Endo Reports Third Quarter 2016 Financial Results
- Third quarter 2016 reported revenues of
$884 million and diluted GAAP loss per share from continuing operations of$0.86 - Third quarter 2016 adjusted diluted earnings per share (EPS) of
$1.01 - Company Reaffirms Full Year 2016 Revenues and Adjusted Diluted EPS Financial Guidance
- Revenues of
$884 million including the addition of sales from its 2015 acquisition of Par Pharmaceutical, a 19 percent increase compared to third quarter 2015 revenues of$746 million . - Reported net loss from continuing operations of
$191 million compared to third quarter 2015 reported net loss from continuing operations of$804 million . - Reported diluted loss per share from continuing operations of
$0.86 compared to third quarter 2015 reported diluted loss per share from continuing operations of$3.84 . - Adjusted net income from continuing operations of
$226 million , a 5 percent increase compared to third quarter 2015 adjusted net income from continuing operations of$214 million .1 - Adjusted diluted EPS from continuing operations of
$1.01 compared to third quarter 2015 adjusted diluted EPS from continuing operations of$1.02 .1
"During the third quarter 2016, Endo further sharpened its focus on operational execution. We have continued to deliver results across all of our businesses that are on-track or ahead of Company expectations for the quarter. Today we are reaffirming our full year 2016 revenue and adjusted diluted EPS financial guidance," said
FINANCIAL PERFORMANCE |
|||||||||||||||||||||
(in thousands, except per share amounts) |
|||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||
2016 |
2015 |
Change |
2016 |
2015 |
Change |
||||||||||||||||
Total Revenues |
$ |
884,335 |
$ |
745,727 |
19 |
% |
$ |
2,768,761 |
$ |
2,195,021 |
26 |
% |
|||||||||
Reported Income (Loss) from |
$ |
(191,496) |
$ |
(803,706) |
(76) |
% |
$ |
109,553 |
$ |
(744,108) |
NM |
||||||||||
Reported Diluted Weighted Average |
222,767 |
209,274 |
6 |
% |
223,060 |
188,085 |
19 |
% |
|||||||||||||
Reported Diluted Income (Loss) per |
$ |
(0.86) |
$ |
(3.84) |
(78) |
% |
$ |
0.49 |
$ |
(3.96) |
NM |
||||||||||
Adjusted Income from Continuing |
$ |
225,519 |
$ |
214,110 |
1 |
5 |
% |
$ |
658,591 |
$ |
625,805 |
1 |
5 |
% |
|||||||
Adjusted Diluted Weighted Average |
223,139 |
210,787 |
6 |
% |
223,060 |
192,144 |
16 |
% |
|||||||||||||
Adjusted Diluted EPS from |
$ |
1.01 |
$ |
1.02 |
1 |
(1) |
% |
$ |
2.95 |
$ |
3.26 |
1 |
(10) |
% |
|||||||
(1) Refer to footnote 12 and 14 in the Reconciliation of GAAP and Non-GAAP Financial Measures tables for three and nine months ended September 30, 2015, respectively, for further discussion. |
CONSOLIDATED RESULTS
Total revenues increased by 19 percent to
Adjusted net income from continuing operations for third quarter 2016 increased by 5 percent to
U.S. BRANDED PHARMACEUTICALS
During third quarter 2016, the
Third quarter 2016
- Revenues of
$280 million , an 8 percent decrease compared to third quarter 2015; this decrease was primarily attributable to a generic entrant for Voltaren® Gel inMarch 2016 and volume contraction across our established pain products. - Net sales of XIAFLEX® increased 19 percent compared to third quarter 2015; this increase reflects high single-digit demand growth for the product and expected inventory build in the quarter.
U.S. GENERIC PHARMACEUTICALS
During third quarter 2016, the
Third quarter and recent 2016
- Revenues of
$534 million , a 45 percent increase compared to third quarter 2015; this increase was primarily attributable to growth from the addition of sales by Par. - Generics Base business revenues declined approximately 20 percent sequentially compared to the second quarter 2016, due to deepening consortium pricing pressures and additional competitive entrants and product discontinuations as well as discrete factors, including destocking and shifts in purchase timing due to market conditions. The sequential decline would have been approximately 15 percent without these discrete factors and this deeper decline may continue into 2017.
- On
November 1, 2016 , the Company launched the generic form of SEROQUEL XR®, for which it has first-to-file status and 180 days of marketing exclusivity.
INTERNATIONAL PHARMACEUTICALS
During third quarter 2016, the
Third quarter 2016
- Revenues of
$71 million , a 3 percent decrease compared to third quarter 2015. - Paladin revenues of
$28 million , a 10 percent increase compared to third quarter 2015, due primarily to solid performance across the base business, the Canadian launch of Nucynta® and the continuing management of the expected loss of exclusivity for two products. - Emerging market revenues from Litha and
Somar of$38 million , a 4 percent decrease compared to third 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 reaffirming its full year revenue and adjusted diluted EPS financial guidance. The Company estimates:
- Total revenues to be between
$3.87 billion and $4.03 billion ; - Diluted GAAP EPS from continuing operations is now expected to be between
$0.98 and $1.28 ; 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 60 percent;
- Adjusted operating expenses as a percentage of revenues to be approximately 22.5 percent;
- Adjusted interest expense of approximately
$450 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 September 30, 2016, the Company had
Third quarter 2016 cash used in operating activities was
During third quarter 2016, the Company recorded impairment charges 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 November 8, 2016 at 11:30 a.m. ET until 11:30 a.m. ET on November 22, 2016 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 1074797.
