Endo Reports Third-Quarter 2019 Financial Results

November 4, 2019

- Operating Performance Led by Year-over-Year Double-Digit-Percentage Revenue Growth in Sterile Injectables and in Specialty Products Portfolio of Branded Pharmaceuticals -

- Full-Year 2019 Financial Guidance Updated to Narrow Expected Ranges for Revenue, Adjusted Diluted Net Income per Share from Continuing Operations and Adjusted EBITDA -

DUBLIN, Nov. 4, 2019 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported third-quarter 2019 financial results, including:

Revenues of $729 million decreased 2% compared to third-quarter 2018 revenues of $745 million.
Branded Pharmaceuticals - Specialty Products revenues increased 18% to $132 million compared to third-quarter 2018 revenues of $112 million.
Sterile Injectables revenues increased 11% to $264 million compared to third-quarter 2018 revenues of $237 million.
Reported loss from continuing operations of $41 million compared to third-quarter 2018 reported loss from continuing operations of $146 million.
Reported diluted net loss per share from continuing operations of $0.18 compared to third-quarter 2018 reported diluted net loss per share from continuing operations of $0.65.
Adjusted income from continuing operations of $138 million compared to third-quarter 2018 adjusted income from continuing operations of $165 million.
Adjusted diluted net income per share from continuing operations of $0.60 compared to third-quarter 2018 adjusted diluted net income per share from continuing operations of $0.71.
Adjusted EBITDA of $321 million compared to third-quarter 2018 adjusted EBITDA of $328 million.

"Endo generated strong operating performance in the third quarter, which was led by continued year-over-year double-digit percentage revenue growth in our Sterile Injectables segment and in the Specialty Products portfolio of our Branded Pharmaceuticals segment, including 29% growth in our XIAFLEX^® franchise," said Paul Campanelli, President and Chief Executive Officer at Endo. "Additionally, during the quarter, we submitted a Biologics License Application for our CCH for Cellulite product with the FDA and settled the Track 1 opioid litigation cases. We believe that a balanced approach to executing our multi-year strategic plan while being responsive to the current external environment remains appropriate and that we are well-positioned to meet our 2019 financial guidance."

FINANCIAL PERFORMANCE

(in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		Change		2019		2018		Change
Total Revenues, Net	$	729,426	$	745,466	(2)	%	$	2,149,564	$	2,160,689	(1)	%
Reported Loss from Continuing Operations	$	(41,431)	$	(146,071)	(72)	%	$	(152,095)	$	(696,288)	(78)	%
Reported Diluted Weighted Average Shares	226,598		224,132		1	%	225,804		223,829		1	%
Reported Diluted Net Loss per Share from Continuing Operations	$	(0.18)	$	(0.65)	(72)	%	$	(0.67)	$	(3.11)	(78)	%
Adjusted Income from Continuing Operations	$	138,129	$	164,845	(16)	%	$	380,617	$	487,823	(22)	%
Adjusted Diluted Weighted Average Shares (1)	230,907		232,358		(1)	%	231,751		228,195		2	%
Adjusted Diluted Net Income per Share from Continuing Operations	$	0.60	$	0.71	(15)	%	$	1.64	$	2.14	(23)	%

__________

(1)

Reported Diluted Net Loss 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.

CONSOLIDATED RESULTS

Total revenues were $729 million in third-quarter 2019 compared to $745 million during the same period in 2018. This decrease was primarily attributable to competitive pressures in the Generic Pharmaceuticals segment and the Established Products portfolio of the Branded Pharmaceuticals segment, partially offset by continued strong growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.

GAAP loss from continuing operations in third-quarter 2019 was $41 million compared to GAAP loss from continuing operations of $146 million during the same period in 2018. This result was primarily attributable to a decrease in asset impairment charges. GAAP diluted net loss per share from continuing operations in third-quarter 2019 was $0.18 compared to GAAP diluted net loss per share from continuing operations of $0.65 in third-quarter 2018.

Adjusted income from continuing operations in third-quarter 2019 was $138 million compared to $165 million in third-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin in the Generic Pharmaceuticals segment due to a decline in revenue and an unfavorable change in product mix. Adjusted diluted net income per share from continuing operations in third-quarter 2019 was $0.60 compared to $0.71 in third-quarter 2018.

BRANDED PHARMACEUTICALS

Third-quarter 2019 Branded Pharmaceuticals revenues were $217 million compared to $220 million in third-quarter 2018. This decrease was primarily attributable to ongoing generic competition in the Established Products portfolio, offset by continued strong growth in the Specialty Products portfolio.

