Endo Reports Fourth-Quarter And Full-Year 2019 Financial Results

Endo Reports Fourth-Quarter And Full-Year 2019 Financial Results

PR Newswire

DUBLIN, Feb. 26, 2020

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

— Full-Year 2020 Financial Guidance Provided for Revenue, Adjusted Diluted Net Income per Share from Continuing Operations and Adjusted EBITDA —

DUBLIN, Feb. 26, 2020 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported financial results for the fourth quarter and full year ended December 31, 2019.

FINANCIAL PERFORMANCE
(in thousands, except per share amounts)


Three months ended December 31,




Year ended December 31,




2019


2018


Change


2019


2018


Change

Total Revenues, Net

$

764,800



$

786,389



(3)

%


$

2,914,364



$

2,947,078



(1)

%

Reported Loss from Continuing Operations

$

(208,489)



$

(265,479)



(21)

%


$

(360,584)



$

(961,767)



(63)

%

Reported Diluted Weighted Average Shares

226,787



224,353



1

%


226,050



223,960



1

%

Reported Diluted Net Loss per Share from Continuing Operations

$

(0.92)



$

(1.18)



(22)

%


$

(1.60)



$

(4.29)



(63)

%

Reported Net Loss

$

(218,643)



$

(291,908)



(25)

%


$

(422,636)



$

(1,031,469)



(59)

%

Adjusted Income from Continuing Operations

$

170,907



$

175,383



(3)

%


$

551,524



$

663,206



(17)

%

Adjusted Diluted Weighted Average Shares (1)

231,571



232,958



(1)

%


231,706



229,386



1

%

Adjusted Diluted Net Income per Share from Continuing Operations

$

0.74



$

0.75



(1)

%


$

2.38



$

2.89



(18)

%

Adjusted EBITDA

$

346,283



$

344,185



1

%


$

1,308,890



$

1,357,061



(4)

%

__________

(1)

Reported Diluted Net Loss per Share from continuing operations is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of ordinary share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.

"In 2019, Endo delivered stronger than expected performance during the fourth quarter and for the full year, driven by continued double-digit percentage revenue growth in our Sterile Injectables segment and in the Specialty Products Portfolio of our Branded Pharmaceuticals segment, and as a result of our dedication to operational execution," said Paul Campanelli, Chairman, President and Chief Executive Officer at Endo. "For the full year, our Sterile Injectables segment exceeded $1 billion in revenue and our Specialty Products Portfolio exceeded $500 million in revenue, demonstrating progress on our strategic priority of expanding and investing in these businesses. Additionally, during the fourth quarter, the U.S. FDA accepted our original Biologics License Application for our CCH for Cellulite product and we launched five products."

"Looking ahead to 2020, Endo intends to build upon the success of the past year. We are focused on continuing to invest in our core areas of growth as part of our multi-year strategic plan, while being responsive to the current external environment under the leadership of Blaise Coleman, Endo's new President and Chief Executive Officer."

CONSOLIDATED RESULTS

Total revenues were $765 million in fourth-quarter 2019 compared to $786 million during the same period in 2018. This decrease was primarily attributable to competitive pressures in the Generic Pharmaceuticals segment and the Established Products portfolio of the Branded Pharmaceuticals segment, partially offset by continued strong growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.

Reported loss from continuing operations in fourth-quarter 2019 was $208 million compared to reported loss from continuing operations of $265 million during the same period in 2018. This result was primarily attributable to a decrease in asset impairment charges. Reported diluted net loss per share from continuing operations in fourth-quarter 2019 was $0.92 compared to reported diluted net loss per share from continuing operations of $1.18 in fourth-quarter 2018.

Adjusted income from continuing operations in fourth-quarter 2019 was $171 million compared to $175 million in fourth-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin due to lower sales. Adjusted diluted net income per share from continuing operations in fourth-quarter 2019 was $0.74 compared to $0.75 in fourth-quarter 2018.

BRANDED PHARMACEUTICALS

Fourth-quarter 2019 Branded Pharmaceuticals revenues were $226 million compared to $230 million in fourth-quarter 2018. This decrease was primarily attributable to ongoing generic competition in the Established Products portfolio, offset by continued strong growth in the Specialty Products portfolio.

Specialty Products revenues increased 15% to $149 million in fourth-quarter 2019 compared to $130 million in fourth-quarter 2018, primarily driven by the continued strong performance of XIAFLEX®. Sales of XIAFLEX® increased 27% to $102 million compared to $80 million in fourth-quarter 2018, primarily attributable to demand growth in both the Peyronie's Disease and Dupuytren's Contracture indications driven by continued commercial execution and investment in promotional activities.