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 nine months ended September 30, 2016 and 2015:
Endo International plc |
|||||||||||||||||||||
Net Revenues (unaudited) |
|||||||||||||||||||||
(in thousands) |
|||||||||||||||||||||
Three Months Ended |
Percent Growth |
Nine Months Ended |
Percent Growth |
||||||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||||||||
U.S. Branded Pharmaceuticals: |
|||||||||||||||||||||
Pain Management: |
|||||||||||||||||||||
LIDODERM® |
$ |
19,704 |
$ |
29,689 |
(34) |
% |
$ |
66,455 |
$ |
85,035 |
(22) |
% |
|||||||||
OPANA® ER |
36,834 |
42,206 |
(13) |
% |
120,058 |
132,162 |
(9) |
% |
|||||||||||||
PERCOCET® |
33,881 |
31,898 |
6 |
% |
103,182 |
100,641 |
3 |
% |
|||||||||||||
Voltaren® Gel |
18,993 |
48,515 |
(61) |
% |
82,030 |
144,992 |
(43) |
% |
|||||||||||||
$ |
109,412 |
$ |
152,308 |
(28) |
% |
$ |
371,725 |
$ |
462,830 |
(20) |
% |
||||||||||
Specialty Pharmaceuticals: |
|||||||||||||||||||||
SUPPRELIN® LA |
$ |
19,392 |
$ |
19,095 |
2 |
% |
$ |
57,855 |
$ |
53,173 |
9 |
% |
|||||||||
XIAFLEX® |
47,695 |
40,000 |
19 |
% |
134,159 |
107,918 |
24 |
% |
|||||||||||||
$ |
67,087 |
$ |
59,095 |
14 |
% |
$ |
192,014 |
$ |
161,091 |
19 |
% |
||||||||||
Branded Other Revenues (1) |
103,344 |
93,375 |
11 |
% |
313,259 |
281,277 |
11 |
% |
|||||||||||||
Total U.S. Branded Pharmaceuticals (2) |
$ |
279,843 |
$ |
304,778 |
(8) |
% |
$ |
876,998 |
$ |
905,198 |
(3) |
% |
|||||||||
U.S. Generic Pharmaceuticals: |
|||||||||||||||||||||
U.S. Generics Base |
$ |
263,431 |
$ |
252,881 |
4 |
% |
$ |
941,955 |
$ |
711,392 |
32 |
% |
|||||||||
Sterile Injectables |
136,966 |
7,081 |
1,834 |
% |
386,900 |
7,081 |
5,364 |
% |
|||||||||||||
New Launches and Alternative Dosages |
133,294 |
107,971 |
23 |
% |
353,584 |
344,748 |
3 |
% |
|||||||||||||
Total U.S. Generic Pharmaceuticals |
$ |
533,691 |
$ |
367,933 |
45 |
% |
$ |
1,682,439 |
$ |
1,063,221 |
58 |
% |
|||||||||
Total International Pharmaceuticals |
$ |
70,801 |
$ |
73,016 |
(3) |
% |
$ |
209,324 |
$ |
226,602 |
(8) |
% |
|||||||||
Total Revenues |
$ |
884,335 |
$ |
745,727 |
19 |
% |
$ |
2,768,761 |
$ |
2,195,021 |
26 |
% |
|||||||||
(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 product category and/or any product having revenues in excess of $25.0 million during the three months ended September 30, 2016 or September 30, 2015. |
The following table presents unaudited consolidated Statement of Operations data for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per share data):
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
TOTAL REVENUES |
$ |
884,335 |
$ |
745,727 |
$ |
2,768,761 |
$ |
2,195,021 |
|||||||
COSTS AND EXPENSES: |
|||||||||||||||
Cost of revenues |
557,472 |
442,459 |
1,878,395 |
1,265,583 |
|||||||||||
Selling, general and administrative |
186,735 |
163,221 |
558,160 |
529,290 |
|||||||||||
Research and development |
44,885 |
21,327 |
137,166 |
58,208 |
|||||||||||
Litigation-related and other contingencies, net |
18,256 |
— |
28,715 |
19,875 |
|||||||||||
Asset impairment charges |
93,504 |
923,607 |
263,080 |
1,000,850 |
|||||||||||
Acquisition-related and integration items |
19,476 |
(27,688) |
80,201 |
51,177 |
|||||||||||
OPERATING LOSS FROM CONTINUING OPERATIONS |
$ |
(35,993) |
$ |
(777,199) |
$ |
(176,956) |
$ |
(729,962) |
|||||||
INTEREST EXPENSE, NET |
112,184 |
96,446 |
340,896 |
250,196 |
|||||||||||
LOSS ON EXTINGUISHMENT OF DEBT |
— |
40,909 |
— |
41,889 |
|||||||||||
OTHER (INCOME) EXPENSE, NET |
(2,866) |
50,091 |
402 |
62,589 |
|||||||||||
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX |
$ |
(145,311) |
$ |
(964,645) |
$ |
(518,254) |
$ |
(1,084,636) |
|||||||
INCOME TAX EXPENSE (BENEFIT) |
46,185 |
(160,939) |
(627,807) |
(340,528) |
|||||||||||
(LOSS) INCOME FROM CONTINUING OPERATIONS |
$ |
(191,496) |
$ |
(803,706) |
$ |
109,553 |
$ |
(744,108) |
|||||||
DISCONTINUED OPERATIONS, NET OF TAX |
(27,423) |
(246,782) |
(118,747) |
(632,624) |