Specialty Products revenues increased 18% to $132 million in third-quarter 2019 compared to $112 million in third-quarter 2018, primarily driven by the continued strong performance of XIAFLEX^®. Sales of XIAFLEX^® increased 29% to $83 million compared to $64 million in third-quarter 2018, primarily attributable to demand growth in both the Peyronie's Disease and Dupuytren's Contracture indications driven by continued commercial execution and investment in promotional activities.

During third-quarter 2019, Endo also submitted a Biologics License Application to the U.S. Food and Drug Administration for its Collagenase Clostridium Histolyticum (CCH) product for the treatment of cellulite.

STERILE INJECTABLES

Third-quarter 2019 Sterile Injectables revenues were $264 million, an increase of 11% compared to $237 million in third-quarter 2018. This increase reflects the continued strong growth of VASOSTRICT^® and ADRENALIN^®, as well as strong growth of APLISOL^®, reflecting wholesalers' restocking following a temporary supply shortage.

GENERIC PHARMACEUTICALS

Third-quarter 2019 Generic Pharmaceuticals revenues were $218 million, a decrease of 15% compared to $258 million in third-quarter 2018. This performance was primarily attributable to increased competitive pressure on certain generic products. Partially offsetting the decrease was the contribution of certain product launches including, among others, colchicine tablets, the authorized generic of Colcrys^®. During third-quarter 2019, the Generic Pharmaceuticals segment launched four products.

INTERNATIONAL PHARMACEUTICALS

Third-quarter 2019 International Pharmaceuticals revenues were $30 million, which was flat versus third-quarter 2018. This quarter benefited from delayed competition which Endo expects to materialize in the near-term.

2019 FINANCIAL GUIDANCE

Endo is updating its financial guidance for the 12 months ending December 31, 2019, narrowing the expected ranges regarding revenue, adjusted diluted net income per share from continuing operations, and Adjusted EBITDA. The Company now estimates:

Total revenues to be between $2.86 billion and $2.89 billion compared to previous guidance of $2.76 billion to $2.96 billion;
Adjusted diluted net income per share from continuing operations to be between $2.10 and $2.25 compared to previous guidance of $2.00 to $2.25; and
Adjusted EBITDA to be between $1.26 billion and $1.30 billion compared to previous guidance of $1.24 billion to $1.34 billion.

The Company's 2019 non-GAAP financial guidance is based on the following assumptions:

Adjusted gross margin of approximately 64.7% to 65.7% compared to previous guidance of 65.0% to 66.0%;
Adjusted operating expenses as a percentage of revenue to be approximately 25.0% compared to 24.5% to 25.0%;
Adjusted interest expense of approximately $540 million compared to $550 million to $560 million;
Adjusted effective tax rate of approximately 16.5% compared to 17.5% to 18.5%; and
Adjusted diluted weighted average shares outstanding of approximately 234 million.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of September 30, 2019, the Company had approximately $1.5 billion in unrestricted cash; debt of $8.4 billion; net debt of approximately $6.9 billion and a net debt to adjusted EBITDA ratio of 5.3.

Third-quarter 2019 cash provided by operating activities was $33 million, compared to $22 million of net cash used in operating activities during third-quarter 2018.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release on November 5, 2019 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 1186004. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from November 5, 2019 at 10:30 a.m. ET until 10:30 a.m. ET on November 8, 2019 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 1186004.

