	$	110,471	$	95,603	16	%	$	215,205	$	189,869	13	%
Established Products:
OPANA® ER	$	31,582	$	38,554	(18)	%	$	67,300	$	83,224	(19)	%
PERCOCET®	30,889		35,708		(13)	%	61,834		69,301		(11)	%
VOLTAREN® Gel	20,270		27,290		(26)	%	34,544		63,037		(45)	%
LIDODERM®	11,678		27,039		(57)	%	24,854		46,751		(47)	%
Other Established (2)	40,298		64,148		(37)	%	91,610		144,973		(37)	%
Total Established Products	$	134,717	$	192,739	(30)	%	$	280,142	$	407,286	(31)	%
Total U.S. Branded Pharmaceuticals (3)	$	245,188	$	288,342	(15)	%	$	495,347	$	597,155	(17)	%
Total International Pharmaceuticals	$	67,231	$	67,187	—	%	$	132,689	$	138,523	(4)	%
Total Revenues	$	875,731	$	920,887	(5)	%	$	1,913,331	$	1,884,426	2	%


__________
(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 six months ended June 30, 2017 and 2016 (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
TOTAL REVENUES	$	875,731	$	920,887	$	1,913,331	$	1,884,426
COSTS AND EXPENSES:
Cost of revenues	539,401		632,218		1,208,363		1,320,923
Selling, general and administrative	155,555		193,070		332,795		371,425
Research and development	40,869		50,589		83,878		92,281
Litigation-related and other contingencies, net	(2,600)		5,259		(1,664)		10,459
Asset impairment charges	725,044		39,951		929,006		169,576
Acquisition-related and integration items	4,190		48,171		15,070		60,725
OPERATING LOSS FROM CONTINUING OPERATIONS	$	(586,728)	$	(48,371)	$	(654,117)	$	(140,963)
INTEREST EXPENSE, NET	121,747		111,919		233,746		228,712
LOSS ON EXTINGUISHMENT OF DEBT	51,734		—		51,734		—
OTHER (INCOME) EXPENSE, NET	(6,709)		5,175		(8,746)		3,268
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX	$	(753,500)	$	(165,465)	$	(930,851)	$	(372,943)
INCOME TAX BENEFIT	(57,480)		(555,277)		(69,408)		(673,992)
(LOSS) INCOME FROM CONTINUING OPERATIONS	$	(696,020)	$	389,812	$	(861,443)	$	301,049
DISCONTINUED OPERATIONS, NET OF TAX	(700,498)		(46,216)		(708,903)		(91,324)
CONSOLIDATED NET (LOSS) INCOME	$	(1,396,518)	$	343,596	$	(1,570,346)	$	209,725
Less: Net income attributable to noncontrolling interests	—		18		—		16
NET (LOSS) INCOME ATTRIBUTABLE TO ENDO INTERNATIONAL PLC	$	(1,396,518)	$	343,578	$	(1,570,346)	$	209,709
NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—BASIC:
Continuing operations	$	(3.12)	$	1.75	$	(3.86)	$	1.35
Discontinued operations	(3.14)		(0.21)		(3.18)		(0.41)
Basic	$	(6.26)	$	1.54	$	(7.04)	$	0.94
NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—DILUTED:
Continuing operations	$	(3.12)	$	1.75	$	(3.86)	$	1.35
Discontinued operations	(3.14)		(0.21)		(3.18)		(0.41)
Diluted	$	(6.26)	$	1.54	$	(7.04)	$	0.94
WEIGHTED AVERAGE SHARES:
Basic	223,158		222,667		223,086		222,485
Diluted	223,158		222,863		223,086		223,021

The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2017 and December 31, 2016 (in thousands):

	June 30, 2017		December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	616,534	$	517,250
Restricted cash and cash equivalents	364,796		282,074
Accounts receivable	580,123		992,153
Inventories, net	489,752		555,671
Assets held for sale	166,190		116,985
Other current assets	57,620		125,326
Total current assets	$	2,275,015	$	2,589,459
TOTAL NON-CURRENT ASSETS	10,003,075		11,685,650
TOTAL ASSETS	$	12,278,090	$	14,275,109
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses, including legal settlement accruals	$	2,143,167	$	2,470,016
Liabilities held for sale	44,367		24,338
Other current liabilities	39,413		140,391
Total current liabilities	$	2,226,947	$	2,634,745
LONG-TERM DEBT, LESS CURRENT PORTION, NET	8,251,289		8,141,378
OTHER LIABILITIES	990,748		797,397
TOTAL SHAREHOLDERS' EQUITY	809,106		2,701,589
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	12,278,090	$	14,275,109

