SEC Filing | Endo International plc

View:

Download DOC

Download PDF

Download XLS

Download XBRL

endp-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________________

FORM 10-Q

____________________________________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-36326

____________________________________________________________________________________________

Endo International plc

(Exact name of registrant as specified in its charter)

____________________________________________________________________________________________


Ireland			68-0683755
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

First Floor, Minerva House, Simmonscourt Road
Ballsbridge, Dublin 4,	Ireland	Not Applicable
(Address of Principal Executive Offices)			(Zip Code)

011-353-1-268-2000

(Registrant’s telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes	☒

		No	☐


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).	Yes	☒

		No	☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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.

☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	Yes	☐

		No	☒

Securities registered pursuant to Section 12(b) of the Exchange 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


The number of Ordinary shares, nominal value $0.0001 per share outstanding as of July 30, 2020 was 229,816,005.

ENDO INTERNATIONAL PLC

INDEX


		Page
Forward-Looking Statements			i

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47

Signatures			49

FORWARD-LOOKING STATEMENTS

Statements contained or incorporated by reference in this document contain information that includes or is based on “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements include, without limitation, estimated future results of operations, estimates of future revenues, future expenses, future net income and future net income per share, as well as statements regarding future financing activities, the impact of the novel strain of coronavirus referred to as COVID-19 on the health and welfare of our employees and on our business, including any response to COVID-19 such as anticipated return to historical purchasing decisions by customers, the economic impact of COVID-19, changes in consumer spending, decisions to engage in certain medical procedures, future governmental orders that could impact our operations and the ability of our manufacturing facilities and suppliers to fulfill their obligations to us, and any other statements that refer to Endo’s expected, estimated or anticipated future results. We have tried, whenever possible, to identify such statements by words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “forecast,” “will,” “may” or similar expressions. We have based these forward-looking statements on our current expectations, assumptions and projections about the growth of our business, our financial performance and the development of our industry. Because these statements reflect our current views concerning future events, these forward-looking statements involve risks and uncertainties including, without limitation, the risks related to the impact of COVID-19 (such as, without limitation, the scope and duration of the pandemic and the resulting economic crisis and levels of unemployment, governmental actions and restrictive measures implemented in response, material delays and cancellations of certain medical procedures, potential manufacturing and supply chain disruptions and other potential impacts to the business as a result of COVID-19) and the other risks and uncertainties more fully described under the caption “Risk Factors” in Part II, Item 1A of this document, in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (SEC) on February 26, 2020 (the Annual Report) and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC on May 7, 2020 (the First Quarter 2020 Form 10-Q). These risks and uncertainties, many of which are outside of our control, and any other risks and uncertainties that we are not currently able to predict or identify, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations and cash flows and could cause our actual results to differ materially and adversely from those expressed in forward-looking statements contained or incorporated by reference in this document. Additionally, the prolonged impact of COVID-19 could heighten the impact of one or more of such risk factors.

We do not undertake any obligation to update our forward-looking statements after the date of this document for any reason, even if new information becomes available or other events occur in the future, except as may be required under applicable securities laws. You are advised to consult any further disclosures we make on related subjects in our reports filed with the SEC and with securities regulators in Canada on the System for Electronic Document Analysis and Retrieval. Also note that, in Part II, Item 1A of this document, in Part I, Item 1A of the Annual Report and in Part II, Item 1A of the First Quarter 2020 Form 10-Q, and as otherwise enumerated herein, we provide a cautionary discussion of the risks, uncertainties and possibly inaccurate assumptions relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section 27A of the Securities Act and Section 21E of the Exchange Act. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this to be a complete discussion of all potential risks or uncertainties.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ENDO INTERNATIONAL PLC

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except share and per share data)


	June 30, 2020		December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,780,087	$	1,454,531
Restricted cash and cash equivalents	180,730		247,457
Accounts receivable, net	271,893		467,953
Inventories, net	330,540		327,865
Prepaid expenses and other current assets	55,813		40,845
Income taxes receivable	67,081		47,567

