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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 SEPTEMBER 30, 2020
or
    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 classTrading symbol(s)Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per shareENDPThe NASDAQ Global Select Market
The number of Ordinary shares, nominal value $0.0001 per share outstanding as of October 30, 2020 was 230,292,329.



ENDO INTERNATIONAL PLC
INDEX
Page
 




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, any future financial results, future cost savings and future litigation relating to the Offer, the Merger (each, as defined below) and the ability to successfully complete such transactions, 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 and uncertainties inherent in the Offer and the Merger, including, among other things, regarding how many of BioSpecifics’ (as defined below) stockholders will tender their shares in the Offer, the possibility that competing offers will be made, the ability to obtain requisite regulatory approvals relating to the acquisition, the ability to satisfy the conditions to the closing of the Offer and the Merger, the expected timing of the Offer and the Merger, the risk of litigation relating to the transaction, including resulting expense or delay, difficulties or unanticipated expenses in connection with integrating BioSpecifics’ operations into the Company’s and the possibility that anticipated synergies and other benefits of the transaction will not be realized in the amounts anticipated within the expected timeframe or at all, 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 our business as a result of COVID-19) and the other risks and uncertainties more fully described in our annual, quarterly and other reports that we file with the Securities and Exchange Commission (SEC), including this report. 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 referenced 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 I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 26, 2020 (the Annual Report); in Part II, Item 1A of the 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) and this report; and as otherwise enumerated herein or therein, 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.
i

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)
September 30, 2020December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$1,679,738 $1,454,531 
Restricted cash and cash equivalents162,648 247,457 
Accounts receivable, net473,368 467,953 
Inventories, net354,903 327,865 
Prepaid expenses and other current assets66,206 40,845 
Income taxes receivable65,957 47,567 
Total current assets$2,802,820 $2,586,218 
PROPERTY, PLANT AND EQUIPMENT, NET487,691 504,865 
OPERATING LEASE ASSETS38,927 51,700 
GOODWILL3,560,011 3,595,184 
OTHER INTANGIBLES, NET2,178,862 2,571,267 
DEFERRED INCOME TAXES2,192 2,192 
OTHER ASSETS94,740 78,101 
TOTAL ASSETS$9,165,243 $9,389,527 
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses$868,404 $899,949 
Current portion of legal settlement accrual374,754 513,005 
Current portion of operating lease liabilities11,449 10,763 
Current portion of long-term debt34,150 34,150 
Income taxes payable2,241 2,422 
Total current liabilities$1,290,998 $1,460,289 
DEFERRED INCOME TAXES26,930 31,703 
LONG-TERM DEBT, LESS CURRENT PORTION, NET8,286,351 8,359,899 
OPERATING LEASE LIABILITIES, LESS CURRENT PORTION40,222 48,299 
OTHER LIABILITIES303,224 355,881 
COMMITMENTS AND CONTINGENCIES (NOTE 13)
SHAREHOLDERS' DEFICIT:
Euro deferred shares, $0.01 par value; 4,000,000 shares authorized and issued at both September 30, 2020 and December 31, 2019
47 45 
Ordinary shares, $0.0001 par value; 1,000,000,000 shares authorized; 230,288,796 and 226,802,609 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
23 23 
Additional paid-in capital8,930,209 8,904,692 
Accumulated deficit(9,487,613)(9,552,214)
Accumulated other comprehensive loss(225,148)(219,090)
Total shareholders' deficit$(782,482)$(866,544)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT$9,165,243 $9,389,527 
See accompanying Notes to Condensed Consolidated Financial Statements.