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2017 and 2016 (in thousands):

	Six Months Ended June 30,
	2017		2016
OPERATING ACTIVITIES:
Consolidated net (loss) income	$	(1,570,346)	$	209,725
Adjustments to reconcile consolidated net (loss) income to Net cash provided by operating activities:
Depreciation and amortization	499,656		476,911
Asset impairment charges	929,006		190,904
Other, including cash payments to claimants from Qualified Settlement Funds (1)	482,670		(318,929)
Net cash provided by operating activities	$	340,986	$	558,611
INVESTING ACTIVITIES:
Purchases of property, plant and equipment	$	(59,729)	$	(53,705)
Proceeds from sale of business and other assets, net	18,531		6,631
Increase in restricted cash and cash equivalents (1)	(522,772)		(327,359)
Decrease in restricted cash and cash equivalents (1)	440,190		524,438
Other	—		(13,000)
Net cash (used in) provided by investing activities	$	(123,780)	$	137,005
FINANCING ACTIVITIES:
(Payments on) proceeds from borrowings, net	$	(2,550)	$	(276,740)
Other	(97,033)		(24,861)
Net cash used in financing activities	$	(99,583)	$	(301,601)
Effect of foreign exchange rate	$	2,786	$	1,459
Movement in cash held for sale	(21,125)		—
NET INCREASE IN CASH AND CASH EQUIVALENTS	$	99,284	$	395,474
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	517,250		272,348
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	616,534	$	667,822

(1)

Included within the above Condensed Consolidated Statements of Cash Flows is the impact of payments into and out of QSFs for mesh-related product liability. 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 operating activities (CFO). The following table reflects the mesh-related payment activities for the six months ended June 30, 2017 and 2016 by cash flow component:

	Six Months Ended June 30,
	2017				2016
	Impact on CFO (a)		Impact on CFI		Impact on CFO (a)		Impact on CFI
Cash contributions to Qualified Settlement Funds	$	—	$	(522,770)	$	—	$	(326,795)
Cash payments to claimants from Qualified Settlement Funds	(440,190)		440,190		(524,438)		524,438
Cash payments made directly to claimants	(3,794)		—		(5,438)		—
Total	$	(443,984)	$	(82,580)	$	(529,876)	$	197,643


	(a)	These amounts are included in "Other, including cash payments to claimants from Qualified Settlement Funds (1)" in the Condensed Consolidated Statements of Cash Flows 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 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) income attributable to Endo International plc (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2017 and 2016 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Net (loss) income attributable to Endo International plc (GAAP)	$	(1,396,518)	$	343,578	$	(1,570,346)	$	209,709
Income tax benefit	(57,480)		(555,277)		(69,408)		(673,992)
Interest expense, net	121,747		111,919		233,746		228,712
Depreciation and amortization (18)	212,801		231,478		496,910		464,912
EBITDA (non-GAAP)	$	(1,119,450)	$	131,698	$	(909,098)	$	229,341

Inventory step-up and other cost savings (2)	$	100	$	29,103	$	215	$	97,579
Upfront and milestone-related payments (3)	3,082		2,688		6,177		4,105
Inventory reserve increase from restructuring (4)	7,899		6,706		7,899		33,633
Royalty obligations (5)	—		—		—		(7,750)
Separation benefits and other restructuring (6)	16,715		15,468		39,385		26,997
Certain litigation-related and other contingencies, net (7)	(2,600)		5,259		(1,664)		10,459
Asset impairment charges (8)	725,044		39,951		929,006		169,576
Acquisition-related and integration costs (9)	2,240		24,287		6,936		47,515
Fair value of contingent consideration (10)	1,950		23,884		8,134		13,210
Loss on extinguishment of debt (11)	51,734		—		51,734		—
Share-based compensation	7,512		14,203		27,005		28,520
Other (income) expense, net (19)	(6,709)		5,175		(8,746)		3,268
Other adjustments	(114)		5,783		(17)		(1,395)
Discontinued operations, net of tax (15)	700,498		46,216		708,903		91,324
Net income attributable to noncontrolling interests (16)	—		18		—		16
Adjusted EBITDA (non-GAAP)	$	387,901	$	350,439	$	865,869	$	746,398

Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)

The following table provides a reconciliation of our (Loss) income from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2017 and 2016 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
(Loss) income from continuing operations (GAAP)	$	(696,020)	$	389,812	$	(861,443)	$	301,049
Non-GAAP adjustments:
Amortization of intangible assets (1)	190,943		212,844		454,077		424,513
Inventory step-up and other cost savings (2)	100		29,103		215		97,579
Upfront and milestone-related payments (3)	3,082		2,688		6,177		4,105
Inventory reserve increase from restructuring (4)	7,899		6,706		7,899		33,633
Royalty obligations (5)	—		—		—		(7,750)
Separation benefits and other restructuring (6)	16,715		15,468		39,385		26,997
Certain litigation-related and other contingencies, net (7)	(2,600)		5,259		(1,664)		10,459
Asset impairment charges (8)	725,044		39,951		929,006		169,576
Acquisition-related and integration costs (9)	2,240		24,287		6,936		47,515
Fair value of contingent consideration (10)	1,950		23,884		8,134		13,210
Loss on extinguishment of debt (11)	51,734		—		51,734		—
Non-cash and penalty interest charges (12)	—		—		—		4,092
Other (13)	(3,233)		1,541		(4,168)		(5,490)
Tax adjustments (14)	(90,653)		(559,202)		(153,842)		(686,416)
Adjusted income from continuing operations (non-GAAP)	$	207,201	$	192,341	$	482,446	$	433,072

Reconciliation of Other Adjusted Income Statement Data (non-GAAP)

The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and six months ended June 30, 2017 and 2016 (in thousands, except per share data):

	Three Months Ended June 30, 2017
	Total revenues	Cost of revenues	Gross margin	Gross margin %	Total operating expenses	Operating expense to revenue %	Operating (loss) income from continuing operations	Operating margin %	Other non-operating expense, net	(Loss) income from continuing operations before income tax	Income tax (benefit) expense	Effective tax rate	(Loss) income from continuing operations	Discontinued operations, net of tax	Net (loss) income attributable to Endo International plc	Diluted (loss) income per share from continuing operations (17)
Reported (GAAP)	$ 875,731	$ 539,401	$ 336,330	38 %	$ 923,058	105 %	$ (586,728)	(67)%	$ 166,772	$ (753,500)	$ (57,480)	8 %	$ (696,020)	$ (700,498)	$ (1,396,518)	$ (3.12)
Items impacting comparability:
Amortization of intangible assets (1)	—	(190,943)	190,943		—		190,943		—	190,943	—		190,943	—	190,943	0.86
Inventory step-up and other cost savings (2)	—	(100)	100		—		100		—	100	—		100	—	100	—
Upfront and milestone-related payments (3)	—	(682)	682		(2,400)		3,082		—	3,082	—		3,082	—	3,082	0.01
Inventory reserve increase from restructuring (4)	—	(7,899)	7,899		—		7,899		—	7,899	—		7,899	—	7,899	0.04
Separation benefits and other restructuring (6)	—	(5,026)	5,026		(11,689)		16,715		—	16,715	—		16,715	—	16,715	0.07
Certain litigation-related and other contingencies, net (7)	—	—	—		2,600		(2,600)		—	(2,600)	—		(2,600)	—	(2,600)	(0.01)
Asset impairment charges (8)	—	—	—		(725,044)		725,044		—	725,044	—		725,044	—	725,044	3.25
Acquisition-related and integration costs (9)	—	—	—		(2,240)		2,240		—	2,240	—		2,240	—	2,240	0.01
Fair value of contingent consideration (10)	—	—	—		(1,950)		1,950		—	1,950	—		1,950	—	1,950	0.01
Loss on extinguishment of debt (11)	—	—	—		—		—		(51,734)	51,734	—		51,734	—	51,734	0.23
Other (13)	—	—	—		—		—		3,233	(3,233)	—		(3,233)	—	(3,233)	(0.01)
Tax adjustments (14)	—	—	—		—		—		—	—	90,653		(90,653)	—	(90,653)	(0.41)
Exclude discontinued operations, net of tax (15)	—	—	—		—		—		—	—	—		—	700,498	700,498	—
After considering items (non-GAAP)	$ 875,731	$ 334,751	$ 540,980	62 %	$ 182,335	21 %	$ 358,645	41 %	$ 118,271	$ 240,374	$ 33,173	14 %	$ 207,201	$ —	$ 207,201	$ 0.93