Total current assets	$	2,686,144	$	2,586,218

PROPERTY, PLANT AND EQUIPMENT, NET	489,668		504,865
OPERATING LEASE ASSETS	47,535		51,700
GOODWILL	3,560,011		3,595,184
OTHER INTANGIBLES, NET	2,281,172		2,571,267
DEFERRED INCOME TAXES	2,192		2,192
OTHER ASSETS	98,412		78,101
TOTAL ASSETS	$	9,165,134	$	9,389,527
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	756,364	$	899,949
Current portion of legal settlement accrual	418,877		513,005
Current portion of operating lease liabilities	11,379		10,763
Current portion of long-term debt	34,150		34,150
Income taxes payable	1,641		2,422

Total current liabilities	$	1,222,411	$	1,460,289
DEFERRED INCOME TAXES	28,170		31,703
LONG-TERM DEBT, LESS CURRENT PORTION, NET	8,302,595		8,359,899

OPERATING LEASE LIABILITIES, LESS CURRENT PORTION	42,673		48,299
OTHER LIABILITIES	284,152		355,881
COMMITMENTS AND CONTINGENCIES (NOTE 12)
SHAREHOLDERS' DEFICIT:
Euro deferred shares, $0.01 par value; 4,000,000 shares authorized and issued at both June 30, 2020 and December 31, 2019	45		45
Ordinary shares, $0.0001 par value; 1,000,000,000 shares authorized; 229,798,823 and 226,802,609 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	23		23
Additional paid-in capital	8,924,694		8,904,692
Accumulated deficit	(9,411,726)		(9,552,214)
Accumulated other comprehensive loss	(227,903)		(219,090)
Total shareholders' deficit	$	(714,867)	$	(866,544)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	9,165,134	$	9,389,527

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

ENDO INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars and shares in thousands, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
TOTAL REVENUES, NET	$	687,588	$	699,727	$	1,507,993	$	1,420,138
COSTS AND EXPENSES:
Cost of revenues	336,096		388,208		724,895		780,117
Selling, general and administrative	173,258		152,297		340,026		303,420
Research and development	30,495		26,348		62,110		59,834
Litigation-related and other contingencies, net	(8,572)		10,315		(25,748)		10,321
Asset impairment charges	—		88,438		97,785		253,886
Acquisition-related and integration items, net	6,045		(5,507)		18,507		(43,008)

Interest expense, net	129,164		134,809		262,041		267,484
Gain on extinguishment of debt	—		—		—		(119,828)
Other (income) expense, net	(4,150)		(597)		(18,124)		4,205
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX	$	25,252	$	(94,584)	$	46,501	$	(96,293)
INCOME TAX EXPENSE (BENEFIT)	7,642		3,468		(128,690)		14,371
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	17,610	$	(98,052)	$	175,191	$	(110,664)
DISCONTINUED OPERATIONS, NET OF TAX (NOTE 3)	(7,052)		(7,953)		(34,703)		(13,914)
NET INCOME (LOSS)	$	10,558	$	(106,005)	$	140,488	$	(124,578)
NET INCOME (LOSS) PER SHARE—BASIC:
Continuing operations	$	0.08	$	(0.43)	$	0.77	$	(0.49)
Discontinued operations	(0.03)		(0.04)		(0.16)		(0.06)
Basic	$	0.05	$	(0.47)	$	0.61	$	(0.55)
NET INCOME (LOSS) PER SHARE—DILUTED:
Continuing operations	$	0.08	$	(0.43)	$	0.75	$	(0.49)
Discontinued operations	(0.03)		(0.04)		(0.15)		(0.06)
Diluted	$	0.05	$	(0.47)	$	0.60	$	(0.55)
WEIGHTED AVERAGE SHARES:
Basic	229,716		226,221		228,457		225,408
Diluted	233,681		226,221		233,348		225,408

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

ENDO INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Dollars in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
NET INCOME (LOSS)	$	10,558	$	(106,005)	$	140,488	$	(124,578)
OTHER COMPREHENSIVE INCOME (LOSS):





