UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 8-K
_______________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 25, 2021
_______________________________
(Exact Name of Registrant as Specified in Its Charter)
_______________________________
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices) | (Zip Code) | |||||||
Registrant's telephone number, including area code 011-353 -1-268-2000
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 25, 2021, Endo International plc (the “Company,” “Endo,” or “we”) issued an earnings release announcing its financial results for the three months and year ended December 31, 2020 (the “Earnings Release”). A copy of the Earnings Release is attached as Exhibit 99.1 hereto and is incorporated herein by reference.
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”). The Company utilizes these financial measures, commonly referred to as “non-GAAP,” because (i) they are used by the Company, along with financial measures in accordance with GAAP, to evaluate the Company’s operating performance; (ii) the Company believes that they will be used by certain investors to measure the Company’s operating results; (iii) the Compensation Committee of the Company's Board of Directors uses Adjusted diluted net income per share from continuing operations and Adjusted EBITDA, or measures derived from such, in assessing the performance and compensation of substantially all of the Company's employees, including executive officers; and (iv) the Company’s leverage ratio, as defined by the Company’s credit agreement, is calculated based on non-GAAP financial measures. The Company believes that presenting these non-GAAP financial measures provides useful information about the Company’s performance across reporting periods on a consistent basis by excluding certain items, which may be favorable or unfavorable, pursuant to the procedure described in the succeeding paragraph.
The initial identification and review of the non-GAAP adjustments necessary to arrive at these non-GAAP financial measures are performed by a team of finance professionals that include the Chief Accounting Officer and segment finance leaders in accordance with the Company’s Adjusted Income Statement Policy, which is reviewed and approved by the Audit Committee of the Company’s Board of Directors. Company tax professionals review and determine the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments as described below. Proposed adjustments, along with any items considered but excluded, are presented to the Chief Accounting Officer, Chief Executive Officer and/or the Chief Financial Officer for their consideration. In turn, the non-GAAP adjustments are presented to the Audit Committee on a quarterly basis as part of the Company’s standard procedures for preparation and review of the earnings release and other quarterly materials.
These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The Company's definition of these non-GAAP financial measures may differ from similarly titled measures used by others. The definitions of the most commonly used non-GAAP financial measures are presented below.
Adjusted income from continuing operations
Adjusted income from continuing operations represents Income (loss) from continuing operations prepared in accordance with GAAP and adjusted for certain items. Adjustments to GAAP amounts may include, but are not limited to, certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, continuity payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; gains or losses from early termination of debt; debt modification costs; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments; and certain other items.
Adjusted diluted net income per share from continuing operations and Adjusted diluted weighted average shares
Adjusted diluted net income per share from continuing operations represents Adjusted income from continuing operations divided by the number of Adjusted diluted weighted average shares.
Both GAAP and non-GAAP diluted Net income (loss) per share data is computed based on weighted average shares outstanding and, if there is net income from continuing operations (rather than net loss) during the period, the dilutive impact of share equivalents outstanding during the period. Diluted weighted average shares outstanding and Adjusted diluted weighted average shares outstanding are calculated on the same basis except for the net income or loss figure used in determining whether to include such dilutive impact.
Adjusted gross margin
Adjusted gross margin represents total revenues less cost of revenues prepared in accordance with GAAP and adjusted for the items enumerated above under the heading “Adjusted income from continuing operations,” to the extent such items relate to cost of revenues. Such items may include, but are not limited to, certain upfront and milestone payments to partners; cost reduction and integration-related initiatives such as separation benefits, continuity payments, other exit costs and certain costs associated with integrating an acquired company’s operations; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; and certain other items.
Adjusted operating expenses
Adjusted operating expenses represent operating expenses prepared in accordance with GAAP and adjusted for the items enumerated above under the heading “Adjusted income from continuing operations,” to the extent such items relate to operating expenses. Such items may include, but are not limited to, certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, continuity payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; debt modification costs; and certain other items.
Adjusted interest expense
Adjusted interest expense represents interest expense, net, prepared in accordance with GAAP, adjusted for certain non-cash interest expense.
Adjusted income taxes and Adjusted effective tax rate
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. Adjustments are then made for certain items relating to prior years and for tax planning actions that are expected to be distortive to the underlying effective tax rate and trend in the effective tax rate. The most directly comparable GAAP financial measure for Adjusted income taxes is Income tax (benefit) expense, prepared in accordance with GAAP. The Adjusted effective tax rate represents the rate generated when dividing Adjusted income taxes by the amount of adjusted pre-tax income.
EBITDA and Adjusted EBITDA
EBITDA represents Net income (loss) before Interest expense, net; Income tax (benefit) expense; Depreciation; and Amortization, each prepared in accordance with GAAP. Adjusted EBITDA further adjusts EBITDA by excluding other (income) expense, net; share-based compensation; certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, continuity payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; debt modification costs; discontinued operations, net of tax; and certain other items.
Net Debt and Net Debt Leverage Ratio
Net debt is calculated as the aggregate carrying amount of debt outstanding less unrestricted cash and cash equivalents.
The net debt leverage ratio is calculated as net debt divided by Adjusted EBITDA for the trailing twelve-month period.
