Endo Reports Second-Quarter 2020 Financial Results

— Revenues decreased 2% to $688 million compared to prior year —

— On July 6, 2020, U.S. FDA approved Qwo™ (collagenase clostridium histolyticum-aaes), the first injectable treatment for cellulite —

DUBLIN, Aug. 5, 2020 /PRNewswire/ -- Endo International plc ENDP today reported financial results for the second quarter ended June 30, 2020.

"I'm proud of what our team delivered in the second quarter. Our Branded Pharmaceuticals segment performed better than previously guided as COVID-19 related restrictions and physician office closures began easing throughout the quarter. Additionally, our Sterile Injectables segment delivered strong revenue growth versus prior year as customers built significant inventory levels of products used to treat certain COVID-19 patients," said Blaise Coleman, President and Chief Executive Officer at Endo. "I want to thank our team members for their tireless work and dedication to meeting our customers' needs in a challenging environment." 

Mr. Coleman continued, "With the recent FDA approval of QWO and Endo's impending entry into the US medical aesthetics market, we are ready to embark on the next phase of our transformation. We have evolved our strategic priorities to focus on expanding and enhancing our portfolio of life-enhancing products while accelerating new ways to better serve our customers and to improve productivity. We look forward to executing against these priorities as we seek to realize Endo's full potential."

SECOND-QUARTER FINANCIAL PERFORMANCE

(
in thousands, except per share amounts)



















Three Months Ended June 30,







Six Months Ended June 30,







2020



2019 (1)



Change



2020



2019 (1)



Change

Total Revenues, Net

$

687,588





$

699,727





(2)

%



$

1,507,993





$

1,420,138





6

%

Reported Income (Loss) from Continuing Operations

$

17,610





$

(98,052)





NM



$

175,191





$

(110,664)





NM

Reported Diluted Weighted Average Shares

233,681





226,221





3

%



233,348





225,408





4

%

Reported Diluted Net Income (Loss) per Share from Continuing Operations

$

0.08





$

(0.43)





NM



$

0.75





$

(0.49)





NM

Reported Net Income (Loss)

$

10,558





$

(106,005)





NM



$

140,488





$

(124,578)





NM

Adjusted Income from Continuing Operations

$

151,700





$

139,388





9

%



$

372,100





$

278,161





34

%

Adjusted Diluted Weighted Average Shares (2)

233,681





232,713





%



233,348





232,174





1

%

Adjusted Diluted Net Income per Share from Continuing Operations

$

0.65





$

0.60





8

%



$

1.59





$

1.20





33

%

Adjusted EBITDA

$

336,481





$

326,084





3

%



$

757,607





$

677,180





12

%













































(1)

Certain prior period adjusted amounts have been revised as a result of a change in the Company's definition of its adjusted financial metrics. Refer to the "Supplemental Financial Information" section below for additional discussion.

(2)

Reported Diluted Net Income (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.



CONSOLIDATED RESULTS

Total revenues were $688 million in second-quarter 2020, a decrease of 2% compared to $700 million during the same period in 2019. This result was primarily attributable to decreased Branded Pharmaceuticals segment revenues due to reduced physician office activity and patient office visits compared to prior year because of the COVID-19 pandemic. This decrease was largely offset by an increase in Sterile Injectables segment revenues due to significant channel inventory stocking of products used to treat certain patients infected with COVID-19.

Reported income from continuing operations in second-quarter 2020 was $18 million compared to reported loss from continuing operations of $98 million during the same period in 2019. This result was primarily attributable to lower asset impairment charges. Reported diluted net income per share from continuing operations in second-quarter 2020 was $0.08 compared to reported diluted net loss per share from continuing operations of $0.43 in second-quarter 2019.

Adjusted income from continuing operations in second-quarter 2020 was $152 million compared to $139 million in second-quarter 2019. This increase was primarily attributable to lower second-quarter 2020 operating expenses. Adjusted diluted net income per share from continuing operations in second-quarter 2020 was $0.65 compared to $0.60 in second-quarter 2019.

