12.31.2019 ER 8-K Shell
false0001593034 0001593034 2020-02-26 2020-02-26


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 26, 2020
_______________________________
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:
    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per share
ENDP
The NASDAQ Global Select Market
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).
    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 26, 2020, 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, 2019 (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 net income per share 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 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; certain legal costs; 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 net income per share from continuing operations and adjusted diluted weighted average shares
Adjusted diluted net income 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 net income 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; certain legal costs; 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; certain legal costs; 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, gain or 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
104
Cover Page Interactive Date File (embedded within the Inline XBRL document)






SIGNATURES
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 26, 2020


Ex 99.1 - 12.31.2019-Earnings Release


Exhibit 99.1
https://cdn.kscope.io/e6a5052d08bf35a619ca25519aa60a5a-endologoa27.jpg
ENDO REPORTS FOURTH-QUARTER AND FULL-YEAR 2019 FINANCIAL RESULTS

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

— Full-Year 2020 Financial Guidance Provided for Revenue, Adjusted Diluted Net Income per Share from Continuing Operations and Adjusted EBITDA —
DUBLIN, February 26, 2020 -- Endo International plc (NASDAQ: ENDP) today reported financial results for the fourth quarter and full year ended December 31, 2019.
Total revenues during the fourth quarter of 2019 were $765 million, a decrease of 3% compared to fourth-quarter 2018 revenues of $786 million.
Revenues of the Specialty Products portfolio of Branded Pharmaceuticals segment increased 15% in the fourth quarter of 2019 to $149 million compared to fourth-quarter 2018 revenues of $130 million.
Revenues of the Sterile Injectables segment increased 10% in the fourth quarter of 2019 to $285 million compared to fourth-quarter 2018 revenues of $259 million.

1


FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
 
Three months ended December 31,
 
 
 
Year ended December 31,
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Total Revenues, Net
$
764,800

 
$
786,389

 
(3
)%
 
$
2,914,364

 
$
2,947,078

 
(1
)%
Reported Loss from Continuing Operations
$
(208,489
)
 
$
(265,479
)
 
(21
)%
 
$
(360,584
)
 
$
(961,767
)
 
(63
)%
Reported Diluted Weighted Average Shares
226,787

 
224,353

 
1
 %
 
226,050

 
223,960

 
1
 %
Reported Diluted Net Loss per Share from Continuing Operations
$
(0.92
)
 
$
(1.18
)
 
(22
)%
 
$
(1.60
)
 
$
(4.29
)
 
(63
)%
Reported Net Loss
$
(218,643
)
 
$
(291,908
)
 
(25
)%
 
$
(422,636
)
 
$
(1,031,469
)
 
(59
)%
Adjusted Income from Continuing Operations
$
170,907

 
$
175,383

 
(3
)%
 
$
551,524

 
$
663,206

 
(17
)%
Adjusted Diluted Weighted Average Shares (1)
231,571

 
232,958

 
(1
)%
 
231,706

 
229,386

 
1
 %
Adjusted Diluted Net Income per Share from Continuing Operations
$
0.74

 
$
0.75

 
(1
)%
 
$
2.38

 
$
2.89

 
(18
)%
Adjusted EBITDA
$
346,283

 
$
344,185

 
1
 %
 
$
1,308,890

 
$
1,357,061

 
(4
)%
__________
(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.
"In 2019, Endo delivered stronger than expected performance during the fourth quarter and for the full year, driven by continued double-digit percentage revenue growth in our Sterile Injectables segment and in the Specialty Products Portfolio of our Branded Pharmaceuticals segment, and as a result of our dedication to operational execution," said Paul Campanelli, Chairman, President and Chief Executive Officer at Endo. “For the full year, our Sterile Injectables segment exceeded $1 billion in revenue and our Specialty Products Portfolio exceeded $500 million in revenue, demonstrating progress on our strategic priority of expanding and investing in these businesses. Additionally, during the fourth quarter, the U.S. FDA accepted our original Biologics License Application for our CCH for Cellulite product and we launched five products."
"Looking ahead to 2020, Endo intends to build upon the success of the past year. We are focused on continuing to invest in our core areas of growth as part of our multi-year strategic plan, while being responsive to the current external environment under the leadership of Blaise Coleman, Endo’s new President and Chief Executive Officer."