Net unrealized gain (loss) on foreign currency	$	5,624	$	4,395	$	(8,813)	$	9,125
Total other comprehensive income (loss)	$	5,624	$	4,395	$	(8,813)	$	9,125
COMPREHENSIVE INCOME (LOSS)	$	16,182	$	(101,610)	$	131,675	$	(115,453)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

ENDO INTERNATIONAL PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)


	Six Months Ended June 30,
	2020		2019
OPERATING ACTIVITIES:
Net income (loss)	$	140,488	$	(124,578)
Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:
Depreciation and amortization	264,198		320,788

Share-based compensation	26,867		37,333
Amortization of debt issuance costs and discount	8,551		9,540
Deferred income taxes	(2,544)		(1,423)

Change in fair value of contingent consideration	18,507		(43,008)
Gain on extinguishment of debt	—		(119,828)

Asset impairment charges	97,785		253,886
Gain on sale of business and other assets	(14,842)		(1,168)
Changes in assets and liabilities which provided (used) cash:
Accounts receivable	192,599		34,557
Inventories	(8,719)		(29,167)
Prepaid and other assets	(15,123)		6,780
Accounts payable, accrued expenses and other liabilities	(228,861)		(266,800)
Income taxes payable/receivable, net	(112,018)		9,690
Net cash provided by operating activities	$	366,888	$	86,602
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, excluding capitalized interest	(36,305)		(23,632)
Capitalized interest payments	(1,125)		(2,190)






Proceeds from sale of business and other assets, net	6,017		2,594
Other investing activities	—		912
Net cash used in investing activities	$	(31,413)	$	(22,316)
FINANCING ACTIVITIES:
Proceeds from issuance of notes, net	—		1,483,125

Repayments of notes	(47,218)		(1,501,788)
Repayments of term loans	(17,074)		(17,076)
Proceeds from draw of revolving debt	—		300,000

Repayments of other indebtedness	(2,393)		(6,656)
Payments for debt issuance and extinguishment costs	—		(5,100)
Payments for contingent consideration	(2,181)		(8,153)
Payments of tax withholding for restricted shares	(6,865)		(9,427)
Proceeds from exercise of options	—		4
Net cash (used in) provided by financing activities	$	(75,731)	$	234,929
Effect of foreign exchange rate	(915)		841

NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS	$	258,829	$	300,056
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD	1,720,388		1,476,837
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD	$	1,979,217	$	1,776,893
SUPPLEMENTAL INFORMATION:


Cash paid into Qualified Settlement Funds for mesh legal settlements	$	—	$	155,995
Cash paid out of Qualified Settlement Funds for mesh legal settlements	$	67,733	$	151,388
Other cash distributions for mesh legal settlements	$	18,165	$	11,428

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

ENDO INTERNATIONAL PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

NOTE 1. BASIS OF PRESENTATION

Endo International plc is an Ireland-domiciled specialty pharmaceutical company that conducts business through its operating subsidiaries. Unless otherwise indicated or required by the context, references throughout to “Endo,” the “Company,” “we,” “our” or “us” refer to Endo International plc and its subsidiaries.

The accompanying unaudited Condensed Consolidated Financial Statements of Endo International plc and its subsidiaries have been prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements of Endo International plc and its subsidiaries, which are unaudited, include all normal and recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2020 and the results of its operations and its cash flows for the periods presented. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The year-end Condensed Consolidated Balance Sheet data as of December 31, 2019 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and accompanying notes included in the Annual Report.

Certain prior period amounts have been reclassified to conform to the current period presentation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires us to make estimates that affect the amounts and disclosures in the Condensed Consolidated Financial Statements, including the notes thereto, and elsewhere in this report. Uncertainties related to the magnitude and duration of COVID-19, the extent to which it will impact our estimated future financial results, worldwide macroeconomic conditions including interest rates, employment rates, consumer spending and health insurance coverage, the speed of the anticipated recovery and governmental and business reactions to the pandemic have increased the complexity of developing these estimates, including the allowance for expected credit losses and the carrying amounts of long-lived assets, goodwill and other intangible assets. Actual results may differ significantly from our estimates, including as a result of COVID-19.

