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): November 4, 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 November 4, 2021, Endo International plc (the “Company,” “Endo,” or “we”) issued an earnings release announcing its financial results for the three and nine months ended September 30, 2021 (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 & Human Capital 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 & Finance 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 & Finance 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 (Loss) income 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; certain amounts related to strategic review initiatives; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; gains or losses from early termination of debt; debt modification costs; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; 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; certain amounts related to strategic review initiatives; 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; certain amounts related to strategic review initiatives; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; 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 expense (benefit), 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 expense (benefit); 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; certain amounts related to strategic review initiatives; 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.
The Company’s Adjusted income from continuing operations, Adjusted diluted net income per share from continuing operations, Adjusted operating expenses and Adjusted EBITDA exclude opioid-related legal expenses. 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.
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 Data 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: November 4, 2021
Exhibit 99.1
ENDO REPORTS THIRD-QUARTER 2021 FINANCIAL RESULTS AND RAISES 2021 FINANCIAL GUIDANCE
DUBLIN, November 4, 2021 -- Endo International plc (NASDAQ: ENDP) today reported financial results for the third-quarter ended September 30, 2021.
"We delivered strong third-quarter results driven by outstanding execution across all of our businesses. As a result of our year-to-date performance and our expectations for the remainder of 2021, we are raising our full-year 2021 financial guidance," said Blaise Coleman, President and Chief Executive Officer at Endo. "Additionally, we are pleased with our progress against our strategic priorities including our efforts to expand and enhance our portfolio with the recent launch of varenicline tablets, the only available FDA approved generic version of Chantix®, and the continued positive market response to QWO®."
THIRD-QUARTER FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||||||||||||||
| Total Revenues, Net | $ | 772,028 | $ | 634,860 | 22 | % | $ | 2,203,777 | $ | 2,142,853 | 3 | % | |||||||||||||||||||||||
| Reported (Loss) Income from Continuing Operations | $ | (49,289) | $ | (68,974) | (29) | % | $ | (12,414) | $ | 106,217 | NM | ||||||||||||||||||||||||
| Reported Diluted Weighted Average Shares | 233,578 | 230,040 | 2 | % | 232,487 | 233,379 | — | % | |||||||||||||||||||||||||||
| Reported Diluted Net (Loss) Income per Share from Continuing Operations | $ | (0.21) | $ | (0.30) | (30) | % | $ | (0.05) | $ | 0.46 | NM | ||||||||||||||||||||||||
| Reported Net (Loss) Income | $ | (77,207) | $ | (75,887) | 2 | % | $ | (51,183) | $ | 64,601 | NM | ||||||||||||||||||||||||
| Adjusted Income from Continuing Operations (2) | $ | 189,277 | $ | 122,275 | 55 | % | $ | 516,315 | $ | 494,375 | 4 | % | |||||||||||||||||||||||
| Adjusted Diluted Weighted Average Shares (1)(2) | 235,527 | 233,442 | 1 | % | 236,538 | 233,379 | 1 | % | |||||||||||||||||||||||||||
| Adjusted Diluted Net Income per Share from Continuing Operations (2) | $ | 0.80 | $ | 0.52 | 54 | % | $ | 2.18 | $ | 2.12 | 3 | % | |||||||||||||||||||||||
| Adjusted EBITDA (2) | $ | 386,883 | $ | 286,700 | 35 | % | $ | 1,094,298 | $ | 1,044,307 | 5 | % | |||||||||||||||||||||||
__________
(1)Reported Diluted Net (Loss) Income 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.
(2)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.
CONSOLIDATED RESULTS
Total revenues were $772 million in third-quarter 2021, an increase of 22% compared to $635 million during the same period in 2020. This result was primarily attributable to increased revenues from our Sterile Injectables, Generic Pharmaceuticals, and Branded Pharmaceuticals segments.
1
Reported loss from continuing operations in third-quarter 2021 was $49 million compared to reported loss from continuing operations of $69 million during the same period in 2020. This result was attributable to increased revenue and favorable changes in product mix, which were partially offset by higher litigation-related costs, asset impairment charges and other operating expenses, including as a result of our investment and promotional efforts behind XIAFLEX® and QWO®. Reported diluted net loss per share from continuing operations in third-quarter 2021 was $0.21 compared to reported diluted net loss per share from continuing operations in third-quarter 2020 of $0.30.
Adjusted income from continuing operations in third-quarter 2021 was $189 million compared to $122 million in third-quarter 2020. The result was attributable to increased revenues and favorable changes in product mix. Adjusted diluted net income per share from continuing operations in third-quarter 2021 was $0.80 compared to $0.52 in third-quarter 2020.
BRANDED PHARMACEUTICALS SEGMENT
Third-quarter 2021 Branded Pharmaceuticals segment revenues were $231 million, an increase of 3% compared to $224 million during third-quarter 2020.
