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Endo Reports Second-Quarter 2021 Financial Results And Updates 2021 Financial Guidance

August 5, 2021
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DUBLIN, Aug. 5, 2021 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported financial results for the second-quarter ended June 30, 2021.

"Our second-quarter 2021 results reflect strong sequential growth in our Branded Pharmaceuticals segment driven by XIAFLEX®, and better than expected performance of our Sterile Injectables and Generic Pharmaceuticals segments," said Blaise Coleman, President and Chief Executive Officer at Endo. "Moving forward, we remain committed to further advancing our strategic priorities by delivering on our business transformation initiatives and investing in the on-going launch of QWO®, the growth of XIAFLEX® and the progression of our product pipeline."

SECOND-QUARTER FINANCIAL PERFORMANCE

(in thousands, except per share amounts)

 

Three Months Ended June 30,

     

Six Months Ended June 30,

   
 

2021

 

2020

 

Change

 

2021

 

2020

 

Change

Total Revenues, Net

$

713,830

   

$

687,588

   

4

%

 

$

1,431,749

   

$

1,507,993

   

(5)

%

Reported (Loss) Income from Continuing Operations

$

(10,184)

   

$

17,610

   

NM

 

$

36,875

   

$

175,191

   

(79)

%

Reported Diluted Weighted Average Shares

233,331

   

233,681

   

%

 

237,043

   

233,348

   

2

%

Reported Diluted Net (Loss) Income per Share from Continuing Operations

$

(0.04)

   

$

0.08

   

NM

 

$

0.16

   

$

0.75

   

(79)

%

Reported Net (Loss) Income

$

(15,500)

   

$

10,558

   

NM

 

$

26,024

   

$

140,488

   

(81)

%

Adjusted Income from Continuing Operations (2)

$

152,121

   

$

151,700

   

%

 

$

327,038

   

$

372,100

   

(12)

%

Adjusted Diluted Weighted Average Shares (1)(2)

235,416

   

233,681

   

1

%

 

237,043

   

233,348

   

2

%

Adjusted Diluted Net Income per Share from Continuing Operations (2)

$

0.65

   

$

0.65

   

%

 

$

1.38

   

$

1.59

   

(13)

%

Adjusted EBITDA (2)

$

342,700

   

$

336,481

   

2

%

 

$

707,415

   

$

757,607

   

(7)

%

 

__________

(1)

Reported Diluted Net (Loss) Income per Share from Continuing Operations is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of ordinary 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.

(2)

The information presented in the table above includes non-GAAP financial measures such as "Adjusted Income from Continuing Operations," "Adjusted Diluted Weighted Average Shares," "Adjusted Diluted Net Income per Share from Continuing Operations" and "Adjusted EBITDA." Refer to the "Supplemental Financial Information" section below for reconciliations of certain non-GAAP financial measures to the most directly comparable GAAP financial measures.

CONSOLIDATED RESULTS

Total revenues were $714 million in second-quarter 2021, an increase of 4% compared to $688 million during the same period in 2020. This result was primarily attributable to increased revenues from the Specialty Products portfolio of our Branded Pharmaceuticals segment, partially offset by decreased revenues from our Generic Pharmaceuticals and Sterile Injectables segments.

Reported loss from continuing operations in second-quarter 2021 was $10 million compared to reported income from continuing operations of $18 million during the same period in 2020. This result was attributable to higher litigation-related costs which were partially offset by increased revenues and favorable product mix changes. Reported diluted net loss per share from continuing operations in second-quarter 2021 was $0.04 compared to reported diluted net income per share from continuing operations in second-quarter 2020 of $0.08.

Adjusted income from continuing operations in second-quarter 2021 was $152 million equal to second-quarter 2020. Adjusted diluted net income per share from continuing operations in second-quarter 2021 was $0.65 equal to second-quarter 2020.

BRANDED PHARMACEUTICALS SEGMENT

Second-quarter 2021 Branded Pharmaceuticals segment revenues were $228 million, an increase of 76% compared to $130 million during second-quarter 2020.

Specialty Products revenues increased to $167 million in second-quarter 2021 compared to $69 million in second-quarter 2020. XIAFLEX® revenues increased to $111 million compared to $34 million in second-quarter 2020 primarily driven by demand growth due to increased physician office activity and patient office visits coupled with commercial execution. Established Products revenues were essentially flat at $61 million in the second-quarter 2021 and the second-quarter 2020.