In November 2019, the U.S. Food and Drug Administration accepted the Company's original Biologics License Application (BLA) for its Collagenase Clostridium Histolyticum (CCH) product for the treatment of cellulite in the buttocks. The Prescription Drug User Fee Act (PDUFA), or target action date for the BLA, has been set for July 6, 2020.

STERILE INJECTABLES

Fourth-quarter 2019 Sterile Injectables revenues were $285 million, an increase of 10% compared to $259 million in fourth-quarter 2018. This increase reflects the continued strong growth of VASOSTRICT® and ADRENALIN®.

GENERIC PHARMACEUTICALS

Fourth-quarter 2019 Generic Pharmaceuticals revenues were $226 million, a decrease of 14% compared to $264 million in fourth-quarter 2018. This performance was primarily attributable to continued competitive pressure on commoditized generic products. Partially offsetting the decrease were the impacts of certain recent product launches. During fourth-quarter 2019, the Generic Pharmaceuticals segment launched five products.

INTERNATIONAL PHARMACEUTICALS

Fourth-quarter 2019 International Pharmaceuticals revenues were $29 million, a decrease of 16% compared to fourth-quarter 2018. This decrease was primarily due to ongoing generic competition.

2020 FINANCIAL GUIDANCE

Endo is providing guidance for the 12 months ending December 31, 2020, at current exchange rates, for revenue, adjusted diluted net income per share from continuing operations and adjusted EBITDA. The Company estimates:

The Company's 2020 non-GAAP financial guidance is based on the following assumptions:

Guidance for Adjusted diluted net income per share from continuing operations, Adjusted EBITDA and Adjusted operating expenses exclude opioid-related legal expenses.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of December 31, 2019, the Company had approximately $1.5 billion in unrestricted cash; debt of $8.4 billion; net debt of approximately $6.9 billion and a net debt to adjusted EBITDA ratio of 5.3.

Fourth-quarter 2019 cash used in operating activities was $21 million, compared to $70 million of net cash provided by operating activities during fourth-quarter 2018.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release today at 8:00 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 4777677. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from February 26, 2020 at 11:00 a.m. ET until 11:00 a.m. ET on March 4, 2020 by dialing U.S./Canada (800) 585-8367, International (404) 537-3406, and entering the passcode 4777677.

A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.

FINANCIAL SCHEDULES

The following table presents Endo's unaudited Total revenues, net for the three and twelve months ended December 31, 2019 and 2018 (dollars in thousands):


Three months ended December 31,


Percent
Growth


Year ended December 31,


Percent
Growth


2019


2018



2019


2018


Branded Pharmaceuticals:












Specialty Products:












XIAFLEX®

$

101,520



$

79,783



27

%


$

327,638



$

264,638



24

%

SUPPRELIN® LA

20,255



20,759



(2)

%


86,797



81,707



6

%

Other Specialty (1)

26,844



29,004



(7)

%


105,241



98,230



7

%

Total Specialty Products

$

148,619



$

129,546



15

%


$

519,676



$

444,575



17

%

Established Products:












PERCOCET®

$

27,813



$

29,362



(5)

%


$

116,012



$

122,901



(6)

%

TESTOPEL®

14,414



13,401



8

%


55,244



58,377



(5)

%

Other Established (2)

34,705



57,551



(40)

%


164,470



236,979



(31)

%

Total Established Products

$

76,932



$

100,314



(23)

%


$

335,726



$

418,257



(20)

%

Total Branded Pharmaceuticals (3)

$

225,551



$

229,860



(2)

%


$

855,402



$

862,832



(1)

%

Sterile Injectables:












VASOSTRICT®

$

146,883



$

121,380



21

%


$

531,737



$

453,767



17

%

ADRENALIN®

45,827



41,631



10

%


179,295



143,489



25

%

Ertapenem for injection

25,060



31,870



(21)

%


104,679



57,668



82

%

APLISOL®

5,830



15,849



(63)

%


61,826



64,913



(5)

%

Other Sterile Injectables (4)

61,568



47,989



28

%


185,594



209,729



(12)

%

Total Sterile Injectables (3)

$

285,168



$

258,719



10

%


$

1,063,131



$

929,566



14

%

Total Generic Pharmaceuticals

$

225,560



$

263,770



(14)

%


$

879,882



$

1,012,215



(13)

%

Total International Pharmaceuticals

$

28,521



$

34,040



(16)

%


$

115,949



$

142,465



(19)

%

Total revenues, net

$

764,800



$

786,389



(3)

%


$

2,914,364



$

2,947,078



(1)

%

__________

(1)

Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®. Beginning with our first-quarter 2019 reporting, TESTOPEL®, which was previously included in Other Specialty, has been reclassified and is now included in the Established Products portfolio for all periods presented.