|||||||||||
CONSOLIDATED NET LOSS |
$ |
(218,919) |
$ |
(1,050,488) |
$ |
(9,194) |
$ |
(1,376,732) |
|||||||
Less: Net income (loss) attributable to noncontrolling interests |
— |
(46) |
16 |
(153) |
|||||||||||
NET LOSS ATTRIBUTABLE TO ENDO |
$ |
(218,919) |
$ |
(1,050,442) |
$ |
(9,210) |
$ |
(1,376,579) |
|||||||
NET LOSS PER SHARE ATTRIBUTABLE TO ENDO |
|||||||||||||||
Continuing operations |
$ |
(0.86) |
$ |
(3.84) |
$ |
0.49 |
$ |
(3.96) |
|||||||
Discontinued operations |
(0.12) |
(1.18) |
(0.53) |
(3.36) |
|||||||||||
Basic |
$ |
(0.98) |
$ |
(5.02) |
$ |
(0.04) |
$ |
(7.32) |
|||||||
NET LOSS PER SHARE ATTRIBUTABLE TO ENDO |
|||||||||||||||
Continuing operations |
$ |
(0.86) |
$ |
(3.84) |
$ |
0.49 |
$ |
(3.96) |
|||||||
Discontinued operations |
(0.12) |
(1.18) |
(0.53) |
(3.36) |
|||||||||||
Diluted |
$ |
(0.98) |
$ |
(5.02) |
$ |
(0.04) |
$ |
(7.32) |
|||||||
WEIGHTED AVERAGE SHARES: |
|||||||||||||||
Basic |
222,767 |
209,274 |
222,579 |
188,085 |
|||||||||||
Diluted |
222,767 |
209,274 |
223,060 |
188,085 |
The following table presents unaudited condensed consolidated Balance Sheet data at September 30, 2016 and December 31, 2015 (in thousands):
September 30, |
December 31, |
||||||
ASSETS |
|||||||
CURRENT ASSETS: |
|||||||
Cash and cash equivalents |
$ |
561,577 |
$ |
272,348 |
|||
Restricted cash and cash equivalents |
275,745 |
585,379 |
|||||
Accounts receivable |
669,815 |
1,014,808 |
|||||
Inventories, net |
624,302 |
752,493 |
|||||
Assets held for sale |
— |
36,522 |
|||||
Other assets |
115,997 |
790,987 |
|||||
Total current assets |
$ |
2,247,436 |
$ |
3,452,537 |
|||
TOTAL NON-CURRENT ASSETS |
15,436,066 |
15,897,799 |
|||||
TOTAL ASSETS |
$ |
17,683,502 |
$ |
19,350,336 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
CURRENT LIABILITIES: |
|||||||
Accounts payable and accrued expenses |
$ |
2,532,293 |
$ |
3,116,841 |
|||
Liabilities held for sale |
— |
20,215 |
|||||
Other current liabilities |
130,009 |
337,256 |
|||||
Total current liabilities |
$ |
2,662,302 |
$ |
3,474,312 |
|||
LONG-TERM DEBT, LESS CURRENT PORTION, NET |
8,170,618 |
8,251,657 |
|||||
OTHER LIABILITIES |
799,721 |
1,656,391 |
|||||
STOCKHOLDERS' EQUITY: |
|||||||
Total Endo International plc shareholders' equity |
$ |
6,050,861 |
$ |
5,968,030 |
|||
Noncontrolling interests |
— |
(54) |
|||||
Total shareholders' equity |
$ |
6,050,861 |
$ |
5,967,976 |
|||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
17,683,502 |
$ |
19,350,336 |
The following table presents unaudited condensed consolidated Statement of Cash Flow data for the nine months ended September 30, 2016 and 2015 (in thousands):
Nine Months Ended September 30, |
|||||||
2016 |
2015 |
||||||
OPERATING ACTIVITIES: |
|||||||
Consolidated net loss |
$ |
(9,194) |
$ |
(1,376,732) |
|||
Adjustments to reconcile consolidated net loss to Net cash provided by (used in) |
|||||||
Depreciation and amortization |
716,332 |
381,952 |
|||||
Asset impairment charges |
284,409 |
1,244,672 |
|||||
Deferred income taxes |
(613,318) |
(335,171) |
|||||
Other |
200,051 |
118,684 |
|||||
Changes in assets and liabilities which used cash |
(134,903) |
(210,837) |
|||||
Net cash provided by (used in) operating activities |
$ |
443,377 |
$ |
(177,432) |
|||
INVESTING ACTIVITIES: |
|||||||
Purchases of property, plant and equipment, net |
(85,509) |
(50,944) |
|||||
Acquisitions, net of cash acquired |
(30,394) |
(7,514,425) |
|||||
Proceeds from sale of business, net |
4,108 |
1,588,779 |
|||||
Increase in restricted cash and cash equivalents, net |
(588,455) |
(533,441) |
|||||
Decrease in restricted cash and cash equivalents |
898,288 |
549,171 |
|||||
Other |
(19,172) |
364 |
|||||
Net cash provided by (used in) investing activities |
$ |
178,866 |
$ |
(5,960,496) |
|||
FINANCING ACTIVITIES: |
|||||||
(Payments on) proceeds from borrowings, net |
(305,634) |
4,418,808 |
|||||
Issuance of ordinary shares |
— |
2,300,000 |
|||||
Other |
(28,877) |