2



CONSOLIDATED RESULTS
Total revenues were $765 million in fourth-quarter 2019 compared to $786 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.
Reported loss from continuing operations in fourth-quarter 2019 was $208 million compared to reported loss from continuing operations of $265 million during the same period in 2018. This result was primarily attributable to a decrease in asset impairment charges. Reported diluted net loss per share from continuing operations in fourth-quarter 2019 was $0.92 compared to reported diluted net loss per share from continuing operations of $1.18 in fourth-quarter 2018.
Adjusted income from continuing operations in fourth-quarter 2019 was $171 million compared to $175 million in fourth-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin due to lower sales. Adjusted diluted net income per share from continuing operations in fourth-quarter 2019 was $0.74 compared to $0.75 in fourth-quarter 2018.
BRANDED PHARMACEUTICALS
Fourth-quarter 2019 Branded Pharmaceuticals revenues were $226 million compared to $230 million in fourth-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 15% to $149 million in fourth-quarter 2019 compared to $130 million in fourth-quarter 2018, primarily driven by the continued strong performance of XIAFLEX®. Sales of XIAFLEX® increased 27% to $102 million compared to $80 million in fourth-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.
In November 2019, the U.S. Food and Drug Administration accepted the Company’s original Biologics License Application (BLA) for its Collagenase Clostridium Histolyticum (CCH) product for the treatment of cellulite in the buttocks. The Prescription Drug User Fee Act (PDUFA), or target action date for the BLA, has been set for July 6, 2020.

3



STERILE INJECTABLES
Fourth-quarter 2019 Sterile Injectables revenues were $285 million, an increase of 10% compared to $259 million in fourth-quarter 2018. This increase reflects the continued strong growth of VASOSTRICT® and ADRENALIN®.
GENERIC PHARMACEUTICALS
Fourth-quarter 2019 Generic Pharmaceuticals revenues were $226 million, a decrease of 14% compared to $264 million in fourth-quarter 2018. This performance was primarily attributable to continued competitive pressure on commoditized generic products. Partially offsetting the decrease were the impacts of certain recent product launches. During fourth-quarter 2019, the Generic Pharmaceuticals segment launched five products.
INTERNATIONAL PHARMACEUTICALS
Fourth-quarter 2019 International Pharmaceuticals revenues were $29 million, a decrease of 16% compared to fourth-quarter 2018. This decrease was primarily due to ongoing generic competition.
2020 FINANCIAL GUIDANCE
Endo is providing guidance for the 12 months ending December 31, 2020, at current exchange rates, for revenue, adjusted diluted net income per share from continuing operations and adjusted EBITDA. The Company estimates:
Total revenues to be between $2.72 billion and $2.92 billion;
Adjusted diluted net income per share from continuing operations to be between $2.15 and $2.40; and
Adjusted EBITDA to be between $1.22 billion and $1.32 billion.
The Company’s 2020 non-GAAP financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 66.0% to 67.0%;
Adjusted operating expenses as a percentage of revenue to be approximately 25.0% to 25.5%;
Adjusted interest expense of approximately $535 to $545 million;
Adjusted effective tax rate of approximately 13.5% to 14.5%; and
Adjusted diluted weighted average shares outstanding of approximately 236 million.
Guidance for Adjusted diluted net income per share from continuing operations, Adjusted EBITDA and Adjusted operating expenses exclude opioid-related legal expenses.

4



BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of December 31, 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.
Fourth-quarter 2019 cash used in operating activities was $21 million, compared to $70 million of net cash provided by operating activities during fourth-quarter 2018.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release today at 8:00 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 4777677. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from February 26, 2020 at 11:00 a.m. ET until 11:00 a.m. ET on March 4, 2020 by dialing U.S./Canada (800) 585-8367, International (404) 537-3406, and entering the passcode 4777677.
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, net for the three and twelve months ended December 31, 2019 and 2018 (dollars in thousands):
 
Three months ended December 31,
 
Percent Growth
 
Year ended December 31,
 
Percent Growth
 
2019
 
2018
 
 
2019
 
2018
 
Branded Pharmaceuticals:
 
 
 
 
 
 
 
 
 
 
 
Specialty Products:


 


 


 
 
 
 
 
 
XIAFLEX®
$
101,520

 
$
79,783

 
27
 %
 
$
327,638

 
$
264,638

 
24
 %
SUPPRELIN® LA
20,255

 
20,759

 
(2
)%
 
86,797

 
81,707

 
6
 %
Other Specialty (1)
26,844

 
29,004

 
(7
)%
 
105,241

 
98,230

 
7
 %
Total Specialty Products
$
148,619

 
$
129,546

 
15
 %
 
$
519,676

 
$
444,575

 
17
 %
Established Products:


 


 


 
 
 
 
 
 
PERCOCET®
$
27,813

 
$
29,362

 
(5
)%
 
$
116,012

 
$
122,901

 
(6
)%
TESTOPEL®
14,414

 
13,401

 
8
 %
 
55,244

 
58,377

 
(5
)%
Other Established (2)
34,705

 
57,551

 
(40
)%
 
164,470

 
236,979

 
(31
)%
Total Established Products
$
76,932

 
$
100,314

 
(23
)%
 
$
335,726

 
$
418,257

 
(20
)%
Total Branded Pharmaceuticals (3)
$
225,551

 
$
229,860

 
(2
)%
 
$
855,402

 
$
862,832

 
(1
)%
Sterile Injectables:
 
 
 
 
 
 
 
 
 
 
 
VASOSTRICT®
$
146,883

 
$
121,380

 
21
 %
 
$
531,737

 
$
453,767

 
17
 %
ADRENALIN®
45,827

 
41,631

 
10
 %
 
179,295

 
143,489

 
25
 %
Ertapenem for injection
25,060

 
31,870

 
(21
)%
 
104,679

 
57,668

 
82
 %
APLISOL®
5,830

 
15,849

 
(63
)%
 
61,826

 
64,913

 
(5
)%
Other Sterile Injectables (4)
61,568

 
47,989

 
28
 %
 
185,594

 
209,729

 
(12
)%
Total Sterile Injectables (3)
$
285,168

 
$
258,719

 
10
 %
 
$
1,063,131

 
$
929,566

 
14
 %
Total Generic Pharmaceuticals
$
225,560

 
$
263,770

 
(14
)%
 
$
879,882

 
$
1,012,215

 
(13
)%
Total International Pharmaceuticals
$
28,521

 
$
34,040

 
(16
)%
 
$
115,949

 
$
142,465

 
(19
)%
Total revenues, net
$
764,800

 
$
786,389

 
(3
)%
 
$
2,914,364

 
$
2,947,078

 
(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®, EDEX® and VOLTAREN® Gel.
(3)
Individual products presented above represent the top two performing products in each product category for the year ended December 31, 2019 and/or any product having revenues in excess of $100 million during any of the years ended December 31, 2019, 2018 or 2017 or $25 million during any quarterly period in 2019 or 2018.
(4)
Products included within Other Sterile Injectables include ephedrine sulfate injection, treprostinil for injection and others.

6



The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and twelve months ended December 31, 2019 and 2018 (in thousands, except per share data):
 
Three months ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
TOTAL REVENUES, NET
$
764,800

 
$
786,389

 
$
2,914,364

 
$
2,947,078

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of revenues
400,056

 
433,214

 
1,569,338

 
1,631,682

Selling, general and administrative
160,671

 
167,422

 
632,420

 
646,037

Research and development
34,379

 
25,395

 
130,732

 
185,826

Litigation-related and other contingencies, net
15,304

 
(1,561
)
 
11,211

 
13,809

Asset impairment charges
267,430

 
303,539

 
526,082

 
916,939

Acquisition-related and integration items, net
(19,115
)
 
8,630

 
(46,098
)
 
21,914

Interest expense, net
134,347

 
135,760

 
538,734

 
521,656

Gain on extinguishment of debt

 

 
(119,828
)
 

Other (income) expense, net
(3,731
)
 
(18,737
)
 
16,677

 
(51,953
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(224,541
)
 
$
(267,273
)
 
$
(344,904
)
 
$
(938,832
)
INCOME TAX (BENEFIT) EXPENSE
(16,052
)
 
(1,794
)
 
15,680

 
22,935

LOSS FROM CONTINUING OPERATIONS
$
(208,489
)
 
$
(265,479
)
 
$
(360,584
)
 
$
(961,767
)
DISCONTINUED OPERATIONS, NET OF TAX
(10,154
)
 
(26,429
)
 
(62,052
)
 
(69,702
)
NET LOSS
$
(218,643
)
 
$
(291,908
)
 
$
(422,636
)
 
$
(1,031,469
)
NET LOSS PER SHARE—BASIC:
 
 
 
 
 
 
 
Continuing operations
$
(0.92
)
 
$
(1.18
)
 
$
(1.60
)
 
$
(4.29
)
Discontinued operations
(0.04
)
 
(0.12
)
 
(0.27
)
 
(0.32
)
Basic
$
(0.96
)
 
$
(1.30
)
 
