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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 JUNE 30, 2022
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)
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
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
The number of ordinary shares, nominal value $0.0001 per share outstanding as of August 1, 2022 was 235,142,889.



ENDO INTERNATIONAL PLC
INDEX
Page
 



Table of Contents
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 statements relating to the status and outcome of litigation, any future financial results, cost savings, revenues, expenses, net income and income per share, as well as 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 economic impact, anticipated return to historical purchasing decisions by customers, 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), the expansion of our product pipeline and any development, approval, launch or commercialization activities, the outcome or progress of our contingency planning, including any potential bankruptcy filing, and any other statements that refer to Endo’s expected, estimated or anticipated future results. We have tried, whenever possible, to identify such statements with 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, governmental actions and restrictive measures, delays and cancellations of medical procedures, manufacturing and supply chain disruptions and other impacts to our business); the timing or results of any pending or future litigation, investigations or claims or actual or contingent liabilities, settlement discussions, negotiations or other adverse proceedings, including proceedings involving opioid-related matters, antitrust matters and tax matters with the United States (U.S.) Internal Revenue Service (IRS); our ability to reach a resolution with certain of our financial creditors and opioid-related plaintiffs in connection with ongoing restructuring and settlement discussions; unfavorable publicity regarding the misuse of opioids; changing competitive, market and regulatory conditions; changes in legislation; our ability to obtain and maintain adequate protection for our intellectual property rights; the impacts of competition such as those related to the loss of VASOSTRICT® exclusivity; the timing and uncertainty of the results of both the research and development and regulatory processes, including regulatory decisions, product recalls, withdrawals and other unusual items; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; technological advances and patents obtained by competitors; the performance, including the approval, introduction and consumer and physician acceptance of new products and the continuing acceptance of currently marketed products; our ability to develop or expand our product pipeline and to continue to develop the market for QWO®, XIAFLEX® and other branded or unbranded products; the impact that known and unknown side effects may have on market perception and consumer preference; the success of any acquisition, licensing or commercialization; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of any strategic and/or optimization initiatives; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; our ability to obtain and successfully manufacture, maintain and distribute a sufficient supply of products to meet market demand in a timely manner; the timing and uncertainty of the results of our strategic review and any related potential bankruptcy; and the other risks and uncertainties more fully described under the caption “Risk Factors” in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (SEC) on March 1, 2022 (the Annual Report), in Part II, Item 1A of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the SEC on May 6, 2022 (the First Quarter 2022 Form 10-Q), in Part II, Item 1A of this report and in other reports that we file with the SEC. 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, including with respect to opioid, tax or antitrust related proceedings or any other litigation; our ability to adjust to changing market conditions; our ability to attract and retain key personnel; our ability to maintain compliance with our financial obligations under certain of our outstanding debt obligations and avoid related downgrades of our debt and long-term corporate credit ratings (which could increase our cost of capital) and/or potential events of default (if not cured or waived) under financial and operating covenants contained in our or our subsidiaries’ outstanding indebtedness; our ability to incur additional borrowings in compliance with the covenants in our then-existing facilities or to obtain additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions or general corporate or other purposes, or to refinance our indebtedness; and/or the potential for a significant reduction in our short-term and long-term revenues and/or any other factor that could cause us to be unable to fund our operations and liquidity needs, such as future capital expenditures and payment of our indebtedness. As a result of the possibility or occurrence of any such result, we have engaged in and, at any given time, may further engage in strategic reviews of all or a portion of our business. Any such review or contingency planning may ultimately result in our pursuing one or more significant corporate transactions or other remedial measures, including on a preventative or proactive basis. Pursuant to such remedial measures, we currently expect to seek protection from our creditors under Chapter 11 of the Bankruptcy Code, which could occur imminently and would subject us to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, as further described herein. We would, in that event, also be subject to risks and uncertainties caused by the actions of creditors and other third parties with interests that may be inconsistent with our plans.