STERILE INJECTABLES SEGMENT

Second-quarter 2021 Sterile Injectables segment revenues were $295 million, a decrease of 8% compared to $319 million during second-quarter 2020. This was primarily driven by a decrease in VASOSTRICT® revenues due to anticipated lower volumes as COVID-19 related hospitalizations decreased.

GENERIC PHARMACEUTICALS SEGMENT

Second-quarter 2021 Generic Pharmaceuticals segment revenues were $167 million, a decrease of 23% compared to $216 million during second-quarter 2020. This decrease was primarily attributable to continued competitive pressures on certain products, partially offset by the January 2021 launch of lubiprostone capsules, the first authorized generic of Mallinckrodt's Amitiza®.

INTERNATIONAL PHARMACEUTICALS SEGMENT

Second-quarter 2021 International Pharmaceuticals segment revenues increased 4% to $24 million compared to $23 million during second-quarter 2020.

2021 FINANCIAL GUIDANCE

Endo is updating its financial guidance for the full-year ending December 31, 2021 by narrowing the expected ranges regarding revenues, adjusted diluted net income per share from continuing operations and adjusted EBITDA. The guidance below contemplates a range of potential outcomes that reflect uncertainties in certain key assumptions including, among other things, uncertainties related to the COVID-19 pandemic. These statements are forward-looking, and actual results may differ materially from Endo's expectations, as further discussed below under the heading "Cautionary Note Regarding Forward-Looking Statements."

 

Full-Year 2021

 

Prior

 

Current

Total Revenues, Net

$2.65B - $2.79B

 

$2.73B - $2.79B

Adjusted EBITDA

$1.18B - $1.28B

 

$1.23B - $1.28B

Adjusted Diluted Net Income per Share from Continuing Operations

$1.95 - $2.30

 

$2.15 - $2.30

Assumptions:

     

Adjusted Gross Margin

~70.0% - 71.0%

 

~70.0% - 71.0%

Adjusted Operating Expenses as a Percentage of Total Revenues, Net

~28.5% - 29.0%

 

~28.5%

Adjusted Interest Expense

~$560M

 

~$560M

Adjusted Effective Tax Rate

~11.0% - 12.0%

 

~11.0% - 12.0%

Adjusted Diluted Weighted Average Shares

~239M

 

~239M

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of June 30, 2021, the Company had approximately $1.5 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 5.0.

Second-quarter 2021 net cash provided by operating activities was $155 million compared to $304 million during the second-quarter 2020. This decrease was primarily due to a decrease in cash flow from the change in net working capital.

Additionally, the Company recently entered into definitive agreements to sell the Company's manufacturing site in Chestnut Ridge, New York, as well as an undisclosed number of U.S. product regulatory approvals and related product inventory to subsidiaries of Strides Pharma Science Limited for approximately $24 million in cash, as well as certain other non-cash considerations. The exit of this site was included in a series of business transformation initiatives that the Company announced in late 2020, including further optimizing of the Company's generic retail business cost structure. The sale is expected to close in the second-half of 2021.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release tomorrow, August 6, 2021, 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 9749734. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from August 6, 2021 at 10:30 a.m. ET until 10:30 a.m. ET on August 16, 2021 by dialing U.S./Canada (855) 859-2056 International (404) 537-3406, and entering the passcode 9749734.

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, net for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):

 

Three Months Ended June 30,

 

Percent
Growth

 

Six Months Ended June 30,

 

Percent
Growth

 

2021

 

2020

   

2021

 

2020

 

Branded Pharmaceuticals:

                     

Specialty Products:

                     

XIAFLEX®

$

111,487

   

$

33,783

   

NM

 

$

206,757

   

$

122,855

   

68

%

SUPPRELIN® LA

27,568

   

15,395

   

79

%

 

55,596

   

35,115

   

58

%

Other Specialty (1)

28,036

   

19,566

   

43

%

 

48,068

   

45,071

   

7

%

Total Specialty Products

$

167,091

   

$

68,744

   

NM

 

$

310,421

   

$

203,041

   

53

%

Established Products:

                     

PERCOCET®

$

26,156

   

$

27,578

   

(5)

%

 

$

51,781

   

$

55,281

   

(6)

%

TESTOPEL®

9,439

   

617

   

NM

 

20,628

   

8,809

   

NM

Other Established (2)

25,354

   

32,582

   

(22)

%

 

51,845

   

66,463

   

(22)

%

Total Established Products

$

60,949

   

$

60,777

   