$
(1.87
)
 
$
(4.61
)
NET LOSS PER SHARE—DILUTED:
 
 
 
 
 
 
 
Continuing operations
$
(0.92
)
 
$
(1.18
)
 
$
(1.60
)
 
$
(4.29
)
Discontinued operations
(0.04
)
 
(0.12
)
 
(0.27
)
 
(0.32
)
Diluted
$
(0.96
)
 
$
(1.30
)
 
$
(1.87
)
 
$
(4.61
)
WEIGHTED AVERAGE SHARES:
 
 
 
 
 
 
 
Basic
226,787

 
224,353

 
226,050

 
223,960

Diluted
226,787

 
224,353

 
226,050

 
223,960


7



The following table presents unaudited Condensed Consolidated Balance Sheet data at December 31, 2019 and December 31, 2018 (in thousands):
 
December 31, 2019
 
December 31, 2018
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
1,454,531

 
$
1,149,113

Restricted cash and cash equivalents
247,457

 
305,368

Accounts receivable
467,953

 
470,570

Inventories, net
327,865

 
322,179

Other current assets
88,412

 
95,920

Total current assets
$
2,586,218

 
$
2,343,150

TOTAL NON-CURRENT ASSETS
6,803,309

 
7,789,243

TOTAL ASSETS
$
9,389,527

 
$
10,132,393

LIABILITIES AND SHAREHOLDERS' DEFICIT
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable and accrued expenses, including legal settlement accruals
$
1,412,954

 
$
1,914,285

Other current liabilities
47,335

 
35,811

Total current liabilities
$
1,460,289

 
$
1,950,096

LONG-TERM DEBT, LESS CURRENT PORTION, NET
8,359,899

 
8,224,269

OTHER LIABILITIES
435,883

 
456,311

SHAREHOLDERS' DEFICIT
(866,544
)
 
(498,283
)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
$
9,389,527

 
$
10,132,393


8



The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the years ended December 31, 2019 and 2018 (in thousands):
 
Year ended December 31,
 
2019

2018
OPERATING ACTIVITIES:
 
 
 
Net loss
$
(422,636
)
 
$
(1,031,469
)
Adjustments to reconcile Net loss to Net cash provided by operating activities:
 
 
 
Depreciation and amortization
612,862

 
723,707

Asset impairment charges
526,082

 
916,939

Other, including cash payments to claimants from Qualified Settlement Funds
(618,256
)
 
(341,907
)
Net cash provided by operating activities
$
98,052

 
$
267,270

INVESTING ACTIVITIES:
 
 
 
Purchases of property, plant and equipment, excluding capitalized interest
$
(63,854
)
 
$
(83,398
)
Proceeds from sale of business and other assets, net
6,577

 
70,369

Other
(2,921
)
 
(4,871
)
Net cash used in investing activities
$
(60,198
)
 
$
(17,900
)
FINANCING ACTIVITIES:
 
 
 
Proceeds from (payments on) borrowings, net
$
237,989

 
$
(39,372
)
Other
(33,388
)
 
(42,200
)
Net cash provided by (used in) financing activities
$
204,601

 
$
(81,572
)
Effect of foreign exchange rate
1,096

 
(1,975
)
NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
$
243,551

 
$
165,823

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
$
1,720,388

 
$
1,476,837


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, 2019 and 2018 (in thousands):
 
Three months ended December 31,
 
Year ended December 31,
 
2019

2018
 
2019
 
2018
Net loss (GAAP)
$
(218,643
)
 
$
(291,908
)
 
$
(422,636
)
 
$
(1,031,469
)
Income tax (benefit) expense
(16,052
)
 
(1,794
)
 
15,680

 
22,935

Interest expense, net
134,347

 
135,760

 
538,734

 
521,656

Depreciation and amortization (15)
144,453

 
167,205

 
612,862

 
688,530

EBITDA (non-GAAP)
$
44,105

 
$
9,263

 
$
744,640

 
$
201,652

 


 


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

 
$

 
$

 
$
261

Upfront and milestone-related payments (3)
2,568

 
2,081

 
6,623

 
45,108

Inventory reserve increase from restructuring (4)

 
150

 

 
2,947

Retention and separation benefits and other restructuring (5)
19,426

 
4,004

 
34,598

 
83,348

Certain litigation-related and other contingencies, net (6)
15,304

 
(1,561
)
 
11,211

 
13,809

Asset impairment charges (7)
267,430

 
303,539

 
526,082

 
916,939

Acquisition-related and integration costs (8)