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 nine months ended September 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended September 30,				Percent Growth		Nine Months Ended September 30,				Percent Growth
	2019		2018		Percent Growth		2019		2018		Percent Growth
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®	$	82,756	$	64,214	29	%	$	226,118	$	184,855	22	%
SUPPRELIN® LA	20,772		20,408		2	%	66,542		60,948		9	%
Other Specialty (1)	28,470		27,614		3	%	78,397		69,226		13	%
Total Specialty Products	$	131,998	$	112,236	18	%	$	371,057	$	315,029	18	%
Established Products:
PERCOCET®	$	28,561	$	30,730	(7)	%	$	88,199	$	93,539	(6)	%
TESTOPEL®	13,236		15,962		(17)	%	40,830		44,976		(9)	%
Other Established (2)	43,518		61,172		(29)	%	129,765		179,428		(28)	%
Total Established Products	$	85,315	$	107,864	(21)	%	$	258,794	$	317,943	(19)	%
Total Branded Pharmaceuticals (3)	$	217,313	$	220,100	(1)	%	$	629,851	$	632,972	—	%
Sterile Injectables:
VASOSTRICT®	$	129,691	$	112,333	15	%	$	384,854	$	332,387	16	%
ADRENALIN®	40,311		35,460		14	%	133,468		101,858		31	%
APLISOL®	28,085		15,992		76	%	55,996		49,064		14	%
Ertapenem for injection	21,853		25,798		(15)	%	79,619		25,798		NM
Other Sterile Injectables (4)	43,695		47,567		(8)	%	124,026		161,740		(23)	%
Total Sterile Injectables (3)	$	263,635	$	237,150	11	%	$	777,963	$	670,847	16	%
Total Generic Pharmaceuticals	$	218,012	$	257,969	(15)	%	$	654,322	$	748,445	(13)	%
Total International Pharmaceuticals	$	30,466	$	30,247	1	%	$	87,428	$	108,425	(19)	%
Total revenues, net	$	729,426	$	745,466	(2)	%	$	2,149,564	$	2,160,689	(1)	%

__________

(1)	Products included within Other Specialty are NASCOBAL^®Nasal Spray and AVEED^®. Beginning with our first-quarter 2019 reporting, TESTOPEL^®, which was previously included in Other Specialty, has been reclassified and is now included in the Established Products portfolio for all periods presented.
(2)	Products included within Other Established include, but are not limited to, LIDODERM^®, VOLTAREN^® Gel, EDEX^®, FORTESTA^® Gel and TESTIM^®, including the authorized generics of FORTESTA^® Gel and TESTIM^®.
(3)	Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2019 and/or any product having revenues in excess of $25 million during any quarterly period in 2019 or 2018.
(4)	Products included within Other Sterile Injectables include ephedrine sulfate injection and others.

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
TOTAL REVENUES, NET	$	729,426	$	745,466	$	2,149,564	$	2,160,689
COSTS AND EXPENSES:
Cost of revenues	389,165		412,965		1,169,282		1,198,468
Selling, general and administrative	168,329		163,791		471,749		478,615
Research and development	36,519		39,683		96,353		160,431
Litigation-related and other contingencies, net	(14,414)		(1,750)		(4,093)		15,370
Asset impairment charges	4,766		142,217		258,652		613,400
Acquisition-related and integration items	16,025		1,288		(26,983)		13,284
Interest expense, net	136,903		131,847		404,387		385,896
Gain on extinguishment of debt	—		—		(119,828)		—
Other expense (income), net	16,203		(1,507)		20,408		(33,216)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX	$	(24,070)	$	(143,068)	$	(120,363)	$	(671,559)
INCOME TAX EXPENSE	17,361		3,003		31,732		24,729
LOSS FROM CONTINUING OPERATIONS	$	(41,431)	$	(146,071)	$	(152,095)	$	(696,288)
DISCONTINUED OPERATIONS, NET OF TAX	(37,984)		(27,134)		(51,898)		(43,273)
NET LOSS	$	(79,415)	$	(173,205)	$	(203,993)	$	(739,561)
NET LOSS PER SHARE—BASIC:
Continuing operations	$	(0.18)	$	(0.65)	$	(0.67)	$	(3.11)
Discontinued operations	(0.17)		(0.12)		(0.23)		(0.19)
Basic	$	(0.35)	$	(0.77)	$	(0.90)	$	(3.30)
NET LOSS PER SHARE—DILUTED:
Continuing operations	$	(0.18)	$	(0.65)	$	(0.67)	$	(3.11)
Discontinued operations	(0.17)		(0.12)		(0.23)		(0.19)
Diluted	$	(0.35)	$	(0.77)	$	(0.90)	$	(3.30)
WEIGHTED AVERAGE SHARES:
Basic	226,598		224,132		225,804		223,829
Diluted	226,598		224,132		225,804		223,829

The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,526,250	$	1,149,113
Restricted cash and cash equivalents	222,491		305,368
Accounts receivable	420,195		470,570
Inventories, net	338,513		322,179
Other current assets	141,686		95,920
Total current assets	$	2,649,135	$	2,343,150
TOTAL NON-CURRENT ASSETS	7,185,731		7,789,243
TOTAL ASSETS	$	9,834,866	$	10,132,393
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses, including legal settlement accruals	$	1,612,124	$	1,914,285
Other current liabilities	55,603		35,811
Total current liabilities	$	1,667,727	$	1,950,096
LONG-TERM DEBT, LESS CURRENT PORTION, NET	8,364,911		8,224,269
OTHER LIABILITIES	463,705		456,311
SHAREHOLDERS' DEFICIT	(661,477)		(498,283)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	9,834,866	$	10,132,393