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 income from continuing operations, Adjusted diluted net income per share from continuing operations, Adjusted operating expenses and Adjusted EBITDA now exclude opioid-related legal expenses. The amounts of such costs for the three months ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019 were $16.7 million, $19.0 million, $14.6 million and $15.1 million, respectively. The amount for the year ended December 31, 2018 was $43.8 million.
Because adjusted financial measures exclude the effect of items that will increase or decrease the Company's reported results of operations, the Company strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety. Investors are also encouraged to review the reconciliation of the non-GAAP financial measures used in the Earnings Release to their most directly comparable GAAP financial measures as included in the Earnings Release. 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, gains or losses on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amount of which could be significant.
The information in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be incorporated into any registration statement or other document filed by the Registrant with the U.S. Securities and Exchange Commission under the Securities Act of 1933, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Number | Description | ||||
| 99.1 | |||||
| 104 | Cover Page Interactive Date File (embedded within the Inline XBRL document) | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| ENDO INTERNATIONAL PLC | |||||
| By: | /s/ Matthew J. Maletta | ||||
| Name: | Matthew J. Maletta | ||||
| Title: | Executive Vice President, Chief Legal Officer and Company Secretary | ||||
Dated: February 25, 2021
Exhibit 99.1
ENDO REPORTS FOURTH-QUARTER AND FULL-YEAR 2020 FINANCIAL RESULTS AND INTRODUCES 2021 FINANCIAL GUIDANCE
DUBLIN, February 25, 2021 -- Endo International plc (NASDAQ: ENDP) today reported financial results for the fourth-quarter and full-year ended December 31, 2020 and introduced 2021 financial guidance.
“I am proud of all that the Endo team achieved in a very challenging year. We made significant progress in advancing our strategic priorities, delivered solid financial performance, rapidly responded to the COVID-19 pandemic and advanced our ESG-related actions,” said Blaise Coleman, President and Chief Executive Officer at Endo.
“Looking ahead, we remain committed to expanding and enhancing our portfolio through focused investments, including the anticipated spring 2021 launch of QWO®, the first and only FDA approved injectable treatment for cellulite. Together with our previously announced business transformation initiatives, we are confident that continuing to execute on our strategic priorities will enable us to deliver sustainable value over the long-term.”
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 (1) | Change | 2020 | 2019 (1) | Change | ||||||||||||||||||||||||||||||
| Total Revenues, Net | $ | 760,221 | $ | 764,800 | (1) | % | $ | 2,903,074 | $ | 2,914,364 | — | % | |||||||||||||||||||||||
| Reported Income (Loss) from Continuing Operations | $ | 141,247 | $ | (208,489) | NM | $ | 247,464 | $ | (360,584) | NM | |||||||||||||||||||||||||
| Reported Diluted Weighted Average Shares | 234,474 | 226,787 | 3 | % | 233,653 | 226,050 | 3 | % | |||||||||||||||||||||||||||
| Reported Diluted Net Income (Loss) per Share from Continuing Operations | $ | 0.60 | $ | (0.92) | NM | $ | 1.06 | $ | (1.60) | NM | |||||||||||||||||||||||||
| Reported Net Income (Loss) | $ | 119,343 | $ | (218,643) | NM | $ | 183,944 | $ | (422,636) | NM | |||||||||||||||||||||||||
| Adjusted Income from Continuing Operations (3) | $ | 175,995 | $ | 185,231 | (5) | % | $ | 670,370 | $ | 616,078 | 9 | % | |||||||||||||||||||||||
| Adjusted Diluted Weighted Average Shares (2)(3) | 234,474 | 231,571 | 1 | % | 233,653 | 231,706 | 1 | % | |||||||||||||||||||||||||||
| Adjusted Diluted Net Income per Share from Continuing Operations (3) | $ | 0.75 | $ | 0.80 | (6) | % | $ | 2.87 | $ | 2.66 | 8 | % | |||||||||||||||||||||||
| Adjusted EBITDA (3) | $ | 351,635 | $ | 361,336 | (3) | % | $ | 1,395,942 | $ | 1,374,172 | 2 | % | |||||||||||||||||||||||
__________
(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.
(3)The information presented in the table above includes non-GAAP financial measures such as “Adjusted Income from Continuing Operations,” “Adjusted Diluted Weighted Average Shares,” “Adjusted Diluted Net Income per Share from Continuing Operations” and “Adjusted EBITDA.” Refer to the “Supplemental Financial Information” section below for reconciliations of certain non-GAAP financial measures to the most directly comparable GAAP financial measures.
1
CONSOLIDATED RESULTS
Total revenues were $760 million in fourth-quarter 2020, a decrease of 1% compared to $765 million during the same period in 2019. This result was primarily attributable to decreased Generic Pharmaceuticals segment revenues which were largely offset by increased Sterile Injectables segment revenues.
Reported income from continuing operations in fourth-quarter 2020 was $141 million compared to a reported loss from continuing operations of $208 million during the same period in 2019. This result was primarily attributable to decreased asset impairment charges and a non-cash income tax benefit resulting from a change in deferred tax liabilities following the BioSpecifics Technologies Corp. (BioSpecifics) acquisition in fourth-quarter 2020. Reported diluted net income per share from continuing operations in fourth-quarter 2020 was $0.60 compared to reported diluted net loss per share from continuing operations in fourth-quarter 2019 of $0.92.