BRANDED PHARMACEUTICALS SEGMENT

Second-quarter 2020 Branded Pharmaceuticals segment revenues were $130 million, a decrease of 38% compared to $209 million during second-quarter 2019. This decrease was primarily attributable to reduced volumes caused by the COVID-19 pandemic.

Specialty Products revenues decreased 45% to $69 million in second-quarter 2020 compared to $124 million in second-quarter 2019, with sales of XIAFLEX® decreasing 55% to $34 million compared to $75 million in second-quarter 2019. This decrease was primarily a result of physician office closures and a decline in patients electing to be treated because of the COVID-19 pandemic. Established Products revenues decreased 28% to $61 million in second-quarter 2020 compared to $85 million in second-quarter 2019 due to competitive pressures and a temporary product supply disruption, which has been resolved.

On July 6, 2020, the U.S. Food and Drug Administration (FDA) approved QWO (collagenase clostridium histolyticum-aaes) for the treatment of moderate to severe cellulite in the buttocks of adult women. QWO is the first FDA-approved injectable treatment for cellulite and is expected to be available throughout the United States beginning in spring 2021.

STERILE INJECTABLES SEGMENT

Second-quarter 2020 Sterile Injectables segment revenues were $319 million, an increase of 31% compared to $244 million during second-quarter 2019. This increase was primarily driven by significant channel inventory stocking of VASOSTRICT® in anticipation of treating vasodilatory shock in patients infected with COVID-19.

GENERIC PHARMACEUTICALS SEGMENT

Second-quarter 2020 Generic Pharmaceuticals segment revenues were $216 million, a decrease of 1% compared to $218 million during second-quarter 2019. This decrease was primarily attributable to continued competitive pressures on certain key products, which were partially offset by recent product launches. 

INTERNATIONAL PHARMACEUTICALS SEGMENT

Second-quarter 2020 International Pharmaceuticals segment revenues decreased 20% to $23 million compared to $29 million during second-quarter 2019.

THIRD-QUARTER AND FULL YEAR 2020 GUIDANCE

Endo is providing financial guidance for third-quarter and full year 2020. The third-quarter financial guidance reflects the anticipated unfavorable impact of new competitive events in Endo's Generic Pharmaceuticals segment and significant VASOSTRICT channel destocking. The outlook ranges below also reflect a number of other assumptions that are subject to change including, among other things, uncertainties related to the COVID-19 pandemic and the Company's expectation of a return to more normalized customer purchasing patterns during the fourth-quarter 2020. The Company estimates:



Third-Quarter 2020



Full Year 2020

Total Revenues, Net

$515M to $550M



$2.60B to $2.70B

Adjusted EBITDA

$175M to $200M



$1.19B to $1.23B

Adjusted Diluted Net Income per Share from Continuing Operations

$0.08 to $0.13



$2.00 to $2.15

Adjusted Gross Margin

~64.0% to ~65.0%



~66.5% to ~67.0%

Adjusted Operating Expenses as a Percentage of Total Revenues, Net

~34.0%



~25.0% to ~25.5%

Adjusted Interest Expense

~$140M



~$530M to ~$535M

Adjusted Effective Tax Rate

~7.5% to ~8.5%



~14.0% to ~15.0%

Adjusted Diluted Weighted Average Shares

~234M



~234M

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of June 30, 2020, the Company had approximately $1.8 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 4.5.

Second-quarter 2020 cash provided by operating activities was $304 million, compared to $177 million of net cash provided by operating activities during second-quarter 2019.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release tomorrow at 7:00 a.m. EDT. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 2058864. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from August 6, 2020 at 10:00 a.m. ET until 10:00 a.m. ET on August 13, 2020 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 2058864.