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2019 and 2018 (in thousands):

	Nine Months Ended September 30,
	2019		2018
OPERATING ACTIVITIES:
Net loss	$	(203,993)	$	(739,561)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
Depreciation and amortization	468,409		556,503
Asset impairment charges	258,652		613,400
Other, including cash payments to claimants from Qualified Settlement Funds	(403,824)		(233,350)
Net cash provided by operating activities	$	119,244	$	196,992
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, excluding capitalized interest	$	(47,812)	$	(56,544)
Proceeds from sale of business and other assets, net	4,780		43,753
Other	(2,295)		(891)
Net cash used in investing activities	$	(45,327)	$	(13,682)
FINANCING ACTIVITIES:
Proceeds from (payments on) borrowings, net	$	247,897	$	(29,535)
Other	(28,333)		(33,273)
Net cash provided by (used in) financing activities	$	219,564	$	(62,808)
Effect of foreign exchange rate	780		(608)
NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS	$	294,261	$	119,894
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD	1,476,837		1,311,014
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD	$	1,771,098	$	1,430,908

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 our 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 (GAAP) to Adjusted EBITDA (non-GAAP) for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net loss (GAAP)	$	(79,415)	$	(173,205)	$	(203,993)	$	(739,561)
Income tax expense	17,361		3,003		31,732		24,729
Interest expense, net	136,903		131,847		404,387		385,896
Depreciation and amortization (15)	147,621		176,856		468,409		521,325
EBITDA (non-GAAP)	$	222,470	$	138,501	$	700,535	$	192,389

Inventory step-up and other cost savings (2)	$	—	$	71	$	—	$	261
Upfront and milestone-related payments (3)	1,672		4,731		4,055		43,027
Inventory reserve increase from restructuring (4)	—		207		—		2,797
Retention and separation benefits and other restructuring (5)	11,023		3,794		15,172		79,344
Certain litigation-related and other contingencies, net (6)	(14,414)		(1,750)		(4,093)		15,370
Asset impairment charges (7)	4,766		142,217		258,652		613,400
Acquisition-related and integration costs (8)	—		519		—		1,553
Fair value of contingent consideration (9)	16,025		769		(26,983)		11,731
Gain on extinguishment of debt (10)	—		—		(119,828)		—
Share-based compensation	11,576		13,736		48,909		43,722
Other expense (income), net (16)	16,203		(1,507)		20,408		(33,216)
Other adjustments	13,795		(67)		13,882		(775)
Discontinued operations, net of tax (13)	37,984		27,134		51,898		43,273
Adjusted EBITDA (non-GAAP)	$	321,100	$	328,355	$	962,607	$	1,012,876

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

The following table provides a reconciliation of our Loss from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Loss from continuing operations (GAAP)	$	(41,431)	$	(146,071)	$	(152,095)	$	(696,288)
Non-GAAP adjustments:
Amortization of intangible assets (1)	131,932		161,275		417,949		471,662
Inventory step-up and other cost savings (2)	—		71		—		261
Upfront and milestone-related payments (3)	1,672		4,731		4,055		43,027
Inventory reserve increase from restructuring (4)	—		207		—		2,797
Retention and separation benefits and other restructuring (5)	11,023		3,794		15,172		79,344
Certain litigation-related and other contingencies, net (6)	(14,414)		(1,750)		(4,093)		15,370
Asset impairment charges (7)	4,766		142,217		258,652		613,400
Acquisition-related and integration costs (8)	—		519		—		1,553
Fair value of contingent consideration (9)	16,025		769		(26,983)		11,731
Gain on extinguishment of debt (10)	—		—		(119,828)		—
Other (11)	28,634		1,353		30,254		(29,908)
Tax adjustments (12)	(78)		(2,270)		(42,466)		(25,126)
Adjusted income from continuing operations (non-GAAP)	$	138,129	$	164,845	$	380,617	$	487,823

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 nine months ended September 30, 2019 and 2018 (in thousands, except per share data):