%

 

$

124,254

   

$

130,553

   

(5)

%

Total Branded Pharmaceuticals (3)

$

228,040

   

$

129,521

   

76

%

 

$

434,675

   

$

333,594

   

30

%

Sterile Injectables:

                     

VASOSTRICT®

$

197,121

   

$

214,214

   

(8)

%

 

$

421,067

   

$

417,118

   

1

%

ADRENALIN®

29,977

   

33,161

   

(10)

%

 

59,414

   

89,673

   

(34)

%

Other Sterile Injectables (4)

67,502

   

71,839

   

(6)

%

 

122,864

   

148,813

   

(17)

%

Total Sterile Injectables (3)

$

294,600

   

$

319,214

   

(8)

%

 

$

603,345

   

$

655,604

   

(8)

%

Total Generic Pharmaceuticals

$

167,272

   

$

215,879

   

(23)

%

 

$

348,145

   

$

467,162

   

(25)

%

Total International Pharmaceuticals

$

23,918

   

$

22,974

   

4

%

 

$

45,584

   

$

51,633

   

(12)

%

Total revenues, net

$

713,830

   

$

687,588

   

4

%

 

$

1,431,749

   

$

1,507,993

   

(5)

%

__________

(1)

Products included within Other Specialty include NASCOBAL® Nasal Spray, AVEED® and QWO®.

(2)

Products included within Other Established include, but are not limited to, EDEX® and LIDODERM®.

(3)

Individual products presented above represent the top two performing products in each product category for either the three or six months ended June 30, 2021 and/or any product having revenues in excess of $25 million during any quarterly period in 2021 or 2020.

(4)

Products included within Other Sterile Injectables include ertapenem for injection, APLISOL® and others.

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2021 and 2020 (in thousands, except per share data):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

TOTAL REVENUES, NET

$

713,830

   

$

687,588

   

$

1,431,749

   

$

1,507,993

 

COSTS AND EXPENSES:

             

Cost of revenues

318,480

   

336,096

   

623,773

   

724,895

 

Selling, general and administrative

177,619

   

173,258

   

364,793

   

340,026

 

Research and development

34,669

   

30,495

   

64,408

   

62,110

 

Litigation-related and other contingencies, net

35,195

   

(8,572)

   

35,832

   

(25,748)

 

Asset impairment charges

4,929

   

   

8,238

   

97,785

 

Acquisition-related and integration items, net

97

   

6,045

   

(4,925)

   

18,507

 

Interest expense, net

141,553

   

129,164

   

275,894

   

262,041

 

Loss on extinguishment of debt

   

   

13,753

   

 

Other expense (income), net

372

   

(4,150)

   

1,284

   

(18,124)

 

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX

$

916

   

$

25,252

   

$

48,699

   

$

46,501

 

INCOME TAX EXPENSE (BENEFIT)

11,100

   

7,642

   

11,824

   

(128,690)

 

(LOSS) INCOME FROM CONTINUING OPERATIONS

$

(10,184)

   

$

17,610

   

$

36,875

   

$

175,191

 

DISCONTINUED OPERATIONS, NET OF TAX

(5,316)

   

(7,052)

   

(10,851)

   

(34,703)

 

NET (LOSS) INCOME

$

(15,500)

   

$

10,558

   

$

26,024

   

$

140,488

 

NET (LOSS) INCOME PER SHARE—BASIC:

             

Continuing operations

$

(0.04)

   

$

0.08

   

$

0.16

   

$

0.77

 

Discontinued operations

(0.03)

   

(0.03)

   

(0.05)

   

(0.16)

 

Basic

$

(0.07)

   

$

0.05

   

$

0.11

   

$

0.61

 

NET (LOSS) INCOME PER SHARE—DILUTED:

             

Continuing operations

$

(0.04)

   

$

0.08

   

$

0.16

   

$

0.75

 

Discontinued operations

(0.03)

   

(0.03)

   

(0.05)

   

(0.15)

 

Diluted

$

(0.07)

   

$

0.05

   

$

0.11

   

$

0.60

 

WEIGHTED AVERAGE SHARES:

             

Basic

233,331

   

229,716

   

231,941

   

228,457

 

Diluted

233,331

   

233,681

   

237,043

   

233,348

 

The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2021 and December 31, 2020 (in thousands):

 

June 30, 2021

 

December 31,
2020

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

$

1,545,172

   

$

1,213,437

 

Restricted cash and cash equivalents

128,558

   