 
451

 

 
2,004

Fair value of contingent consideration (9)
(19,115
)
 
8,179

 
(46,098
)
 
19,910

Gain on extinguishment of debt (10)

 

 
(119,828
)
 

Share-based compensation
10,233

 
10,349

 
59,142

 
54,071

Other (income) expense, net (16)
(3,731
)
 
(18,737
)
 
16,677

 
(51,953
)
Other adjustments
(91
)
 
38

 
13,791

 
(737
)
Discontinued operations, net of tax (13)
10,154

 
26,429

 
62,052

 
69,702

Adjusted EBITDA (non-GAAP)
$
346,283

 
$
344,185

 
$
1,308,890

 
$
1,357,061


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, 2019 and 2018 (in thousands):
 
Three months ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
Loss from continuing operations (GAAP)
$
(208,489
)
 
$
(265,479
)
 
$
(360,584
)
 
$
(961,767
)
Non-GAAP adjustments:


 


 


 


Amortization of intangible assets (1)
125,913

 
150,677

 
543,862

 
622,339

Inventory step-up and other cost savings (2)

 

 

 
261

Upfront and milestone-related payments (3)
2,568

 
2,081

 
6,623

 
45,108

Inventory reserve increase from restructuring (4)

 
150

 

 
2,947

Retention and separation benefits and other restructuring (5)
19,426

 
4,004

 
34,598

 
83,348

Certain litigation-related and other contingencies, net (6)
15,304

 
(1,561
)
 
11,211

 
13,809

Asset impairment charges (7)
267,430

 
303,539

 
526,082

 
916,939

Acquisition-related and integration costs (8)

 
451

 

 
2,004

Fair value of contingent consideration (9)
(19,115
)
 
8,179

 
(46,098
)
 
19,910

Gain on extinguishment of debt (10)

 

 
(119,828
)
 

Other (11)
(2,002
)
 
(19,034
)
 
28,252

 
(48,942
)
Tax adjustments (12)
(30,128
)
 
(7,624
)
 
(72,594
)
 
(32,750
)
Adjusted income from continuing operations (non-GAAP)
$
170,907

 
$
175,383

 
$
551,524

 
$
663,206


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, 2019 and 2018 (in thousands, except per share data):
Three months ended December 31, 2019
 
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 (benefit) 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)
$
764,800

 
$
400,056

 
$
364,744

 
47.7
%
 
$
458,669

 
60.0
%
 
$
(93,925
)
 
(12.3
)%
 
$
130,616

 
$
(224,541
)
 
$
(16,052
)
 
7.1
%
 
$
(208,489
)
 
$
(10,154
)
 
$
(218,643
)
 
$
(0.92
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(125,913
)
 
125,913

 
 
 

 
 
 
125,913

 
 
 

 
125,913

 

 
 
 
125,913

 

 
125,913

 


Upfront and milestone-related payments (3)

 
(542
)
 
542

 
 
 
(2,026
)
 
 
 
2,568

 
 
 

 
2,568

 

 
 
 
2,568

 

 
2,568

 


Retention and separation benefits and other restructuring (5)

 
(4,689
)
 
4,689

 
 
 
(14,737
)
 
 
 
19,426

 
 
 

 
19,426

 

 
 
 
19,426

 

 
19,426

 


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

 

 

 
 
 
(15,304
)
 
 
 
15,304

 
 
 

 
15,304

 

 
 
 
15,304

 

 
15,304

 


Asset impairment charges (7)

 

 

 
 
 
(267,430
)
 
 
 
267,430

 
 
 

 
267,430

 

 
 
 
267,430

 

 
267,430

 


Fair value of contingent consideration (9)

 

 

 
 
 
19,115

 
 
 
(19,115
)
 
 
 

 
(19,115
)
 

 
 
 
(19,115
)
 

 
(19,115
)
 


Other (11)

 

 

 
 
 

 
 
 

 
 
 
2,002

 
(2,002
)
 

 
 
 
(2,002
)
 

 
(2,002
)
 


Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
30,128

 
 
 
(30,128
)
 

 
(30,128
)
 


Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
10,154

 
10,154

 


After considering items (non-GAAP)
$
764,800

 
$
268,912

 
$
495,888

 
64.8
%
 
$
178,287

 
23.3
%
 
$
317,601

 
41.5
 %
 
$
132,618

 
$
184,983

 
$
14,076

 
7.6
%
 
$
170,907

 
$

 
$
170,907

 
$
0.74

Three months ended December 31, 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 (benefit) 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)
$
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