Adjusted income from continuing operations in fourth-quarter 2020 was $176 million compared to $185 million in fourth-quarter 2019. Adjusted diluted net income per share from continuing operations in fourth-quarter 2020 was $0.75 compared to $0.80 in fourth-quarter 2019. These decreases were primarily attributable to higher adjusted operating expenses.
BRANDED PHARMACEUTICALS SEGMENT
Fourth-quarter 2020 Branded Pharmaceuticals segment revenues were $225 million and were comparable to revenues of $226 million during fourth-quarter 2019.
Specialty Products revenues increased 4% to $154 million in fourth-quarter 2020 compared to $149 million in fourth-quarter 2019, with sales of XIAFLEX® increasing 4% to $105 million compared to sales of $102 million in fourth-quarter 2019. Established Products revenues decreased 8% to $71 million in fourth-quarter 2020 compared to $77 million in fourth-quarter 2019, driven primarily by TESTOPEL® supply normalization.
STERILE INJECTABLES SEGMENT
Fourth-quarter 2020 Sterile Injectables segment revenues were $332 million, an increase of 16% compared to $285 million during fourth-quarter 2019. This increase was primarily driven by higher VASOSTRICT® revenues.
GENERIC PHARMACEUTICALS SEGMENT
Fourth-quarter 2020 Generic Pharmaceuticals segment revenues were $180 million, a decrease of 20% compared to $226 million during fourth-quarter 2019. This decrease was primarily attributable to continued competitive pressures on certain key products.
INTERNATIONAL PHARMACEUTICALS SEGMENT
Fourth-quarter 2020 International Pharmaceuticals segment revenues decreased 18% to $23 million compared to $29 million during fourth-quarter 2019. This decrease was primarily attributable to continued competitive pressures on certain key products.
2
2021 FINANCIAL GUIDANCE
Endo is providing financial guidance for the first-quarter and full-year ending December 31, 2021. The guidance below contemplates a range of potential outcomes that reflect uncertainties in certain key assumptions including, among other things, uncertainties related to the COVID-19 pandemic. These statements are forward-looking, and actual results may differ materially from Endo’s expectations, as further discussed below under the heading “Cautionary Note Regarding Forward-Looking Statements.”
| First-Quarter 2021 | Full-Year 2021 | ||||||||||
| Total Revenues, Net | $620M - $680M | $2.55B - $2.79B | |||||||||
| Adjusted EBITDA | $270M - $300M | $1.12B - $1.28B | |||||||||
| Adjusted Diluted Net Income per Share from Continuing Operations | $0.40 - $0.50 | $1.80 - $2.30 | |||||||||
| Assumptions: | |||||||||||
| Adjusted Gross Margin | ~70.5% | ~70.0% - 71.0% | |||||||||
| Adjusted Operating Expenses as a Percentage of Total Revenues, Net | ~30.5% | ~28.5% - 29.5% | |||||||||
| Adjusted Interest Expense | ~$135M | ~$540M | |||||||||
| Adjusted Effective Tax Rate | ~16.5% | ~13.0% - 14.0% | |||||||||
| Adjusted Diluted Weighted Average Shares | ~237M | ~239M | |||||||||
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of December 31, 2020, the Company had approximately $1.2 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 5.1.
Fourth-quarter 2020 net cash provided by operating activities was $108 million, compared to $21 million of net cash used in operating activities during fourth-quarter 2019.
On December 2, 2020, the Company completed the previously announced acquisition of BioSpecifics, a commercial-stage biopharmaceutical company, for $88.50 per share in an all-cash transaction. We paid approximately $560 million in cash, net of cash, cash equivalents and investments acquired, to acquire BioSpecifics.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release tomorrow, February 26, 2021, at 7:30 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 8387347. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from February 26, 2021 at 10:30 a.m. ET until 10:30 a.m. ET on March 5, 2021 by dialing U.S./Canada (855) 859-2056; International (404) 537-3406, and entering the passcode 8387347.
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.