1

Table of Contents
ENDO INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars and shares in thousands, except per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
TOTAL REVENUES, NET$634,860 $729,426 $2,142,853 $2,149,564 
COSTS AND EXPENSES:
Cost of revenues348,077 389,165 1,072,972 1,169,282 
Selling, general and administrative182,259 168,329 522,285 471,749 
Research and development32,055 36,519 94,165 96,353 
Litigation-related and other contingencies, net1,810 (14,414)(23,938)(4,093)
Asset impairment charges8,412 4,766 106,197 258,652 
Acquisition-related and integration items, net(1,407)16,025 17,100 (26,983)
Interest expense, net135,648 136,903 397,689 404,387 
Gain on extinguishment of debt   (119,828)
Other (income) expense, net(7,194)16,203 (25,318)20,408 
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX$(64,800)$(24,070)$(18,299)$(120,363)
INCOME TAX EXPENSE (BENEFIT)4,174 17,361 (124,516)31,732 
(LOSS) INCOME FROM CONTINUING OPERATIONS$(68,974)$(41,431)$106,217 $(152,095)
DISCONTINUED OPERATIONS, NET OF TAX (NOTE 3)(6,913)(37,984)(41,616)(51,898)
NET (LOSS) INCOME$(75,887)$(79,415)$64,601 $(203,993)
NET (LOSS) INCOME PER SHARE—BASIC:
Continuing operations$(0.30)$(0.18)$0.46 $(0.67)
Discontinued operations(0.03)(0.17)(0.18)(0.23)
Basic$(0.33)$(0.35)$0.28 $(0.90)
NET (LOSS) INCOME PER SHARE—DILUTED:
Continuing operations$(0.30)$(0.18)$0.46 $(0.67)
Discontinued operations(0.03)(0.17)(0.18)(0.23)
Diluted$(0.33)$(0.35)$0.28 $(0.90)
WEIGHTED AVERAGE SHARES:
Basic230,040 226,598 228,985 225,804 
Diluted230,040 226,598 233,379 225,804 
See accompanying Notes to Condensed Consolidated Financial Statements.
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ENDO INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(Dollars in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
NET (LOSS) INCOME$(75,887)$(79,415)$64,601 $(203,993)
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized gain (loss) on foreign currency$2,755 $(2,515)$(6,058)$6,610 
Total other comprehensive income (loss)$2,755 $(2,515)$(6,058)$6,610 
COMPREHENSIVE (LOSS) INCOME$(73,132)$(81,930)$58,543 $(197,383)
See accompanying Notes to Condensed Consolidated Financial Statements.
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ENDO INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Nine Months Ended September 30,
20202019
OPERATING ACTIVITIES:
Net income (loss)$64,601 $(203,993)
Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:
Depreciation and amortization391,463 468,409 
Share-based compensation33,452 48,909 
Amortization of debt issuance costs and discount12,058 13,799 
Deferred income taxes(4,147)(2,452)
Change in fair value of contingent consideration17,100 (26,983)
Gain on extinguishment of debt (119,828)
Asset impairment charges106,197 258,652 
Gain on sale of business and other assets(16,730)(3,101)
Changes in assets and liabilities which (used) provided cash:
Accounts receivable(8,631)58,630 
Inventories(33,062)(32,761)
Prepaid and other assets(18,455)15,577 
Accounts payable, accrued expenses and other liabilities(147,176)(378,547)
Income taxes payable/receivable, net(107,227)22,933 
Net cash provided by operating activities$289,443 $119,244 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, excluding capitalized interest(52,692)(47,812)
Capitalized interest payments(1,915)(3,207)
Product acquisition costs and license fees(2,000) 
Proceeds from sale of business and other assets, net6,377 4,780 
Other investing activities 912 
Net cash used in investing activities$(50,230)$(45,327)
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Nine Months Ended September 30,
20202019
FINANCING ACTIVITIES:
Proceeds from issuance of notes, net 1,483,125 
Repayments of notes(57,649)(1,501,788)
Repayments of term loans(25,612)(25,614)
Proceeds from draw of revolving debt 300,000 
Repayments of other indebtedness(3,626)(7,826)
Payments for debt issuance and extinguishment costs (6,414)
Payments for contingent consideration(3,535)(11,846)
Payments of tax withholding for restricted shares(7,935)(10,077)
Proceeds from exercise of options 4 
Net cash (used in) provided by financing activities$(98,357)$219,564 
Effect of foreign exchange rate(458)780 
NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS$140,398 $294,261 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD1,720,388 1,476,837 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD$1,860,786 $1,771,098 
SUPPLEMENTAL INFORMATION:
Cash paid into Qualified Settlement Funds for mesh legal settlements$ $185,745 
Cash paid out of Qualified Settlement Funds for mesh legal settlements$107,225 $266,958 
Other cash distributions for mesh legal settlements$26,559 $13,334 
See accompanying Notes to Condensed Consolidated Financial Statements.