Specialty Products revenues increased 16% to $162 million in third-quarter 2021 compared to $140 million in third-quarter 2020. XIAFLEX® revenues increased 20% to $106 million compared to $88 million in third-quarter 2020 primarily driven by demand growth due to additional physician office activity coupled with commercial execution. Established Products revenues decreased 17% to $69 million in third-quarter 2021 compared to $84 million in third-quarter 2020 partly driven by a non-recurring stocking benefit for TESTOPEL® in prior year.
STERILE INJECTABLES SEGMENT
Third-quarter 2021 Sterile Injectables segment revenues were $344 million, an increase of 37% compared to $251 million during third-quarter 2020. This increase was attributable to additional VASOSTRICT® revenues primarily due to hospitalizations associated with the COVID-19 delta variant.
GENERIC PHARMACEUTICALS SEGMENT
Third-quarter 2021 Generic Pharmaceuticals segment revenues were $174 million, an increase of 29% compared to $136 million during third-quarter 2020. This increase was primarily attributable to additional revenues from 2021 product launches.
INTERNATIONAL PHARMACEUTICALS SEGMENT
Third-quarter 2021 International Pharmaceuticals segment revenues were $23 million compared to $24 million during third-quarter 2020.
2
2021 FINANCIAL GUIDANCE
Endo is updating its financial guidance for the full-year ending December 31, 2021 by raising the expected ranges regarding revenues, adjusted diluted net income per share from continuing operations and adjusted EBITDA. 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.”
| Full-Year 2021 | |||||||||||
| Prior | Current | ||||||||||
| Total Revenues, Net | $2.73B - $2.79B | $2.90B - $2.94B | |||||||||
| Adjusted EBITDA | $1.23B - $1.28B | $1.40B - $1.42B | |||||||||
| Adjusted Diluted Net Income per Share from Continuing Operations | $2.15 - $2.30 | $2.80 - $2.85 | |||||||||
| Assumptions: | |||||||||||
| Adjusted Gross Margin | ~70.0% - 71.0% | ~71.5% | |||||||||
| Adjusted Operating Expenses as a Percentage of Total Revenues, Net | ~28.5% | ~26.5% | |||||||||
| Adjusted Interest Expense | ~$560M | ~$560M | |||||||||
| Adjusted Effective Tax Rate | ~11.0% - 12.0% | ~13.0% | |||||||||
| Adjusted Diluted Weighted Average Shares | ~239M | ~236M | |||||||||
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of September 30, 2021, the Company had approximately $1.6 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 4.6.
Third-quarter 2021 net cash provided by operating activities was $62 million compared to $77 million used in operating activities during the third-quarter 2020. This change was primarily due to an increase in adjusted income from continuing operations and changes in working capital, offset by payments to settle certain opioid matters.
Additionally, in October 2021, the Company completed the previously announced sale of its manufacturing site in Chestnut Ridge, NY, which included, among other assets, U.S. generic retail products and related product inventory to subsidiaries of Strides Pharma Science Limited for approximately $24 million in cash, as well as certain other non-cash considerations. The exit of this site was included in a series of business transformation initiatives that the Company announced in late 2020, including further optimization of its generic retail business cost structure.
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CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release tomorrow, November 5, 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 6052178. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from November 5, 2021 at 10:30 a.m. ET until 9:30 a.m. ET on November 12, 2021 by dialing U.S./Canada (855) 859-2056 International (404) 537-3406, and entering the passcode 6052178.
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.
Chantix® is a registered trademark of Pfizer Inc.