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 six months ended June 30, 2020 and 2019 (dollars in thousands):



Three Months Ended June 30,



Percent Growth



Six Months Ended June 30,



Percent Growth



2020



2019





2020



2019



Branded Pharmaceuticals:























Specialty Products:























XIAFLEX®

$

33,783





$

74,855





(55)

%



$

122,855





$

143,362





(14)

%

SUPPRELIN® LA

15,395





23,714





(35)

%



35,115





45,770





(23)

%

Other Specialty (1)

19,566





25,524





(23)

%



45,071





49,927





(10)

%

Total Specialty Products

$

68,744





$

124,093





(45)

%



$

203,041





$

239,059





(15)

%

Established Products:























PERCOCET®

$

27,578





$

28,878





(5)

%



$

55,281





$

59,638





(7)

%

LIDODERM®

7,056





9,051





(22)

%



14,279





17,120





(17)

%

EDEX®

6,604





7,662





(14)

%



15,172





13,633





11

%

Other Established (2)

19,539





39,329





(50)

%



45,821





83,088





(45)

%

Total Established Products

$

60,777





$

84,920





(28)

%



$

130,553





$

173,479





(25)

%

Total Branded Pharmaceuticals (3)

$

129,521





$

209,013





(38)

%



$

333,594





$

412,538





(19)

%

Sterile Injectables:























VASOSTRICT®

$

214,214





$

116,026





85

%



$

417,118





$

255,163





63

%

ADRENALIN®

33,161





45,835





(28)

%



89,673





93,157





(4)

%

Ertapenem for injection

11,990





25,547





(53)

%



29,864





57,766





(48)

%

APLISOL®

6,511





15,530





(58)

%



16,378





27,911





(41)

%

Other Sterile Injectables (4)

53,338





41,342





29

%



102,571





80,331





28

%

Total Sterile Injectables (3)

$

319,214





$

244,280





31

%



$

655,604





$

514,328





27

%

Total Generic Pharmaceuticals

$

215,879





$

217,784





(1)

%



$

467,162





$

436,310





7

%

Total International Pharmaceuticals

$

22,974





$

28,650





(20)

%



$

51,633





$

56,962





(9)

%

Total revenues, net

$

687,588





$

699,727





(2)

%



$

1,507,993





$

1,420,138





6

%

__________

(1)

Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®.

(2)

Products included within Other Established include, but are not limited to, TESTOPEL®.

(3)

Individual products presented above represent the top two performing products in each product category for either the three or six months ended June 30, 2020 and/or any product having revenues in excess of $25 million during any quarterly period in 2020 or 2019.

(4)

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

 

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share data):



Three Months Ended June 30,



Six Months Ended June 30,



2020



2019



2020



2019

TOTAL REVENUES, NET

$

687,588





$

699,727





$

1,507,993





$

1,420,138



COSTS AND EXPENSES:















Cost of revenues

336,096





388,208





724,895





780,117



Selling, general and administrative

173,258





152,297





340,026





303,420



Research and development

30,495





26,348





62,110





59,834



Litigation-related and other contingencies, net

(8,572)





10,315





(25,748)





10,321



Asset impairment charges





88,438





97,785





253,886



Acquisition-related and integration items, net

6,045





(5,507)





18,507





(43,008)



Interest expense, net

129,164





134,809





262,041





267,484



Gain on extinguishment of debt













(119,828)



Other (income) expense, net

(4,150)





(597)





(18,124)





4,205



INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX

$

25,252





$

(94,584)





$

46,501





$

(96,293)



INCOME TAX EXPENSE (BENEFIT)

7,642





3,468





(128,690)





14,371



INCOME (LOSS) FROM CONTINUING OPERATIONS

$

17,610





$

(98,052)





$

175,191





$

(110,664)



DISCONTINUED OPERATIONS, NET OF TAX

(7,052)





(7,953)





(34,703)





(13,914)



NET INCOME (LOSS)

$

10,558





$

(106,005)





$

140,488





$

(124,578)



NET INCOME (LOSS) PER SHARE—BASIC:















Continuing operations

$

0.08





$

(0.43)





$

0.77





$

(0.49)



Discontinued operations

(0.03)





(0.04)





(0.16)





(0.06)



Basic

$

0.05





$

(0.47)





$

0.61





$

(0.55)



