12.31.2018 Earnings Release 8-K Shell


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 8-K
_______________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 28, 2019

_______________________________
ENDO INTERNATIONAL PLC
(Exact Name of Registrant as Specified in Its Charter)
_______________________________
Ireland
001-36326
68-0683755
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)

First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland
Not Applicable
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 011-353-1-268-2000
Not Applicable
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
o    Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 2.02.    Results of Operations and Financial Condition.
On February 28, 2019, Endo International plc (the “Company,” “Endo,” or “we”) issued an earnings release announcing its financial results for the three and twelve months ended December 31, 2018 (the “Earnings Release”). A copy of the Earnings Release is attached as Exhibit 99.1 hereto and is incorporated herein by reference.
The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). The Company utilizes these financial measures, commonly referred to as “non-GAAP,” because (i) they are used by the Company, along with financial measures in accordance with GAAP, to evaluate the Company's operating performance; (ii) the Company believes that they will be used by certain investors to measure the Company’s operating results; (iii) the Compensation Committee of the Company's Board of Directors uses adjusted diluted EPS and Adjusted EBITDA, or measures derived from such, in assessing the performance and compensation of substantially all of the Company's employees, including executive officers and (iv) the Company’s leverage ratio, as defined by the Company’s credit agreement, is calculated based on non-GAAP financial measures. The Company believes that presenting these non-GAAP measures provides useful information about the Company's performance across reporting periods on a consistent basis by excluding certain items, which may be favorable or unfavorable, pursuant to the procedure as described in the succeeding paragraph.
The initial identification and review of the non-GAAP adjustments necessary to arrive at these non-GAAP financial measures are performed by a team of finance professionals that include the Chief Accounting Officer and segment finance leaders in accordance with the Company’s Adjusted Income Statement Policy, which is reviewed and approved by the Company’s Audit Committee. Company tax professionals, including the Senior Vice President of Tax, review and determine the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments as described below. Proposed adjustments, along with any items considered but excluded, are presented to the Chief Accounting Officer, Chief Executive Officer and/or the Chief Financial Officer for their consideration. In turn, the non-GAAP adjustments are presented to the Audit Committee on a quarterly basis as part of the Company’s standard procedures for preparation and review of the earnings release and other quarterly materials.
These non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The Company's definition of these non-GAAP measures may differ from similarly titled measures used by others. The definitions of the most commonly used non-GAAP financial measures are presented below:
Adjusted income from continuing operations
Adjusted income from continuing operations represents income (loss) from continuing operations, prepared in accordance with GAAP, adjusted for certain items. Adjustments to GAAP amounts may include, but are not limited to, certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, retention payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; gains or losses from early termination of debt; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; and certain other items; further adjusted for the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments as described below.
Adjusted diluted earnings per share from continuing operations and adjusted diluted weighted average shares
Adjusted diluted earnings per share from continuing operations represent adjusted income from continuing operations divided by the number of adjusted diluted weighted average shares.
Both GAAP and non-GAAP diluted per share data is computed based on weighted average shares outstanding and, if there is net income from continuing operations (rather than net loss) during the period, the dilutive impact of share equivalents outstanding during the period. Diluted weighted average shares outstanding and adjusted diluted weighted average shares outstanding are calculated on the same basis except for the net income or loss figure used in determining whether to include such dilutive impact.
Adjusted gross margin
Adjusted gross margin represents total revenues less cost of revenues, prepared in accordance with GAAP, adjusted for the items enumerated above under the heading "Adjusted income from continuing operations," to the extent such items relate to cost of revenues. Such items may include, but are not limited to, amortization of intangible assets and inventory step-up recorded as part of our acquisitions, certain excess inventory reserves resulting from restructuring initiatives and separation benefits.





Adjusted operating expenses
Adjusted operating expenses represent operating expenses, prepared in accordance with GAAP, adjusted for the items enumerated above under the heading "Adjusted income from continuing operations," to the extent such items relate to operating expenses. Such items may include, but are not limited to, certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, retention payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; litigation-related and other contingent matters; and certain other items.
Adjusted interest expense
Adjusted interest expense represents interest expense, net, prepared in accordance with GAAP, adjusted for certain non-cash interest expense and penalty interest.
Adjusted income taxes
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. Adjustments are then made for certain items relating to prior years and for tax planning actions that are expected to be distortive to the underlying effective tax rate and trend in the effective tax rate. The most directly comparable GAAP financial measure for Adjusted income taxes is income tax expense (benefit), prepared in accordance with GAAP. The adjusted effective tax rate represents the rate generated when dividing adjusted income tax expense or benefit by the amount of adjusted pre-tax income.
EBITDA and Adjusted EBITDA
EBITDA represents net income (loss) before interest expense, net; income tax; depreciation; and amortization, each prepared in accordance with GAAP. Adjusted EBITDA further adjusts EBITDA by excluding other (income) expense, net; share-based compensation; certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, retention payments, excess inventory reserves, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; gains or losses from early termination of debt; gains or losses from the sales of businesses and other assets; discontinued operations, net of tax; and certain other items.
Net Debt and Net Debt Leverage Ratio
Net debt is calculated as the aggregate carrying amount of debt outstanding less unrestricted cash and cash equivalents.
The net debt leverage ratio is calculated as net debt divided by adjusted EBITDA for the trailing twelve-month period.
Because adjusted financial measures exclude the effect of items that will increase or decrease the Company's reported results of operations, the Company strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety. Investors are also encouraged to review the reconciliation of the non-GAAP financial measures used in the Earnings Release to their most directly comparable GAAP financial measures as included in the Earnings Release. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amount of which could be significant.
The information in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be incorporated into any registration statement or other document filed by the Registrant with the U.S. Securities and Exchange Commission under the Securities Act of 1933, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
Item 9.01.    Financial Statements and Exhibits.
(d)
Exhibits.