171,563

 

Accounts receivable

458,138

   

511,262

 

Inventories, net

338,456

   

352,260

 

Other current assets

99,005

   

164,736

 

Total current assets

$

2,569,329

   

$

2,413,258

 

TOTAL NON-CURRENT ASSETS

6,636,928

   

6,851,379

 

TOTAL ASSETS

$

9,206,257

   

$

9,264,637

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

     

CURRENT LIABILITIES:

     

Accounts payable and accrued expenses, including legal settlement accruals

$

1,174,178

   

$

1,208,061

 

Other current liabilities

235,034

   

45,763

 

Total current liabilities

$

1,409,212

   

$

1,253,824

 

LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,052,815

   

8,280,578

 

OTHER LIABILITIES

361,272

   

378,174

 

SHAREHOLDERS' DEFICIT

(617,042)

   

(647,939)

 

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$

9,206,257

   

$

9,264,637

 

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2021 and 2020 (in thousands):

 

Six Months Ended June 30,

 

2021

 

2020

OPERATING ACTIVITIES:

     

Net income

$

26,024

   

$

140,488

 

Adjustments to reconcile Net income to Net cash provided by operating activities:

     

Depreciation and amortization

237,703

   

264,198

 

Asset impairment charges

8,238

   

97,785

 

Other, including cash payments to claimants from Qualified Settlement Funds

126,851

   

(135,583)

 

Net cash provided by operating activities

$

398,816

   

$

366,888

 

INVESTING ACTIVITIES:

     

Capital expenditures, excluding capitalized interest

$

(41,345)

   

$

(36,305)

 

Proceeds from sale of business and other assets, net

1,343

   

6,017

 

Other

(5,048)

   

(1,125)

 

Net cash used in investing activities

$

(45,050)

   

$

(31,413)

 

FINANCING ACTIVITIES:

     

Payments on borrowings, net

$

(43,166)

   

$

(66,685)

 

Other

(22,581)

   

(9,046)

 

Net cash used in financing activities

$

(65,747)

   

$

(75,731)

 

Effect of foreign exchange rate

711

   

(915)

 

NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS

$

288,730

   

$

258,829

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD

1,385,000

   

1,720,388

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD

$

1,673,730

   

$

1,979,217

 

SUPPLEMENTAL FINANCIAL INFORMATION

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.

The tables below provide reconciliations of certain of the Company's non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.

Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2021 and 2020 (in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Net (loss) income (GAAP)

$

(15,500)

   

$

10,558

   

$

26,024

   

$

140,488

 

Income tax expense (benefit)

11,100

   

7,642

   

11,824

   

(128,690)

 

Interest expense, net

141,553

   

129,164

   

275,894

   

262,041

 

Depreciation and amortization (14)

110,145

   

120,855

   

221,724

   

255,813

 

EBITDA (non-GAAP)

$

247,298

   

$

268,219

   

$

535,466

   

$

529,652

 
               

Upfront and milestone-related payments (2)

5,125

   

444

   

5,681

   

2,194

 

Continuity and separation benefits and other cost reductions (3)

15,083

   

9,444

   

38,803

   

32,664

 

Certain litigation-related and other contingencies, net (4)

35,195

   

(8,572)

   

35,832

   

(25,748)

 

Certain legal costs (5)

24,843

   

18,005

   

44,119

   

33,541

 

Asset impairment charges (6)

4,929

   

   

8,238

   

97,785

 

Acquisition-related and integration costs (7)

(20)

   

   

411

   

 

Fair value of contingent consideration (8)

117

   

6,045

   

(5,336)

   

18,507

 

Loss on extinguishment of debt (9)

   

   

13,753

   

 

Share-based compensation (14)

4,444

   

9,222

   

14,437

   

21,677

 

Other expense (income), net (15)

372

   

(4,150)

   

1,284

   

(18,124)

 

Other (10)

(2)

   

30,772

   

3,876

   

30,756

 

Discontinued operations, net of tax (12)

5,316

   

7,052

   

10,851

   

34,703

 

Adjusted EBITDA (non-GAAP)

$

342,700

   

$

336,481

   

$

707,415

   

$

757,607

 

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

The following table provides a reconciliation of the Company's (Loss) income from continuing operations (GAAP) to Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2021 and 2020 (in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

(Loss) income from continuing operations (GAAP)

$

(10,184)

   

$

17,610

   

$

36,875

   

$

175,191

 

Non-GAAP adjustments:

             