NET INCOME (LOSS) PER SHARE—DILUTED:















Continuing operations

$

0.08





$

(0.43)





$

0.75





$

(0.49)



Discontinued operations

(0.03)





(0.04)





(0.15)





(0.06)



Diluted

$

0.05





$

(0.47)





$

0.60





$

(0.55)



WEIGHTED AVERAGE SHARES:















Basic

229,716





226,221





228,457





225,408



Diluted

233,681





226,221





233,348





225,408



 

The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2020 and December 31, 2019 (in thousands):



June 30, 2020



December 31, 2019

ASSETS







CURRENT ASSETS:







Cash and cash equivalents

$

1,780,087





$

1,454,531



Restricted cash and cash equivalents

180,730





247,457



Accounts receivable

271,893





467,953



Inventories, net

330,540





327,865



Other current assets

122,894





88,412



Total current assets

$

2,686,144





$

2,586,218



TOTAL NON-CURRENT ASSETS

6,478,990





6,803,309



TOTAL ASSETS

$

9,165,134





$

9,389,527



LIABILITIES AND SHAREHOLDERS' DEFICIT







CURRENT LIABILITIES:







Accounts payable and accrued expenses, including legal settlement accruals

$

1,175,241





$

1,412,954



Other current liabilities

47,170





47,335



Total current liabilities

$

1,222,411





$

1,460,289



LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,302,595





8,359,899



OTHER LIABILITIES

354,995





435,883



SHAREHOLDERS' DEFICIT

(714,867)





(866,544)



TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$

9,165,134





$

9,389,527



 

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2020 and 2019 (in thousands):



Six Months Ended June 30,



2020



2019

OPERATING ACTIVITIES:







Net income (loss)

$

140,488





$

(124,578)



Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:







Depreciation and amortization

264,198





320,788



Asset impairment charges

97,785





253,886



Other, including cash payments to claimants from Qualified Settlement Funds

(135,583)





(363,494)



Net cash provided by operating activities

$

366,888





$

86,602



INVESTING ACTIVITIES:







Purchases of property, plant and equipment, excluding capitalized interest

$

(36,305)





$

(23,632)



Proceeds from sale of business and other assets, net

6,017





2,594



Other

(1,125)





(1,278)



Net cash used in investing activities

$

(31,413)





$

(22,316)



FINANCING ACTIVITIES:







(Payments on) proceeds from borrowings, net

$

(66,685)





$

257,605



Other

(9,046)





(22,676)



Net cash (used in) provided by financing activities

$

(75,731)





$

234,929



Effect of foreign exchange rate

(915)





841



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

$

258,829





$

300,056



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

1,720,388





1,476,837



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

$

1,979,217





$

1,776,893



 

SUPPLEMENTAL 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 the Company's 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.

Effective January 1, 2020, the Company revised its definition of its adjusted financial metrics to exclude certain legal costs. The Company believes that such costs are not indicative of business performance and that excluding them more accurately reflects the Company's results and better enables management to compare financial results between periods. As a result of this change, the Company's adjusted financial metrics now exclude opioid-related legal expenses. Prior period adjusted results throughout this document have also been adjusted to reflect this change. The impact of excluding these costs during the three and six months ended June 30, 2020 and 2019 is reflected in the Certain legal costs lines of each of the following reconciliation tables.

Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2020 and 2019 (in thousands):



Three Months Ended June 30,



Six Months Ended June 30,



2020



2019



2020



2019

Net income (loss) (GAAP)

$

10,558





$

(106,005)





$

140,488





$

(124,578)



Income tax expense (benefit)

7,642





3,468





(128,690)





14,371



Interest expense, net

129,164





134,809





262,041





267,484



Depreciation and amortization (13)

120,855





158,055





255,813





320,788



EBITDA (non-GAAP)

$

268,219





$

190,327





$

529,652





$

478,065



















Upfront and milestone-related payments (2)

444





1,444





2,194





2,383



Continuity and separation benefits and other cost reductions (3)