i

Table of Contents
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 (SEDAR). Also note that, in Part I, Item 1A of the Annual Report, Part II, Item 1A of the First Quarter 2022 Form 10-Q and Part II, Item 1A of this report, we provide a cautionary discussion of 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.
ii

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, 2022December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$1,191,572 $1,507,196 
Restricted cash and cash equivalents113,493 124,114 
Accounts receivable, net491,492 592,019 
Inventories, net287,756 283,552 
Prepaid expenses and other current assets97,105 200,484 
Income taxes receivable7,406 7,221 
Assets held for sale (NOTE 3)11,080  
Total current assets$2,199,904 $2,714,586 
PROPERTY, PLANT AND EQUIPMENT, NET405,749 396,712 
OPERATING LEASE ASSETS31,343 34,832 
GOODWILL1,449,011 3,197,011 
OTHER INTANGIBLES, NET2,133,955 2,362,823 
DEFERRED INCOME TAXES 1,138 
OTHER ASSETS142,300 60,313 
TOTAL ASSETS$6,362,262 $8,767,415 
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses$749,873 $836,898 
Current portion of legal settlement accrual390,781 580,994 
Current portion of operating lease liabilities10,870 10,992 
Current portion of long-term debt26,119 200,342 
Income taxes payable4,029 736 
Total current liabilities$1,181,672 $1,629,962 
DEFERRED INCOME TAXES14,902 21,628 
LONG-TERM DEBT, LESS CURRENT PORTION, NET8,039,178 8,048,980 
LONG-TERM LEGAL SETTLEMENT ACCRUAL, LESS CURRENT PORTION5,000  
OPERATING LEASE LIABILITIES, LESS CURRENT PORTION29,068 33,727 
OTHER LIABILITIES290,514 277,104 
COMMITMENTS AND CONTINGENCIES (NOTE 14)
SHAREHOLDERS’ DEFICIT:
Euro deferred shares, $0.01 par value; 4,000,000 shares authorized and issued at both June 30, 2022 and December 31, 2021
42 45 
Ordinary shares, $0.0001 par value; 1,000,000,000 shares authorized; 235,139,243 and 233,690,816 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
24 23 
Additional paid-in capital8,959,662 8,953,906 
Accumulated deficit(11,938,916)(9,981,515)
Accumulated other comprehensive loss(218,884)(216,445)
Total shareholders’ deficit$(3,198,072)$(1,243,986)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT$6,362,262 $8,767,415 
See accompanying Notes to Condensed Consolidated Financial Statements.
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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,
2022202120222021
TOTAL REVENUES, NET$569,114 $713,830 $1,221,373 $1,431,749 
COSTS AND EXPENSES:
Cost of revenues263,786 318,480 537,001 623,773 
Selling, general and administrative180,830 177,619 407,991 364,793 
Research and development29,788 29,669 65,918 59,408 
Acquired in-process research and development65,000 5,000 67,900 5,000 
Litigation-related and other contingencies, net208 35,195 25,362 35,832 
Asset impairment charges1,781,063 4,929 1,801,016 8,238 
Acquisition-related and integration items, net1,825 97 448 (4,925)
Interest expense, net139,784 141,553 274,733 275,894 
Loss on extinguishment of debt   13,753 
Other (income) expense, net(19,438)372 (18,149)1,284 
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX$(1,873,732)$916 $(1,940,847)$48,699 
INCOME TAX EXPENSE7,151 11,100 5,336 11,824 
(LOSS) INCOME FROM CONTINUING OPERATIONS$(1,880,883)$(10,184)$(1,946,183)$36,875 
DISCONTINUED OPERATIONS, NET OF TAX (NOTE 3)(4,544)(5,316)(11,218)(10,851)
NET (LOSS) INCOME$(1,885,427)$(15,500)$(1,957,401)$26,024 
NET (LOSS) INCOME PER SHARE—BASIC:
Continuing operations$(8.00)$(0.04)$(8.30)$0.16 
Discontinued operations(0.02)(0.03)(0.05)(0.05)
Basic$(8.02)$(0.07)$(8.35)$0.11 
NET (LOSS) INCOME PER SHARE—DILUTED:
Continuing operations$(8.00)$(0.04)$(8.30)$0.16 
Discontinued operations(0.02)(0.03)(0.05)(0.05)
Diluted$(8.02)$(0.07)$(8.35)$0.11 
WEIGHTED AVERAGE SHARES:
Basic235,117 233,331 234,498 231,941 
Diluted235,117 233,331 234,498 237,043 
See accompanying Notes to Condensed Consolidated Financial Statements.