Amortization of intangible assets (1)

94,070

   

104,498

   

189,200

   

221,735

 

Upfront and milestone-related payments (2)

5,125

   

444

   

5,681

   

2,194

 

Continuity and separation benefits and other cost reductions (3)

15,083

   

9,444

   

38,803

   

32,664

 

Certain litigation-related and other contingencies, net (4)

35,195

   

(8,572)

   

35,832

   

(25,748)

 

Certain legal costs (5)

24,843

   

18,005

   

44,119

   

33,541

 

Asset impairment charges (6)

4,929

   

   

8,238

   

97,785

 

Acquisition-related and integration costs (7)

(20)

   

   

411

   

 

Fair value of contingent consideration (8)

117

   

6,045

   

(5,336)

   

18,507

 

Loss on extinguishment of debt (9)

   

   

13,753

   

 

Other (10)

1,355

   

29,755

   

6,381

   

15,335

 

Tax adjustments (11)

(18,392)

   

(25,529)

   

(46,919)

   

(199,104)

 

Adjusted income from continuing operations (non-GAAP)

$

152,121

   

$

151,700

   

$

327,038

   

$

372,100

 

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, 2021 and 2020 (in thousands, except per share data):

 

Three Months Ended June 30, 2021

 

Total
revenues,
net

 

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

 

Income from
continuing
operations
before
income
tax

 

Income
tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted net
(loss) income
per share
from
continuing
operations
(13)

Reported (GAAP)

$   713,830

 

$     318,480

 

$   395,350

 

55.4 %

 

$     252,509

 

35.4 %

 

$   142,841

 

20.0 %

 

$ 141,925

 

$            916

 

$   11,100

 

1,211.8 %

 

$   (10,184)

 

$         (5,316)

 

$     (15,500)

 

$          (0.04)

Items impacting comparability:

                                                             

Amortization of intangible assets (1)

-

 

(94,070)

 

94,070

     

-

     

94,070

     

-

 

94,070

 

-

     

94,070

 

-

 

94,070

   

Upfront and milestone-related payments (2)

-

 

(125)

 

125

     

(5,000)

     

5,125

     

-

 

5,125

 

-

     

5,125

 

-

 

5,125

   

Continuity and separation benefits and other cost reductions (3)

-

 

(4,970)

 

4,970

     

(10,113)

     

15,083

     

-

 

15,083

 

-

     

15,083

 

-

 

15,083

   

Certain litigation-related and other contingencies, net (4)

-

 

-

 

-

     

(35,195)

     

35,195

     

-

 

35,195

 

-

     

35,195

 

-

 

35,195

   

Certain legal costs (5)

-

 

-

 

-

     

(24,843)

     

24,843

     

-

 

24,843

 

-

     

24,843

 

-

 

24,843

   

Asset impairment charges (6)

-

 

-

 

-

     

(4,929)

     

4,929

     

-

 

4,929

 

-

     

4,929

 

-

 

4,929

   

Acquisition-related and integration costs (7)

-

 

-

 

-

     

20

     

(20)

     

-

 

(20)

 

-

     

(20)

 

-

 

(20)

   

Fair value of contingent consideration (8)

-

 

-

 

-

     

(117)

     

117

     

-

 

117

 

-

     

117

 

-

 

117

   

Other (10)

-

 

-

 

-

     

-

     

-

     

(1,355)

 

1,355

 

-

     

1,355

 

-

 

1,355

   

Tax adjustments (11)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

18,392

     

(18,392)

 

-

 

(18,392)

   

Exclude discontinued operations, net of tax (12)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

-

     

-

 

5,316

 

5,316

   

After considering items (non-GAAP)

$   713,830

 

$     219,315

 

$   494,515

 

69.3 %

 

$     172,332

 

24.1 %

 

$   322,183

 

45.1 %

 

$ 140,570

 

$     181,613

 

$   29,492

 

16.2 %

 

$   152,121

 

$                  -

 

$     152,121

 

$            0.65

 

 

 

Three Months Ended June 30, 2020

 

Total
revenues,
net

 

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

 

Income from
continuing
operations
before
income tax

 

Income
tax
expense

 

Effective
tax rate

 

Income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net
income

 

Diluted net
income per
share from
continuing
operations
(13)

Reported (GAAP)

$   687,588

 

$     336,096

 

$   351,492

 

51.1 %

 

$     201,226

 

29.3 %

 

$   150,266

 

21.9 %

 

$ 125,014

 