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FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total revenues, net for the three and nine months ended September 30, 2021 and 2020 (dollars in thousands):
| Three Months Ended September 30, | Percent Growth | Nine Months Ended September 30, | Percent Growth | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
| Branded Pharmaceuticals: | |||||||||||||||||||||||||||||||||||
| Specialty Products: | |||||||||||||||||||||||||||||||||||
| XIAFLEX® | $ | 105,509 | $ | 88,167 | 20 | % | $ | 312,266 | $ | 211,022 | 48 | % | |||||||||||||||||||||||
| SUPPRELIN® LA | 30,069 | 28,229 | 7 | % | 85,665 | 63,344 | 35 | % | |||||||||||||||||||||||||||
| Other Specialty (1) | 26,339 | 23,724 | 11 | % | 74,407 | 68,795 | 8 | % | |||||||||||||||||||||||||||
| Total Specialty Products | $ | 161,917 | $ | 140,120 | 16 | % | $ | 472,338 | $ | 343,161 | 38 | % | |||||||||||||||||||||||
| Established Products: | |||||||||||||||||||||||||||||||||||
| PERCOCET® | $ | 26,914 | $ | 27,508 | (2) | % | $ | 78,695 | $ | 82,789 | (5) | % | |||||||||||||||||||||||
| TESTOPEL® | 11,686 | 18,068 | (35) | % | 32,314 | 26,877 | 20 | % | |||||||||||||||||||||||||||
| Other Established (2) | 30,460 | 37,986 | (20) | % | 82,305 | 104,449 | (21) | % | |||||||||||||||||||||||||||
| Total Established Products | $ | 69,060 | $ | 83,562 | (17) | % | $ | 193,314 | $ | 214,115 | (10) | % | |||||||||||||||||||||||
| Total Branded Pharmaceuticals (3) | $ | 230,977 | $ | 223,682 | 3 | % | $ | 665,652 | $ | 557,276 | 19 | % | |||||||||||||||||||||||
| Sterile Injectables: | |||||||||||||||||||||||||||||||||||
| VASOSTRICT® | $ | 255,697 | $ | 155,412 | 65 | % | $ | 676,764 | $ | 572,530 | 18 | % | |||||||||||||||||||||||
| ADRENALIN® | 28,722 | 30,662 | (6) | % | 88,136 | 120,335 | (27) | % | |||||||||||||||||||||||||||
| Other Sterile Injectables (4) | 59,234 | 65,319 | (9) | % | 182,098 | 214,132 | (15) | % | |||||||||||||||||||||||||||
| Total Sterile Injectables (3) | $ | 343,653 | $ | 251,393 | 37 | % | $ | 946,998 | $ | 906,997 | 4 | % | |||||||||||||||||||||||
| Total Generic Pharmaceuticals | $ | 174,306 | $ | 135,508 | 29 | % | $ | 522,451 | $ | 602,670 | (13) | % | |||||||||||||||||||||||
| Total International Pharmaceuticals | $ | 23,092 | $ | 24,277 | (5) | % | $ | 68,676 | $ | 75,910 | (10) | % | |||||||||||||||||||||||
| Total revenues, net | $ | 772,028 | $ | 634,860 | 22 | % | $ | 2,203,777 | $ | 2,142,853 | 3 | % | |||||||||||||||||||||||
__________
(1)Products included within Other Specialty include NASCOBAL® Nasal Spray, AVEED® and QWO®.
(2)Products included within Other Established include, but are not limited to, EDEX® and LIDODERM®.
(3)Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2021 and/or any product having revenues in excess of $25 million during any quarterly period in 2021 or 2020.
(4)Products included within Other Sterile Injectables include ertapenem for injection, APLISOL® and others.
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The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and nine months ended September 30, 2021 and 2020 (in thousands, except per share data):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| TOTAL REVENUES, NET | $ | 772,028 | $ | 634,860 | $ | 2,203,777 | $ | 2,142,853 | |||||||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||||||
| Cost of revenues | 286,068 | 348,077 | 909,841 | 1,072,972 | |||||||||||||||||||
| Selling, general and administrative | 246,864 | 182,259 | 611,657 | 522,285 | |||||||||||||||||||
| Research and development | 25,616 | 32,055 | 90,024 | 94,165 | |||||||||||||||||||
| Litigation-related and other contingencies, net | 83,495 | 1,810 | 119,327 | (23,938) | |||||||||||||||||||
| Asset impairment charges | 42,155 | 8,412 | 50,393 | 106,197 | |||||||||||||||||||
| Acquisition-related and integration items, net | (1,432) | (1,407) | (6,357) | 17,100 | |||||||||||||||||||
| Interest expense, net | 142,958 | 135,648 | 418,852 | 397,689 | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | 13,753 | — | |||||||||||||||||||
| Other income, net | (5,955) | (7,194) | (4,671) | (25,318) | |||||||||||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX | $ | (47,741) | $ | (64,800) | $ | 958 | $ | (18,299) | |||||||||||||||