Significant Accounting Policies Added or Updated since December 31, 2019

Significant changes to our significant accounting policies since December 31, 2019 are detailed below. For additional discussion of the Company’s significant accounting policies, see Note 2. Summary of Significant Accounting Policies in the Consolidated Financial Statements, included in Part IV, Item 15 of the Annual Report.

Accounts Receivable. The Company adopted Accounting Standards Codification (ASC) Topic 326, Financial Instruments-Credit Losses (ASC 326) on January 1, 2020. For further discussion of the adoption, refer to the “Recent Accounting Pronouncements Adopted or Otherwise Effective as of June 30, 2020” section below. Subsequent to the adoption of ASC 326, our accounts receivable balance is stated at amortized cost less an allowance for expected credit losses. In addition, our accounts receivable balance is reduced by certain sales deduction reserves where we have the right of offset with the customer. We generally do not require collateral.

Concentrations of Credit Risk and Credit Losses. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash equivalents, restricted cash equivalents and accounts receivable. From time to time, we invest our excess cash in high-quality, liquid money market instruments maintained by major banks and financial institutions. We have not experienced any losses on our cash equivalents.

With respect to our accounts receivable, we have no history of significant losses. Approximately 86% and 88% of our gross trade accounts receivable balances represent amounts due from three customers (Cardinal Health, Inc., McKesson Corporation and AmerisourceBergen Corporation) at June 30, 2020 and December 31, 2019, respectively. We perform ongoing credit evaluations of these and our other customers based on information available to us. We consider these and other factors, including changes in the composition and aging of our accounts receivable, in developing our allowance for expected credit losses. The estimated allowance was not material to the Company’s Condensed Consolidated Financial Statements at June 30, 2020 or December 31, 2019, nor were the changes to the allowance during any of the periods presented.

Table of Contents

We do not currently expect our current or future exposures to credit losses to have a significant impact on us. However, our customers’ ability to pay us on a timely basis, or at all, could be affected by factors specific to their respective businesses and/or by economic conditions, including those related to the COVID-19 pandemic, the extent of which cannot be fully predicted.

Recent Accounting Pronouncements Adopted or Otherwise Effective as of June 30, 2020

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13, together with a series of subsequently-issued related ASUs, has been codified in ASC 326. ASC 326 establishes new requirements for companies to estimate expected credit losses when measuring certain financial assets, including accounts receivable. The Company adopted ASC 326 using a modified retrospective approach with an effective date of January 1, 2020. The adoption of ASC 326 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

NOTE 3. DISCONTINUED OPERATIONS

Astora

The operating results of the Company’s Astora business, which the Company’s board of directors (the Board) resolved to wind-down in 2016, are reported as Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for all periods presented. The following table provides the operating results of Astora Discontinued operations, net of tax, for the three and six months ended June 30, 2020 and 2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Litigation-related and other contingencies, net	$	(2,103)	$	—	$	28,351	$	—
Loss from discontinued operations before income taxes	$	(6,507)	$	(7,953)	$	(40,024)	$	(13,914)
Income tax expense (benefit)	$	545	$	—	$	(5,321)	$	—
Discontinued operations, net of tax	$	(7,052)	$	(7,953)	$	(34,703)	$	(13,914)

Loss from discontinued operations before income taxes includes Litigation-related and other contingencies, net, mesh-related legal defense costs and certain other items.

The cash flows from discontinued operating activities related to Astora included the impact of net losses of $34.7 million and $13.9 million for the six months ended June 30, 2020 and 2019, respectively, and the impact of cash activity related to vaginal mesh cases. There were no material net cash flows related to Astora discontinued investing activities during the six months ended June 30, 2020 or 2019. There was no depreciation or amortization during the six months ended June 30, 2020 or 2019 related to Astora.

NOTE 4. SEGMENT RESULTS

The Company’s four reportable business segments are Branded Pharmaceuticals, Sterile Injectables, Generic Pharmaceuticals and International Pharmaceuticals. These segments reflect the level at which the chief operating decision maker (CODM) regularly reviews financial information to assess performance and to make decisions about resources to be allocated. Each segment derives revenue from the sales or licensing of its respective products and is discussed in more detail below.