3
FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total revenues, net for the three months and years ended December 31, 2020 and 2019 (dollars in thousands):
| Three Months Ended December 31, | Percent Growth | Year Ended December 31, | Percent Growth | ||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| Branded Pharmaceuticals: | |||||||||||||||||||||||||||||||||||
| Specialty Products: | |||||||||||||||||||||||||||||||||||
| XIAFLEX® | $ | 105,212 | $ | 101,520 | 4 | % | $ | 316,234 | $ | 327,638 | (3) | % | |||||||||||||||||||||||
| SUPPRELIN® LA | 24,838 | 20,255 | 23 | % | 88,182 | 86,797 | 2 | % | |||||||||||||||||||||||||||
| Other Specialty (1) | 23,867 | 26,844 | (11) | % | 92,662 | 105,241 | (12) | % | |||||||||||||||||||||||||||
| Total Specialty Products | $ | 153,917 | $ | 148,619 | 4 | % | $ | 497,078 | $ | 519,676 | (4) | % | |||||||||||||||||||||||
| Established Products: | |||||||||||||||||||||||||||||||||||
| PERCOCET® | $ | 27,323 | $ | 27,813 | (2) | % | $ | 110,112 | $ | 116,012 | (5) | % | |||||||||||||||||||||||
| TESTOPEL® | 8,357 | 14,414 | (42) | % | 35,234 | 55,244 | (36) | % | |||||||||||||||||||||||||||
| Other Established (2) | 34,907 | 34,705 | 1 | % | 139,356 | 164,470 | (15) | % | |||||||||||||||||||||||||||
| Total Established Products | $ | 70,587 | $ | 76,932 | (8) | % | $ | 284,702 | $ | 335,726 | (15) | % | |||||||||||||||||||||||
| Total Branded Pharmaceuticals (3) | $ | 224,504 | $ | 225,551 | — | % | $ | 781,780 | $ | 855,402 | (9) | % | |||||||||||||||||||||||
| Sterile Injectables: | |||||||||||||||||||||||||||||||||||
| VASOSTRICT® | $ | 213,116 | $ | 146,883 | 45 | % | $ | 785,646 | $ | 531,737 | 48 | % | |||||||||||||||||||||||
| ADRENALIN® | 31,739 | 45,827 | (31) | % | 152,074 | 179,295 | (15) | % | |||||||||||||||||||||||||||
| Ertapenem for injection | 18,959 | 25,060 | (24) | % | 65,607 | 104,679 | (37) | % | |||||||||||||||||||||||||||
| APLISOL® | 10,399 | 5,830 | 78 | % | 36,220 | 61,826 | (41) | % | |||||||||||||||||||||||||||
| Other Sterile Injectables (4) | 57,637 | 61,568 | (6) | % | 199,300 | 185,594 | 7 | % | |||||||||||||||||||||||||||
| Total Sterile Injectables (3) | $ | 331,850 | $ | 285,168 | 16 | % | $ | 1,238,847 | $ | 1,063,131 | 17 | % | |||||||||||||||||||||||
| Total Generic Pharmaceuticals | $ | 180,440 | $ | 225,560 | (20) | % | $ | 783,110 | $ | 879,882 | (11) | % | |||||||||||||||||||||||
| Total International Pharmaceuticals | $ | 23,427 | $ | 28,521 | (18) | % | $ | 99,337 | $ | 115,949 | (14) | % | |||||||||||||||||||||||
| Total revenues, net | $ | 760,221 | $ | 764,800 | (1) | % | $ | 2,903,074 | $ | 2,914,364 | — | % | |||||||||||||||||||||||
__________
(1)Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®.
(2)Products included within Other Established include, but are not limited to, EDEX® and LIDODERM®.
(3)Individual products presented above represent the top two performing products in each product category for the year ended December 31, 2020 and/or any product having revenues in excess of $100 million during any of the years ended December 31, 2020, 2019 or 2018 or $25 million during any quarterly period in 2020 or 2019.
(4)Products included within Other Sterile Injectables include ephedrine sulfate injection and others.
4
The following table presents unaudited Condensed Consolidated Statement of Operations data for the three months and years ended December 31, 2020 and 2019 (in thousands, except per share data):
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| TOTAL REVENUES, NET | $ | 760,221 | $ | 764,800 | $ | 2,903,074 | $ | 2,914,364 | |||||||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||||||
| Cost of revenues | 369,539 | 400,056 | 1,442,511 | 1,569,338 | |||||||||||||||||||
| Selling, general and administrative | 176,221 | 160,671 | 698,506 | 632,420 | |||||||||||||||||||
| Research and development | 64,737 | 34,379 | 158,902 | 130,732 | |||||||||||||||||||
| Litigation-related and other contingencies, net | 4,889 | 15,304 | (19,049) | 11,211 | |||||||||||||||||||
| Asset impairment charges | 14,147 | 267,430 | 120,344 | 526,082 | |||||||||||||||||||
| Acquisition-related and integration items, net | (551) | (19,115) | 16,549 | (46,098) | |||||||||||||||||||
| Interest expense, net | 135,250 | 134,347 | 532,939 | 538,734 | |||||||||||||||||||
| Gain on extinguishment of debt | — | — | — | (119,828) | |||||||||||||||||||
| Other expense (income), net | 4,208 | (3,731) | (21,110) | 16,677 | |||||||||||||||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX | $ | (8,219) | $ | (224,541) | $ | (26,518) | $ | (344,904) | |||||||||||||||
| INCOME TAX (BENEFIT) EXPENSE | (149,466) | (16,052) | (273,982) | 15,680 | |||||||||||||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS | $ | 141,247 | $ | (208,489) | $ | 247,464 | $ | (360,584) | |||||||||||||||
| DISCONTINUED OPERATIONS, NET OF TAX | (21,904) | (10,154) | (63,520) | (62,052) | |||||||||||||||||||
| NET INCOME (LOSS) | $ | 119,343 | $ | (218,643) | $ | 183,944 | $ | (422,636) | |||||||||||||||
| NET INCOME (LOSS) PER SHARE—BASIC: | |||||||||||||||||||||||
| Continuing operations | $ | 0.61 | $ | (0.92) | $ | 1.08 | $ | (1.60) | |||||||||||||||
| Discontinued operations | (0.09) | (0.04) | (0.28) | (0.27) | |||||||||||||||||||
| Basic | $ | 0.52 | $ | (0.96) | $ | 0.80 | $ | (1.87) | |||||||||||||||
| NET INCOME (LOSS) PER SHARE—DILUTED: | |||||||||||||||||||||||
| Continuing operations | $ | 0.60 | $ | (0.92) | $ | 1.06 | $ | (1.60) | |||||||||||||||