(2)

Products included within Other Established include, but are not limited to, LIDODERM®, EDEX® and VOLTAREN® Gel.

(3)

Individual products presented above represent the top two performing products in each product category for the year ended December 31, 2019 and/or any product having revenues in excess of $100 million during any of the years ended December 31, 2019, 2018 or 2017 or $25 million during any quarterly period in 2019 or 2018.

(4)

Products included within Other Sterile Injectables include ephedrine sulfate injection, treprostinil for injection and others.

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and twelve months ended December 31, 2019 and 2018 (in thousands, except per share data):


Three months ended December 31,


Year ended December 31,


2019


2018


2019


2018

TOTAL REVENUES, NET

$

764,800



$

786,389



$

2,914,364



$

2,947,078


COSTS AND EXPENSES:








Cost of revenues

400,056



433,214



1,569,338



1,631,682


Selling, general and administrative

160,671



167,422



632,420



646,037


Research and development

34,379



25,395



130,732



185,826


Litigation-related and other contingencies, net

15,304



(1,561)



11,211



13,809


Asset impairment charges

267,430



303,539



526,082



916,939


Acquisition-related and integration items, net

(19,115)



8,630



(46,098)



21,914


Interest expense, net

134,347



135,760



538,734



521,656


Gain on extinguishment of debt





(119,828)




Other (income) expense, net

(3,731)



(18,737)



16,677



(51,953)


LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX

$

(224,541)



$

(267,273)



$

(344,904)



$

(938,832)


INCOME TAX (BENEFIT) EXPENSE

(16,052)



(1,794)



15,680



22,935


LOSS FROM CONTINUING OPERATIONS

$

(208,489)



$

(265,479)



$

(360,584)



$

(961,767)


DISCONTINUED OPERATIONS, NET OF TAX

(10,154)



(26,429)



(62,052)



(69,702)


NET LOSS

$

(218,643)



$

(291,908)



$

(422,636)



$

(1,031,469)


NET LOSS PER SHARE—BASIC:








Continuing operations

$

(0.92)



$

(1.18)



$

(1.60)



$

(4.29)


Discontinued operations

(0.04)



(0.12)



(0.27)



(0.32)


Basic

$

(0.96)



$

(1.30)



$

(1.87)



$

(4.61)


NET LOSS PER SHARE—DILUTED:








Continuing operations

$

(0.92)



$

(1.18)



$

(1.60)



$

(4.29)


Discontinued operations

(0.04)



(0.12)



(0.27)



(0.32)


Diluted

$

(0.96)



$

(1.30)



$

(1.87)



$

(4.61)


WEIGHTED AVERAGE SHARES:








Basic

226,787



224,353



226,050



223,960


Diluted

226,787



224,353



226,050



223,960


The following table presents unaudited Condensed Consolidated Balance Sheet data at December 31, 2019 and December 31, 2018 (in thousands):


December 31, 2019


December 31, 2018

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

1,454,531



$

1,149,113


Restricted cash and cash equivalents

247,457



305,368


Accounts receivable

467,953



470,570


Inventories, net

327,865



322,179


Other current assets

88,412



95,920


Total current assets

$

2,586,218



$

2,343,150


TOTAL NON-CURRENT ASSETS

6,803,309



7,789,243


TOTAL ASSETS

$

9,389,527



$

10,132,393


LIABILITIES AND SHAREHOLDERS' DEFICIT




CURRENT LIABILITIES:




Accounts payable and accrued expenses, including legal settlement accruals

$

1,412,954



$

1,914,285


Other current liabilities

47,335



35,811


Total current liabilities

$

1,460,289



$

1,950,096


LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,359,899



8,224,269


OTHER LIABILITIES

435,883



456,311


SHAREHOLDERS' DEFICIT

(866,544)



(498,283)


TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$

9,389,527



$

10,132,393


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


Year ended December 31,


2019


2018

OPERATING ACTIVITIES:




Net loss

$

(422,636)



$

(1,031,469)


Adjustments to reconcile Net loss to Net cash provided by operating activities:




Depreciation and amortization

612,862



723,707


Asset impairment charges

526,082



916,939


Other, including cash payments to claimants from Qualified Settlement Funds

(618,256)



(341,907)


Net cash provided by operating activities

$

98,052



$

267,270


INVESTING ACTIVITIES:




Purchases of property, plant and equipment, excluding capitalized interest

$

(63,854)



$

(83,398)


Proceeds from sale of business and other assets, net

6,577



70,369


Other

(2,921)



(4,871)


Net cash used in investing activities

$

(60,198)



$

(17,900)


FINANCING ACTIVITIES:




Proceeds from (payments on) borrowings, net

$

237,989



$

(39,372)


Other

(33,388)



(42,200)


Net cash provided by (used in) financing activities

$

204,601



$

(81,572)


Effect of foreign exchange rate

1,096



(1,975)


NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS

$

243,551



$

165,823


CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD

1,476,837



1,311,014


CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD

$

1,720,388



$

1,476,837


SUPPLEMENTAL FINANCIAL INFORMATION

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.

The tables below provide reconciliations of certain of our non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.

Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) for the three and twelve months ended December 31, 2019 and 2018 (in thousands):


Three months ended December 31,


Year ended December 31,


2019


2018


2019


2018

Net loss (GAAP)

$

(218,643)



$

(291,908)



$

(422,636)



$

(1,031,469)


Income tax (benefit) expense

(16,052)



(1,794)



15,680



22,935


Interest expense, net

134,347



135,760



538,734



521,656


Depreciation and amortization (15)

144,453



167,205



612,862



688,530


EBITDA (non-GAAP)

$

44,105



$

9,263



$

744,640



$

201,652










Inventory step-up and other cost savings (2)

$



$



$



$

261


Upfront and milestone-related payments (3)

2,568



2,081



6,623



45,108


Inventory reserve increase from restructuring (4)



150





2,947


Retention and separation benefits and other restructuring (5)

19,426



4,004



34,598



83,348


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

15,304



(1,561)



11,211



13,809


Asset impairment charges (7)

267,430



303,539



526,082



916,939


Acquisition-related and integration costs (8)



451





2,004


Fair value of contingent consideration (9)

(19,115)



8,179



(46,098)



19,910


Gain on extinguishment of debt (10)





(119,828)




Share-based compensation

10,233



10,349



59,142



54,071


Other (income) expense, net (16)

(3,731)



(18,737)



16,677



(51,953)


Other adjustments

(91)



38



13,791



(737)


Discontinued operations, net of tax (13)

10,154



26,429



62,052



69,702


Adjusted EBITDA (non-GAAP)

$

346,283



$

344,185



$

1,308,890



$

1,357,061


Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)

The following table provides a reconciliation of our Loss from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and twelve months ended December 31, 2019 and 2018 (in thousands):


Three months ended December 31,


Year ended December 31,


2019


2018


2019


2018

Loss from continuing operations (GAAP)

$

(208,489)



$

(265,479)



$

(360,584)



$

(961,767)


Non-GAAP adjustments:








Amortization of intangible assets (1)

125,913



150,677



543,862



622,339


Inventory step-up and other cost savings (2)







261


Upfront and milestone-related payments (3)

2,568



2,081



6,623



45,108


Inventory reserve increase from restructuring (4)



150





2,947


Retention and separation benefits and other restructuring (5)

19,426



4,004



34,598



83,348


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

15,304



(1,561)



11,211



13,809


Asset impairment charges (7)

267,430



303,539



526,082



916,939


Acquisition-related and integration costs (8)



451





2,004


Fair value of contingent consideration (9)

(19,115)



8,179



(46,098)



19,910


Gain on extinguishment of debt (10)





(119,828)




Other (11)

(2,002)



(19,034)



28,252



(48,942)


Tax adjustments (12)

(30,128)



(7,624)



(72,594)



(32,750)


Adjusted income from continuing operations (non-GAAP)

$

170,907



$

175,383



$

551,524



$

663,206


Reconciliation of Other Adjusted Income Statement Data (non-GAAP)

The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and twelve months ended December 31, 2019 and 2018 (in thousands, except per share data):


Three months ended December 31, 2019


Total revenues, net


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating
expense to
revenue %


Operating (loss)
income from
continuing
operations


Operating margin %


Other non-operating expense, net


(Loss) income
from continuing
operations before
income tax


Income tax (benefit) expense


Effective tax rate


(Loss) income
from continuing
operations


Discontinued operations, net of tax


Net (loss) income


Diluted net (loss)
income per share
from continuing
operations (14)