Number
Description
99.1





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 
 
ENDO INTERNATIONAL PLC
 
 
By:
/s/ Matthew J. Maletta
Name:
Matthew J. Maletta
Title:
Executive Vice President,
 
Chief Legal Officer
Dated: February 28, 2019


Ex 99.1 - 12.31.2018-Earnings Release


Exhibit 99.1
https://cdn.kscope.io/8f1453fa2bb958d5b2d1ba93d4a1549a-endologoa18.jpg
ENDO REPORTS FOURTH-QUARTER AND FULL YEAR 2018 FINANCIAL RESULTS

Fourth-quarter 2018 revenues increased 2 percent to $786 million
Fourth-quarter 2018 Sterile Injectables revenues increased 32 percent to $259 million
Fourth-quarter 2018 XIAFLEX® franchise revenues increased 30 percent to $80 million
Company expects 2019 revenues to range between $2.76 billion and $2.96 billion and 2019 adjusted EBITDA between $1.24 billion and $1.34 billion
DUBLIN, February 28, 2019 -- Endo International plc (NASDAQ: ENDP) today reported fourth-quarter 2018 financial results, including:
Revenues of $786 million, an increase of 2 percent compared to fourth-quarter 2017 revenues of $769 million; revenues increased 5 percent compared to third-quarter 2018.
Reported net loss from continuing operations of $265 million compared to fourth-quarter 2017 reported net loss from continuing operations of $272 million.
Reported diluted loss per share from continuing operations of $1.18 compared to fourth-quarter 2017 reported diluted loss per share from continuing operations of $1.22.
Adjusted income from continuing operations of $175 million compared to fourth-quarter 2017 adjusted income from continuing operations of $174 million.
Adjusted diluted EPS from continuing operations of $0.75 compared to fourth-quarter 2017 adjusted diluted EPS from continuing operations of $0.77.
Adjusted EBITDA of $344 million compared to fourth-quarter 2017 adjusted EBITDA of $327 million.
"We are pleased to report both revenue and adjusted EBITDA growth during the fourth quarter. This resulted from continued dedicated operational execution and strategic focus, and concluded a full year of strong performance. The fourth quarter's performance was driven by double-digit growth in our U.S. Branded - Sterile Injectables segment and in the Specialty Products portfolio of our U.S. Branded - Specialty & Established Pharmaceuticals segment," said Paul Campanelli, President and Chief Executive Officer of Endo. "We expect to further enhance our capabilities in these core growth areas as well as in the development of high-barrier generic products and we expect 2019 to be a critical transitional year as we progress to the next phase of our multi-year turnaround plan."

1


FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
 
Three Months Ended December 31,
 
 
 
Year Ended December 31,
 
 
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Total Revenues
$
786,389

 
$
768,640

 
2
 %
 
$
2,947,078

 
$
3,468,858

 
(15
)%
Reported Loss from Continuing Operations
$
(265,479
)
 
$
(271,581
)
 
(2
)%
 
$
(961,767
)
 
$
(1,232,711
)
 
(22
)%
Reported Diluted Weighted Average Shares
224,353

 
223,322

 
 %
 
223,960

 
223,198

 
 %
Reported Diluted Loss per Share from Continuing Operations
$
(1.18
)
 
$
(1.22
)
 
(3
)%
 
$
(4.29
)
 
$
(5.52
)
 