| INCOME TAX EXPENSE (BENEFIT) | 1,548 | 4,174 | 13,372 | (124,516) | |||||||||||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS | $ | (49,289) | $ | (68,974) | $ | (12,414) | $ | 106,217 | |||||||||||||||
| DISCONTINUED OPERATIONS, NET OF TAX | (27,918) | (6,913) | (38,769) | (41,616) | |||||||||||||||||||
| NET (LOSS) INCOME | $ | (77,207) | $ | (75,887) | $ | (51,183) | $ | 64,601 | |||||||||||||||
| NET (LOSS) INCOME PER SHARE—BASIC: | |||||||||||||||||||||||
| Continuing operations | $ | (0.21) | $ | (0.30) | $ | (0.05) | $ | 0.46 | |||||||||||||||
| Discontinued operations | (0.12) | (0.03) | (0.17) | (0.18) | |||||||||||||||||||
| Basic | $ | (0.33) | $ | (0.33) | $ | (0.22) | $ | 0.28 | |||||||||||||||
| NET (LOSS) INCOME PER SHARE—DILUTED: | |||||||||||||||||||||||
| Continuing operations | $ | (0.21) | $ | (0.30) | $ | (0.05) | $ | 0.46 | |||||||||||||||
| Discontinued operations | (0.12) | (0.03) | (0.17) | (0.18) | |||||||||||||||||||
| Diluted | $ | (0.33) | $ | (0.33) | $ | (0.22) | $ | 0.28 | |||||||||||||||
| WEIGHTED AVERAGE SHARES: | |||||||||||||||||||||||
| Basic | 233,578 | 230,040 | 232,487 | 228,985 | |||||||||||||||||||
| Diluted | 233,578 | 230,040 | 232,487 | 233,379 | |||||||||||||||||||
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The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2021 and December 31, 2020 (in thousands):
| September 30, 2021 | December 31, 2020 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 1,568,665 | $ | 1,213,437 | |||||||
| Restricted cash and cash equivalents | 131,605 | 171,563 | |||||||||
| Accounts receivable | 533,827 | 511,262 | |||||||||
| Inventories, net | 297,302 | 352,260 | |||||||||
| Assets held for sale | 39,952 | — | |||||||||
| Other current assets | 177,595 | 164,736 | |||||||||
| Total current assets | $ | 2,748,946 | $ | 2,413,258 | |||||||
| TOTAL NON-CURRENT ASSETS | 6,497,606 | 6,851,379 | |||||||||
| TOTAL ASSETS | $ | 9,246,552 | $ | 9,264,637 | |||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable and accrued expenses, including legal settlement accruals | $ | 1,316,842 | $ | 1,208,061 | |||||||
| Liabilities held for sale | 3,055 | — | |||||||||
| Other current liabilities | 234,372 | 45,763 | |||||||||
| Total current liabilities | $ | 1,554,269 | $ | 1,253,824 | |||||||
| LONG-TERM DEBT, LESS CURRENT PORTION, NET | 8,050,874 | 8,280,578 | |||||||||
| OTHER LIABILITIES | 331,726 | 378,174 | |||||||||
| SHAREHOLDERS’ DEFICIT | (690,317) | (647,939) | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | 9,246,552 | $ | 9,264,637 | |||||||
7
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2021 and 2020 (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net (loss) income | $ | (51,183) | $ | 64,601 | |||||||
| Adjustments to reconcile Net (loss) income to Net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 350,455 | 391,463 | |||||||||
| Asset impairment charges | 50,393 | 106,197 | |||||||||
| Other, including cash payments to claimants from Qualified Settlement Funds | 111,249 | (272,818) | |||||||||
| Net cash provided by operating activities | $ | 460,914 | $ | 289,443 | |||||||
| INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures, excluding capitalized interest | $ | (61,496) | $ | (52,692) | |||||||
| Acquisitions, including in-process research and development, net of cash and restricted cash acquired | (5,000) | — | |||||||||
| Proceeds from sale of business and other assets, net | 1,357 | 6,377 | |||||||||
| Other | (5,207) | (3,915) | |||||||||
| Net cash used in investing activities | $ | (70,346) | $ | (50,230) | |||||||
| FINANCING ACTIVITIES: | |||||||||||
| Payments on borrowings, net | $ | (49,541) | $ | (86,887) | |||||||
| Other | (25,995) | (11,470) | |||||||||
| Net cash used in financing activities | $ | (75,536) | $ | (98,357) | |||||||
| Effect of foreign exchange rate | 238 | (458) | |||||||||
| NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS | $ | 315,270 | $ | 140,398 | |||||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD | 1,385,000 | 1,720,388 | |||||||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD | $ | 1,700,270 | $ | 1,860,786 | |||||||
8
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.
Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)
The following table provides a reconciliation of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) for the three and nine months ended September 30, 2021 and 2020 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net (loss) income (GAAP) | $ | (77,207) | $ | (75,887) | $ | (51,183) | $ | 64,601 | |||||||||||||||
| Income tax expense (benefit) | 1,548 | 4,174 | 13,372 | (124,516) | |||||||||||||||||||
| Interest expense, net | 142,958 | 135,648 | 418,852 | 397,689 | |||||||||||||||||||
| Depreciation and amortization (14) | 106,402 | 120,974 | 328,126 | 376,787 | |||||||||||||||||||
| EBITDA (non-GAAP) | $ | 173,701 | $ | 184,909 | $ | 709,167 | $ | 714,561 | |||||||||||||||
| Upfront and milestone-related payments (2) | $ | 525 | $ | 275 | $ | 6,206 | $ | 2,469 | |||||||||||||||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (3) | 19,829 | 67,692 | 58,632 | 100,356 | |||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | 83,495 | 1,810 | 119,327 | (23,938) | |||||||||||||||||||
| Certain legal costs (5) | 38,842 | 18,343 | 82,961 | 51,884 | |||||||||||||||||||
| Asset impairment charges (6) | 42,155 | 8,412 | 50,393 | 106,197 | |||||||||||||||||||
| Acquisition-related and integration costs (7) | 3 | — | 414 | — | |||||||||||||||||||
| Fair value of contingent consideration (8) | (1,435) | (1,407) | (6,771) | 17,100 | |||||||||||||||||||
| Loss on extinguishment of debt (9) | — | — | 13,753 | — | |||||||||||||||||||
| Share-based compensation (14) | 7,800 | 6,585 | 22,237 | 28,262 | |||||||||||||||||||
| Other income, net (15) | (5,955) | (7,194) | (4,671) | (25,318) | |||||||||||||||||||
| Other (10) | 5 | 362 | 3,881 | 31,118 | |||||||||||||||||||
| Discontinued operations, net of tax (12) | 27,918 | 6,913 | 38,769 | 41,616 | |||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 386,883 | $ | 286,700 | $ | 1,094,298 | $ | 1,044,307 | |||||||||||||||
9
Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)
The following table provides a reconciliation of the Company’s (Loss) income from continuing operations (GAAP) to Adjusted income from continuing operations (non-GAAP) for the three and nine months ended September 30, 2021 and 2020 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Loss) income from continuing operations (GAAP) | $ | (49,289) | $ | (68,974) | $ | (12,414) | $ | 106,217 | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Amortization of intangible assets (1) | 91,901 | 104,066 | 281,101 | 325,801 | |||||||||||||||||||
| Upfront and milestone-related payments (2) | 525 | 275 | 6,206 | 2,469 | |||||||||||||||||||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (3) | 19,829 | 67,692 | 58,632 | 100,356 | |||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | 83,495 | 1,810 | 119,327 | (23,938) | |||||||||||||||||||
| Certain legal costs (5) | 38,842 | 18,343 | 82,961 | 51,884 | |||||||||||||||||||
| Asset impairment charges (6) | 42,155 | 8,412 | 50,393 | 106,197 | |||||||||||||||||||
| Acquisition-related and integration costs (7) | 3 | — | 414 | — | |||||||||||||||||||
| Fair value of contingent consideration (8) | (1,435) | (1,407) | (6,771) | 17,100 | |||||||||||||||||||
| Loss on extinguishment of debt (9) | — | — | 13,753 | — | |||||||||||||||||||
| Other (10) | (6,926) | (1,898) | (545) | 13,437 | |||||||||||||||||||
| Tax adjustments (11) | (29,823) | (6,044) | (76,742) | (205,148) | |||||||||||||||||||
| Adjusted income from continuing operations (non-GAAP) | $ | 189,277 | $ | 122,275 | $ | 516,315 | $ | 494,375 | |||||||||||||||
10
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 nine months ended September 30, 2021 and 2020 (in thousands, except per share data):
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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) | $ | 772,028 | $ | 286,068 | $ | 485,960 | 62.9 | % | $ | 396,698 | 51.4 | % | $ | 89,262 | 11.6 | % | $ | 137,003 | $ | (47,741) | $ | 1,548 | (3.2) | % | $ | (49,289) | $ | (27,918) | $ | (77,207) | $ | (0.21) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets (1) | — | (91,901) | 91,901 | — | 91,901 | — | 91,901 | — | 91,901 | — | 91,901 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Upfront and milestone-related payments (2) | — | (525) | 525 | — | 525 | — | 525 | — | 525 | — | 525 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (3) | — | 10,259 | (10,259) | (30,088) | 19,829 | — | 19,829 | — | 19,829 | — | 19,829 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | (83,495) | 83,495 | — | 83,495 | — | 83,495 | — | 83,495 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (38,842) | 38,842 | — | 38,842 | — | 38,842 | — | 38,842 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (42,155) | 42,155 | — | 42,155 | — | 42,155 | — | 42,155 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related and integration costs (7) | — | — | — | (3) | 3 | — | 3 | — | 3 | — | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | 1,435 | (1,435) | — | (1,435) | — | (1,435) | — | (1,435) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | — | — | 6,926 | (6,926) | — | (6,926) | — | (6,926) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 29,823 | (29,823) | — | (29,823) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 27,918 | 27,918 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 772,028 | $ | 203,901 | $ | 568,127 | 73.6 | % | $ | 203,550 | 26.4 | % | $ | 364,577 | 47.2 | % | $ | 143,929 | $ | 220,648 | $ | 31,371 | 14.2 | % | $ | 189,277 | $ | — | $ | 189,277 | $ | 0.80 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 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 | (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) | $ | 634,860 | $ | 348,077 | $ | 286,783 | 45.2 | % | $ | 223,129 | 35.1 | % | $ | 63,654 | 10.0 | % | $ | 128,454 | $ | (64,800) | $ | 4,174 | (6.4) | % | $ | (68,974) | $ | (6,913) | $ | (75,887) | $ | (0.30) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets (1) | — | (104,066) | 104,066 | — | 104,066 | — | 104,066 | — | 104,066 | — | 104,066 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Upfront and milestone-related payments (2) | — | (125) | 125 | (150) | 275 | — | 275 | — | 275 | — | 275 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (3) | — | (36,550) | 36,550 | (31,142) | 67,692 | — | 67,692 | — | 67,692 | — | 67,692 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | (1,810) | 1,810 | — | 1,810 | — | 1,810 | — | 1,810 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (18,343) | 18,343 | — | 18,343 | — | 18,343 | — | 18,343 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (8,412) | 8,412 | — | 8,412 | — | 8,412 | — | 8,412 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | 1,407 | (1,407) | — | (1,407) | — | (1,407) | — | (1,407) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | (369) | 369 | 2,267 | (1,898) | — | (1,898) | — | (1,898) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 6,044 | (6,044) | — | (6,044) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 6,913 | 6,913 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 634,860 | $ | 207,336 | $ | 427,524 | 67.3 | % | $ | 164,310 | 25.9 | % | $ | 263,214 | 41.5 | % | $ | 130,721 | $ | 132,493 | $ | 10,218 | 7.7 | % | $ | 122,275 | $ | — | $ | 122,275 | $ | 0.52 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | (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) | $ | 2,203,777 | $ | 909,841 | $ | 1,293,936 | 58.7 | % | $ | 865,044 | 39.3 | % | $ | 428,892 | 19.5 | % | $ | 427,934 | $ | 958 | $ | 13,372 | 1,395.8 | % | $ | (12,414) | $ | (38,769) | $ | (51,183) | $ | (0.05) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets (1) | — | (281,101) | 281,101 | — | 281,101 | — | 281,101 | — | 281,101 | — | 281,101 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Upfront and milestone-related payments (2) | — | (1,176) | 1,176 | (5,030) | 6,206 | — | 6,206 | — | 6,206 | — | 6,206 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (3) | — | (10,007) | 10,007 | (48,625) | 58,632 | — | 58,632 | — | 58,632 | — | 58,632 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | (119,327) | 119,327 | — | 119,327 | — | 119,327 | — | 119,327 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (82,961) | 82,961 | — | 82,961 | — | 82,961 | — | 82,961 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (50,393) | 50,393 | — | 50,393 | — | 50,393 | — | 50,393 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related and integration costs (7) | — | — | — | (414) | 414 | — | 414 | — | 414 | — | 414 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | 6,771 | (6,771) | — | (6,771) | — | (6,771) | — | (6,771) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt (9) | — | — | — | — | — | (13,753) | 13,753 | — | 13,753 | — | 13,753 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | (3,879) | 3,879 | 4,424 | (545) | — | (545) | — | (545) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 76,742 | (76,742) | — | (76,742) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 38,769 | 38,769 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 2,203,777 | $ | 617,557 | $ | 1,586,220 | 72.0 | % | $ | 561,186 | 25.5 | % | $ | 1,025,034 | 46.5 | % | $ | 418,605 | $ | 606,429 | $ | 90,114 | 14.9 | % | $ | 516,315 | $ | — | $ | 516,315 | $ | 2.18 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 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 | (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) | $ | 2,142,853 | $ | 1,072,972 | $ | 1,069,881 | 49.9 | % | $ | 715,809 | 33.4 | % | $ | 354,072 | 16.5 | % | $ | 372,371 | $ | (18,299) | $ | (124,516) | 680.5 | % | $ | 106,217 | $ | (41,616) | $ | 64,601 | $ | 0.46 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Items impacting comparability: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets (1) | — | (325,801) | 325,801 | — | 325,801 | — | 325,801 | — | 325,801 | — | 325,801 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Upfront and milestone-related payments (2) | — | (792) | 792 | (1,677) | 2,469 | — | 2,469 | — | 2,469 | — | 2,469 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (3) | — | (43,692) | 43,692 | (56,664) | 100,356 | — | 100,356 | — | 100,356 | — | 100,356 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain litigation-related and other contingencies, net (4) | — | — | — | 23,938 | (23,938) | — | (23,938) | — | (23,938) | — | (23,938) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain legal costs (5) | — | — | — | (51,884) | 51,884 | — | 51,884 | — | 51,884 | — | 51,884 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (6) | — | — | — | (106,197) | 106,197 | — | 106,197 | — | 106,197 | — | 106,197 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of contingent consideration (8) | — | — | — | (17,100) | 17,100 | — | 17,100 | — | 17,100 | — | 17,100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (10) | — | — | — | (31,118) | 31,118 | 17,681 | 13,437 | — | 13,437 | — | 13,437 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (11) | — | — | — | — | — | — | — | 205,148 | (205,148) | — | (205,148) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exclude discontinued operations, net of tax (12) | — | — | — | — | — | — | — | — | — | 41,616 | 41,616 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After considering items (non-GAAP) | $ | 2,142,853 | $ | 702,687 | $ | 1,440,166 | 67.2 | % | $ | 475,107 | 22.2 | % | $ | 965,059 | 45.0 | % | $ | 390,052 | $ | 575,007 | $ | 80,632 | 14.0 | % | $ | 494,375 | $ | — | $ | 494,375 | $ | 2.12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 and nine months ended September 30, 2021 and 2020 are as follows:
(1)To exclude amortization expense related to intangible assets.