Reported (GAAP)

$   764,800


$     400,056


$   364,744


47.7 %


$     458,669


60.0 %


$    (93,925)


(12.3)%


$ 130,616


$   (224,541)


$ (16,052)


7.1 %


$ (208,489)


$       (10,154)


$   (218,643)


$          (0.92)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(125,913)


125,913




-




125,913




-


125,913


-




125,913


-


125,913



Upfront and milestone-related payments (3)

-


(542)


542




(2,026)




2,568




-


2,568


-




2,568


-


2,568



Retention and separation benefits and other restructuring (5)

-


(4,689)


4,689




(14,737)




19,426




-


19,426


-




19,426


-


19,426



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

-


-


-




(15,304)




15,304




-


15,304


-




15,304


-


15,304



Asset impairment charges (7)

-


-


-




(267,430)




267,430




-


267,430


-




267,430


-


267,430



Fair value of contingent consideration (9)

-


-


-




19,115




(19,115)




-


(19,115)


-




(19,115)


-


(19,115)



Other (11)

-


-


-




-




-




2,002


(2,002)


-




(2,002)


-


(2,002)



Tax adjustments (12)

-


-


-




-




-




-


-


30,128




(30,128)


-


(30,128)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


10,154


10,154



After considering items (non-GAAP)

$   764,800


$     268,912


$   495,888


64.8 %


$     178,287


23.3 %


$   317,601


41.5 %


$ 132,618


$     184,983


$   14,076


7.6 %


$   170,907


$                  -


$     170,907


$            0.74

 


Three months ended December 31, 2018


Total revenues, net


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating
expense to
revenue %


Operating (loss)
income from
continuing
operations


Operating margin %


Other non-
operating
expense, net


(Loss) income
from continuing
operations before
income tax


Income tax
(benefit)
expense


Effective tax rate


(Loss) income
from continuing
operations


Discontinued operations, net of tax


Net (loss) income


Diluted net (loss)
income per share
from continuing
operations (14)

Reported (GAAP)

$   786,389


$     433,214


$   353,175


44.9 %


$     503,425


64.0 %


$  (150,250)


(19.1)%


$ 117,023


$   (267,273)


$   (1,794)


0.7 %


$ (265,479)


$       (26,429)


$   (291,908)


$          (1.18)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(150,677)


150,677




-




150,677




-


150,677


-




150,677


-


150,677



Upfront and milestone-related payments (3)

-


(741)


741




(1,340)




2,081




-


2,081


-




2,081


-


2,081



Inventory reserve increase from restructuring (4)

-


(150)


150




-




150




-


150


-




150


-


150



Retention and separation benefits and other restructuring (5)

-


(30)


30




(3,974)




4,004




-


4,004


-




4,004


-


4,004



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

-


-


-




1,561




(1,561)




-


(1,561)


-




(1,561)


-


(1,561)



Asset impairment charges (7)

-


-


-




(303,539)




303,539




-


303,539


-




303,539


-


303,539



Acquisition-related and integration costs (8)

-


-


-




(451)




451




-


451


-




451


-


451



Fair value of contingent consideration (9)

-


-


-




(8,179)




8,179




-


8,179


-




8,179


-


8,179



Other (11)

-


-


-




-




-




19,034


(19,034)


-




(19,034)


-


(19,034)



Tax adjustments (12)

-


-


-




-




-




-


-


7,624




(7,624)


-


(7,624)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


26,429


26,429



After considering items (non-GAAP)

$   786,389


$     281,616


$   504,773


64.2 %


$     187,503


23.8 %


$   317,270


40.3 %


$ 136,057


$     181,213


$     5,830


3.2 %


$   175,383


$                  -


$     175,383


$            0.75

 


Year Ended December 31, 2019


Total revenues, net


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating
expense
to revenue %


Operating
income from
continuing
operations


Operating margin %


Other non-operating expense, net


(Loss) income
from continuing
operations before
income tax


Income tax expense


Effective tax rate


(Loss) income
from
continuing operations


Discontinued operations, net of tax


Net (loss) income


Diluted net (loss)
income per share
from continuing
operations (14)

Reported (GAAP)

$2,914,364


$  1,569,338


$1,345,026


46.2 %


$  1,254,347


43.0 %


$     90,679


3.1 %


$ 435,583


$   (344,904)


$   15,680


(4.5)%


$ (360,584)


$       (62,052)


$   (422,636)


$          (1.60)