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ENDO INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(Dollars in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
NET (LOSS) INCOME$(1,885,427)$(15,500)$(1,957,401)$26,024 
OTHER COMPREHENSIVE (LOSS) INCOME:
Net unrealized (loss) gain on foreign currency$(4,334)$2,238 $(2,439)$3,930 
Total other comprehensive (loss) income$(4,334)$2,238 $(2,439)$3,930 
COMPREHENSIVE (LOSS) INCOME$(1,889,761)$(13,262)$(1,959,840)$29,954 
See accompanying Notes to Condensed Consolidated Financial Statements.
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ENDO INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Six Months Ended June 30,
20222021
OPERATING ACTIVITIES:
Net (loss) income$(1,957,401)$26,024 
Adjustments to reconcile Net (loss) income to Net cash provided by operating activities:
Depreciation and amortization206,224 237,703 
Share-based compensation7,650 14,437 
Amortization of debt issuance costs and discount7,470 7,120 
Deferred income taxes(5,416)(3,555)
Change in fair value of contingent consideration448 (5,336)
Loss on extinguishment of debt 13,753 
Acquired in-process research and development charges67,900 5,000 
Asset impairment charges1,801,016 8,238 
(Gain) loss on sale of business and other assets(11,745)91 
Changes in assets and liabilities which provided (used) cash:
Accounts receivable93,519 52,283 
Inventories(25,369)20,406 
Prepaid and other assets120,013 17,965 
Accounts payable, accrued expenses and other liabilities(239,449)(49,475)
Income taxes payable/receivable, net3,043 54,162 
Net cash provided by operating activities$67,903 $398,816 
INVESTING ACTIVITIES:
Capital expenditures, excluding capitalized interest(47,559)(41,345)
Capitalized interest payments(3,140)(2,563)
Proceeds from the U.S. Government Agreement7,340  
Acquisitions, including in-process research and development, net of cash and restricted cash acquired(89,520) 
Product acquisition costs and license fees (2,485)
Proceeds from sale of business and other assets, net21,133 1,343 
Net cash used in investing activities$(111,746)$(45,050)
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ENDO INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Six Months Ended June 30,
20222021
FINANCING ACTIVITIES:
Proceeds from issuance of notes, net 1,279,978 
Proceeds from issuance of term loans, net 1,980,000 
Repayments of notes(180,342) 
Repayments of term loans(10,000)(3,300,475)
Repayments of other indebtedness(2,970)(2,669)
Payments for debt issuance and extinguishment costs (7,618)
Payments for contingent consideration(1,744)(1,471)
Payments of tax withholding for restricted shares(1,894)(14,114)
Proceeds from exercise of options 622 
Net cash used in financing activities$(196,950)$(65,747)
Effect of foreign exchange rate(452)711 
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS$(241,245)$288,730 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD1,631,310 1,385,000 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD$1,390,065 $1,673,730 
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 SIX MONTHS ENDED JUNE 30, 2022
NOTE 1. BASIS OF PRESENTATION
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 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, 2022 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The year-end Condensed Consolidated Balance Sheet data as of December 31, 2021 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. The reclassification adjustments primarily relate to changes to the presentation of certain costs and expenses in our Condensed Consolidated Statements of Operations. Specifically, effective with the First Quarter 2022 Form 10-Q, the Company has added a new financial statement line item labeled Acquired in-process research and development. Any prior period amounts of acquired in-process research and development charges presented in this report have been reclassified to this line item from the existing financial statement line item labeled Research and development.