(2)Adjustments for upfront and milestone-related payments to partners included the following (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Sales-based | $ | 525 | $ | — | $ | 125 | $ | — | |||||||||||||||
| Development-based | — | — | — | 150 | |||||||||||||||||||
| Total | $ | 525 | $ | — | $ | 125 | $ | 150 | |||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Sales-based | $ | 1,176 | $ | — | $ | 792 | $ | — | |||||||||||||||
| Development-based | — | 5,030 | — | 1,677 | |||||||||||||||||||
| Total | $ | 1,176 | $ | 5,030 | $ | 792 | $ | 1,677 | |||||||||||||||
(3)Adjustments for amounts related to continuity and separation benefits, cost reductions and strategic review initiatives included the following (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Continuity and separation benefits | $ | (16,106) | $ | 4,823 | $ | 32,048 | $ | 25,906 | |||||||||||||||
| Accelerated depreciation | 5,128 | 1,223 | 4,502 | 1,789 | |||||||||||||||||||
| Other, including strategic review initiatives | 719 | 24,042 | — | 3,447 | |||||||||||||||||||
| Total | $ | (10,259) | $ | 30,088 | $ | 36,550 | $ | 31,142 | |||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Cost of revenues | Operating expenses | Cost of revenues | Operating expenses | ||||||||||||||||||||
| Continuity and separation benefits | $ | (13,827) | $ | 12,660 | $ | 33,190 | $ | 42,681 | |||||||||||||||
| Accelerated depreciation | 17,322 | 5,008 | 10,528 | 4,148 | |||||||||||||||||||
| Other, including strategic review initiatives | 6,512 | 30,957 | (26) | 9,835 | |||||||||||||||||||
| Total | $ | 10,007 | $ | 48,625 | $ | 43,692 | $ | 56,664 | |||||||||||||||
The amounts in the tables above include adjustments related to previously announced restructuring activities, certain continuity and transitional compensation arrangements, certain other cost reduction initiatives and certain strategic review initiatives.
(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.
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(6)Adjustments for asset impairment charges included the following (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Goodwill impairment charges | $ | — | $ | — | $ | — | $ | 32,786 | |||||||||||||||
| Other intangible asset impairment charges | — | 2,020 | 7,811 | 65,771 | |||||||||||||||||||
| Property, plant and equipment impairment charges | — | — | 427 | 1,248 | |||||||||||||||||||
| Operating lease right-of-use asset impairment charges | — | 6,392 | — | 6,392 | |||||||||||||||||||
| Disposal group impairment charges | 42,155 | — | 42,155 | — | |||||||||||||||||||
| Total | $ | 42,155 | $ | 8,412 | $ | 50,393 | $ | 106,197 | |||||||||||||||
(7)To exclude integration costs.
(8)To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to 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 loss on the extinguishment of debt associated with the Company’s March 2021 refinancing transactions.
(10)The Other rows included in each of the above reconciliations of GAAP financial measures to non-GAAP financial measures (except for the reconciliations of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP)) include the following (in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Operating expenses | Other non-operating expenses | Operating expenses | Other non-operating expenses | ||||||||||||||||||||
| Foreign currency impact related to the re-measurement of intercompany debt instruments | $ | — | $ | (2,036) | $ | — | $ | 1,663 | |||||||||||||||
| Debt modification costs | — | — | 369 | — | |||||||||||||||||||
| Other miscellaneous | — | (4,890) | — | (3,930) | |||||||||||||||||||
| Total | $ | — | $ | (6,926) | $ | 369 | $ | (2,267) | |||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Operating expenses | Other non-operating expenses | Operating expenses | Other non-operating expenses | ||||||||||||||||||||
| Foreign currency impact related to the re-measurement of intercompany debt instruments | $ | — | $ | 466 | $ | — | $ | (2,426) | |||||||||||||||
| Gain on sale of business and other assets | — | — | — | (11,325) | |||||||||||||||||||
| Debt modification costs | 3,879 | — | 31,118 | — | |||||||||||||||||||
| Other miscellaneous | — | (4,890) | — | (3,930) | |||||||||||||||||||
| Total | $ | 3,879 | $ | (4,424) | $ | 31,118 | $ | (17,681) | |||||||||||||||
The Other row included in the reconciliations of Net (loss) income (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.