(22
)%
Adjusted Income from Continuing Operations
$
175,383

 
$
173,863

 
1
 %
 
$
663,206

 
$
860,361

 
(23
)%
Adjusted Diluted Weighted Average Shares1
232,958

 
224,577

 
4
 %
 
229,386

 
223,978

 
2
 %
Adjusted Diluted EPS from Continuing Operations
$
0.75

 
$
0.77

 
(3
)%
 
$
2.89

 
$
3.84

 
(25
)%
__________
(1)
Diluted per share data is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.
CONSOLIDATED RESULTS
Total revenues were $786 million in fourth-quarter 2018 compared to $769 million during the same period in 2017. This increase was primarily attributable to continued strong growth in the U.S. Branded - Sterile Injectables segment and the Specialty Products portfolio of our U.S. Branded - Specialty & Established Pharmaceuticals segment. In addition to the continued strong underlying performance of our core areas of growth, the fourth quarter increase in these areas reflects a benefit from the timing of shipments compared to prior year. These factors were partially offset by competitive pressures in the U.S. Generic Pharmaceuticals segment and the divestiture of the Company's Mexican business, Somar.
GAAP net loss from continuing operations in fourth-quarter 2018 was $265 million compared to GAAP net loss from continuing operations of $272 million during the same period in 2017. This result was primarily attributable to an overall reduction in operating expenses, including the impact of lower litigation-related charges and research and development expenses, partially offset by higher asset impairment charges. GAAP diluted net loss per share from continuing operations in fourth-quarter 2018 was $1.18 compared to GAAP diluted net loss per share from continuing operations of $1.22 in fourth-quarter 2017.
Adjusted income from continuing operations in fourth-quarter 2018 was $175 million compared to $174 million in fourth-quarter 2017. Adjusted diluted EPS from continuing operations in fourth-quarter 2018 was $0.75 compared to $0.77 in fourth-quarter 2017.

2


U.S. BRANDED - SPECIALTY & ESTABLISHED PHARMACEUTICALS
The Company reported positive results from two Phase 3 clinical trials of collagenase clostridium histolyticum (or "CCH") for the treatment of cellulite in the buttocks. Trial subjects receiving CCH showed highly statistically significant levels of improvement in the appearance of cellulite with treatment, as measured by the trial's primary endpoint.
Fourth-quarter 2018 U.S. Branded - Specialty & Established Pharmaceuticals results include:
Revenues of $230 million compared to $228 million in fourth-quarter 2017; this increase was primarily attributable to continued strong growth of our Specialty Products portfolio, offset by ongoing generic competition in our Established Products portfolio.
Specialty Products revenues increased 15 percent to $143 million in fourth-quarter 2018 compared to fourth-quarter 2017, primarily driven by the continued strong performance from XIAFLEX®. Sales of XIAFLEX® increased 30 percent to $80 million compared to fourth-quarter 2017; this increase was primarily attributable to underlying volume growth in both the Peyronie’s Disease and Dupuytren’s Contracture indications and a benefit from the timing of shipments compared to prior year.
U.S. BRANDED - STERILE INJECTABLES
Fourth-quarter 2018 U.S. Branded - Sterile Injectables revenues were $259 million, an increase of 32 percent compared to fourth-quarter 2017. This increase was primarily attributable to the continued strong growth of ADRENALIN® and VASOSTRICT® and a benefit from timing of shipments compared to prior year.
U.S. GENERIC PHARMACEUTICALS
During fourth-quarter 2018, the U.S. Generic Pharmaceuticals segment launched three products. Fourth-quarter 2018 U.S. Generic Pharmaceuticals revenues were $264 million compared to $303 million in fourth-quarter 2017. This performance was primarily attributable to competitive pressures in the generics business.
INTERNATIONAL PHARMACEUTICALS
Fourth-quarter 2018 International Pharmaceuticals revenues were $34 million, compared to $41 million in the same period in 2017. This performance is primarily attributable to the Somar divestiture in the fourth-quarter of 2017.

3


2019 FINANCIAL GUIDANCE
For the twelve months ending December 31, 2019, at current exchange rates, Endo is providing guidance on revenue, adjusted diluted EPS from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:
Total revenues to be between $2.76 billion and $2.96 billion;
Adjusted diluted EPS from continuing operations to be between $2.00 and $2.25; and
Adjusted EBITDA from continuing operations to be between $1.24 billion and $1.34 billion.
The Company’s 2019 non-GAAP financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 65.0% to 66.0%;
Adjusted operating expenses as a percentage of revenues of approximately 24.5% to 25.0%;
Adjusted interest expense of approximately $550 million to $560 million;
Adjusted effective tax rate of approximately 17.5% to 18.5%;
Adjusted diluted weighted average shares outstanding of approximately 234 million; and
Revenue, Adjusted EBITDA, and Adjusted Diluted EPS weighted more towards the second half of 2019
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of December 31, 2018, the Company had $1.1 billion in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.1 billion and a net debt to adjusted EBITDA ratio of 5.2.
Fourth-quarter 2018 cash provided by operating activities was $70 million, compared to $132 million of net cash provided by operating activities during fourth quarter 2017.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release today 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 8771989. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from February 28, 2019 at 10:30 a.m. ET until 10:30 a.m. ET on March 3, 2019 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 8771989.