$       25,252

 

$     7,642

 

30.3 %

 

$     17,610

 

$         (7,052)

 

$       10,558

 

$            0.08

Items impacting comparability:

                                                             

Amortization of intangible assets (1)

-

 

(104,498)

 

104,498

     

-

     

104,498

     

-

 

104,498

 

-

     

104,498

 

-

 

104,498

   

Upfront and milestone-related payments (2)

-

 

(125)

 

125

     

(319)

     

444

     

-

 

444

 

-

     

444

 

-

 

444

   

Continuity and separation benefits and other cost reductions (3)

-

 

(904)

 

904

     

(8,540)

     

9,444

     

-

 

9,444

 

-

     

9,444

 

-

 

9,444

   

Certain litigation-related and other contingencies, net (4)

-

 

-

 

-

     

8,572

     

(8,572)

     

-

 

(8,572)

 

-

     

(8,572)

 

-

 

(8,572)

   

Certain legal costs (5)

-

 

-

 

-

     

(18,005)

     

18,005

     

-

 

18,005

 

-

     

18,005

 

-

 

18,005

   

Fair value of contingent consideration (8)

-

 

-

 

-

     

(6,045)

     

6,045

     

-

 

6,045

 

-

     

6,045

 

-

 

6,045

   

Other (10)

-

 

-

 

-

     

(30,749)

     

30,749

     

994

 

29,755

 

-

     

29,755

 

-

 

29,755

   

Tax adjustments (11)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

25,529

     

(25,529)

 

-

 

(25,529)

   

Exclude discontinued operations, net of tax (12)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

-

     

-

 

7,052

 

7,052

   

After considering items (non-GAAP)

$   687,588

 

$     230,569

 

$   457,019

 

66.5 %

 

$     146,140

 

21.3 %

 

$   310,879

 

45.2 %

 

$ 126,008

 

$     184,871

 

$   33,171

 

17.9 %

 

$   151,700

 

$                  -

 

$     151,700

 

$            0.65

 

 

 

Six Months Ended June 30, 2021

 

Total
revenues,
net

 

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

 

Income from
continuing
operations
before
income tax

 

Income
tax
expense

 

Effective
tax rate

 

Income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net
income

 

Diluted net
income per
share from
continuing
operations
(13)

Reported (GAAP)

$1,431,749

 

$     623,773

 

$   807,976

 

56.4 %

 

$     468,346

 

32.7 %

 

$   339,630

 

23.7 %

 

$ 290,931

 

$       48,699

 

$   11,824

 

24.3 %

 

$     36,875

 

$       (10,851)

 

$       26,024

 

$            0.16

Items impacting comparability:

                                                             

Amortization of intangible assets (1)

-

 

(189,200)

 

189,200

     

-

     

189,200

     

-

 

189,200

 

-

     

189,200

 

-

 

189,200

   

Upfront and milestone-related payments (2)

-

 

(651)

 

651

     

(5,030)

     

5,681

     

-

 

5,681

 

-

     

5,681

 

-

 

5,681

   

Continuity and separation benefits and other cost reductions (3)

-

 

(20,266)

 

20,266

     

(18,537)

     

38,803

     

-

 

38,803

 

-

     

38,803

 

-

 

38,803

   

Certain litigation-related and other contingencies, net (4)

-

 

-

 

-

     

(35,832)

     

35,832

     

-

 

35,832

 

-

     

35,832

 

-

 

35,832

   

Certain legal costs (5)

-

 

-

 

-

     

(44,119)

     

44,119

     

-

 

44,119

 

-

     

44,119

 

-

 

44,119

   

Asset impairment charges (6)

-

 

-

 

-

     

(8,238)

     

8,238

     

-

 

8,238

 

-

     

8,238

 

-

 

8,238

   

Acquisition-related and integration costs (7)

-

 

-

 

-

     

(411)

     

411

     

-

 

411

 

-

     

411

 

-

 

411

   

Fair value of contingent consideration (8)

-

 

-

 

-

     

5,336

     

(5,336)

     

-

 

(5,336)

 

-

     

(5,336)

 

-

 

(5,336)

   

Loss on extinguishment of debt (9)

-

 

-

 

-

     

-

     

-

     

(13,753)

 

13,753

 

-

     

13,753

 

-

 

13,753

   

Other (10)

-

 

-

 

-

     

(3,879)

     

3,879

     

(2,502)

 

6,381

 

-

     

6,381

 

-

 