Going Concern
As previously disclosed, as a result of the possibility or occurrence of an unfavorable outcome with respect to any legal proceeding, we have engaged in and, at any given time, may further engage in strategic reviews of all or a portion of our business. Any such review or contingency planning may ultimately result in our pursuing one or more significant corporate transactions or other remedial measures, including on a preventative or proactive basis. Some of these actions could take significant time to implement and others may require judicial or other third-party approval. As further described below, thousands of governmental and private plaintiffs have filed suit against us and/or certain of our subsidiaries alleging opioid-related claims. We have not been able to settle most of the opioid claims made against us and, as a result, we are exploring a wide array of potential actions as part of our contingency planning.
During the second quarter of 2022, our contingency planning process continued to advance. For example, we have been working with our external advisors to explore a range of options and have been engaging in dialogue with certain financial creditors and litigation claimants, together with their advisors. While continuing these discussions and our evaluation of strategic alternatives, we elected, for certain of our senior notes, to not make certain interest payments as they became due beginning on June 30, 2022. Under each of the indentures governing these notes, we have a 30-day grace period from the respective due dates to make these interest payments before such non-payments constitute events of default with respect to such notes. As of the date of this report, these interest payments either: (i) had been paid before the end of any applicable grace periods or (ii) remained unpaid but were still within applicable grace periods. However, we remain in constructive negotiations with an ad hoc group of first lien creditors, among other parties, and, in light of the progress to date, we currently expect that these negotiations will likely result in a pre-arranged filing under Chapter 11 of the U.S. Bankruptcy Code by Endo International plc and substantially all of its subsidiaries, which could occur imminently. There can be no assurance of such an outcome. Despite a likely Chapter 11 filing, we retain substantial liquidity, with approximately $1.19 billion of unrestricted cash on our Condensed Consolidated Balance Sheets as of June 30, 2022, and we continue to meet our obligations to customers, vendors, counterparties and employees in the ordinary course of business.
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As we continue discussions with certain of our creditors and/or consider further actions in connection with our evaluation of strategic alternatives, we cannot predict with certainty whether the remaining unpaid interest payments referenced above will be made by the end of any applicable grace periods or whether they and/or any of our future interest payments will be made timely, or at all. If one or more events of default were to occur under any of the agreements relating to our outstanding indebtedness, including without limitation as a result of us not making interest payments by the end of any applicable grace periods and/or us issuing audited financial statements containing an audit opinion with going concern or similar qualifications or exceptions, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to become due and payable immediately, terminate all commitments to extend further credit, foreclose against assets comprising the collateral securing or otherwise supporting the debt and pursue other legal remedies. Additionally, the instruments governing our debt contain cross-default or cross-acceleration provisions that may cause all of the debt issued under such instruments to become immediately due and payable as a result of a default under an unrelated debt instrument. Our assets and cash flows may be insufficient to fully repay borrowings under our outstanding debt instruments if the obligations thereunder were accelerated upon one or more events of default. Refer to the “Covenants and Events of Default” section of Note 13. Debt for further discussion.
Any of the circumstances above would subject us to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, including, but not limited to, by causing increased difficulty obtaining and maintaining commercial relationships on competitive terms with customers, suppliers and other counterparties; increased difficulty retaining and motivating key employees, as well as attracting new employees; diversion of management’s time and attention to dealing with bankruptcy and restructuring activities rather than focusing exclusively on business operations; incurrence of substantial costs, fees and other expenses associated with bankruptcy proceedings; and loss of ability to maintain or obtain sufficient financing sources for operations or to fund any reorganization plan and meet future obligations. We would, in that event, also be subject to risks and uncertainties caused by the actions of creditors and other third parties with interests that may be inconsistent with our plans. Certain of these risks and uncertainties could also occur if our suppliers or other third parties believe that we may pursue one or more significant corporate transactions or other remedial measures.