| Discontinued operations | (0.09) | (0.04) | (0.27) | (0.27) | |||||||||||||||||||
| Diluted | $ | 0.51 | $ | (0.96) | $ | 0.79 | $ | (1.87) | |||||||||||||||
| WEIGHTED AVERAGE SHARES: | |||||||||||||||||||||||
| Basic | 230,301 | 226,787 | 229,314 | 226,050 | |||||||||||||||||||
| Diluted | 234,474 | 226,787 | 233,653 | 226,050 | |||||||||||||||||||
5
The following table presents unaudited Condensed Consolidated Balance Sheet data at December 31, 2020 and December 31, 2019 (in thousands):
| December 31, 2020 | December 31, 2019 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 1,213,437 | $ | 1,454,531 | |||||||
| Restricted cash and cash equivalents | 171,563 | 247,457 | |||||||||
| Accounts receivable | 511,262 | 467,953 | |||||||||
| Inventories, net | 352,260 | 327,865 | |||||||||
| Other current assets | 164,736 | 88,412 | |||||||||
| Total current assets | $ | 2,413,258 | $ | 2,586,218 | |||||||
| TOTAL NON-CURRENT ASSETS | 6,851,379 | 6,803,309 | |||||||||
| TOTAL ASSETS | $ | 9,264,637 | $ | 9,389,527 | |||||||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable and accrued expenses, including legal settlement accruals | $ | 1,208,061 | $ | 1,412,954 | |||||||
| Other current liabilities | 45,763 | 47,335 | |||||||||
| Total current liabilities | $ | 1,253,824 | $ | 1,460,289 | |||||||
| LONG-TERM DEBT, LESS CURRENT PORTION, NET | 8,280,578 | 8,359,899 | |||||||||
| OTHER LIABILITIES | 378,174 | 435,883 | |||||||||
| SHAREHOLDERS' DEFICIT | (647,939) | (866,544) | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 9,264,637 | $ | 9,389,527 | |||||||
6
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the years ended December 31, 2020 and 2019 (in thousands):
| Year Ended December 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net income (loss) | $ | 183,944 | $ | (422,636) | |||||||
| Adjustments to reconcile Net income (loss) to Net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 518,807 | 612,862 | |||||||||
| Asset impairment charges | 120,344 | 526,082 | |||||||||
| Other, including cash payments to claimants from Qualified Settlement Funds | (425,703) | (618,256) | |||||||||
| Net cash provided by operating activities | $ | 397,392 | $ | 98,052 | |||||||
| INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures, excluding capitalized interest | $ | (69,971) | $ | (63,854) | |||||||
| Acquisitions, including in-process research and development, net of cash and restricted cash acquired | (649,504) | — | |||||||||
| Proceeds from sales and maturities of investments | 92,763 | — | |||||||||
| Proceeds from sale of business and other assets, net | 6,737 | 6,577 | |||||||||
| Other | (4,892) | (2,921) | |||||||||
| Net cash used in investing activities | $ | (624,867) | $ | (60,198) | |||||||
| FINANCING ACTIVITIES: | |||||||||||
| (Payments on) proceeds from borrowings, net | $ | (96,683) | $ | 237,989 | |||||||
| Other | (11,884) | (33,388) | |||||||||
| Net cash (used in) provided by financing activities | $ | (108,567) | $ | 204,601 | |||||||
| Effect of foreign exchange rate | 654 | 1,096 | |||||||||
| NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS | $ | (335,388) | $ | 243,551 | |||||||
| 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 | $ | 1,385,000 | $ | 1,720,388 | |||||||
7
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 months and years ended December 31, 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 months and years ended December 31, 2020 and 2019 (in thousands):
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net income (loss) (GAAP) | $ | 119,343 | $ | (218,643) | $ | 183,944 | $ | (422,636) | |||||||||||||||
| Income tax (benefit) expense | (149,466) | (16,052) | (273,982) | 15,680 | |||||||||||||||||||
| Interest expense, net | 135,250 | 134,347 | 532,939 | 538,734 | |||||||||||||||||||
| Depreciation and amortization (14) | 119,562 | 144,453 | 496,349 | 612,862 | |||||||||||||||||||
| EBITDA (non-GAAP) | $ | 224,689 | $ | 44,105 | $ | 939,250 | $ | 744,640 | |||||||||||||||
| Upfront and milestone-related payments (2) | 32,606 | 2,568 | 35,075 | 6,623 | |||||||||||||||||||
| Continuity and separation benefits and other cost reductions (3) | 25,926 | 19,426 | 126,282 | 34,598 | |||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | 4,889 | 15,304 | (19,049) | 11,211 | |||||||||||||||||||
| Certain legal costs (5) | 15,935 | 15,053 | 67,819 | 65,282 | |||||||||||||||||||
| Asset impairment charges (6) | 14,147 | 267,430 | 120,344 | 526,082 | |||||||||||||||||||
| Acquisition-related and integration costs (7) | 196 | — | 196 | — | |||||||||||||||||||
| Fair value of contingent consideration (8) | (747) | (19,115) | 16,353 | (46,098) | |||||||||||||||||||
| Gain on extinguishment of debt (9) | — | — | — | (119,828) | |||||||||||||||||||
| Share-based compensation (14) | 7,905 | 10,233 | 36,167 | 59,142 | |||||||||||||||||||
| Other expense (income), net (15) | 4,208 | (3,731) | (21,110) | 16,677 | |||||||||||||||||||
| Other (10) | (23) | (91) | 31,095 | 13,791 | |||||||||||||||||||
| Discontinued operations, net of tax (12) | 21,904 | 10,154 | 63,520 | 62,052 | |||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 351,635 | $ | 361,336 | $ | 1,395,942 | $ | 1,374,172 | |||||||||||||||
8
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 months and years ended December 31, 2020 and 2019 (in thousands):