We evaluate segment performance based on segment adjusted income from continuing operations before income tax, which we define as Income (loss) from continuing operations before income tax and before 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, continuity 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; debt modification costs; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; and certain other items. Effective January 1, 2020, the Company revised its definition of segment adjusted income from continuing operations before income tax to exclude certain legal costs in order to reflect changes in how the CODM reviews segment performance. The Company believes that such costs are not indicative of business performance and that excluding them more accurately reflects each segment’s results and better enables management to compare financial results between periods. Prior period results have been adjusted to reflect this change. Specifically, for the three months ended June 30, 2019, certain legal costs of $18.6 million and $0.4 million have been excluded from our Branded Pharmaceuticals and Generic Pharmaceuticals segments, respectively, and for the six months ended June 30, 2019, certain legal costs of $34.8 million and $0.8 million have been excluded from our Branded Pharmaceuticals and Generic Pharmaceuticals segments, respectively, resulting in increases to the segment adjusted income from continuing operations before income tax for these segments. This change had no impact on our Total consolidated income (loss) from continuing operations before income tax.

Table of Contents

Certain of the corporate expenses incurred by the Company are not directly attributable to any specific segment. Accordingly, these costs are not allocated to any of the Company’s segments and are included in the results below as “Corporate unallocated costs.” Interest income and expense are also considered corporate items and not allocated to any of the Company’s segments. The Company’s total segment adjusted income from continuing operations before income tax is equal to the combined results of each of its segments.

Branded Pharmaceuticals

Our Branded Pharmaceuticals segment includes a variety of branded prescription products to treat and manage conditions in urology, urologic oncology, endocrinology, pain and orthopedics. The products in this segment include XIAFLEX^®, SUPPRELIN^®LA, NASCOBAL^® Nasal Spray, AVEED^®, PERCOCET^®, LIDODERM^®, EDEX^® and TESTOPEL^®, among others.

Sterile Injectables

Our Sterile Injectables segment consists primarily of branded sterile injectable products such as VASOSTRICT^®, ADRENALIN^® and APLISOL^®, among others, and certain generic sterile injectable products, including ertapenem for injection (the authorized generic of Merck Sharp & Dohme Corp.’s (Merck) Invanz^®) and ephedrine sulfate injection, among others.

Generic Pharmaceuticals

Our Generic Pharmaceuticals segment consists of a differentiated product portfolio including solid oral extended-release, solid oral immediate-release, liquids, semi-solids, patches, powders, ophthalmics and sprays and includes products in the pain management, urology, central nervous system disorders, immunosuppression, oncology, women’s health and cardiovascular disease markets, among others.

International Pharmaceuticals

Our International Pharmaceuticals segment includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through our operating company Paladin Labs Inc. (Paladin). The key products of this segment serve various therapeutic areas, including attention deficit hyperactivity disorder, pain, women’s health and oncology.

The following represents selected information for the Company’s reportable segments for the three and six months ended June 30, 2020 and 2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net revenues from external customers:
Branded Pharmaceuticals	$	129,521	$	209,013	$	333,594	$	412,538
Sterile Injectables	319,214		244,280		655,604		514,328
Generic Pharmaceuticals	215,879		217,784		467,162		436,310
International Pharmaceuticals (1)	22,974		28,650		51,633		56,962
Total net revenues from external customers	$	687,588	$	699,727	$	1,507,993	$	1,420,138
Segment adjusted income from continuing operations before income tax:
Branded Pharmaceuticals	$	49,174	$	101,535	$	147,596	$	196,818
Sterile Injectables	241,753		172,188		505,649		368,371
Generic Pharmaceuticals	47,394		49,722		104,721		100,133
International Pharmaceuticals	9,304		11,447		23,501		23,542
Total segment adjusted income from continuing operations before income tax	$	347,625	$	334,892	$	781,467	$	688,864

__________

(1)Revenues generated by our International Pharmaceuticals segment are primarily attributable to external customers located in Canada.