Taken together, we believe the conditions and events described above raise substantial doubt about our ability to continue as a going concern within one year after the date of issuance of these unaudited Condensed Consolidated Financial Statements. While the accompanying unaudited Condensed Consolidated Financial Statements have been prepared under the going concern basis of accounting, we continue to evaluate plans to resolve our risks to continue to operate as a going concern. These plans, however, have not yet been finalized and are not fully within our control. As a result, management has concluded that its plans at this stage do not alleviate substantial doubt about Endo’s ability to continue as a going concern.
The unaudited Condensed Consolidated Financial Statements do not include any material adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might result from the outcome of this uncertainty. See Note 18. Income Taxes for discussion regarding the impact of our going concern assessment on the valuation allowance related to our net deferred tax assets.
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 and assumptions that affect the amounts and disclosures in our Condensed Consolidated Financial Statements, including the Notes thereto, and elsewhere in this report. For example, we are required to make significant estimates and assumptions related to revenue recognition, including sales deductions, long-lived assets, goodwill, other intangible assets, income taxes, contingencies, financial instruments and share-based compensation, among others. Some of these estimates can be subjective and complex. 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. Furthermore, as further discussed in Note 1. Basis of Presentation, as a result of the possibility or occurrence of an unfavorable outcome with respect to any legal proceeding, we have engaged in and, at any given time, may further engage in strategic reviews of all or a portion of our business. Any such review or contingency planning may ultimately result in our pursuing one or more significant corporate transactions or other remedial measures, including on a preventative or proactive basis. Any such action could ultimately result in, among other things, asset impairment charges that may be material. Although we believe that our estimates and assumptions are reasonable, there may be other reasonable estimates or assumptions that differ significantly from ours. Further, our estimates and assumptions are based upon information available at the time they were made. Actual results may differ significantly from our estimates, including as a result of the uncertainties described in this report, those described in our other reports filed with the SEC or other uncertainties.
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Significant Accounting Policies Added or Updated since December 31, 2021
There have been no significant changes to our significant accounting policies since December 31, 2021. 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.
NOTE 3. DISCONTINUED OPERATIONS AND HELD FOR SALE
Astora
The operating results of the Company’s Astora business, which the 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, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Loss from discontinued operations before income taxes$(4,544)$(5,873)$(11,218)$(12,094)
Income tax benefit (557) (1,243)
Discontinued operations, net of tax$(4,544)$(5,316)$(11,218)$(10,851)
Loss from discontinued operations before income taxes includes 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 $11.2 million and $10.9 million for the six months ended June 30, 2022 and 2021, respectively, and the impact of cash activity related to vaginal mesh cases. During the periods presented above, there were no material net cash flows related to Astora discontinued investing activities and there was no depreciation or amortization expense related to Astora.
Certain Assets and Liabilities of Endo’s Retail Generics Business
In November 2020, we announced the initiation of several strategic actions to further optimize the Company’s operations and increase overall efficiency, which are collectively referred to as the 2020 Restructuring Initiative and are further discussed in Note 4. Restructuring. These actions include an initiative to exit certain of our manufacturing and other sites to optimize our retail generics business cost structure. As part of this initiative, certain of these sites were sold in 2021 as further discussed in the Annual Report. Additionally, during the second quarter of 2022, we entered into a definitive agreement to sell certain additional assets located in Chestnut Ridge, New York that supported our retail generics business to Ram Ridge Partners BH LLC (Ram Ridge Partners). As of June 30, 2022, the sale has not yet closed; it is expected to close in the third quarter of 2022.
During the second quarter of 2022, these assets, which include property, plant and equipment with a carrying amount of approximately $11 million as of June 30, 2022, met the criteria to be classified as held for sale in the Condensed Consolidated Balance Sheets. Depreciation expense is not recorded on assets held for sale. These assets, which primarily related to the Company’s Generic Pharmaceuticals segment, did not meet the requirements for treatment as a discontinued operation.