 


Upfront and milestone-related payments (3)

 
(741
)
 
741

 
 
 
(1,340
)
 
 
 
2,081

 
 
 

 
2,081

 

 
 
 
2,081

 

 
2,081

 


Inventory reserve increase from restructuring (4)

 
(150
)
 
150

 
 
 

 
 
 
150

 
 
 

 
150

 

 
 
 
150

 

 
150

 


Retention and separation benefits and other restructuring (5)

 
(30
)
 
30

 
 
 
(3,974
)
 
 
 
4,004

 
 
 

 
4,004

 

 
 
 
4,004

 

 
4,004

 


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

 

 

 
 
 
1,561

 
 
 
(1,561
)
 
 
 

 
(1,561
)
 

 
 
 
(1,561
)
 

 
(1,561
)
 


Asset impairment charges (7)

 

 

 
 
 
(303,539
)
 
 
 
303,539

 
 
 

 
303,539

 

 
 
 
303,539

 

 
303,539

 


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

 


Other (11)

 

 

 
 
 

 
 
 

 
 
 
19,034

 
(19,034
)
 

 
 
 
(19,034
)
 

 
(19,034
)
 


Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
7,624

 
 
 
(7,624
)
 

 
(7,624
)
 


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


12



Year Ended December 31, 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)
$
2,914,364

 
$
1,569,338

 
$
1,345,026

 
46.2
%
 
$
1,254,347

 
43.0
%
 
$
90,679

 
3.1
%
 
$
435,583

 
$
(344,904
)
 
$
15,680

 
(4.5
)%
 
$
(360,584
)
 
$
(62,052
)
 
$
(422,636
)
 
$
(1.60
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(543,862
)
 
543,862

 
 
 

 
 
 
543,862

 
 
 

 
543,862

 

 
 
 
543,862

 

 
543,862

 


Upfront and milestone-related payments (3)

 
(2,484
)
 
2,484

 
 
 
(4,139
)
 
 
 
6,623

 
 
 

 
6,623

 

 
 
 
6,623

 

 
6,623

 


Retention and separation benefits and other restructuring (5)

 
(5,693
)
 
5,693

 
 
 
(28,905
)
 
 
 
34,598

 
 
 

 
34,598

 

 
 
 
34,598

 

 
34,598

 


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

 

 

 
 
 
(11,211
)
 
 
 
11,211

 
 
 

 
11,211

 

 
 
 
11,211

 

 
11,211

 


Asset impairment charges (7)

 

 

 
 
 
(526,082
)
 
 
 
526,082

 
 
 

 
526,082

 

 
 
 
526,082

 

 
526,082

 


Fair value of contingent consideration (9)

 

 

 
 
 
46,098

 
 
 
(46,098
)
 
 
 

 
(46,098
)
 

 
 
 
(46,098
)
 

 
(46,098
)
 


Gain on extinguishment of debt (10)

 

 

 
 
 

 
 
 

 
 
 
119,828

 
(119,828
)
 

 
 
 
(119,828
)
 

 
(119,828
)
 


Other (11)

 

 

 
 
 
(13,878
)
 
 
 
13,878

 
 
 
(14,374
)
 
28,252

 

 
 
 
28,252

 

 
28,252

 


Tax adjustments (12)

 

 

 
 
 

 
 
 

 
 
 

 

 
72,594

 
 
 
(72,594
)
 

 
(72,594
)
 


Exclude discontinued operations, net of tax (13)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
62,052

 
62,052

 


After considering items (non-GAAP)
$
2,914,364

 
$
1,017,299

 
$
1,897,065

 
65.1
%
 
$
716,230

 
24.6
%
 
$
1,180,835

 
40.5
%
 
$
541,037

 
$
639,798

 
$
88,274

 
13.8
 %
 
$
551,524

 
$

 
$
551,524

 
$
2.38

Year Ended December 31, 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)
$
2,947,078

 
$
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

 


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

 


Inventory reserve increase from restructuring (4)

 
(2,947
)
 
2,947

 
 
 

 
 
 
2,947

 
 
 

 
2,947

 

 
 
 
2,947

 

 
2,947

 


Retention and separation benefits and other restructuring (5)

 
(57,487
)
 
57,487

 
 
 
(25,861
)
 
 
 
83,348

 
 
 

 
83,348

 

 
 
 
83,348

 

 
83,348

 


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

 

 

 
 
 
(13,809
)