Items impacting comparability:
































Amortization of intangible assets (1)

-


(543,862)


543,862




-




543,862




-


543,862


-




543,862


-


543,862



Upfront and milestone-related payments (3)

-


(2,484)


2,484




(4,139)




6,623




-


6,623


-




6,623


-


6,623



Retention and separation benefits and other restructuring (5)

-


(5,693)


5,693




(28,905)




34,598




-


34,598


-




34,598


-


34,598



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

-


-


-




(11,211)




11,211




-


11,211


-




11,211


-


11,211



Asset impairment charges (7)

-


-


-




(526,082)




526,082




-


526,082


-




526,082


-


526,082



Fair value of contingent consideration (9)

-


-


-




46,098




(46,098)




-


(46,098)


-




(46,098)


-


(46,098)



Gain on extinguishment of debt (10)

-


-


-




-




-




119,828


(119,828)


-




(119,828)


-


(119,828)



Other (11)

-


-


-




(13,878)




13,878




(14,374)


28,252


-




28,252


-


28,252



Tax adjustments (12)

-


-


-




-




-




-


-


72,594




(72,594)


-


(72,594)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


62,052


62,052



After considering items (non-GAAP)

$2,914,364


$  1,017,299


$1,897,065


65.1 %


$     716,230


24.6 %


$1,180,835


40.5 %


$ 541,037


$     639,798


$   88,274


13.8 %


$   551,524


$                  -


$     551,524


$            2.38

 


Year Ended December 31, 2018


Total revenues, net


Cost of revenues


Gross margin


Gross margin %


Total operating expenses


Operating
expense to
revenue %


Operating (loss)
income from
continuing
operations


Operating margin %


Other non-
operating
expense, net


(Loss) income
from continuing
operations before
income tax


Income tax expense


Effective tax rate


(Loss) income
from
continuing
operations


Discontinued operations, net of tax


Net (loss) income


Diluted net (loss)
income per share
from continuing
operations (14)

Reported (GAAP)

$2,947,078


$  1,631,682


$1,315,396


44.6 %


$  1,784,525


60.6 %


$  (469,129)


(15.9)%


$ 469,703


$   (938,832)


$   22,935


(2.4)%


$ (961,767)


$       (69,702)


$(1,031,469)


$          (4.29)

Items impacting comparability:
































Amortization of intangible assets(1)

-


(622,339)


622,339




-




622,339




-


622,339


-




622,339


-


622,339



Inventory step-up and other cost savings (2)

-


(261)


261




-




261




-


261


-




261


-


261



Upfront and milestone-related payments (3)

-


(2,836)


2,836




(42,272)




45,108




-


45,108


-




45,108


-


45,108



Inventory reserve increase from restructuring (4)

-


(2,947)


2,947




-




2,947




-


2,947


-




2,947


-


2,947



Retention and separation benefits and other restructuring (5)

-


(57,487)


57,487




(25,861)




83,348




-


83,348


-




83,348


-


83,348



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

-


-


-




(13,809)




13,809




-


13,809


-




13,809


-


13,809



Asset impairment charges (7)

-


-


-




(916,939)




916,939




-


916,939


-




916,939


-


916,939



Acquisition-related and integration costs (8)

-


-


-




(2,004)




2,004




-


2,004


-




2,004


-


2,004



Fair value of contingent consideration (9)

-


-


-




(19,910)




19,910




-


19,910


-




19,910


-


19,910



Other (11)

-


-


-




630




(630)




48,312


(48,942)


-




(48,942)


-


(48,942)



Tax adjustments (12)

-


-


-




-




-




-


-


32,750




(32,750)


-


(32,750)



Exclude discontinued operations, net of tax (13)

-


-


-




-




-




-


-


-




-


69,702


69,702



After considering items (non-GAAP)

$2,947,078


$     945,812


$2,001,266


67.9 %


$     764,360


25.9 %


$1,236,906


42.0 %


$ 518,015


$     718,891


$   55,685


7.7 %


$   663,206


$                  -


$     663,206


$            2.89

Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures

Notes to certain line items included in the reconciliations of the GAAP financial measures to the Non-GAAP financial measures for the three and twelve months ended December 31, 2019 and 2018 are as follows:

(1)

Adjustments for amortization of commercial intangible assets included the following (in thousands):





Three months ended December 31,


Year ended December 31,



2019


2018


2019


2018


Amortization of intangible assets excluding fair value step-up from contingent consideration

$

123,669



$

141,917



$

523,872



$

587,932



Amortization of intangible assets related to fair value step-up from contingent consideration

2,244



8,760



19,990



34,407



Total

$

125,913



$

150,677



$

543,862



$

622,339




(2)

To exclude adjustments for inventory step-up.