(148,262) |
|||||
Net cash (used in) provided by financing activities |
$ |
(334,511) |
$ |
6,570,546 |
|||
Effect of foreign exchange rate |
$ |
1,497 |
$ |
(5,260) |
|||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
$ |
289,229 |
$ |
427,358 |
|||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
272,348 |
408,753 |
|||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
561,577 |
$ |
836,111 |
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 nine months ended September 30, 2016 and 2015 (in thousands):
Nine Months Ended September 30, |
|||||||
2016 |
2015 |
||||||
Payments for mesh-related product liability and other litigation matters (1) |
$ |
931,496 |
$ |
525,875 |
|||
Redemption fees paid in connection with debt retirements |
— |
17,496 |
|||||
Unused commitment fees |
— |
78,352 |
|||||
Separation and restructuring payments |
73,962 |
59,292 |
|||||
Transaction costs and certain integration charges paid in connection with acquisitions |
54,262 |
151,687 |
|||||
U.S. Federal tax refunds received |
(712,303) |
(70,300) |
|||||
Total |
$ |
347,417 |
$ |
762,402 |
(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 nine months ended September 30, 2016 and 2015 by cash flow component: |
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Impact on CFO (A) |
Impact on CFI |
Impact on CFO (A) |
Impact on CFI |
||||||||||||
Cash contributions to Qualified Settlement Funds |
$ |
— |
$ |
(587,782) |
$ |
— |
$ |
(526,785) |
|||||||
Cash payments to claimants from Qualified Settlement Funds |
(898,288) |
898,288 |
(509,563) |
509,563 |
|||||||||||
Cash payments made directly to claimants |
(5,561) |
— |
(16,312) |
— |
|||||||||||
Total |
$ |
(903,849) |
$ |
310,506 |
$ |
(525,875) |
$ |
(17,222) |
(A) |
These amounts are included in Changes in assets and liabilities which used cash in the table above. |
Supplemental Financial Information
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the
The table below provides reconciliations of our consolidated income (loss) from continuing operations (GAAP) to our adjusted income from continuing operations (non-GAAP) for the three and nine months ended
ENDO INTERNATIONAL PLC |
|||||||||||||||
Reconciliation of GAAP and Non-GAAP Financial Measures |
|||||||||||||||
(UNAUDITED) |
|||||||||||||||
(In thousands) |
|||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
(Loss) Income from continuing operations (GAAP) |
$ |
(191,496) |
$ |
(803,706) |
$ |
109,553 |
$ |
(744,108) |
|||||||
Non-GAAP adjustments: |
|||||||||||||||
Amortization of intangible assets |
211,548 |
121,503 |
636,061 |
333,759 |
|||||||||||
Inventory step-up and other cost savings |
14,208 |
42,919 |
111,787 |
131,783 |
|||||||||||
Upfront and milestone related payments |
1,770 |
9,261 |
5,875 |
14,063 |
|||||||||||
Inventory reserve (decrease) increase from restructuring |
(9,041) |
— |
24,592 |
— |
|||||||||||
Royalty obligations |
— |
— |
(7,750) |
— |
|||||||||||
Separation benefits and other restructuring |
18,823 |
22,669 |
45,820 |
70,256 |
|||||||||||
Acceleration of Auxilium employee equity awards |
— |
— |
— |
37,603 |
|||||||||||
Charges for litigation and other legal matters |
18,256 |
— |
28,715 |
19,875 |
|||||||||||
Asset impairment charges |
93,504 |
923,607 |
263,080 |
1,000,850 |
|||||||||||
Acquisition-related and integration costs |
7,907 |
52,585 |
55,422 |
134,778 |
|||||||||||
Fair value of contingent consideration |
11,569 |
(80,273) |
24,779 |
(83,601) |
|||||||||||
Non-cash and penalty interest charges |
— |
1,924 |
4,092 |
6,302 |
|||||||||||
Other |
53 |
87,089 |
(5,437) |
102,664 |
|||||||||||
Tax adjustments |
48,418 |
(163,468) |
(637,998) |
(398,419) |
|||||||||||
Adjusted income from continuing operations (non-GAAP) |
$ |
225,519 |
$ |
214,110 |
$ |
658,591 |
$ |
625,805 |
|||||||
Refer to the following tables for additional information regarding non-GAAP financial measures. |
ENDO INTERNATIONAL PLC |
|||||||||||||||||||||||||||||||