4


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.

5


FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total Revenues for the three and twelve months ended December 31, 2018 and 2017 (dollars in thousands):
 
Three Months Ended December 31,
 
Percent Growth
 
Year Ended December 31,
 
Percent Growth
 
2018
 
2017
 
 
2018
 
2017
 
U.S. Branded - Specialty & Established Pharmaceuticals:
 
 
 
 
 
 
 
 
 
 
 
Specialty Products:


 


 


 
 
 
 
 
 
XIAFLEX®
$
79,783

 
$
61,265

 
30
 %
 
$
264,638

 
$
213,378

 
24
 %
SUPPRELIN® LA
20,759

 
22,743

 
(9
)%
 
81,707

 
86,211

 
(5
)%
Other Specialty (1)
42,405

 
39,977

 
6
 %
 
156,607

 
153,384

 
2
 %
Total Specialty Products
$
142,947

 
$
123,985

 
15
 %
 
$
502,952

 
$
452,973

 
11
 %
Established Products:


 


 


 
 
 
 
 
 
PERCOCET®
$
29,362

 
$
32,048

 
(8
)%
 
$
122,901

 
$
125,231

 
(2
)%
VOLTAREN® Gel
13,515

 
15,134

 
(11
)%
 
57,700

 
68,780

 
(16
)%
OPANA® ER

 
1,770

 
(100
)%
 

 
83,826

 
(100
)%
Other Established (2)
44,036

 
55,438

 
(21
)%
 
179,279

 
226,715

 
(21
)%
Total Established Products
$
86,913

 
$
104,390

 
(17
)%
 
$
359,880

 
$
504,552

 
(29
)%
Total U.S. Branded - Specialty & Established Pharmaceuticals (3)
$
229,860

 
$
228,375

 
1
 %
 
$
862,832

 
$
957,525

 
(10
)%
U.S. Branded - Sterile Injectables:
 
 
 
 
 
 
 
 
 
 
 
VASOSTRICT®
$
121,380

 
$
99,260

 
22
 %
 
$
453,767

 
$
399,909

 
13
 %
ADRENALIN®
41,631

 
26,059

 
60
 %
 
143,489

 
76,523

 
88
 %
Ertapenem for injection
31,870

 

 
NM

 
57,668

 

 
NM

Other Sterile Injectables (4)
63,838

 
70,787

 
(10
)%
 
274,642

 
274,039

 
 %
Total U.S. Branded - Sterile Injectables (3)
$
258,719

 
$
196,106

 
32
 %
 
$
929,566

 
$
750,471

 
24
 %
Total U.S. Generic Pharmaceuticals
$
263,770

 
$
302,946

 
(13
)%
 
$
1,012,215

 
$
1,530,530

 
(34
)%
Total International Pharmaceuticals
$
34,040

 
$
41,213

 
(17
)%
 
$
142,465

 
$
230,332

 
(38
)%
Total Revenues
$
786,389

 
$
768,640

 
2
 %
 
$
2,947,078

 
$
3,468,858

 
(15
)%
__________
(1)
Products included within Other Specialty include NASCOBAL® Nasal Spray, TESTOPEL® and AVEED®.
(2)
Products included within Other Established include, but are not limited to, LIDODERM®, FORTESTA® Gel, EDEX® and TESTIM® including the authorized generics of TESTIM® and FORTESTA® Gel.
(3)
Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $100 million during any of the years ended December 31, 2018, 2017 and 2016 or $25 million during any quarterly period in 2018.
(4)
Products included within Other Sterile Injectables include, but are not limited to, APLISOL® and ephedrine sulfate injection.

6


The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and twelve months ended December 31, 2018 and 2017 (in thousands, except per share data):
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
TOTAL REVENUES
$
786,389

 
$
768,640

 
$
2,947,078

 
$
3,468,858

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of revenues
433,214

 
505,645

 
1,631,682

 
2,228,530

Selling, general and administrative
167,422

 
161,199

 
646,037

 
629,874

Research and development
25,395

 
48,545

 
185,826

 
172,067

Litigation-related and other contingencies, net
(1,561
)
 
200,006

 
13,809

 
185,990

Asset impairment charges
303,539

 
130,446

 
916,939

 
1,154,376

Acquisition-related and integration items
8,630

 
26,375

 
21,914

 
58,086

OPERATING LOSS FROM CONTINUING OPERATIONS
$
(150,250
)
 
$
(303,576
)
 
$
(469,129
)
 
$
(960,065
)
INTEREST EXPENSE, NET
135,760

 
126,961

 
521,656

 
488,228

LOSS ON EXTINGUISHMENT OF DEBT

 

 

 
51,734

OTHER INCOME, NET
(18,737
)
 
(6,180
)
 