	Three Months Ended June 30, 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)	$ 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 cost 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 (6)	—	(6,405)	6,405		(9,063)		15,468		—	15,468	—		15,468	—	15,468	0.07
Certain litigation-related and other contingencies, net (7)	—	—	—		(5,259)		5,259		—	5,259	—		5,259	—	5,259	0.02
Asset impairment charges (8)	—	—	—		(39,951)		39,951		—	39,951	—		39,951	—	39,951	0.18
Acquisition-related and integration costs (9)	—	—	—		(24,287)		24,287		—	24,287	—		24,287	—	24,287	0.11
Fair value of contingent consideration (10)	—	—	—		(23,884)		23,884		—	23,884	—		23,884	—	23,884	0.11
Other (13)	—	—	—		—		—		(1,541)	1,541	—		1,541	—	1,541	0.01
Tax adjustments (14)	—	—	—		—		—		—	—	559,202		(559,202)	—	(559,202)	(2.51)
Exclude discontinued operations, net of tax (15)	—	—	—		—		—		—	—	—		—	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

	Six Months Ended June 30, 2017
	Total revenues	Cost of revenues	Gross margin	Gross margin %	Total operating expenses	Operating expense to revenue %	Operating (loss) income from continuing operations	Operating margin %	Other non-operating expense, net	(Loss) income from continuing operations before income tax	Income tax (benefit) expense	Effective tax rate	(Loss) income from continuing operations	Discontinued operations, net of tax	Net (loss) income attributable to Endo International plc	Diluted (loss) income per share from continuing operations (17)
Reported (GAAP)	$ 1,913,331	$ 1,208,363	$ 704,968	37 %	$ 1,359,085	71 %	$ (654,117)	(34)%	$ 276,734	$ (930,851)	$ (69,408)	7 %	$ (861,443)	$ (708,903)	$ (1,570,346)	$ (3.86)
Items impacting comparability:
Amortization of intangible assets (1)	—	(454,077)	454,077		—		454,077		—	454,077	—		454,077	—	454,077	2.03
Inventory step-up and other cost savings (2)	—	(215)	215		—		215		—	215	—		215	—	215	—
Upfront and milestone-related payments (3)	—	(1,351)	1,351		(4,826)		6,177		—	6,177	—		6,177	—	6,177	0.03
Inventory reserve increase from restructuring (4)	—	(7,899)	7,899		—		7,899		—	7,899	—		7,899	—	7,899	0.04
Separation benefits and other restructuring (6)	—	(6,687)	6,687		(32,698)		39,385		—	39,385	—		39,385	—	39,385	0.18
Certain litigation-related and other contingencies, net (7)	—	—	—		1,664		(1,664)		—	(1,664)	—		(1,664)	—	(1,664)	(0.01)
Asset impairment charges (8)	—	—	—		(929,006)		929,006		—	929,006	—		929,006	—	929,006	4.16
Acquisition-related and integration costs (9)	—	—	—		(6,936)		6,936		—	6,936	—		6,936	—	6,936	0.03
Fair value of contingent consideration (10)	—	—	—		(8,134)		8,134		—	8,134	—		8,134	—	8,134	0.04
Loss on extinguishment of debt (11)	—	—	—		—		—		(51,734)	51,734	—		51,734	—	51,734	0.23
Other (13)	—	—	—		—		—		4,168	(4,168)	—		(4,168)	—	(4,168)	(0.02)
Tax adjustments (14)	—	—	—		—		—		—	—	153,842		(153,842)	—	(153,842)	(0.69)
Exclude discontinued operations, net of tax (15)	—	—	—		—		—		—	—	—		—	708,903	708,903	—
After considering items (non-GAAP)	$ 1,913,331	$ 738,134	$ 1,175,197	61 %	$ 379,149	20 %	$ 796,048	42 %	$ 229,168	$ 566,880	$ 84,434	15 %	$ 482,446	$ —	$ 482,446	$ 2.16

	Six Months Ended June 30, 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)	$ 1,884,426	$ 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	—

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