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Income (loss) from continuing operations (GAAP) | $ | 141,247 | $ | (208,489) | $ | 247,464 | $ | (360,584) | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Amortization of intangible assets (1) | 101,742 | 125,913 | 427,543 | 543,862 | |||||||||||||||||||
| Upfront and milestone-related payments (2) | 32,606 | 2,568 | 35,075 | 6,623 | |||||||||||||||||||
| Continuity and separation benefits and other cost reductions (3) | 25,926 | 19,426 | 126,282 | 34,598 | |||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | 4,889 | 15,304 | (19,049) | 11,211 | |||||||||||||||||||
| Certain legal costs (5) | 15,935 | 15,053 | 67,819 | 65,282 | |||||||||||||||||||
| Asset impairment charges (6) | 14,147 | 267,430 | 120,344 | 526,082 | |||||||||||||||||||
| Acquisition-related and integration costs (7) | 196 | — | 196 | — | |||||||||||||||||||
| Fair value of contingent consideration (8) | (747) | (19,115) | 16,353 | (46,098) | |||||||||||||||||||
| Gain on extinguishment of debt (9) | — | — | — | (119,828) | |||||||||||||||||||
| Other (10) | 3,727 | (2,002) | 17,164 | 28,252 | |||||||||||||||||||
| Tax adjustments (11) | (163,673) | (30,857) | (368,821) | (73,322) | |||||||||||||||||||
| Adjusted income from continuing operations (non-GAAP) | $ | 175,995 | $ | 185,231 | $ | 670,370 | $ | 616,078 | |||||||||||||||
9
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 months and years ended December 31, 2020 and 2019 (in thousands, except per share data):
| Three Months Ended December 31, 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 | (Loss) 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 (13) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | $ | 760,221 | $ | 369,539 | $ | 390,682 | 51.4 | % | $ | 259,443 | 34.1 | % | $ | 131,239 | 17.3 | % | $ | 139,458 | $ | (8,219) | $ | (149,466) | 1,818.5 | % | $ | 141,247 | $ | (21,904) | $ | 119,343 | $ | 0.60 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets (1) | — | (101,742) | 101,742 | — | 101,742 | — | 101,742 | — | 101,742 | — | 101,742 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Upfront and milestone-related payments (2) | — | (925) | 925 | (31,681) | 32,606 | — | 32,606 | — | 32,606 | — | 32,606 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuity and separation benefits and other cost reductions (3) | — | (11,721) | 11,721 | (14,205) | 25,926 | — | 25,926 | — | 25,926 | — | 25,926 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | (4,889) | 4,889 | — | 4,889 | — | 4,889 | — | 4,889 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (15,935) | 15,935 | — | 15,935 | — | 15,935 | — | 15,935 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (14,147) | 14,147 | — | 14,147 | — | 14,147 | — | 14,147 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related and integration costs (7) | — | — | — | (196) | 196 | — | 196 | — | 196 | — | 196 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | 747 | (747) | — | (747) | — | (747) | — | (747) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | — | — | (3,727) | 3,727 | — | 3,727 | — | 3,727 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 163,673 | (163,673) | — | (163,673) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 21,904 | 21,904 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 760,221 | $ | 255,151 | $ | 505,070 | 66.4 | % | $ | 179,137 | 23.6 | % | $ | 325,933 | 42.9 | % | $ | 135,731 | $ | 190,202 | $ | 14,207 | 7.5 | % | $ | 175,995 | $ | — | $ | 175,995 | $ | 0.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 (13) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 (2) | — | (542) | 542 | (2,026) | 2,568 | — | 2,568 | — | 2,568 | — | 2,568 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuity and separation benefits and other cost reductions (3) | — | (4,689) | 4,689 | (14,737) | 19,426 | — | 19,426 | — | 19,426 | — | 19,426 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | (15,304) | 15,304 | — | 15,304 | — | 15,304 | — | 15,304 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (15,053) | 15,053 | — | 15,053 | — | 15,053 | — | 15,053 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (267,430) | 267,430 | — | 267,430 | — | 267,430 | — | 267,430 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | 19,115 | (19,115) | — | (19,115) | — | (19,115) | — | (19,115) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | — | — | 2,002 | (2,002) | — | (2,002) | — | (2,002) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 30,857 | (30,857) | — | (30,857) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 10,154 | 10,154 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 764,800 | $ | 268,912 | $ | 495,888 | 64.8 | % | $ | 163,234 | 21.3 | % | $ | 332,654 | 43.5 | % | $ | 132,618 | $ | 200,036 | $ | 14,805 | 7.4 | % | $ | 185,231 | $ | — | $ | 185,231 | $ | 0.80 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10