	Three Months Ended September 30, 2019
	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	(Loss) 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 (14)
Reported (GAAP)	$ 729,426	$ 389,165	$ 340,261	46.6 %	$ 211,225	29.0 %	$ 129,036	17.7 %	$ 153,106	$ (24,070)	$ 17,361	(72.1)%	$ (41,431)	$ (37,984)	$ (79,415)	$ (0.18)
Items impacting comparability:
Amortization of intangible assets (1)	-	(131,932)	131,932		-		131,932		-	131,932	-		131,932	-	131,932
Upfront and milestone-related payments (3)	-	(542)	542		(1,130)		1,672		-	1,672	-		1,672	-	1,672
Retention and separation benefits and other restructuring (5)	-	(1,004)	1,004		(10,019)		11,023		-	11,023	-		11,023	-	11,023
Certain litigation-related and other contingencies, net (6)	-	-	-		14,414		(14,414)		-	(14,414)	-		(14,414)	-	(14,414)
Asset impairment charges (7)	-	-	-		(4,766)		4,766		-	4,766	-		4,766	-	4,766
Fair value of contingent consideration (9)	-	-	-		(16,025)		16,025		-	16,025	-		16,025	-	16,025
Other (11)	-	-	-		(14,053)		14,053		(14,581)	28,634	-		28,634	-	28,634
Tax adjustments (12)	-	-	-		-		-		-	-	78		(78)	-	(78)
Exclude discontinued operations, net of tax (13)	-	-	-		-		-		-	-	-		-	37,984	37,984
After considering items (non-GAAP)	$ 729,426	$ 255,687	$ 473,739	64.9 %	$ 179,646	24.6 %	$ 294,093	40.3 %	$ 138,525	$ 155,568	$ 17,439	11.2 %	$ 138,129	$ -	$ 138,129	$ 0.60

	Three Months Ended September 30, 2018
	Total revenues, net	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 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 (14)
Reported (GAAP)	$ 745,466	$ 412,965	$ 332,501	44.6 %	$ 345,229	46.3 %	$ (12,728)	(1.7)%	$ 130,340	$ (143,068)	$ 3,003	(2.1)%	$ (146,071)	$ (27,134)	$ (173,205)	$ (0.65)
Items impacting comparability:
Amortization of intangible assets (1)	-	(161,275)	161,275		-		161,275		-	161,275	-		161,275	-	161,275
Inventory step-up and other cost savings (2)	-	(71)	71		-		71		-	71	-		71	-	71
Upfront and milestone-related payments (3)	-	(745)	745		(3,986)		4,731		-	4,731	-		4,731	-	4,731
Inventory reserve increase from restructuring (4)	-	(207)	207		-		207		-	207	-		207	-	207
Retention and separation benefits and other restructuring (5)	-	(3,626)	3,626		(168)		3,794		-	3,794	-		3,794	-	3,794
Certain litigation-related and other contingencies, net (6)	-	-	-		1,750		(1,750)		-	(1,750)	-		(1,750)	-	(1,750)
Asset impairment charges (7)	-	-	-		(142,217)		142,217		-	142,217	-		142,217	-	142,217
Acquisition-related and integration costs (8)	-	-	-		(519)		519		-	519	-		519	-	519
Fair value of contingent consideration (9)	-	-	-		(769)		769		-	769	-		769	-	769
Other (11)	-	-	-		-		-		(1,353)	1,353	-		1,353	-	1,353
Tax adjustments (12)	-	-	-		-		-		-	-	2,270		(2,270)	-	(2,270)
Exclude discontinued operations, net of tax (13)	-	-	-		-		-		-	-	-		-	27,134	27,134
After considering items (non-GAAP)	$ 745,466	$ 247,041	$ 498,425	66.9 %	$ 199,320	26.7 %	$ 299,105	40.1 %	$ 128,987	$ 170,118	$ 5,273	3.1 %	$ 164,845	$ -	$ 164,845	$ 0.71