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ENDO INTERNATIONAL PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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 September 30, 2020 and the results of its operations and its cash flows for the periods presented. Operating results for the three and nine months ended September 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 continued magnitude and duration of the COVID-19 pandemic, the extent to which it will impact our estimated future financial results, worldwide macroeconomic conditions including interest rates, employment rates, consumer spending, health insurance coverage, the speed of the anticipated recovery and governmental and business reactions to the pandemic, including any possible re-initiation of shutdowns or renewed restrictions, 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 September 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 90% and 88% of our gross trade accounts receivable balances represent amounts due from three customers (Cardinal Health, Inc., McKesson Corporation and AmerisourceBergen Corporation) at September 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 September 30, 2020 or December 31, 2019, nor were the changes to the allowance during any of the periods presented.
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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 September 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 nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Litigation-related and other contingencies, net$ $30,000 $28,351 $30,400 
Loss from discontinued operations before income taxes$(7,134)$(37,984)$(47,158)$(51,898)
Income tax benefit$(221)$ $(5,542)$ 
Discontinued operations, net of tax$(6,913)$(37,984)$(41,616)$(51,898)
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 $41.6 million and $51.9 million for the nine months ended September 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 nine months ended September 30, 2020 or 2019. There was no depreciation or amortization during the nine months ended September 30, 2020 or 2019 related to Astora.
NOTE 4. RESTRUCTURING
Restructuring charges related to nonretirement postemployment benefits that fall under Accounting Standards Codification Topic 712, Compensation—Nonretirement Postemployment Benefits (ASC 712) are recognized when the severance liability is determined to be probable of being paid and reasonably estimable. One-time benefits related to restructurings, if any, are recognized in accordance with Accounting Standards Codification Topic 420, Exit or Disposal Cost Obligations (ASC 420) when the programs are approved, the affected employees are identified, the terms of the arrangement are established, it is determined changes to the plan are unlikely to occur and the arrangements are communicated to employees. Other restructuring costs are generally expensed as incurred.
Set forth below are disclosures relating to restructuring initiatives that resulted in material expenses or cash expenditures during the three- or nine-month periods ended September 30, 2020 and 2019 or had material restructuring liabilities at either September 30, 2020 or December 31, 2019.
2020 Restructuring Initiative
On November 5, 2020, the Company announced the initiation of several strategic actions to further optimize the Company’s operations and increase overall efficiency (the 2020 Restructuring Initiative). These actions are expected to generate significant cost savings that will be reinvested, among other things, to support the Company’s key strategic priority to expand and enhance its product portfolio. These actions include the following:
Optimizing the Company’s generic retail business cost structure by exiting manufacturing sites in Irvine, California and Chestnut Ridge, New York, as well as active pharmaceutical ingredient manufacturing and bioequivalence study sites in India. The sites will be exited in a phased approach that is expected to be completed in the second half of 2022. Certain products currently manufactured at the Irvine and Chestnut Ridge sites are expected to be transferred to other internal and external sites within the Company’s manufacturing network.
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Improving operating flexibility and reducing general and administrative costs by transferring certain transaction processing activities to third-party global business process service providers.
Increasing organizational effectiveness by further integrating the Company’s commercial, operations and research and development functions, respectively, to support the Company’s key strategic priorities.
As a result of the 2020 Restructuring Initiative, the Company’s global workforce is expected to be reduced by approximately 560 net full-time positions. The Company expects to realize annualized pre-tax cash savings (without giving effect to the costs described below) of approximately $85 million to $95 million by the first half of 2023, primarily related to reductions in Cost of revenues of approximately $65 million to $70 million and other expenses, including Selling, general and administrative and Research and development expenses, of approximately $20 million to $25 million.
As a result of the 2020 Restructuring Initiative, the Company expects to incur total pre-tax restructuring-related expenses of approximately $163 million to $183 million, of which approximately $125 million to $140 million relates to the Generic Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs. These estimated restructuring charges consist of accelerated depreciation charges of approximately $56 million to $66 million, asset impairment charges of approximately $7 million, employee separation, continuity and other benefit-related costs of approximately $85 million to $90 million and certain other restructuring costs of approximately $15 million to $20 million. Cash outlays associated with the 2020 Restructuring Initiative are expected to be approximately $100 million to $110 million and consist primarily of employee separation, continuity and other benefit-related costs and certain other restructuring costs. The Company anticipates these actions will be substantially completed by the end of 2022, with substantially all cash payments made by then.