| Year Ended December 31, 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 | (Loss) 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 (13) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | $ | 2,903,074 | $ | 1,442,511 | $ | 1,460,563 | 50.3 | % | $ | 975,252 | 33.6 | % | $ | 485,311 | 16.7 | % | $ | 511,829 | $ | (26,518) | $ | (273,982) | 1,033.2 | % | $ | 247,464 | $ | (63,520) | $ | 183,944 | $ | 1.06 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets (1) | — | (427,543) | 427,543 | — | 427,543 | — | 427,543 | — | 427,543 | — | 427,543 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Upfront and milestone-related payments (2) | — | (1,717) | 1,717 | (33,358) | 35,075 | — | 35,075 | — | 35,075 | — | 35,075 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuity and separation benefits and other cost reductions (3) | — | (55,413) | 55,413 | (70,869) | 126,282 | — | 126,282 | — | 126,282 | — | 126,282 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | 19,049 | (19,049) | — | (19,049) | — | (19,049) | — | (19,049) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (67,819) | 67,819 | — | 67,819 | — | 67,819 | — | 67,819 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (120,344) | 120,344 | — | 120,344 | — | 120,344 | — | 120,344 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related and integration costs (7) | — | — | — | (196) | 196 | — | 196 | — | 196 | — | 196 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | (16,353) | 16,353 | — | 16,353 | — | 16,353 | — | 16,353 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | (31,118) | 31,118 | 13,954 | 17,164 | — | 17,164 | — | 17,164 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 368,821 | (368,821) | — | (368,821) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 63,520 | 63,520 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 2,903,074 | $ | 957,838 | $ | 1,945,236 | 67.0 | % | $ | 654,244 | 22.5 | % | $ | 1,290,992 | 44.5 | % | $ | 525,783 | $ | 765,209 | $ | 94,839 | 12.4 | % | $ | 670,370 | $ | — | $ | 670,370 | $ | 2.87 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 (13) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 (2) | — | (2,484) | 2,484 | (4,139) | 6,623 | — | 6,623 | — | 6,623 | — | 6,623 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuity and separation benefits and other cost reductions (3) | — | (5,693) | 5,693 | (28,905) | 34,598 | — | 34,598 | — | 34,598 | — | 34,598 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | (11,211) | 11,211 | — | 11,211 | — | 11,211 | — | 11,211 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (65,282) | 65,282 | — | 65,282 | — | 65,282 | — | 65,282 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (526,082) | 526,082 | — | 526,082 | — | 526,082 | — | 526,082 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | 46,098 | (46,098) | — | (46,098) | — | (46,098) | — | (46,098) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt (9) | — | — | — | — | — | 119,828 | (119,828) | — | (119,828) | — | (119,828) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | (13,878) | 13,878 | (14,374) | 28,252 | — | 28,252 | — | 28,252 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 73,322 | (73,322) | — | (73,322) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 62,052 | 62,052 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 2,914,364 | $ | 1,017,299 | $ | 1,897,065 | 65.1 | % | $ | 650,948 | 22.3 | % | $ | 1,246,117 | 42.8 | % | $ | 541,037 | $ | 705,080 | $ | 89,002 | 12.6 | % | $ | 616,078 | $ | — | $ | 616,078 | $ | 2.66 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 months and years ended December 31, 2020 and 2019 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, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Amortization of intangible assets excluding fair value step-up from contingent consideration | $ | 100,926 | $ | 123,669 | $ | 424,276 | $ | 523,872 | |||||||||||||||
| Amortization of intangible assets related to fair value step-up from contingent consideration | 816 | 2,244 | 3,267 | 19,990 | |||||||||||||||||||
| Total | $ | 101,742 | $ | 125,913 | $ | 427,543 | $ | 543,862 | |||||||||||||||
(2)Adjustments for upfront and milestone-related payments to partners included the following (in thousands):
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Sales-based | $ | 925 | $ | — | $ | 542 | $ | — | |||||||||||||||
| Development-based | — | 31,681 | — | 2,026 | |||||||||||||||||||
| Total | $ | 925 | $ | 31,681 | $ | 542 | $ | 2,026 | |||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Sales-based | $ | 1,717 | $ | — | $ | 2,484 | $ | — | |||||||||||||||
| Development-based | — | 33,358 | — | 4,139 | |||||||||||||||||||
| Total | $ | 1,717 | $ | 33,358 | $ | 2,484 | $ | 4,139 | |||||||||||||||
The amounts included in Development-based payments included a fourth-quarter 2020 charge of $28.6 million related to in-process research and development assets expensed in connection with the acquisition of BioSpecifics.
(3)Adjustments for continuity and separation benefits and other cost reductions included the following (in thousands):
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Continuity and separation benefits | $ | 3,585 | $ | 7,451 | $ | 4,689 | $ | 9,997 | |||||||||||||||
| Accelerated depreciation charges | 5,039 | 2,744 | — | — | |||||||||||||||||||
| Other | 3,097 | 4,010 | — | 4,740 | |||||||||||||||||||
| Total | $ | 11,721 | $ | 14,205 | $ | 4,689 | $ | 14,737 | |||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Continuity and separation benefits | $ | 36,775 | $ | 50,132 | $ | 5,693 | $ | 17,881 | |||||||||||||||
| Accelerated depreciation charges | 15,567 | 6,892 | — | — | |||||||||||||||||||
| Other | 3,071 | 13,845 | — | 11,024 | |||||||||||||||||||
| Total | $ | 55,413 | $ | 70,869 | $ | 5,693 | $ | 28,905 | |||||||||||||||
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. Additionally, amounts during the three months and year ended December 31, 2020 include severance and other restructuring charges related to the previously announced strategic initiatives to further optimize Endo’s operations.