There were no material revenues from external customers attributed to an individual country outside of the U.S. during any of the periods presented.

Table of Contents

The table below provides reconciliations of our Total consolidated income (loss) from continuing operations before income tax, which is determined in accordance with U.S. GAAP, to our total segment adjusted income from continuing operations before income tax for the three and six months ended June 30, 2020 and 2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Total consolidated income (loss) from continuing operations before income tax	$	25,252	$	(94,584)	$	46,501	$	(96,293)
Interest expense, net	129,164		134,809		262,041		267,484
Corporate unallocated costs (1)	33,590		38,365		76,912		86,460
Amortization of intangible assets	104,498		140,418		221,735		286,017

Upfront and milestone payments to partners	444		1,444		2,194		2,383
Continuity and separation benefits and other cost reduction initiatives (2)	9,444		2,124		32,664		4,149
Certain litigation-related and other contingencies, net (3)	(8,572)		10,315		(25,748)		10,321
Certain legal costs (4)	18,005		18,984		33,541		35,673
Asset impairment charges (5)	—		88,438		97,785		253,886
Acquisition-related and integration items, net (6)	6,045		(5,507)		18,507		(43,008)
Gain on extinguishment of debt	—		—		—		(119,828)

Foreign currency impact related to the remeasurement of intercompany debt instruments	3,005		2,262		(4,089)		3,796
Other, net (7)	26,750		(2,176)		19,424		(2,176)
Total segment adjusted income from continuing operations before income tax	$	347,625	$	334,892	$	781,467	$	688,864

__________

(1)Amounts include certain corporate overhead costs, such as headcount, facility and corporate litigation expenses and certain other income and expenses.

(2)Amounts for the three and six months ended June 30, 2020 include $4.1 million and $17.9 million, respectively, of costs associated with certain continuity and transitional compensation arrangements for certain senior management of the Company. Other amounts in 2020 related primarily to certain cost reduction initiatives. Such amounts included accelerated depreciation of $1.8 million and other charges of $3.6 million during the three months ended June 30, 2020 and accelerated depreciation of $8.4 million and other charges of $6.4 million during the six months ended June 30, 2020. Amounts for the three and six months ended June 30, 2019 primarily relate to employee separation costs of $0.4 million and $2.2 million, respectively, and other charges of $1.7 million and $1.9 million, respectively.

(3)Amounts include adjustments to our accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by our subsidiaries. Our material legal proceedings and other contingent matters are described in more detail in Note 12. Commitments and Contingencies.

(4)Amounts relate to opioid-related legal expenses.

(5)Amounts primarily relate to charges to impair goodwill and intangible assets as further described in Note 8. Goodwill and Other Intangibles.

(6)Amounts primarily relate to changes in the fair value of contingent consideration.

(7)The amounts during the three and six months ended June 30, 2020 primarily relate to $30.7 million of third party fees incurred in connection with the June 2020 Refinancing Transactions, which were accounted for as debt modifications. Refer to Note 11. Debt for additional information. Remaining amounts in this line primarily relate to gains on sales of businesses and other assets, as further described in Note 15. Other (Income) Expense, Net.

Asset information is not reviewed or included within our internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.

Table of Contents

During the three and six months ended June 30, 2020 and 2019, the Company disaggregated its revenue from contracts with customers into the categories included in the table below (in thousands). The Company believes these categories depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®	$	33,783	$	74,855	$	122,855	$	143,362
SUPPRELIN® LA	15,395		23,714		35,115		45,770
Other Specialty (1)	19,566		25,524		45,071		49,927
Total Specialty Products	$	68,744	$	124,093	$	203,041	$	239,059
Established Products:
PERCOCET®	$	27,578	$	28,878	$	55,281	$	59,638
LIDODERM®	7,056		9,051		14,279		17,120
EDEX®	6,604		7,662		15,172		13,633
Other Established (2)	19,539		39,329		45,821		83,088
Total Established Products	$	60,777	$	84,920	$	130,553	$	173,479
Total Branded Pharmaceuticals (3)	$	129,521	$