	Nine Months Ended September 30, 2019
	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	(Loss) 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 (14)
Reported (GAAP)	$ 2,149,564	$ 1,169,282	$ 980,282	45.6 %	$ 795,678	37.0 %	$ 184,604	8.6 %	$ 304,967	$ (120,363)	$ 31,732	(26.4)%	$ (152,095)	$ (51,898)	$ (203,993)	$ (0.67)
Items impacting comparability:
Amortization of intangible assets (1)	-	(417,949)	417,949		-		417,949		-	417,949	-		417,949	-	417,949
Upfront and milestone-related payments (3)	-	(1,942)	1,942		(2,113)		4,055		-	4,055	-		4,055	-	4,055
Retention and separation benefits and other restructuring (5)	-	(1,004)	1,004		(14,168)		15,172		-	15,172	-		15,172	-	15,172
Certain litigation-related and other contingencies, net (6)	-	-	-		4,093		(4,093)		-	(4,093)	-		(4,093)	-	(4,093)
Asset impairment charges (7)	-	-	-		(258,652)		258,652		-	258,652	-		258,652	-	258,652
Fair value of contingent consideration (9)	-	-	-		26,983		(26,983)		-	(26,983)	-		(26,983)	-	(26,983)
Gain on extinguishment of debt (10)	-	-	-		-		-		119,828	(119,828)	-		(119,828)	-	(119,828)
Other (11)	-	-	-		(13,878)		13,878		(16,376)	30,254	-		30,254	-	30,254
Tax adjustments (12)	-	-	-		-		-		-	-	42,466		(42,466)	-	(42,466)
Exclude discontinued operations, net of tax (13)	-	-	-		-		-		-	-	-		-	51,898	51,898
After considering items (non-GAAP)	$ 2,149,564	$ 748,387	$ 1,401,177	65.2 %	$ 537,943	25.0 %	$ 863,234	40.2 %	$ 408,419	$ 454,815	$ 74,198	16.3 %	$ 380,617	$ -	$ 380,617	$ 1.64

	Nine Months Ended September 30, 2018
	Total revenues, net	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 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 (14)
Reported (GAAP)	$ 2,160,689	$ 1,198,468	$ 962,221	44.5 %	$ 1,281,100	59.3 %	$ (318,879)	(14.8)%	$ 352,680	$ (671,559)	$ 24,729	(3.7)%	$ (696,288)	$ (43,273)	$ (739,561)	$ (3.11)
Items impacting comparability:
Amortization of intangible assets (1)	-	(471,662)	471,662		-		471,662		-	471,662	-		471,662	-	471,662
Inventory step-up and other cost savings (2)	-	(261)	261		-		261		-	261	-		261	-	261
Upfront and milestone-related payments (3)	-	(2,095)	2,095		(40,932)		43,027		-	43,027	-		43,027	-	43,027
Inventory reserve increase from restructuring (4)	-	(2,797)	2,797		-		2,797		-	2,797	-		2,797	-	2,797
Retention and separation benefits and other restructuring (5)	-	(57,457)	57,457		(21,887)		79,344		-	79,344	-		79,344	-	79,344
Certain litigation-related and other contingencies, net (6)	-	-	-		(15,370)		15,370		-	15,370	-		15,370	-	15,370
Asset impairment charges (7)	-	-	-		(613,400)		613,400		-	613,400	-		613,400	-	613,400
Acquisition-related and integration costs (8)	-	-	-		(1,553)		1,553		-	1,553	-		1,553	-	1,553
Fair value of contingent consideration (9)	-	-	-		(11,731)		11,731		-	11,731	-		11,731	-	11,731
Other (11)	-	-	-		630		(630)		29,278	(29,908)	-		(29,908)	-	(29,908)
Tax adjustments (12)	-	-	-		-		-		-	-	25,126		(25,126)	-	(25,126)
Exclude discontinued operations, net of tax (13)	-	-	-		-		-		-	-	-		-	43,273	43,273
After considering items (non-GAAP)	$ 2,160,689	$ 664,196	$ 1,496,493	69.3 %	$ 576,857	26.7 %	$ 919,636	42.6 %	$ 381,958	$ 537,678	$ 49,855	9.3 %	$ 487,823	$ -	$ 487,823	$ 2.14

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 nine months ended September 30, 2019 and 2018 are as follows:

(1)	Adjustments for amortization of commercial intangible assets included the following (in thousands):

		Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	Amortization of intangible assets excluding fair value step-up from contingent consideration	$	128,865	$	149,249	$	400,203	$	446,015
	Amortization of intangible assets related to fair value step-up from contingent consideration	3,067		12,026		17,746		25,647
	Total	$	131,932	$	161,275	$	417,949	$	471,662

(2)	To exclude adjustments for inventory step-up.

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

		Three Months Ended September 30,
		2019				2018
		Cost of revenues		Operating expenses		Cost of revenues		Operating expenses
	Sales-based	$	542	$	—	$	745	$	—
	Development-based	—		1,130

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Endo Reports Third-Quarter 2019 Financial Results