NOTE 4. RESTRUCTURING
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 were initiated with the expectation of generating significant cost savings to be reinvested, among other things, to support the Company’s key strategic priority to expand and enhance its product portfolio. These actions, which we have been progressing, include the following:
Optimizing the Company’s retail generics business cost structure by exiting manufacturing and other sites in Irvine, California and Chestnut Ridge, New York, as well as certain sites in India. Certain of the sites have already been exited and certain products historically manufactured at these sites have been transferred to other internal and external sites within the Company’s manufacturing network.
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.
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As a result of the 2020 Restructuring Initiative, the Company’s global workforce is ultimately expected to be reduced by up to approximately 500 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 $170 million to $185 million, of which approximately $140 million to $155 million relates to the Generic Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs. The estimated expenses consist of accelerated depreciation charges of approximately $50 million to $55 million, asset impairment charges of approximately $50 million, employee separation, continuity and other benefit-related costs of approximately $55 million to $60 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 $75 million and consist primarily of employee separation, continuity and other benefit-related costs and certain other restructuring costs. By the end of 2022, the Company expects that substantially all of these costs will have been incurred and substantially all related cash payments will have been made.
The following pre-tax net amounts related to the 2020 Restructuring Initiative are included in the Company’s Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net restructuring (charge reversals) charges related to:
Accelerated depreciation$147 $9,072 $3,824 $15,979 
Inventory adjustments261 745 1,027 5,794 
Employee separation, continuity and other benefit-related costs(655)1,721 1,723 8,331 
Certain other restructuring costs108 936 682 1,794 
Total$(139)$12,474 $7,256 $31,898 
These pre-tax net amounts were primarily attributable to our Generic Pharmaceuticals segment, which incurred $0.1 million and $5.1 million of pre-tax net charges during the three and six months ended June 30, 2022, respectively, and $7.6 million and $22.5 million of pre-tax net charges during the three and six months ended June 30, 2021, respectively. The remaining amounts related to our other segments and certain corporate unallocated costs.
As of June 30, 2022, cumulative amounts incurred to date include charges related to accelerated depreciation of approximately $51.0 million, asset impairments related to certain identifiable intangible assets, operating lease assets and disposal groups totaling approximately $49.5 million, inventory adjustments of approximately $11.1 million, employee separation, continuity and other benefit-related costs, net of approximately $54.4 million and certain other restructuring costs of approximately $3.4 million. Of these amounts, approximately $133.9 million was attributable to the Generic Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs.
The following pre-tax net amounts related to the 2020 Restructuring Initiative are included in the Company’s Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net restructuring (charge reversals) charges included in:
Cost of revenues$391 $5,048 $3,650 $20,344 
Selling, general and administrative(712)6,686 444 10,228 
Research and development182 740 3,162 1,326 
Total$(139)$12,474 $7,256 $31,898 
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Changes to the liability for the 2020 Restructuring Initiative during the six months ended June 30, 2022 were as follows (in thousands):
Employee Separation, Continuity and Other Benefit-Related CostsCertain Other Restructuring CostsTotal
Liability balance as of December 31, 2021$10,979 $205 $11,184 
Net charges1,723 683 2,406 
Cash payments(9,966)(888)(10,854)
Liability balance as of June 30, 2022$2,736 $ $2,736 
Of the liability at June 30, 2022, approximately $2.5 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.
2022 Restructuring Initiative
On April 28, 2022, the Company communicated the initiation of actions to streamline and simplify certain functions, including its commercial organization, to increase its overall organizational effectiveness and better align with current and future needs (the 2022 Restructuring Initiative). These actions were initiated with the expectation of generating cost savings, with a portion to be reinvested to support the Company’s key strategic priority to expand and enhance its product portfolio.