Reconciliation of GAAP and Non-GAAP Financial Measures |
|||||||||||||||||||||||||||||||
(UNAUDITED) |
|||||||||||||||||||||||||||||||
(In thousands, except per share data) |
|||||||||||||||||||||||||||||||
Three Months Ended September 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 expense |
Effective tax rate |
Loss from continuing operations |
Discontinued operations, net of tax |
Net loss attributable to Endo International plc (14) |
Diluted loss per share (15) |
||||||||||||||||
Reported (GAAP) |
$ 884,335 |
$ 557,472 |
$ 326,863 |
37 % |
$ 362,856 |
41 % |
$ (35,993) |
(4)% |
$ 109,318 |
$ (145,311) |
$ 46,185 |
(32)% |
$ (191,496) |
$ (27,423) |
$ (218,919) |
$ (0.86) |
|||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(211,548) |
211,548 |
— |
211,548 |
— |
211,548 |
— |
211,548 |
— |
211,548 |
0.95 |
|||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(14,208) |
14,208 |
— |
14,208 |
— |
14,208 |
— |
14,208 |
— |
14,208 |
0.06 |
|||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(664) |
664 |
(1,106) |
1,770 |
— |
1,770 |
— |
1,770 |
— |
1,770 |
0.01 |
|||||||||||||||||||
Inventory reserve decrease from restructuring (4) |
— |
9,041 |
(9,041) |
— |
(9,041) |
— |
(9,041) |
— |
(9,041) |
— |
(9,041) |
(0.04) |
|||||||||||||||||||
Separation benefits and other restructuring (5) |
— |
(12,989) |
12,989 |
(5,834) |
18,823 |
— |
18,823 |
— |
18,823 |
— |
18,823 |
0.08 |
|||||||||||||||||||
Charges for litigation and other legal matters (6) |
— |
— |
— |
(18,256) |
18,256 |
— |
18,256 |
— |
18,256 |
— |
18,256 |
0.08 |
|||||||||||||||||||
Asset impairment charges (7) |
— |
— |
— |
(93,504) |
93,504 |
— |
93,504 |
— |
93,504 |
— |
93,504 |
0.42 |
|||||||||||||||||||
Acquisition-related and integration costs (8) |
— |
— |
— |
(7,907) |
7,907 |
— |
7,907 |
— |
7,907 |
— |
7,907 |
0.04 |
|||||||||||||||||||
Fair value of contingent consideration (9) |
— |
— |
— |
(11,569) |
11,569 |
— |
11,569 |
— |
11,569 |
— |
11,569 |
0.05 |
|||||||||||||||||||
Other (11) |
— |
— |
— |
— |
— |
(53) |
53 |
— |
53 |
— |
53 |
— |
|||||||||||||||||||
Tax adjustments (12) |
— |
— |
— |
— |
— |
— |
— |
(48,418) |
48,418 |
— |
48,418 |
0.22 |
|||||||||||||||||||
Exclude discontinued operations, net of tax (13) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
27,423 |
27,423 |
— |
|||||||||||||||||||
After considering items (non-GAAP) |
$ 884,335 |
$ 327,104 |
$ 557,231 |
63 % |
$ 224,680 |
25 % |
$ 332,551 |
38 % |
$ 109,265 |
$ 223,286 |
$ (2,233) |
(1)% |
$ 225,519 |
$ — |
$ 225,519 |
$ 1.01 |
|||||||||||||||
Three Months Ended September 30, 2015 |
|||||||||||||||||||||||||||||||
Total revenues |
Cost of revenues |
Gross margin |
Gross margin % |
Total |
Operating expense to revenue % |
Operating loss from continuing operations |
Operating margin % |
Other non-operating expense, net |
Loss from continuing operations before income tax |
Income tax benefit |
Effective tax rate |
Loss from continuing operations |
Discontinued operations, net of tax |
Net loss attributable to Endo International plc (14) |
Diluted loss per share (15) |
||||||||||||||||
Reported (GAAP) |
$ 745,727 |
$ 442,459 |
$ 303,268 |
41 % |
$ 1,080,467 |
145 % |
$ (777,199) |
(104)% |
$ 187,446 |
$ (964,645) |
$ (160,939) |
17 % |
$ (803,706) |
$ (246,782) |
$(1,050,442) |
$ (3.84) |
|||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(121,503) |
121,503 |
— |
121,503 |
— |
121,503 |
— |
121,503 |
— |
121,503 |
0.57 |
|||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(42,919) |
42,919 |
— |
42,919 |
— |
42,919 |
— |
42,919 |
— |
42,919 |
0.21 |
|||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(4,639) |
4,639 |
(4,622) |
9,261 |
— |
9,261 |
— |
9,261 |
— |
9,261 |
0.04 |
|||||||||||||||||||
Separation benefits and other restructuring (5) |
— |
(906) |
906 |
(21,763) |
22,669 |
— |
22,669 |
— |
22,669 |
— |
22,669 |
0.11 |
|||||||||||||||||||
Asset impairment charges (7) |
— |
— |
— |
(923,607) |
923,607 |
— |
923,607 |