9,444





2,124





32,664





4,149



Certain litigation-related and other contingencies, net (4)

(8,572)





10,315





(25,748)





10,321



Certain legal costs (5)

18,005





18,984





33,541





35,673



Asset impairment charges (6)





88,438





97,785





253,886



Fair value of contingent consideration (7)

6,045





(5,507)





18,507





(43,008)



Gain on extinguishment of debt (8)













(119,828)



Share-based compensation (13)

9,222





12,600





21,677





37,333



Other (income) expense, net (14)

(4,150)





(597)





(18,124)





4,205



Other (9)

30,772





3





30,756





87



Discontinued operations, net of tax (11)

7,052





7,953





34,703





13,914



Adjusted EBITDA (non-GAAP)

$

336,481





$

326,084





$

757,607





$

677,180



 

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

The following table provides a reconciliation of the Company's Income (loss) from continuing operations (GAAP) to Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2020 and 2019 (in thousands):



Three Months Ended June 30,



Six Months Ended June 30,



2020



2019



2020



2019

Income (loss) from continuing operations (GAAP)

$

17,610





$

(98,052)





$

175,191





$

(110,664)



Non-GAAP adjustments:















Amortization of intangible assets (1)

104,498





140,418





221,735





286,017



Upfront and milestone-related payments (2)

444





1,444





2,194





2,383



Continuity and separation benefits and other cost reductions (3)

9,444





2,124





32,664





4,149



Certain litigation-related and other contingencies, net (4)

(8,572)





10,315





(25,748)





10,321



Certain legal costs (5)

18,005





18,984





33,541





35,673



Asset impairment charges (6)





88,438





97,785





253,886



Fair value of contingent consideration (7)

6,045





(5,507)





18,507





(43,008)



Gain on extinguishment of debt (8)













(119,828)



Other (9)

29,755





86





15,335





1,620



Tax adjustments (10)

(25,529)





(18,862)





(199,104)





(42,388)



Adjusted income from continuing operations (non-GAAP)

$

151,700





$

139,388





$

372,100





$

278,161



 

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 six months ended June 30, 2020 and 2019 (in thousands, except per share data):



Three Months Ended June 30, 2020



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



Income from continuing operations before income tax



Income tax expense



Effective tax rate



Income from continuing operations



Discontinued operations, net of tax



Net income



Diluted net income per share from continuing operations (12)

Reported (GAAP)

$   687,588



$     336,096



$   351,492



51.1 %



$     201,226



29.3 %



$   150,266



21.9 %



$ 125,014



$       25,252



$      7,642



30.3 %



$     17,610



$         (7,052)



$       10,558



$            0.08

Items impacting comparability:































































Amortization of intangible assets (1)

-



(104,498)



104,498







-







104,498







-



104,498



-







104,498



-



104,498





Upfront and milestone-related payments (2)

-



(125)



125







(319)







444







-



444



-







444



-



444





Continuity and separation benefits and other cost reductions (3)

-



(904)



904







(8,540)







9,444







-



9,444



-







9,444



-



9,444





Certain litigation-related and other contingencies, net (4)

-



-



-







8,572







(8,572)







-



(8,572)



-







(8,572)



-



(8,572)





Certain legal costs (5)

-



-



-







(18,005)







18,005







-



18,005



-







18,005



-



18,005





Fair value of contingent consideration (7)

-



-



-







(6,045)







6,045







-



6,045



-







6,045



-



6,045





Other (9)

-



-



-







(30,749)







30,749







994



29,755



-







29,755



-



29,755





Tax adjustments (10)

-



-



-







-







-







-



-



25,529







(25,529)



-



(25,529)





Exclude discontinued operations, net of tax (11)

-



-



-







-







-







-



-



-







-



7,052



7,052





After considering items (non-GAAP)

$   687,588



$     230,569



$   457,019



66.5 %



$     146,140



21.3 %



$   310,879



45.2 %



$ 126,008



$     184,871



$    33,171



17.9 %



$   151,700



$                  -



$     151,700



$            0.65

 