6,381

   

Tax adjustments (11)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

46,919

     

(46,919)

 

-

 

(46,919)

   

Exclude discontinued operations, net of tax (12)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

-

     

-

 

10,851

 

10,851

   

After considering items (non-GAAP)

$1,431,749

 

$     413,656

 

$1,018,093

 

71.1 %

 

$     357,636

 

25.0 %

 

$   660,457

 

46.1 %

 

$ 274,676

 

$     385,781

 

$   58,743

 

15.2 %

 

$   327,038

 

$                  -

 

$     327,038

 

$            1.38

 

 

 

Six Months Ended June 30, 2020

 

Total
revenues,
net

 

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

 

Income from
continuing
operations
before
income tax

 

Income
tax
(benefit)
expense

 

Effective
tax rate

 

Income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net
income

 

Diluted net
income per
share from
continuing
operations
(13)

Reported (GAAP)

$1,507,993

 

$     724,895

 

$   783,098

 

51.9 %

 

$     492,680

 

32.7 %

 

$   290,418

 

19.3 %

 

$ 243,917

 

$       46,501

 

$(128,690)

 

(276.7)%

 

$   175,191

 

$       (34,703)

 

$     140,488

 

$            0.75

Items impacting comparability:

                                                             

Amortization of intangible assets (1)

-

 

(221,735)

 

221,735

     

-

     

221,735

     

-

 

221,735

 

-

     

221,735

 

-

 

221,735

   

Upfront and milestone-related payments (2)

-

 

(667)

 

667

     

(1,527)

     

2,194

     

-

 

2,194

 

-

     

2,194

 

-

 

2,194

   

Continuity and separation benefits and other cost reductions (3)

-

 

(7,142)

 

7,142

     

(25,522)

     

32,664

     

-

 

32,664

 

-

     

32,664

 

-

 

32,664

   

Certain litigation-related and other contingencies, net (4)

-

 

-

 

-

     

25,748

     

(25,748)

     

-

 

(25,748)

 

-

     

(25,748)

 

-

 

(25,748)

   

Certain legal costs (5)

-

 

-

 

-

     

(33,541)

     

33,541

     

-

 

33,541

 

-

     

33,541

 

-

 

33,541

   

Asset impairment charges (6)

-

 

-

 

-

     

(97,785)

     

97,785

     

-

 

97,785

 

-

     

97,785

 

-

 

97,785

   

Fair value of contingent consideration (8)

-

 

-

 

-

     

(18,507)

     

18,507

     

-

 

18,507

 

-

     

18,507

 

-

 

18,507

   

Other (10)

-

 

-

 

-

     

(30,749)

     

30,749

     

15,414

 

15,335

 

-

     

15,335

 

-

 

15,335

   

Tax adjustments (11)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

199,104

     

(199,104)

 

-

 

(199,104)

   

Exclude discontinued operations, net of tax (12)

-

 

-

 

-

     

-

     

-

     

-

 

-

 

-

     

-

 

34,703

 

34,703

   

After considering items (non-GAAP)

$1,507,993

 

$     495,351

 

$1,012,642

 

67.2 %

 

$     310,797

 

20.6 %

 

$   701,845

 

46.5 %

 

$ 259,331

 

$     442,514

 

$   70,414

 

15.9 %

 

$   372,100

 

$                  -

 

$     372,100

 

$            1.59

 

Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures

Notes to certain line items included in the reconciliations of the GAAP financial measures to the non-GAAP financial measures for the three and six months ended June 30, 2021 and 2020 are as follows:

(1)

To exclude amortization expense related to intangible assets.

   

(2)

Adjustments for upfront and milestone-related payments to partners included the following (in thousands):

   
 

Three Months Ended June 30,

 

2021

 

2020

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Sales-based

$

125

   

$

   

$

125

   

$

 

Development-based

   

5,000

   

   

319

 

Total

$

125

   

$

5,000

   

$

125

   

$

319

 
               
 

Six Months Ended June 30,

 

2021

 

2020

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Sales-based

$

651

   

$

   

$

667

   

$

 

Development-based

   

5,030

   

   

1,527

 

Total

$

651

   

$

5,030

   

$

667

   

$

1,527

 
   

(3)

Adjustments for continuity and separation benefits and other cost reductions included the following (in thousands):

   
 

Three Months Ended June 30,

 

2021

 

2020

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Continuity and separation benefits

$

(2,913)

   

$

4,485

   

$

515

   