— |
923,607 |
— |
923,607 |
4.41 |
|||||||||||||||||||
Acquisition-related and integration costs (8) |
— |
— |
— |
(52,585) |
52,585 |
— |
52,585 |
— |
52,585 |
— |
52,585 |
0.25 |
|||||||||||||||||||
Fair value of contingent consideration (9) |
— |
— |
— |
80,273 |
(80,273) |
— |
(80,273) |
— |
(80,273) |
— |
(80,273) |
(0.38) |
|||||||||||||||||||
Non-cash and penalty interest charges (10) |
— |
— |
— |
— |
— |
(1,924) |
1,924 |
— |
1,924 |
— |
1,924 |
0.01 |
|||||||||||||||||||
Other (11) |
— |
— |
— |
— |
— |
(87,089) |
87,089 |
— |
87,089 |
— |
87,089 |
0.42 |
|||||||||||||||||||
Tax adjustments (12) |
— |
— |
— |
— |
— |
— |
— |
163,468 |
(163,468) |
— |
(163,468) |
(0.78) |
|||||||||||||||||||
Exclude discontinued operations, net of tax (13) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
247,362 |
247,362 |
— |
|||||||||||||||||||
After considering items (non-GAAP) |
$ 745,727 |
$ 272,492 |
$ 473,235 |
63 % |
$ 158,163 |
21 % |
$ 315,072 |
42 % |
$ 98,433 |
$ 216,639 |
$ 2,529 |
1 % |
$ 214,110 |
$ 580 |
$ 214,736 |
$ 1.02 |
|||||||||||||||
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 September 30, |
|||||||
2016 |
2015 |
||||||
Amortization of intangible assets excluding fair value step-up from contingent consideration |
$ |
198,117 |
$ |
113,669 |
|||
Amortization of intangible assets related to fair value step-up from contingent consideration |
13,431 |
7,834 |
|||||
Total |
$ |
211,548 |
$ |
121,503 |
(2) Adjustments for inventory step-up and other cost savings included the following:
Three Months Ended September 30, |
|||||||
2016 |
2015 |
||||||
Fair value step-up of inventory sold |
$ |
11,129 |
$ |
38,461 |
|||
Excess manufacturing costs that will be eliminated pursuant to integration plans |
3,079 |
4,458 |
|||||
Total |
$ |
14,208 |
$ |
42,919 |
(3) Adjustments for upfront and milestone-related payments to partners included the following:
Three Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Sales-based milestones |
$ |
664 |
$ |
— |
$ |
4,639 |
$ |
— |
|||||||
Development-based milestones |
— |
1,106 |
— |
4,622 |
|||||||||||
Total |
664 |
1,106 |
4,639 |
4,622 |
(4) To exclude decreases of excess inventory reserves of
(5) Adjustments for separation benefits and other restructuring included the following:
Three Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Separation benefits |
$ |
5,564 |
$ |
9,234 |
$ |
906 |
$ |
21,169 |
|||||||
Accelerated depreciation |
7,425 |
(4,968) |
— |
175 |
|||||||||||
Other |
— |
1,568 |
— |
419 |
|||||||||||
Total |
$ |
12,989 |
$ |
5,834 |
$ |
906 |
$ |
21,763 |
(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 September 30, |
|||||||
2016 |
2015 |
||||||
Integration costs (primarily third-party consulting fees) |
$ |
7,125 |
$ |
6,697 |
|||
Transaction costs |
— |
40,877 |
|||||
Transition services |
1,259 |
3,391 |
|||||
Other |
(477) |
1,620 |
|||||
Total |
$ |
7,907 |
$ |
52,585 |
(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 September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Operating expenses |
Other non- |
Operating expenses |
Other non-operating expenses |
||||||||||||
Costs associated with unused financing commitments |
$ |
— |
$ |
— |
$ |
— |
$ |
64,281 |
|||||||
Foreign currency impact related to the re-measurement of intercompany debt instruments |
— |
(114) |
— |
(5,693) |
|||||||||||
Loss on extinguishment of debt |
— |
— |
— |
40,909 |
|||||||||||
Other miscellaneous |
— |
167 |
— |
(12,408) |
|||||||||||
Total |
$ |
— |
$ |
53 |
$ |
— |
$ |
87,089 |
(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.
During the third quarter of 2016, Endo completed a legal entity reorganization of the Generics business. The restructuring resulted in the recording of a deferred tax charge of
Refer to footnote 14 in the Reconciliation of GAAP and Non-GAAP Financial Measures tables for nine months ended
(13) To exclude the results of the Astora business reported as discontinued operations, net of tax.