(3)

Adjustments for upfront and milestone-related payments to partners included the following (in thousands):





Three months ended December 31,



2019


2018



Cost of revenues


Operating
expenses


Cost of revenues


Operating
expenses


Sales-based

$

542



$



$

741



$



Development-based



2,026





1,340



Total

$

542



$

2,026



$

741



$

1,340







Year ended December 31,



2019


2018



Cost of revenues


Operating
expenses


Cost of revenues


Operating
expenses


Sales-based

$

2,484



$



$

2,836



$



Development-based



4,139





42,272



Total

$

2,484



$

4,139



$

2,836



$

42,272




(4)

To exclude charges reflecting adjustments to excess inventory reserves related to our various restructuring initiatives.



(5)

Adjustments for retention and separation benefits and other restructuring included the following (in thousands):





Three months ended December 31,



2019


2018



Cost of revenues


Operating
expenses


Cost of revenues


Operating
expenses


Retention and separation benefits

$

4,689



$

9,997



$

17



$

(986)



Other



4,740



13



4,960



Total

$

4,689



$

14,737



$

30



$

3,974






Year ended December 31,



2019


2018



Cost of revenues


Operating
expenses


Cost of revenues


Operating
expenses


Retention and separation benefits

$

5,693



$

17,881



$

15,496



$

16,229



Accelerated depreciation and product discontinuation charges





35,177





Other



11,024



6,814



9,632



Total

$

5,693



$

28,905



$

57,487



$

25,861




(6)

To exclude adjustments to our accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by our subsidiaries.



(7)

Adjustments for asset impairment charges included the following (in thousands):





Three months ended December 31,


Year ended December 31,



2019


2018


2019


2018


Goodwill impairment charges

$

20,800



$

289,000



$

171,908



$

680,000



Other intangible asset impairment charges

243,046



12,842



347,706



230,418



Property, plant and equipment impairment charges

3,584



1,697



6,468



6,521



Total asset impairment charges

$

267,430



$

303,539



$

526,082



$

916,939




(8)

Adjustments for acquisition and integration items primarily relate to various acquisitions.



(9)

To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to our estimates regarding the timing and amount of the future revenues of the underlying products and changes in other assumptions impacting the probability of incurring, and extent to which we could incur, related contingent obligations.



(10)

To exclude the gain on the extinguishment of debt associated with our March 2019 refinancing.



(11)

Other adjustments included the following (in thousands):





Three months ended December 31,



2019


2018



Operating
expenses


Other non-
operating
expenses


Operating
expenses


Other non-
operating
expenses


Foreign currency impact related to the re-measurement of intercompany debt instruments

$



$

1,488



$



$

(3,926)



(Gain) loss on sale of business and other assets



(5,488)





(15,513)



Other miscellaneous



1,998





405



Total

$



$

(2,002)



$



$

(19,034)






Year ended December 31,



2019


2018



Operating
expenses


Other non-
operating
expenses


Operating
expenses


Other non-
operating
expenses


Foreign currency impact related to the re-measurement of intercompany debt instruments

$



$

4,362



$



$

(5,486)



(Gain) loss on sale of business and other assets



(7,488)





(39,527)



Other miscellaneous

13,878



17,500



(630)



(3,299)



Total

$

13,878



$

14,374



$

(630)



$

(48,312)





Other miscellaneous during the year ended December 31, 2019 includes $14.1 million in Operating expenses for a premium associated with an extended reporting period endorsement on an expiring insurance program and $17.5 million in Other non-operating expenses for contract termination costs incurred as a result of certain product discontinuation activities in our International Pharmaceuticals segment.



(12)

Adjusted income taxes are calculated by tax effecting adjusted pre-tax income and permanent book-tax differences at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates. Adjusted income taxes include current and deferred income tax expense commensurate with the non-GAAP measure of profitability.



(13)

To exclude the results of the businesses reported as discontinued operations, net of tax.



(14)

Calculated as Net (loss) income from continuing operations divided by the applicable weighted average share number. The applicable weighted average share numbers are as follows (in thousands):





Three months ended December 31,


Year ended December 31,



2019


2018


2019


2018


GAAP

226,787



224,353



226,050



223,960



Non-GAAP Adjusted

231,571



232,958



231,706



229,386




(15)

Depreciation and amortization per the Adjusted EBITDA reconciliations do not include certain depreciation amounts reflected in other lines of the reconciliations, including Acquisition-related and integration costs and Retention and separation benefits and other restructuring.