$

3,606

 

Accelerated depreciation charges

7,140

   

1,932

   

1,347

   

408

 

Other

743

   

3,696

   

(958)

   

4,526

 

Total

$

4,970

   

$

10,113

   

$

904

   

$

8,540

 
               
 

Six Months Ended June 30,

 

2021

 

2020

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Continuity and separation benefits

$

2,279

   

$

7,837

   

$

1,142

   

$

16,775

 

Accelerated depreciation charges

12,194

   

3,785

   

6,026

   

2,359

 

Other

5,793

   

6,915

   

(26)

   

6,388

 

Total

$

20,266

   

$

18,537

   

$

7,142

   

$

25,522

 
 

Included within the Continuity and separation benefits line are costs associated with certain continuity and transitional compensation arrangements for certain senior management of the Company. Additionally, amounts include adjustments related to previously announced restructurings and other strategic initiatives to further optimize Endo's operations.

 

(4)

To exclude adjustments to accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by subsidiaries.

   

(5)

To exclude opioid-related legal expenses.

   

(6)

Adjustments for asset impairment charges included the following (in thousands):

   
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Goodwill impairment charges

$

   

$

   

$

   

$

32,786

 

Other intangible asset impairment charges

4,929

   

   

7,811

   

63,751

 

Property, plant and equipment impairment charges

   

   

427

   

1,248

 

Total

$

4,929

   

$

   

$

8,238

   

$

97,785

 
   

(7)

To exclude integration costs.

   

(8)

To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to estimates regarding the timing and amount of the future revenues of the underlying products and changes in other assumptions impacting the probability of incurring, and extent to which the Company could incur, related contingent obligations.

   

(9)

To exclude the loss on the extinguishment of debt associated with the Company's March 2021 refinancing transactions.

   

(10)

The Other rows included in each of the above reconciliations of GAAP financial measures to non-GAAP financial measures (except for the reconciliations of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP)) include the following (in thousands):

   
 

Three Months Ended June 30,

 

2021

 

2020

 

Operating
expenses

 

Other non-
operating
expenses

 

Operating
expenses

 

Other non-
operating
expenses

Foreign currency impact related to the re-measurement of intercompany debt instruments

$

   

$

1,355

   

$

   

$

3,005

 

(Gain) loss on sale of business and other assets

   

   

   

(3,999)

 

Debt modification costs

   

   

30,749

   

 

Total

$

   

$

1,355

   

$

30,749

   

$

(994)

 
               
 

Six Months Ended June 30,

 

2021

 

2020

 

Operating
expenses

 

Other non-
operating
expenses

 

Operating
expenses

 

Other non-
operating
expenses

Foreign currency impact related to the re-measurement of intercompany debt instruments

$

   

$

2,502

   

$

   

$

(4,089)

 

Gain on sale of business and other assets

   

   

   

(11,325)

 

Debt modification costs

3,879

   

   

30,749

   

 

Total

$

3,879

   

$

2,502

   

$

30,749

   

$

(15,414)

 
 

The Other row included in the reconciliations of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) primarily relates to the items enumerated in the foregoing "Operating expenses" columns.

 

(11)

Adjusted income taxes are calculated by tax effecting adjusted pre-tax income and permanent book-tax differences at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates. Adjusted income taxes include current and deferred income tax expense commensurate with the non-GAAP measure of profitability.

   

(12)

To exclude the results of the businesses reported as discontinued operations, net of tax.

   

(13)

Calculated as income or loss from continuing operations divided by the applicable weighted average share number. The applicable weighted average share numbers are as follows (in thousands):

   
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

GAAP

233,331

   

233,681

   

237,043

   

233,348

 

Non-GAAP Adjusted

235,416

   

233,681

   

237,043

   

233,348

 
   

(14)

Depreciation and amortization and Share-based compensation per the Adjusted EBITDA reconciliations do not include amounts reflected in other lines of the reconciliations, including Continuity and separation benefits and other cost reductions.

   

(15)

To exclude Other expense (income), net per the Condensed Consolidated Statements of Operations.

Reconciliation of Net Debt Leverage Ratio (non-GAAP)

The following table provides a reconciliation of the Company's Net income (GAAP) to Adjusted EBITDA (non-GAAP) for the twelve months ended June 30, 2021 (in thousands) and the calculation of the Company's Net Debt Leverage Ratio (non-GAAP):

 

Twelve Months

Ended June 30,

2021

Net income (GAAP)

$

69,480