As a result of the 2020 Restructuring Initiative, the Company incurred the following pre-tax net charges during the three and nine months ended September 30, 2020 (in thousands):
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Accelerated depreciation charges$6,291 $14,676 
Asset impairment charges7,391 7,391 
Employee separation, continuity and other benefit-related costs (1)53,647 53,647 
Total$67,329 $75,714 
__________
(1)As of September 30, 2020, all employee-related costs have been recognized in accordance with ASC 712.
During the three and nine months ended September 30, 2020, these pre-tax net charges were primarily attributable to our Generic Pharmaceuticals segment, including $57.8 million and $66.2 million during the three and nine months ended September 30, 2020, respectively. The remaining amounts related to our other segments and certain corporate unallocated costs.
As of September 30, 2020, cumulative amounts incurred to date include accelerated depreciation charges of approximately $14.7 million, asset impairment charges related to identifiable intangible assets and certain operating lease assets of approximately $7.4 million and employee separation, continuity and other benefit-related costs of approximately $53.6 million. Of these amounts, approximately $66.2 million were attributable to the Generic Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs.
During the three and nine months ended September 30, 2020, the pre-tax net charges related to the 2020 Restructuring Initiative were included in our Condensed Consolidated Statements of Operations as follows (in thousands):
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Cost of revenues$36,172 $42,198 
Selling, general and administrative20,185 22,130 
Research and development3,581 3,995 
Asset impairment charges7,391 7,391 
Total$67,329 $75,714 
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Changes to the liability for the 2020 Restructuring Initiative during the nine months ended September 30, 2020 were as follows (in thousands):
Employee Separation, Continuity and Other Benefit-Related CostsTotal
Liability balance as of December 31, 2019$ $ 
Net charges53,647 53,647 
Liability balance as of September 30, 2020$53,647 $53,647 
Of the liability at September 30, 2020, $29.5 million is classified as current and is included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets, with the remaining amount classified as noncurrent and included in Other liabilities.
NOTE 5. 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 (loss) from continuing operations before income tax, which we define as 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 (loss) 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 September 30, 2019, certain legal costs of $14.4 million and $0.1 million have been excluded from our Branded Pharmaceuticals and Generic Pharmaceuticals segments, respectively, and for the nine months ended September 30, 2019, certain legal costs of $49.3 million and $1.0 million have been excluded from our Branded Pharmaceuticals and Generic Pharmaceuticals segments, respectively, resulting in increases to the Segment adjusted income (loss) from continuing operations before income tax for these segments. This change had no impact on our Total consolidated loss from continuing operations before income tax.
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 (loss) 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®, TESTOPEL®, EDEX® and LIDODERM®, 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 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.
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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 nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net revenues from external customers:
Branded Pharmaceuticals$223,682 $217,313 $557,276 $629,851 
Sterile Injectables251,393 263,635 906,997 777,963 
Generic Pharmaceuticals135,508 218,012 602,670 654,322 
International Pharmaceuticals (1)24,277 30,466 75,910 87,428 
Total net revenues from external customers$634,860 $729,426 $2,142,853 $2,149,564 
Segment adjusted income (loss) from continuing operations before income tax:
Branded Pharmaceuticals$120,368 $105,864 $267,964 $302,682 
Sterile Injectables190,498 197,974 696,147 566,345 
Generic Pharmaceuticals(13,428)29,569 91,293 129,702 
International Pharmaceuticals10,679 11,511 34,180 35,053 
Total segment adjusted income (loss) from continuing operations before income tax$308,117 $344,918 $1,089,584 $1,033,782 
__________
(1)Revenues generated by our International Pharmaceuticals segment are primarily attributable to external customers located in Canada.
There were no material revenues from external customers attributed to an individual country outside of the U.S. during any of the periods presented.