Three Months Ended June 30, 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 (12)

Reported (GAAP)

$   699,727



$     388,208



$   311,519



44.5 %



$     271,891



38.9 %



$     39,628



5.7 %



$ 134,212



$     (94,584)



$      3,468



(3.7)%



$   (98,052)



$         (7,953)



$   (106,005)



$          (0.43)

Items impacting comparability:































































Amortization of intangible assets (1)

-



(140,418)



140,418







-







140,418







-



140,418



-







140,418



-



140,418





Upfront and milestone-related payments (2)

-



(739)



739







(705)







1,444







-



1,444



-







1,444



-



1,444





Continuity and separation benefits and other cost reductions (3)

-



-



-







(2,124)







2,124







-



2,124



-







2,124



-



2,124





Certain litigation-related and other contingencies, net (4)

-



-



-







(10,315)







10,315







-



10,315



-







10,315



-



10,315





Certain legal costs (5)

-



-



-







(18,984)







18,984







-



18,984



-







18,984



-



18,984





Asset impairment charges (6)

-



-



-







(88,438)







88,438







-



88,438



-







88,438



-



88,438





Fair value of contingent consideration (7)

-



-



-







5,507







(5,507)







-



(5,507)



-







(5,507)



-



(5,507)





Other (9)

-



-



-







175







(175)







(261)



86



-







86



-



86





Tax adjustments (10)

-



-



-







-







-







-



-



18,862







(18,862)



-



(18,862)





Exclude discontinued operations, net of tax (11)

-



-



-







-







-







-



-



-







-



7,953



7,953





After considering items (non-GAAP)

$   699,727



$     247,051



$   452,676



64.7 %



$     157,007



22.4 %



$   295,669



42.3 %



$ 133,951



$     161,718



$    22,330



13.8 %



$   139,388



$                  -



$     139,388



$            0.60

































































 



Six Months Ended June 30, 2020



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



Income from continuing operations before income tax



Income tax (benefit) expense



Effective tax rate



Income from continuing operations



Discontinued operations, net of tax



Net income



Diluted net income per share from continuing operations (12)

Reported (GAAP)

$1,507,993



$     724,895



$   783,098



51.9 %



$     492,680



32.7 %



$   290,418



19.3 %



$ 243,917



$       46,501



$(128,690)



(276.7)%



$   175,191



$       (34,703)



$     140,488



$            0.75

Items impacting comparability:































































Amortization of intangible assets (1)

-



(221,735)



221,735







-







221,735







-



221,735



-







221,735



-



221,735





Upfront and milestone-related payments (2)

-



(667)



667







(1,527)







2,194







-



2,194



-







2,194



-



2,194





Continuity and separation benefits and other cost reductions (3)

-



(7,142)



7,142







(25,522)







32,664







-



32,664



-







32,664



-



32,664





Certain litigation-related and other contingencies, net (4)

-



-



-







25,748







(25,748)







-



(25,748)



-







(25,748)



-



(25,748)





Certain legal costs (5)

-



-



-







(33,541)







33,541







-



33,541



-







33,541



-



33,541





Asset impairment charges (6)

-



-



-







(97,785)







97,785







-



97,785



-







97,785



-



97,785





Fair value of contingent consideration (7)

-



-



-







(18,507)







18,507







-



18,507



-







18,507



-



18,507





Other (9)

-



-



-







(30,749)







30,749







15,414



15,335



-







15,335



-



15,335





Tax adjustments (10)

-



-



-







-







-







-



-



199,104







(199,104)



-



(199,104)





Exclude discontinued operations, net of tax (11)

-



-



-







-







-







-



-



-







-



34,703



34,703





After considering items (non-GAAP)

$1,507,993



$     495,351



$1,012,642



67.2 %



$     310,797



20.6 %



$   701,845



46.5 %



$ 259,331



$     442,514



$    70,414



15.9 %



$   372,100



$                  -



$     372,100



$            1.59

 



Six Months Ended June 30, 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 (12)