(51,953
)
 
(17,023
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(267,273
)
 
$
(424,357
)
 
$
(938,832
)
 
$
(1,483,004
)
INCOME TAX (BENEFIT) EXPENSE
(1,794
)
 
(152,776
)
 
22,935

 
(250,293
)
LOSS FROM CONTINUING OPERATIONS
$
(265,479
)
 
$
(271,581
)
 
$
(961,767
)
 
$
(1,232,711
)
DISCONTINUED OPERATIONS, NET OF TAX
(26,429
)
 
(96,836
)
 
(69,702
)
 
(802,722
)
NET LOSS
$
(291,908
)
 
$
(368,417
)
 
$
(1,031,469
)
 
$
(2,035,433
)
NET LOSS PER SHARE—BASIC:
 
 
 
 
 
 
 
Continuing operations
$
(1.18
)
 
$
(1.22
)
 
$
(4.29
)
 
$
(5.52
)
Discontinued operations
(0.12
)
 
(0.43
)
 
(0.32
)
 
(3.60
)
Basic
$
(1.30
)
 
$
(1.65
)
 
$
(4.61
)
 
$
(9.12
)
NET LOSS PER SHARE—DILUTED:
 
 
 
 
 
 
 
Continuing operations
$
(1.18
)
 
$
(1.22
)
 
$
(4.29
)
 
$
(5.52
)
Discontinued operations
(0.12
)
 
(0.43
)
 
(0.32
)
 
(3.60
)
Diluted
$
(1.30
)
 
$
(1.65
)
 
$
(4.61
)
 
$
(9.12
)
WEIGHTED AVERAGE SHARES:
 
 
 
 
 
 
 
Basic
224,353

 
223,322

 
223,960

 
223,198

Diluted
224,353

 
223,322

 
223,960

 
223,198


7


The following table presents unaudited Condensed Consolidated Balance Sheet data at December 31, 2018 and December 31, 2017 (in thousands):
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
1,149,113

 
$
986,605

Restricted cash and cash equivalents
305,368

 
320,453

Accounts receivable
470,570

 
517,436

Inventories, net
322,179

 
391,437

Other current assets
95,920

 
55,146

Total current assets
$
2,343,150

 
$
2,271,077

TOTAL NON-CURRENT ASSETS
7,789,243

 
9,364,503

TOTAL ASSETS
$
10,132,393

 
$
11,635,580

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable and accrued expenses, including legal settlement accruals
$
1,914,285

 
$
2,184,618

Other current liabilities
35,811

 
36,291

Total current liabilities
$
1,950,096

 
$
2,220,909

LONG-TERM DEBT, LESS CURRENT PORTION, NET
8,224,269

 
8,242,032

OTHER LIABILITIES
456,311

 
687,759

SHAREHOLDERS' (DEFICIT) EQUITY
(498,283
)
 
484,880

TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
$
10,132,393

 
$
11,635,580


8


The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the years ended December 31, 2018 and 2017 (in thousands):
 
Year Ended December 31,
 
2018

2017
OPERATING ACTIVITIES:
 
 
 
Net loss
$
(1,031,469
)
 
$
(2,035,433
)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
 
 
 
Depreciation and amortization
723,707

 
983,765

Asset impairment charges
916,939

 
1,154,376

Other, including cash payments to claimants from Qualified Settlement Funds
(341,907
)
 
451,277

Net cash provided by operating activities
$
267,270

 
$
553,985

INVESTING ACTIVITIES:
 
 
 
Purchases of property, plant and equipment, excluding capitalized interest
$
(83,398
)
 
$
(125,654
)
Proceeds from sale of business and other assets, net
70,369

 
223,237

Other
(4,871
)
 
7,000

Net cash (used in) provided by investing activities
$
(17,900
)
 
$
104,583

FINANCING ACTIVITIES:
 
 
 
Payments on borrowings, net
$
(39,372
)
 
$
(22,105
)
Other
(42,200
)
 
(144,888
)
Net cash used in financing activities
$
(81,572
)
 
$
(166,993
)
Effect of foreign exchange rate
(1,975
)
 
2,515

Movement in cash held for sale

 
11,744

NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
$
165,823

 
$
505,834

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD
1,311,014

 
805,180

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD
$
1,476,837

 
$
1,311,014


9


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 twelve months ended December 31, 2018 and 2017 (in thousands):
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018

2017
 
2018
 
2017
Net loss (GAAP)
$
(291,908
)
 
$
(368,417
)
 
$
(1,031,469
)
 
$
(2,035,433
)
Income tax (benefit) expense
(1,794
)
 
(152,776
)
 
22,935

 
(250,293
)
Interest expense, net
135,760

 
126,961

 
521,656

 
488,228

Depreciation and amortization (15)
167,205

 
177,321

 
688,530

 
857,706

EBITDA (non-GAAP)
$
9,263

 
$
(216,911
)
 