As a result of the 2022 Restructuring Initiative, the Company’s global workforce is ultimately expected to be reduced by up to approximately 125 net full-time positions. The Company expects to realize annualized pre-tax cash savings (without giving effect to the costs described below) of approximately $55 million to $65 million by the second quarter of 2023, primarily related to reductions in Selling, general and administrative expenses.
As a result of the 2022 Restructuring Initiative, the Company expects to incur total pre-tax restructuring-related expenses of approximately $40 million to $55 million, the majority of which relates to the Branded Pharmaceuticals segment, with the remaining amounts relating to our other segments and certain corporate unallocated costs. These estimates consist of employee separation, continuity and other benefit-related costs of approximately $25 million to $35 million and certain other restructuring costs of approximately $15 million to $20 million. Cash outlays associated with the 2022 Restructuring Initiative are expected to be approximately $30 million and consist primarily of employee separation, continuity and other benefit-related costs. The Company anticipates these actions will be substantially completed by the second quarter of 2023, with substantially all cash payments made by then.
The following pre-tax net amounts related to the 2022 Restructuring Initiative are included in the Company’s Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2022 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
20222022
Net restructuring charges (charge reversals) related to:
Inventory adjustments$905 $2,462 
Employee separation, continuity and other benefit-related costs(233)20,087 
Certain other restructuring costs 7,555 
Total$672 $30,104 
These pre-tax net amounts were primarily attributable to our Branded Pharmaceuticals segment, which incurred $0.6 million and $17.0 million of pre-tax net charges during the three and six months ended June 30, 2022, respectively. The remaining amounts related to our Generic Pharmaceuticals segment and certain corporate unallocated costs.
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The following pre-tax net amounts related to the 2022 Restructuring Initiative are included in the Company’s Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2022 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
20222022
Net restructuring charges (charge reversals) included in:
Cost of revenues$1,169 $13,284 
Selling, general and administrative(907)12,719 
Research and development410 4,101 
Total$672 $30,104 
Changes to the liability for the 2022 Restructuring Initiative during the six months ended June 30, 2022 were as follows (in thousands):
Employee Separation, Continuity and Other Benefit-Related CostsTotal
Liability balance as of December 31, 2021$ $ 
Net charges20,087 20,087 
Cash payments(8,950)(8,950)
Liability balance as of June 30, 2022$11,137 $11,137 
Of the liability at June 30, 2022, approximately $7.3 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 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 (Loss) income from continuing operations before income tax and before acquired in-process research and development charges; 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; certain amounts related to strategic review initiatives; 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.
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 products in the areas of urology, orthopedics, endocrinology, medical aesthetics and bariatrics, among others. The products in this segment include XIAFLEX®, SUPPRELIN® LA, NASCOBAL® Nasal Spray, AVEED®, QWO®, PERCOCET®, TESTOPEL® and EDEX®, 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.
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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 that treat and manage a wide variety of medical conditions.
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, oncology and transplantation.
The following represents selected information for the Company’s reportable segments for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net revenues from external customers:
Branded Pharmaceuticals$218,952 $228,040 $423,813 $434,675 
Sterile Injectables123,171 294,600 363,199 603,345 
Generic Pharmaceuticals203,377 167,272 389,321 348,145 
International Pharmaceuticals (1)23,614 23,918 45,040 45,584 
Total net revenues from external customers$569,114 $713,830 $1,221,373 $1,431,749 
Segment adjusted income from continuing operations before income tax:
Branded Pharmaceuticals$88,613 $101,659 $166,279 $195,428 
Sterile Injectables68,397 226,983 259,651 469,622 
Generic Pharmaceuticals83,337 20,922 149,719 55,026 
International Pharmaceuticals8,472 10,102 12,853 17,573 
Total segment adjusted income from continuing operations before income tax$248,819 $359,666 $588,502 $737,649 
__________
(1)Revenues generated by our International Pharmaceuticals segment are primarily attributable to external customers located in Canada.
There were no material revenues from external customers attributed to an individual country outside of the U.S. during any of the periods presented.