Reported (GAAP)

$1,420,138



$     780,117



$   640,021



45.1 %



$     584,453



41.2 %



$     55,568



3.9 %



$ 151,861



$     (96,293)



$    14,371



(14.9)%



$ (110,664)



$       (13,914)



$   (124,578)



$          (0.49)

Items impacting comparability:































































Amortization of intangible assets (1)

-



(286,017)



286,017







-







286,017







-



286,017



-







286,017



-



286,017





Upfront and milestone-related payments (2)

-



(1,400)



1,400







(983)







2,383







-



2,383



-







2,383



-



2,383





Continuity and separation benefits and other cost reductions (3)

-



-



-







(4,149)







4,149







-



4,149



-







4,149



-



4,149





Certain litigation-related and other contingencies, net (4)

-



-



-







(10,321)







10,321







-



10,321



-







10,321



-



10,321





Certain legal costs (5)

-



-



-







(35,673)







35,673







-



35,673



-







35,673



-



35,673





Asset impairment charges (6)

-



-



-







(253,886)







253,886







-



253,886



-







253,886



-



253,886





Fair value of contingent consideration (7)

-



-



-







43,008







(43,008)







-



(43,008)



-







(43,008)



-



(43,008)





Gain on extinguishment of debt (8)

-



-



-







-







-







119,828



(119,828)



-







(119,828)



-



(119,828)





Other (9)

-



-



-







175







(175)







(1,795)



1,620



-







1,620



-



1,620





Tax adjustments (10)

-



-



-







-







-







-



-



42,388







(42,388)



-



(42,388)





Exclude discontinued operations, net of tax (11)

-



-



-







-







-







-



-



-







-



13,914



13,914





After considering items (non-GAAP)

$1,420,138



$     492,700



$   927,438



65.3 %



$     322,624



22.7 %



$   604,814



42.6 %



$ 269,894



$     334,920



$    56,759



16.9 %



$   278,161



$                  -



$     278,161



$            1.20

 

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 six months ended June 30, 2020 and 2019 are as follows:

(1)

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







Three Months Ended June 30,



Six Months Ended June 30,



2020



2019



2020



2019

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

$

103,681





$

134,473





$

220,101





$

271,338



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

817





5,945





1,634





14,679



Total

$

104,498





$

140,418





$

221,735





$

286,017



 

(2)

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







Three Months Ended June 30,



2020



2019



Cost of revenues



Operating expenses



Cost of revenues



Operating expenses

Sales-based

$

125





$





$

739





$



Development-based





319









705



Total

$

125





$

319





$

739





$

705









Six Months Ended June 30,



2020



2019



Cost of revenues



Operating expenses



Cost of revenues



Operating expenses

Sales-based

$

667





$





$

1,400





$



Development-based





1,527









983



Total

$

667





$

1,527





$

1,400





$

983



 

(3)

   Adjustments for continuity and separation benefits and other cost reductions included the following (in thousands):







Three Months Ended June 30,



2020



2019



Cost of revenues



Operating expenses



Cost of revenues



Operating expenses

Continuity and separation benefits

$

515





$

3,606





$





$

410



Accelerated depreciation charges

1,347





408











Other

(958)





4,526









1,714



Total

$

904





$

8,540





$





$

2,124









Six Months Ended June 30,



2020



2019



Cost of revenues



Operating expenses



Cost of revenues



Operating expenses

Continuity and separation benefits

$

1,142





$

16,775





$





$

2,212



Accelerated depreciation charges

6,026





2,359











Other

(26)





6,388









1,937



Total

$

7,142





$

25,522





$





$

4,149



 

Included within the Continuity and separation benefits line are costs associated with certain continuity and transitional compensation arrangements for certain senior management of the Company.



(4)

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





(5)

To exclude opioid-related legal expenses.