$
201,652

 
$
(939,792
)
 


 


 
 
 
 
Inventory step-up and other cost savings (2)
$

 
$
109

 
$
261

 
$
390

Upfront and milestone-related payments (3)
2,081

 
2,531

 
45,108

 
9,483

Inventory reserve increase from restructuring (4)
150

 
5,779

 
2,947

 
13,678

Separation benefits and other restructuring (5)
4,004

 
78,692

 
83,348

 
198,770

Certain litigation-related and other contingencies, net (6)
(1,561
)
 
200,006

 
13,809

 
185,990

Asset impairment charges (7)
303,539

 
130,446

 
916,939

 
1,154,376

Acquisition-related and integration costs (8)
451

 

 
2,004

 
8,137

Fair value of contingent consideration (9)
8,179

 
26,375

 
19,910

 
49,949

Loss on extinguishment of debt (10)

 

 

 
51,734

Share-based compensation
10,349

 
9,897

 
54,071

 
50,149

Other income, net (16)
(18,737
)
 
(6,180
)
 
(51,953
)
 
(17,023
)
Other adjustments
38

 
(151
)
 
(737
)
 
(226
)
Discontinued operations, net of tax (13)
26,429

 
96,836

 
69,702

 
802,722

Adjusted EBITDA (non-GAAP)
$
344,185

 
$
327,429

 
$
1,357,061

 
$
1,568,337


10


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 twelve months ended December 31, 2018 and 2017 (in thousands):
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Loss from continuing operations (GAAP)
$
(265,479
)
 
$
(271,581
)
 
$
(961,767
)
 
$
(1,232,711
)
Non-GAAP adjustments:


 


 


 


Amortization of intangible assets (1)
150,677

 
158,276

 
622,339

 
773,766

Inventory step-up and other cost savings (2)

 
109

 
261

 
390

Upfront and milestone-related payments (3)
2,081

 
2,531

 
45,108

 
9,483

Inventory reserve increase from restructuring (4)
150

 
5,779

 
2,947

 
13,678

Separation benefits and other restructuring (5)
4,004

 
78,692

 
83,348

 
198,770

Certain litigation-related and other contingencies, net (6)
(1,561
)
 
200,006

 
13,809

 
185,990

Asset impairment charges (7)
303,539

 
130,446

 
916,939

 
1,154,376

Acquisition-related and integration costs (8)
451

 

 
2,004

 
8,137

Fair value of contingent consideration (9)
8,179

 
26,375

 
19,910

 
49,949

Loss on extinguishment of debt (10)

 

 

 
51,734

Other (11)
(19,034
)
 
(7,487
)
 
(48,942
)
 
(8,620
)
Tax adjustments (12)
(7,624
)
 
(149,283
)
 
(32,750
)
 
(344,581
)
Adjusted income from continuing operations (non-GAAP)
$
175,383

 
$
173,863

 
$
663,206

 
$
860,361


11


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 twelve months ended December 31, 2018 and 2017 (in thousands, except per share data):
Three Months Ended December 31, 2018
 
Total revenues
 
Cost of revenues
 
Gross margin
 
Gross margin %
 
Total operating expenses
 
Operating expense to revenue %
 
Operating (loss) income from continuing operations
 
Operating margin %
 
Other non-operating expense, net
 
(Loss) income from continuing operations before income tax
 
Income tax (benefit) expense
 
Effective tax rate
 
(Loss) income from continuing operations
 
Discontinued operations, net of tax
 
Net (loss) income
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
786,389

 
$
433,214

 
$
353,175

 
44.9
%
 
$
503,425

 
64.0
%
 
$
(150,250
)
 
(19.1
)%
 
$
117,023

 
$
(267,273
)
 
$
(1,794
)
 
0.7
%
 
$
(265,479
)
 
$
(26,429
)
 
$
(291,908
)
 
$
(1.18
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(150,677
)
 
150,677

 
 
 

 
 
 
150,677

 
 
 

 
150,677

 

 
 
 
150,677

 

 
150,677

 
0.66

Upfront and milestone-related payments (3)

 
(741
)
 
741

 
 
 
(1,340
)
 
 
 
2,081

 
 
 

 
2,081

 

 
 
 
2,081

 

 
2,081

 
0.01

Inventory reserve increase from restructuring (4)

 
(150
)
 
150

 
 
 

 
 
 
150

 
 
 

 
150

 

 
 
 
150

 

 
150

 

Separation benefits and other restructuring (5)

 
(30
)
 
30

 
 
 
(3,974
)
 
 
 
4,004

 
 
 

 
4,004

 

 
 
 
4,004

 

 
4,004

 
0.02

Certain litigation-related and other contingencies, net (6)

 

 

 
 
 
1,561

 
 