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The table below provides reconciliations of our Total consolidated (loss) income from continuing operations before income tax, which is determined in accordance with U.S. GAAP, to our Total segment adjusted income from continuing operations before income tax for the three and six months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Total consolidated (loss) income from continuing operations before income tax$(1,873,732)$916 $(1,940,847)$48,699 
Interest expense, net139,784 141,553 274,733 275,894 
Corporate unallocated costs (1)38,388 36,500 81,669 75,974 
Amortization of intangible assets87,568 94,070 177,802 189,200 
Acquired in-process research and development charges65,000 5,000 67,900 5,000 
Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (2)37,347 15,083 94,996 38,803 
Certain litigation-related and other contingencies, net (3)208 35,195 25,362 35,832 
Certain legal costs (4)(9,462)24,843 23,270 44,119 
Asset impairment charges (5)1,781,063 4,929 1,801,016 8,238 
Acquisition-related and integration items, net (6)1,825 97 448 (4,925)
Loss on extinguishment of debt   13,753 
Foreign currency impact related to the remeasurement of intercompany debt instruments(2,092)1,355 (894)2,502 
Other, net (7)(17,078)125 (16,953)4,560 
Total segment adjusted income from continuing operations before income tax$248,819 $359,666 $588,502 $737,649 
__________
(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 months ended June 30, 2022 include net employee separation, continuity and other benefit-related charges of $11.7 million, accelerated depreciation charges of $0.1 million and other net charges, including those related to strategic review initiatives, of $25.5 million. Amounts for the six months ended June 30, 2022 include net employee separation, continuity and other benefit-related charges of $44.1 million, accelerated depreciation charges of $3.8 million and other net charges, including those related to strategic review initiatives, of $47.1 million. Amounts for the three months ended June 30, 2021 include net employee separation, continuity and other benefit-related charges of $1.6 million, accelerated depreciation charges of $9.1 million and other net charges, including those related to strategic review initiatives, of $4.4 million. Amounts for the six months ended June 30, 2021 include net employee separation, continuity and other benefit-related charges of $10.1 million, accelerated depreciation charges of $16.0 million and other net charges, including those related to strategic review initiatives, of $12.7 million. These amounts relate primarily to our restructuring activities as further described in Note 4. Restructuring, certain continuity and transitional compensation arrangements, certain other cost reduction initiatives and certain strategic review initiatives.
(3)Amounts include adjustments to our accruals for litigation-related settlement charges. Our material legal proceedings and other contingent matters are described in more detail in Note 14. Commitments and Contingencies.
(4)Amounts relate to opioid-related legal expenses. The amount during the second quarter of 2022 reflects the recovery of certain previously-incurred opioid-related legal expenses.
(5)Amounts primarily relate to charges to impair goodwill and intangible assets. For additional information, refer to Note 9. Goodwill and Other Intangibles.
(6)Amounts primarily relate to changes in the fair value of contingent consideration.
(7)Amounts for the six months ended June 30, 2021 primarily relate to $3.9 million of third-party fees incurred in connection with the March 2021 Refinancing Transactions, which were accounted for as debt modification costs. Refer to Note 13. Debt for additional information. Other amounts in this row relate to gains and losses on sales of businesses and other assets and certain other items.
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 six months ended June 30, 2022 and 2021, 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,
2022202120222021
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®$120,878 $111,487 $220,362 $206,757 
SUPPRELIN® LA24,739 27,568 53,569 55,596 
Other Specialty (1)18,246 28,036 38,990 48,068 
Total Specialty Products$163,863 $167,091 $312,921 $310,421 
Established Products:
PERCOCET®$26,256 $26,156 $52,431 $51,781 
TESTOPEL®10,021 9,439 18,901 20,628 
Other Established (2)18,812 25,354 39,560 51,845 
Total Established Products$55,089 $60,949 $110,892 $124,254 
Total Branded Pharmaceuticals (3)$218,952 $228,040 $423,813 $434,675 
Sterile Injectables:
VASOSTRICT®$35,630 $197,121 $191,520