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(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 December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Goodwill impairment charges | $ | — | $ | 20,800 | $ | 32,786 | $ | 171,908 | |||||||||||||||
| Other intangible asset impairment charges | 14,146 | 243,046 | 79,917 | 347,706 | |||||||||||||||||||
| Property, plant and equipment impairment charges | 1 | 3,584 | 1,249 | 6,468 | |||||||||||||||||||
| Operating lease right-of-use asset impairment charges | — | — | 6,392 | — | |||||||||||||||||||
| Total | $ | 14,147 | $ | 267,430 | $ | 120,344 | $ | 526,082 | |||||||||||||||
(7)To exclude integration costs.
(8)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.
(9)To exclude the gain on the extinguishment of debt associated with the Company’s March 2019 refinancing.
(10)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 December 31, | |||||||||||||||||||||||
| 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 | $ | — | $ | 4,345 | $ | — | $ | 1,488 | |||||||||||||||
| (Gain) loss on sale of business and other assets | — | — | — | (5,488) | |||||||||||||||||||
| Other miscellaneous | — | (618) | — | 1,998 | |||||||||||||||||||
| Total | $ | — | $ | 3,727 | $ | — | $ | (2,002) | |||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 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 | $ | — | $ | 1,919 | $ | — | $ | 4,362 | |||||||||||||||
| (Gain) loss on sale of business and other assets | — | (11,325) | — | (7,488) | |||||||||||||||||||
| Debt modification costs | 31,118 | — | — | — | |||||||||||||||||||
| Other miscellaneous | — | (4,548) | 13,878 | 17,500 | |||||||||||||||||||
| Total | $ | 31,118 | $ | (13,954) | $ | 13,878 | $ | 14,374 | |||||||||||||||
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.
(11)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.
(12)To exclude the results of the businesses reported as discontinued operations, net of tax.
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(13)Calculated as net income or loss 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, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| GAAP | 234,474 | 226,787 | 233,653 | 226,050 | |||||||||||||||||||
| Non-GAAP Adjusted | 234,474 | 231,571 | 233,653 | 231,706 | |||||||||||||||||||
(14)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.
(15)To exclude Other expense (income), net per the Condensed Consolidated Statements of Operations.
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Reconciliation of Net Debt Leverage Ratio (non-GAAP)
The following table provides a reconciliation of the Company’s Net income (GAAP) to Adjusted EBITDA (non-GAAP) for the twelve months ended December 31, 2020 (in thousands) and the calculation of the Company’s Net Debt Leverage Ratio (non-GAAP):
| Twelve Months Ended December 31, 2020 | |||||
| Net income (GAAP) | $ | 183,944 | |||
| Income tax benefit | (273,982) | ||||
| Interest expense, net | 532,939 | ||||
| Depreciation and amortization (14) | 496,349 | ||||
| EBITDA (non-GAAP) | $ | 939,250 | |||
| Upfront and milestone-related payments | $ | 35,075 | |||
| Continuity and separation benefits and other cost reductions | 126,282 | ||||
| Certain litigation-related and other contingencies, net | (19,049) | ||||
| Certain legal costs | 67,819 | ||||
| Asset impairment charges | 120,344 | ||||
| Acquisition-related and integration costs | 196 | ||||
| Fair value of contingent consideration | 16,353 | ||||
| Share-based compensation (14) | 36,167 | ||||
| Other income, net | (21,110) | ||||
| Other | 31,095 | ||||
| Discontinued operations, net of tax | 63,520 | ||||
| Adjusted EBITDA (non-GAAP) | $ | 1,395,942 | |||
| Calculation of Net Debt: | |||||
| Debt | $ | 8,314,728 | |||
| Cash (excluding Restricted Cash) | 1,213,437 | ||||
| Net Debt (non-GAAP) | $ | 7,101,291 | |||
| Calculation of Net Debt Leverage: | |||||
| Net Debt Leverage Ratio (non-GAAP) | 5.1 | ||||
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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 (NASDAQ: 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. Learn more at www.endo.com or connect with us on LinkedIn.
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 and optimization efforts, together with Endo’s net income per share from continuing operations amounts, product net sales, revenue forecasts and other financial guidance for the first-quarter and full-year 2021, 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. Statements including words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plan,” “will,” “may,” “look forward,” “intend,” “guidance,” “future” or similar expressions are forward-looking statements. 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.
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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 and adversely 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 and regulatory developments; 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 any strategic and/or optimization 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, including pending and future opioid-related matters, pending tax matters with the IRS and proceedings that involve or may involve key products such as VASOSTRICT®; unfavorable publicity regarding the misuse of opioids; the 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 (such as our recently completed acquisition of BioSpecifics) 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 ongoing 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 or other filings with the U.S. Securities and Exchange Commission. 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.
SOURCE Endo International plc
Media: Heather Zoumas-Lubeski, (484) 216-6829; Investors: Pravesh Khandelwal, (845) 364-4833
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