 
(1,561
)
 
 
 

 
(1,561
)
 

 
 
 
(1,561
)
 

 
(1,561
)
 
(0.01
)
Asset impairment charges (7)

 

 

 
 
 
(303,539
)
 
 
 
303,539

 
 
 

 
303,539

 

 
 
 
303,539

 

 
303,539

 
1.34

Acquisition-related and integration costs (8)

 

 

 
 
 
(451
)
 
 
 
451

 
 
 

 
451

 

 
 
 
451

 

 
451

 

Fair value of contingent consideration (9)

 

 

 
 
 
(8,179
)
 
 
 
8,179

 
 
 

 
8,179

 

 
 
 
8,179

 

 
8,179

 
0.04

Other (11)

 

 

 
 
 

 
 
 

 
 
 
19,034

 
(19,034
)
 

 
 
 
(19,034
)
 

 
(19,034
)
 
(0.09
)
Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
7,624

 
 
 
(7,624
)
 

 
(7,624
)
 
(0.04
)
Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
26,429

 
26,429

 

After considering items (non-GAAP)
$
786,389

 
$
281,616

 
$
504,773

 
64.2
%
 
$
187,503

 
23.8
%
 
$
317,270

 
40.3
 %
 
$
136,057

 
$
181,213

 
$
5,830

 
3.2
%
 
$
175,383

 
$

 
$
175,383

 
$
0.75

Three Months Ended December 31, 2017
 
Total revenues
 
Cost of revenues
 
Gross margin
 
Gross margin %
 
Total operating expenses
 
Operating expense to revenue %
 
Operating (loss) income from continuing operations
 
Operating margin %
 
Other non-operating expense, net
 
(Loss) income from continuing operations before income tax
 
Income tax benefit
 
Effective tax rate
 
(Loss) income from continuing operations
 
Discontinued operations, net of tax
 
Net (loss) income
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
768,640

 
$
505,645

 
$
262,995

 
34.2
%
 
$
566,571

 
73.7
%
 
$
(303,576
)
 
(39.5
)%
 
$
120,781

 
$
(424,357
)
 
$
(152,776
)
 
36.0
 %
 
$
(271,581
)
 
$
(96,836
)
 
$
(368,417
)
 
$
(1.22
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(158,276
)
 
158,276

 
 
 

 
 
 
158,276

 
 
 

 
158,276

 

 
 
 
158,276

 

 
158,276

 
0.70

Inventory step-up and other cost savings (2)

 
(109
)
 
109

 
 
 

 
 
 
109

 
 
 

 
109

 

 
 
 
109

 

 
109

 

Upfront and milestone-related payments (3)

 
(712
)
 
712

 
 
 
(1,819
)
 
 
 
2,531

 
 
 

 
2,531

 

 
 
 
2,531

 

 
2,531

 
0.01

Inventory reserve increase from restructuring (4)

 
(5,779
)
 
5,779

 
 
 

 
 
 
5,779

 
 
 

 
5,779

 

 
 
 
5,779

 

 
5,779

 
0.03

Separation benefits and other restructuring (5)

 
(76,764
)
 
76,764

 
 
 
(1,928
)
 
 
 
78,692

 
 
 

 
78,692

 

 
 
 
78,692

 

 
78,692

 
0.35

Certain litigation-related and other contingencies, net (6)

 

 

 
 
 
(200,006
)
 
 
 
200,006

 
 
 

 
200,006

 

 
 
 
200,006

 

 
200,006

 
0.90

Asset impairment charges (7)

 

 

 
 
 
(130,446
)
 
 
 
130,446

 
 
 

 
130,446

 

 
 
 
130,446

 

 
130,446

 
0.58

Fair value of contingent consideration (9)

 

 

 
 
 
(26,375
)
 
 
 
26,375

 
 
 

 
26,375

 

 
 
 
26,375

 

 
26,375

 
0.12

Other (11)

 

 

 
 
 

 
 
 

 
 
 
7,487

 
(7,487
)
 

 
 
 
(7,487
)
 

 
(7,487
)
 
(0.03
)
Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
149,283

 
 
 
(149,283
)
 

 
(149,283
)
 
(0.67
)
Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
96,836

 
96,836

 

After considering items (non-GAAP)
$
768,640

 
$
264,005

 
$
504,635

 
65.7
%
 
$
205,997

 
26.8
%
 
$
298,638

 
38.9
 %
 
$
128,268

 
$
170,370

 
$
(3,493
)
 
(2.1
)%
 
$
173,863

 
$

 
$
173,863

 
$
0.77


12


Year Ended December 31, 2018
 
Total revenues
 
Cost of revenues
 
Gross margin
 
Gross margin %
 
Total operating expenses
 
Operating expense to revenue %
 
Operating (loss) income from continuing operations
 
Operating margin %
 
Other non-operating expense, net
 
(Loss) income from continuing operations before income tax
 
Income tax expense
 
Effective tax rate
 
(Loss) income from continuing operations
 
Discontinued operations, net of tax
 
Net (loss) income
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
2,947,078