(14) This amount includes non-controlling interest
(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) |
|||||||||||||||||||||||||||||||
Nine Months Ended September 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 loss attributable to Endo International plc (16) |
Diluted earnings per share (17) |
||||||||||||||||
Reported (GAAP) |
$2,768,761 |
$1,878,395 |
$ 890,366 |
32 % |
$1,067,322 |
39 % |
$ (176,956) |
(6)% |
$ 341,298 |
$ (518,254) |
$ (627,807) |
121 % |
$ 109,553 |
$ (118,747) |
$ (9,210) |
$ 0.49 |
|||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(636,061) |
636,061 |
— |
636,061 |
— |
636,061 |
— |
636,061 |
— |
636,061 |
2.84 |
|||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(110,437) |
110,437 |
(1,350) |
111,787 |
— |
111,787 |
— |
111,787 |
— |
111,787 |
0.50 |
|||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(1,973) |
1,973 |
(3,902) |
5,875 |
— |
5,875 |
— |
5,875 |
— |
5,875 |
0.03 |
|||||||||||||||||||
Inventory reserve increase from restructuring (4) |
— |
(24,592) |
24,592 |
— |
24,592 |
— |
24,592 |
— |
24,592 |
— |
24,592 |
0.11 |
|||||||||||||||||||
Royalty obligations (5) |
— |
7,750 |
(7,750) |
— |
(7,750) |
— |
(7,750) |
— |
(7,750) |
— |
(7,750) |
(0.03) |
|||||||||||||||||||
Separation benefits and other restructuring (6) |
— |
(19,394) |
19,394 |
(26,426) |
45,820 |
— |
45,820 |
— |
45,820 |
— |
45,820 |
0.21 |
|||||||||||||||||||
Charges for litigation and other legal matters (8) |
— |
— |
— |
(28,715) |
28,715 |
— |
28,715 |
— |
28,715 |
— |
28,715 |
0.13 |
|||||||||||||||||||
Asset impairment charges (9) |
— |
— |
— |
(263,080) |
263,080 |
— |
263,080 |
— |
263,080 |
— |
263,080 |
1.18 |
|||||||||||||||||||
Acquisition-related and integration costs (10) |
— |
— |
— |
(55,422) |
55,422 |
— |
55,422 |
— |
55,422 |
— |
55,422 |
0.25 |
|||||||||||||||||||
Fair value of contingent consideration (11) |
— |
— |
— |
(24,779) |
24,779 |
— |
24,779 |
— |
24,779 |
— |
24,779 |
0.11 |
|||||||||||||||||||
Non-cash and penalty interest charges (12) |
— |
— |
— |
— |
— |
(4,092) |
4,092 |
— |
4,092 |
— |
4,092 |
0.02 |
|||||||||||||||||||
Other (13) |
— |
— |
— |
— |
— |
5,437 |
(5,437) |
— |
(5,437) |
— |
(5,437) |
(0.02) |
|||||||||||||||||||
Tax adjustments (14) |
— |
— |
— |
— |
— |
— |
— |
637,998 |
(637,998) |
— |
(637,998) |
(2.87) |
|||||||||||||||||||
Exclude discontinued operations, net of tax (15) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
118,747 |
118,747 |
— |
|||||||||||||||||||
After considering items (non-GAAP) |
$2,768,761 |
$1,093,688 |
$1,675,073 |
60 % |
$ 663,648 |
24 % |
$1,011,425 |
37 % |
$ 342,643 |
$ 668,782 |
$ 10,191 |
2 % |
$ 658,591 |
$ — |
$ 658,575 |
$ 2.95 |
|||||||||||||||
Nine Months Ended September 30, 2015 |
|||||||||||||||||||||||||||||||
Total revenues |
Cost of revenues |
Gross margin |
Gross margin % |
Total operating expenses |
Operating expense to revenue % |
Operating loss from continuing operations |
Operating margin % |
Other non-operating expense, net |
Loss from continuing operations before income tax |
Income tax benefit |
Effective tax rate |
Loss from continuing operations |
Discontinued operations, net of tax |
Net loss attributable to Endo International plc (16) |
Diluted loss per share (17) |
||||||||||||||||
Reported (GAAP) |
$2,195,021 |
$1,265,583 |
$ 929,438 |
42 % |
$1,659,400 |
76 % |
$ (729,962) |
(33)% |
$ 354,674 |
$(1,084,636) |
$ (340,528) |
31 % |
$ (744,108) |
$ (632,624) |
$(1,376,579) |
$(3.96) |
|||||||||||||||
Items impacting comparability: |
|||||||||||||||||||||||||||||||
Amortization of intangible assets (1) |
— |
(333,759) |
333,759 |
— |
333,759 |
— |
333,759 |
— |
333,759 |
— |
333,759 |
1.76 |
|||||||||||||||||||
Inventory step-up and other costs savings (2) |
— |
(131,783) |
131,783 |
— |
131,783 |
— |
131,783 |
— |
131,783 |
— |
131,783 |
0.69 |
|||||||||||||||||||
Upfront and milestone-related payments (3) |
— |
(5,866) |
5,866 |
(8,197) |
14,063 |
— |
14,063 |
— |
14,063 |
— |
14,063 |
0.07 |
|||||||||||||||||||
Separation benefits and other restructuring (6) |
— |
(906) |
906 |
(69,350) |
70,256 |
— |
70,256 |
— |
70,256 |
— |
70,256 |
0.36 |
|||||||||||||||||||
Acceleration of Auxilium employee equity awards (7) |
— |
— |
— |
(37,603) |
37,603 |
— |
37,603 |
— |
37,603 |
— |
37,603 |
0.20 |
|||||||||||||||||||
Charges for litigation and other legal matters (8) |
— |
— |
— |
(19,875) |
19,875 |
— |
19,875 |
— |
19,875 |
— |
19,875 |
0.11 |
|||||||||||||||||||
Asset impairment charges (9) |
— |
— |
— |
(1,000,850) |
1,000,850 |
— |
1,000,850 |
— |
1,000,850 |
— |
1,000,850 |
5.31 |
|||||||||||||||||||
Acquisition-related and integration costs (10) |
— |
— |
— |
(134,778) |
134,778 |
— |
134,778 |
— |
134,778 |
— |