(16)

To exclude Other expense (income), net per the Condensed Consolidated Statements of Operations.

Reconciliation of Net Debt Leverage Ratio (non-GAAP)

The following table provides a reconciliation of our Net loss (GAAP) to our Adjusted EBITDA (non-GAAP) for the twelve months ended December 31, 2019 (in thousands) and the calculation of our Net Debt Leverage Ratio (non-GAAP):


Twelve Months
Ended
December 31,
2019

Net loss (GAAP)

$

(422,636)


Income tax expense

15,680


Interest expense, net

538,734


Depreciation and amortization (15)

612,862


EBITDA (non-GAAP)

$

744,640




Upfront and milestone-related payments

$

6,623


Retention and separation benefits and other restructuring

34,598


Certain litigation-related and other contingencies, net

11,211


Asset impairment charges

526,082


Fair value of contingent consideration

(46,098)


Gain on extinguishment of debt

(119,828)


Share-based compensation

59,142


Other expense, net

16,677


Other adjustments

13,791


Discontinued operations, net of tax

62,052


Adjusted EBITDA (non-GAAP)

$

1,308,890




Calculation of Net Debt:


Debt

$

8,394,049


Cash (excluding Restricted Cash)

1,454,531


Net Debt (non-GAAP)

$

6,939,518




Calculation of Net Debt Leverage:


Net Debt Leverage Ratio (non-GAAP)

5.3


Non-GAAP Financial Measures

The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These Non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP net income and its components and diluted net income per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, the company stresses that these are Non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted EBITDA and Non-GAAP adjusted net income from continuing operations and its components (unlike GAAP net income from continuing operations and its components) may not be comparable to the calculation of similar measures of other companies. These Non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance.

Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, gain / loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amounts of which could be significant.

See Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission for an explanation of Endo's non-GAAP financial measures.

About Endo International plc

Endo International plc (NASDAQ: ENDP) is a highly focused specialty branded and generics pharmaceutical company delivering quality medicines to patients in need through excellence in development, manufacturing and commercialization. Endo has global headquarters in Dublin, Ireland. Learn more at www.endo.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including but not limited to the statements by Mr. Campanelli, as well as other statements regarding product development, market potential, corporate strategy, optimization efforts and restructurings, timing, closing and expected benefits and value from any acquisition, expected growth and regulatory approvals, together with Endo's net income per share from continuing operations amounts, product net sales, revenue forecasts and any other statements that refer to Endo's expected, estimated or anticipated future results. Because forecasts are inherently estimates that cannot be made with precision, Endo's performance at times differs materially from its estimates and targets, and Endo often does not know what the actual results will be until after the end of the applicable reporting period. Therefore, Endo will not report or comment on its progress during a current quarter except through public announcement. Any statement made by others with respect to progress during a current quarter cannot be attributed to Endo.

All forward-looking statements in this press release reflect Endo's current analysis of existing trends and information and represent Endo's judgment only as of the date of this press release. Actual results may differ materially from current expectations based on a number of factors affecting Endo's businesses, including, among other things, the following: changing competitive, market and regulatory conditions; changes in legislation; Endo's ability to obtain and maintain adequate protection for its intellectual property rights; 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; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; 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; unfavorable publicity regarding the misuse of opioids; timing and uncertainty of any acquisition, including the possibility that various closing conditions may not be satisfied or waived, uncertainty surrounding the successful integration of any acquired business and failure to achieve the expected financial and commercial results from such acquisition; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; and Endo's ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, U.S. and international economic conditions, including higher unemployment, political instability, financial hardship, consumer confidence and debt levels, taxation, changes in interest and currency exchange rates, international relations, capital and credit availability, the status of financial markets and institutions, fluctuations or devaluations in the value of sovereign government debt, as well as the general impact of continued economic volatility, can materially affect Endo's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Endo expressly disclaims any intent or obligation to update these forward-looking statements except as required to do so by law.

Additional information concerning the above-referenced risk factors and other risk factors can be found in press releases issued by Endo, as well as Endo's public periodic filings with the U.S. Securities and Exchange Commission and with securities regulators in Canada, including the discussion under the heading "Risk Factors" in Endo's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Endo's press releases and additional information about Endo are available at www.endo.com or you can contact the Endo Investor Relations Department by calling 845-364-4833.

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