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The table below provides reconciliations of our Total consolidated loss from continuing operations before income tax, which is determined in accordance with U.S. GAAP, to our Total segment adjusted income (loss) from continuing operations before income tax for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Total consolidated loss from continuing operations before income tax$(64,800)$(24,070)$(18,299)$(120,363)
Interest expense, net135,648 136,903 397,689 404,387 
Corporate unallocated costs (1)39,976 37,891 116,888 124,351 
Amortization of intangible assets104,066 131,932 325,801 417,949 
Upfront and milestone payments to partners275 1,672 2,469 4,055 
Continuity and separation benefits and other cost reduction initiatives (2)67,692 11,023 100,356 15,172 
Certain litigation-related and other contingencies, net (3)1,810 (14,414)(23,938)(4,093)
Certain legal costs (4)18,343 14,556 51,884 50,229 
Asset impairment charges (5)8,412 4,766 106,197 258,652 
Acquisition-related and integration items, net (6)(1,407)16,025 17,100 (26,983)
Gain on extinguishment of debt   (119,828)
Foreign currency impact related to the remeasurement of intercompany debt instruments1,663 (922)(2,426)2,874 
Other, net (7)(3,561)29,556 15,863 27,380 
Total segment adjusted income (loss) from continuing operations before income tax$308,117 $344,918 $1,089,584 $1,033,782 
__________
(1)Amounts include certain corporate overhead costs, such as headcount, facility and corporate litigation expenses and certain other income and expenses.
(2)Included within this line are costs associated with certain continuity and transitional compensation arrangements for certain senior management of the Company, including $4.3 million and $22.2 million during the three and nine months ended September 30, 2020, respectively, and $6.7 million during both the three and nine months ended September 30, 2019. Other amounts primarily relate to the 2020 Restructuring Initiative and certain other cost reduction initiatives, including employee separation, continuity and other benefit-related costs of $53.6 million, accelerated depreciation of $6.3 million and miscellaneous charges of $3.4 million during the three months ended September 30, 2020; employee separation, continuity and other benefit-related costs of $53.6 million, accelerated depreciation of $14.7 million and miscellaneous charges of $9.8 million during the nine months ended September 30, 2020; miscellaneous charges of $4.3 million during the three months ended September 30, 2019; and employee separation, continuity and other benefit-related costs of $2.2 million and miscellaneous charges of $6.3 million during the nine months ended September 30, 2019. Refer to Note 4. Restructuring for further discussion of the 2020 Restructuring Initiative.
(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 13. Commitments and Contingencies.
(4)Amounts relate to opioid-related legal expenses.
(5)Amounts primarily relate to charges to impair goodwill and intangible assets and operating lease right-of-use assets as further described in Note 9. Goodwill and Other Intangibles and Note 8. Leases, respectively.
(6)Amounts primarily relate to changes in the fair value of contingent consideration.
(7)The amount during the nine months ended September 30, 2020 includes $31.1 million of third-party fees incurred in connection with the June 2020 Refinancing Transactions, which were accounted for as debt modifications. Refer to Note 12. Debt for additional information. Amounts during the three and nine months ended September 30, 2019 include $17.5 million for contract termination costs incurred as a result of certain product discontinuation activities in our International Pharmaceuticals segment and $14.1 million for a premium associated with an extended reporting period endorsement on an expiring insurance program. Remaining amounts in this line primarily relate to gains on sales of businesses and other assets, as further described in Note 16. 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.
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During the three and nine months ended September 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 September 30,Nine Months Ended September 30,
2020201920202019
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®$88,167 $82,756 $211,022 $226,118 
SUPPRELIN® LA28,229 20,772 63,344 66,542 
Other Specialty (1)23,724 28,470 68,795 78,397 
Total Specialty Products$140,120 $131,998 $343,161 $371,057 
Established Products:
PERCOCET®$27,508 $28,561 $82,789 $88,199 
TESTOPEL®18,068 13,236 26,877 40,830 
Other Established (2)37,986 43,518 104,449 129,765 
Total Established Products$83,562 $85,315 $214,115 $258,794 
Total Branded Pharmaceuticals (3)$223,682 $217,313 $557,276 $629,851 
Sterile Injectables:
VASOSTRICT®$155,412 $129,691 $572,530 $384,854 
ADRENALIN®30,662 40,311 120,335 133,468 
Ertapenem for injection16,784 21,853 46,648 79,619 
APLISOL®9,443 28,085 25,821 55,996 
Other Sterile Injectables (4)39,092 43,695 141,663 124,026 
Total Sterile Injectables (3)$251,393 $263,635 $906,997 $777,963 
Total Generic Pharmaceuticals (5)$135,508 $218,012 $602,670 $654,322 
Total International Pharmaceuticals (6)$24,277 $30,466 $75,910 $87,428 
Total revenues, net$634,860 $729,426 $2,142,853 $2,149,564 
__________
(1)Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®.