134,778 |
0.71 |
|||||||||||||||||||
Fair value of contingent consideration (11) |
— |
— |
— |
83,601 |
(83,601) |
— |
(83,601) |
— |
(83,601) |
— |
(83,601) |
(0.44) |
|||||||||||||||||||
Non-cash and penalty interest charges (12) |
— |
— |
— |
— |
— |
(6,302) |
6,302 |
— |
6,302 |
— |
6,302 |
0.02 |
|||||||||||||||||||
Other (13) |
— |
— |
— |
(800) |
800 |
(101,864) |
102,664 |
— |
102,664 |
— |
102,664 |
0.55 |
|||||||||||||||||||
Tax adjustments (14) |
— |
— |
— |
— |
— |
— |
— |
398,419 |
(398,419) |
— |
(398,419) |
(2.12) |
|||||||||||||||||||
Exclude discontinued operations, net of tax (15) |
— |
— |
— |
— |
— |
— |
— |
— |
— |
675,998 |
675,998 |
— |
|||||||||||||||||||
After considering items (non-GAAP) |
$2,195,021 |
$ 793,269 |
$1,401,752 |
64 % |
$ 471,548 |
21 % |
$ 930,204 |
42 % |
$ 246,508 |
$ 683,696 |
$ 57,891 |
8 % |
$ 625,805 |
$ 43,374 |
$ 669,332 |
$ 3.26 |
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:
Nine Months Ended September 30, |
|||||||
2016 |
2015 |
||||||
Amortization of intangible assets excluding fair value step-up from contingent consideration |
$ |
606,090 |
$ |
314,179 |
|||
Amortization of intangible assets related to fair value step-up from contingent consideration |
29,971 |
19,580 |
|||||
Total |
$ |
636,061 |
$ |
333,759 |
(2) Adjustments for inventory step-up and other cost savings included the following:
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Fair value step-up of inventory sold |
$ |
99,099 |
$ |
957 |
$ |
122,714 |
$ |
— |
|||||||
Excess manufacturing costs that will be |
11,338 |
393 |
9,069 |
— |
|||||||||||
Total |
$ |
110,437 |
$ |
1,350 |
$ |
131,783 |
$ |
— |
(3) Adjustments for upfront and milestone-related payments to partners included the following:
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Sales-based milestones |
$ |
1,973 |
$ |
— |
$ |
5,866 |
$ |
— |
|||||||
Development-based milestones |
— |
3,902 |
— |
8,197 |
|||||||||||
Total |
1,973 |
3,902 |
5,866 |
8,197 |
(4) To exclude charges due to increases of excess inventory reserves related to the 2016
(5) To adjust for the reversal of the remaining Voltaren® Gel minimum royalty obligations as a result of a generic entrant.
(6) Adjustments for separation benefits and other restructuring included the following:
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Cost of revenues |
Operating expenses |
Cost of revenues |
Operating expenses |
||||||||||||
Separation benefits |
$ |
11,969 |
$ |
18,008 |
$ |
906 |
$ |
58,348 |
|||||||
Accelerated depreciation and product |
7,425 |
2,803 |
— |
8,320 |
|||||||||||
Other |
— |
5,615 |
— |
2,682 |
|||||||||||
Total |
$ |
19,394 |
$ |
26,426 |
$ |
906 |
$ |
69,350 |
(7) To exclude the acceleration of Auxilium employee equity awards at closing of acquisition.
(8) To exclude litigation settlement charges.
(9) To exclude asset impairment charges. During the nine months ended
(10) Adjustments for acquisition and integration items primarily relate to various acquisitions, including
Nine Months Ended September 30, |
|||||||
2016 |
2015 |
||||||
Integration costs (primarily third-party consulting fees) |
$ |
38,311 |
$ |
23,356 |
|||
Transaction costs |
— |
90,583 |
|||||
Transition services |
9,729 |
12,911 |
|||||
Other |
7,382 |
7,928 |
|||||
Total |
$ |
55,422 |
$ |
134,778 |
(11) 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.
(12) Adjustments to interest charges included the following:
Nine Months Ended September 30, |
|||||||
2016 |
2015 |
||||||
Penalty interest charges |
$ |
4,092 |
$ |
4,670 |
|||
Non-cash interest expense related to our 1.75% Convertible Senior Subordinated Notes |
— |
1,632 |
|||||
Total |
$ |
4,092 |
$ |
6,302 |
(13) Adjustments to other included the following:
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
Operating expenses |
Other non-operating expenses |
Operating expenses |
Other non-operating expenses |
||||||||||||
Costs associated with unused financing commitments |
$ |
— |
$ |
— |
$ |
800 |
$ |
78,352 |
|||||||
Other than temporary impairment of equity investment |
— |
— |
18,869 |
||||||||||||
Foreign currency impact related to the re-measurement of intercompany debt instruments |
— |
1,558 |
— |
(23,991) |
|||||||||||
Loss on extinguishment of debt |
— |
— |
41,889 |
||||||||||||
Other miscellaneous expense (income) |
— |
(6,995) |
— |
(13,255) |
|||||||||||
Total |
$ |
— |
$ |
(5,437) |
$ |
800 |
$ |
101,864 |
(14) During the third quarter of 2016, Endo completed 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 |
Nine |
Three |
Twelve |
Three |
||||||||||||||
Adjusted Diluted EPS from |
1.17 |
1.08 |
1.02 |
3.26 |
1.36 |
4.66 |
1.08 |
|||||||||||||
Amount attributable to the change in |
(0.11) |
(0.09) |
(0.16) |
(0.36) |
|