(6)

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







Three Months Ended June 30,



Six Months Ended June 30,



2020



2019



2020



2019

Goodwill impairment charges

$





$

65,108





$

32,786





$

151,108



Other intangible asset impairment charges





21,699





63,751





100,399



Property, plant and equipment impairment charges





1,631





1,248





2,379



Total asset impairment charges

$





$

88,438





$

97,785





$

253,886







(7)

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 the Company could incur, related contingent obligations.





(8)

To exclude the gain on the extinguishment of debt associated with the Company's March 2019 refinancing.





(9)

The Other row included in each of the above reconciliations of GAAP financial measures to Non-GAAP financial measures (except for the reconciliations of Net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP)) includes the following (in thousands):







Three Months Ended June 30,



2020



2019



Operating expenses



Other non-operating expenses



Operating expenses



Other non-operating expenses

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

$





$

3,005





$





$

2,262



(Gain) loss on sale of business and other assets





(3,999)









(2,001)



Debt modification costs

30,749















Other miscellaneous









(175)







Total

$

30,749





$

(994)





$

(175)





$

261









Six Months Ended June 30,



2020



2019



Operating expenses



Other non-operating expenses



Operating expenses



Other non-operating expenses

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

$





$

(4,089)





$





$

3,796



(Gain) loss on sale of business and other assets





(11,325)









(2,001)



Debt modification costs

30,749















Other miscellaneous









(175)







Total

$

30,749





$

(15,414)





$

(175)





$

1,795





The Other row included in the reconciliations of Net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) primarily relates to the items enumerated in the foregoing "Operating expenses" columns.





(10)

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.





(11)

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





(12)

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 June 30,



Six Months Ended June 30,



2020



2019



2020



2019

GAAP

233,681





226,221





233,348





225,408



Non-GAAP Adjusted

233,681





232,713





233,348





232,174







(13)

Depreciation and amortization and Share-based compensation per the Adjusted EBITDA reconciliations do not include amounts reflected in other lines of the reconciliations, including Continuity and separation benefits and other cost reductions.





(14)

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



 

Reconciliation of Net Debt Leverage Ratio (non-GAAP)

The following table provides a reconciliation of the Company's Net income (loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the twelve months ended June 30, 2020 (in thousands) and the calculation of the Company's Net Debt Leverage Ratio (non-GAAP):



Twelve Months

Ended June 30,

2020

Net loss (GAAP)

$

(157,570)



Income tax benefit

(127,381)



Interest expense, net

533,291



Depreciation and amortization (13)

547,887



EBITDA (non-GAAP)

$

796,227







Upfront and milestone-related payments

$

6,434



Continuity and separation benefits and other cost reductions

63,113



Certain litigation-related and other contingencies, net

(24,858)



Certain legal costs

63,150



Asset impairment charges

369,981



Fair value of contingent consideration

15,417



Share-based compensation (13)

43,486



Other income, net

(5,652)



Other

44,460



Discontinued operations, net of tax

82,841



Adjusted EBITDA (non-GAAP)

$

1,454,599







Calculation of Net Debt:



Debt

$

8,336,745



Cash (excluding Restricted Cash)

1,780,087



Net Debt (non-GAAP)

$

6,556,658







Calculation of Net Debt Leverage:



Net Debt Leverage Ratio (non-GAAP)

4.5



 

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 ENDP is a specialty pharmaceutical company committed to helping everyone we serve live their best life through the delivery of quality, life-enhancing therapies. Our decades of proven success come from a global team of passionate employees collaborating to bring the best treatments forward. Together, we boldly transform insights into treatments benefiting those who need them, when they need them. Endo has global headquarters in Dublin, Ireland and U.S. headquarters in Malvern, Pennsylvania.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including but not limited to the statements by Mr. Coleman, as well as other statements regarding product development, market potential, corporate strategy, optimization efforts, expected growth and regulatory approvals, together with Endo's net income per share from continuing operations amounts, product net sales, revenue forecasts, the impact of and response to the COVID-19 pandemic 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 manufacture, maintain and distribute 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, the impact of and response to the COVID-19 pandemic and the 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.

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/endo-reports-second-quarter-2020-financial-results-301107030.html

SOURCE Endo International plc

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