(2)Products included within Other Established include, but are not limited to, EDEX® and LIDODERM®.
(3)Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2020 and/or any product having revenues in excess of $25 million during any quarterly period in 2020 or 2019.
(4)Products included within Other Sterile Injectables include ephedrine sulfate injection and others.
(5)The Generic Pharmaceuticals segment is comprised of a portfolio of products that are generic versions of branded products, are distributed primarily through the same wholesalers, generally have no intellectual property protection and are sold within the U.S. During the three and nine months ended September 30, 2019, colchicine tablets (the authorized generic of Takeda Pharmaceuticals U.S.A., Inc.’s (Takeda) Colcrys®), which launched in July 2018, made up 7% and 6% of consolidated total revenues, respectively. No other individual product within this segment has exceeded 5% of consolidated total revenues for the periods presented.
(6)The International Pharmaceuticals segment, which accounted for less than 5% of consolidated total revenues for each of the periods presented, includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through our operating company Paladin.
NOTE 6. FAIR VALUE MEASUREMENTS
Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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Table of Contents
Financial Instruments
The financial instruments recorded in our Condensed Consolidated Balance Sheets include cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, equity method investments, accounts payable and accrued expenses, acquisition-related contingent consideration and debt obligations. Included in cash and cash equivalents and restricted cash and cash equivalents are money market funds representing a type of mutual fund required by law to invest in low-risk securities (for example, U.S. government bonds, U.S. Treasury Bills and commercial paper). Money market funds pay dividends that generally reflect short-term interest rates. Due to their short-term maturity, the carrying amounts of non-restricted and restricted cash and cash equivalents (including money market funds), accounts receivable, accounts payable and accrued expenses approximate their fair values.
Restricted Cash and Cash Equivalents
The following table presents current and noncurrent restricted cash and cash equivalent balances at September 30, 2020 and December 31, 2019 (in thousands):
Condensed Consolidated Balance Sheets Line ItemsSeptember 30, 2020December 31, 2019
Restricted cash and cash equivalents—currentRestricted cash and cash equivalents$162,648 $247,457 
Restricted cash and cash equivalents—noncurrentOther assets18,400 18,400 
Total restricted cash and cash equivalents$181,048 $265,857 
The restricted cash and cash equivalents amounts primarily relate to litigation-related matters, including approximately $136.3 million and $242.8 million held in Qualified Settlement Funds (QSFs) for mesh-related matters at September 30, 2020 and December 31, 2019, respectively. See Note 13. Commitments and Contingencies for further information about mesh-related and other litigation-related matters. Additionally, at September 30, 2020, approximately $25.0 million of restricted cash and cash equivalents related to certain insurance-related matters.
Acquisition-Related Contingent Consideration
The fair value of contingent consideration liabilities is determined using unobservable inputs; hence, these instruments represent Level 3 measurements within the above-defined fair value hierarchy. These inputs include the estimated amount and timing of projected cash flows, the probability of success (achievement of the contingent event) and the risk-adjusted discount rate used to present value the probability-weighted cash flows. Subsequent to the acquisition date, at each reporting period, the contingent consideration liability is remeasured at current fair value with changes recorded in earnings. The estimates of fair value are uncertain and changes in any of the estimated inputs used as of the date of this report could have resulted in significant adjustments to fair value. See the “Recurring Fair Value Measurements” section below for additional information on acquisition-related contingent consideration.
Recurring Fair Value Measurements
The Company’s financial assets and liabilities measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019 were as follows (in thousands):
Fair Value Measurements at September 30, 2020 using:
Level 1 InputsLevel 2 InputsLevel 3 InputsTotal
Assets:
Money market funds$628,875 $ $ $628,875 
Liabilities:
Acquisition-related contingent consideration—current$ $ $9,665 $9,665 
Acquisition-related contingent consideration—noncurrent$ $ $28,044 $28,044 
Fair Value Measure