 
$
1,631,682

 
$
1,315,396

 
44.6
%
 
$
1,784,525

 
60.6
%
 
$
(469,129
)
 
(15.9
)%
 
$
469,703

 
$
(938,832
)
 
$
22,935

 
(2.4
)%
 
$
(961,767
)
 
$
(69,702
)
 
$
(1,031,469
)
 
$
(4.29
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(622,339
)
 
622,339

 
 
 

 
 
 
622,339

 
 
 

 
622,339

 

 
 
 
622,339

 

 
622,339

 
2.77

Inventory step-up and other cost savings (2)

 
(261
)
 
261

 
 
 

 
 
 
261

 
 
 

 
261

 

 
 
 
261

 

 
261

 

Upfront and milestone-related payments (3)

 
(2,836
)
 
2,836

 
 
 
(42,272
)
 
 
 
45,108

 
 
 

 
45,108

 

 
 
 
45,108

 

 
45,108

 
0.19

Inventory reserve increase from restructuring (4)

 
(2,947
)
 
2,947

 
 
 

 
 
 
2,947

 
 
 

 
2,947

 

 
 
 
2,947

 

 
2,947

 
0.01

Separation benefits and other restructuring (5)

 
(57,487
)
 
57,487

 
 
 
(25,861
)
 
 
 
83,348

 
 
 

 
83,348

 

 
 
 
83,348

 

 
83,348

 
0.36

Certain litigation-related and other contingencies, net (6)

 

 

 
 
 
(13,809
)
 
 
 
13,809

 
 
 

 
13,809

 

 
 
 
13,809

 

 
13,809

 
0.06

Asset impairment charges (7)

 

 

 
 
 
(916,939
)
 
 
 
916,939

 
 
 

 
916,939

 

 
 
 
916,939

 

 
916,939

 
4.08

Acquisition-related and integration costs (8)

 

 

 
 
 
(2,004
)
 
 
 
2,004

 
 
 

 
2,004

 

 
 
 
2,004

 

 
2,004

 
0.01

Fair value of contingent consideration (9)

 

 

 
 
 
(19,910
)
 
 
 
19,910

 
 
 

 
19,910

 

 
 
 
19,910

 

 
19,910

 
0.09

Other (11)

 

 

 
 
 
630

 
 
 
(630
)
 
 
 
48,312

 
(48,942
)
 

 
 
 
(48,942
)
 

 
(48,942
)
 
(0.23
)
Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
32,750

 
 
 
(32,750
)
 

 
(32,750
)
 
(0.16
)
Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
69,702

 
69,702

 

After considering items (non-GAAP)
$
2,947,078

 
$
945,812

 
$
2,001,266

 
67.9
%
 
$
764,360

 
25.9
%
 
$
1,236,906

 
42.0
 %
 
$
518,015

 
$
718,891

 
$
55,685

 
7.7
 %
 
$
663,206

 
$

 
$
663,206

 
$
2.89

Year Ended December 31, 2017
 
Total revenues
 
Cost of revenues
 
Gross margin
 
Gross margin %
 
Total operating expenses
 
Operating expense to revenue %
 
Operating (loss) income from continuing operations
 
Operating margin %
 
Other non-operating expense, net
 
(Loss) income from continuing operations before income tax
 
Income tax (benefit) expense
 
Effective tax rate
 
(Loss) income from continuing operations
 
Discontinued operations, net of tax
 
Net (loss) income
 
Diluted (loss) income per share from continuing operations (14)
Reported (GAAP)
$
3,468,858

 
$
2,228,530

 
$
1,240,328

 
35.8
%
 
$
2,200,393

 
63.4
%
 
$
(960,065
)
 
(27.7
)%
 
$
522,939

 
$
(1,483,004
)
 
$
(250,293
)
 
16.9
%
 
$
(1,232,711
)
 
$
(802,722
)
 
$
(2,035,433
)
 
$
(5.52
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(773,766
)
 
773,766

 
 
 

 
 
 
773,766

 
 
 

 
773,766

 

 
 
 
773,766

 

 
773,766

 
3.47

Inventory step-up and other cost savings (2)

 
(390
)
 
390

 
 
 

 
 
 
390

 
 
 

 
390

 

 
 
 
390

 

 
390

 

Upfront and milestone-related payments (3)

 
(2,751
)
 
2,751

 
 
 
(6,732
)
 
 
 
9,483

 
 
 

 
9,483

 

 
 
 
9,483

 

 
9,483

 
0.04

Inventory reserve increase from restructuring (4)

 
(13,678
)
 
13,678

 
 
 

 
 
 
13,678