(13)Calculated as 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| GAAP | 233,578 | 230,040 | 232,487 | 233,379 | |||||||||||||||||||
| Non-GAAP Adjusted | 235,527 | 233,442 | 236,538 | 233,379 | |||||||||||||||||||
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(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 Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives.
(15)To exclude Other 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 September 30, 2021 (in thousands) and the calculation of the Company’s Net Debt Leverage Ratio (non-GAAP):
| Twelve Months Ended September 30, 2021 | |||||
| Net income (GAAP) | $ | 68,160 | |||
| Income tax benefit | (136,094) | ||||
| Interest expense, net | 554,102 | ||||
| Depreciation and amortization (14) | 447,688 | ||||
| EBITDA (non-GAAP) | $ | 933,856 | |||
| Upfront and milestone-related payments | $ | 38,812 | |||
| Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives | 84,558 | ||||
| Certain litigation-related and other contingencies, net | 124,216 | ||||
| Certain legal costs | 98,896 | ||||
| Asset impairment charges | 64,540 | ||||
| Acquisition-related and integration costs | 610 | ||||
| Fair value of contingent consideration | (7,518) | ||||
| Loss on extinguishment of debt | 13,753 | ||||
| Share-based compensation (14) | 30,142 | ||||
| Other income, net | (463) | ||||
| Other | 3,858 | ||||
| Discontinued operations, net of tax | 60,673 | ||||
| Adjusted EBITDA (non-GAAP) | $ | 1,445,933 | |||
| Calculation of Net Debt: | |||||
| Debt | $ | 8,274,016 | |||
| Cash (excluding Restricted Cash) | 1,568,665 | ||||
| Net Debt (non-GAAP) | $ | 6,705,351 | |||
| Calculation of Net Debt Leverage: | |||||
| Net Debt Leverage Ratio (non-GAAP) | 4.6 | ||||
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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
Certain information in this press release may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation, including, but not limited to, the statements by Mr. Coleman, as well as other statements regarding product development, product launches and product demand, the expansion and enhancement of our product portfolio, market potential, progress on our strategic priorities, the status and outcome of litigation, financial guidance for full-year 2021 or any other future period, the impact of and response to the COVID-19 pandemic, the status of our contingency planning, including any potential bankruptcy filing, and any other statements that refer to our expected, estimated or anticipated future results or that do not relate solely to historical facts. Statements including words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “will,” “may,” “look forward,” “intend,” “guidance,” “future,” “potential” 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
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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 and adversely from current expectations based on a number of factors affecting Endo’s businesses, including, among other things, the following: the outcome of our strategic review, contingency planning and any potential restructuring or bankruptcy filing; the timing, impact 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 key products such as VASOSTRICT®; our ability to satisfy judgments or settlements or pursue appeals including bonding requirements; our ability to adjust to changing market conditions; our ability to attract and retain key personnel; our inability to maintain compliance with financial covenants and operating obligations which would expose us to potential events of default under our outstanding indebtedness; our ability to incur additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions or general corporate or other purposes; our ability to refinance our indebtedness; a significant reduction in our short-term or long-term revenues which could cause us to be unable to fund our operations and liquidity needs or repay indebtedness; supply chain interruptions or difficulties; changes in competitive or market conditions; changes in legislation or regulatory developments; our ability to obtain and maintain adequate protection for our 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 initiatives; unfavorable publicity regarding the misuse of opioids; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; our ability to advance our strategic priorities, develop our product pipeline and continue to develop the market for QWO® and other products; and our 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 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, the impact of and response to the ongoing COVID-19 pandemic and the impact of continued economic volatility, can materially affect our results. The occurrence or possibility of any such result has caused us to engage, and may result in further engagement in strategic reviews that ultimately may result in our pursuing one or more significant corporate transactions or other remedial measures, including on a preventative or proactive basis. Those remedial measures could include a potential bankruptcy filing (which, if it occurred, would subject us to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern), corporate reorganization or restructuring activities involving all or a portion of our business, asset sales or other divestitures, cost-saving initiatives or other corporate realignments, seeking strategic partnerships and exiting certain product or geographic markets. Some of these measures could take significant time to implement and others may require judicial or other third-party approval. Any such actions may be complex, could entail significant costs and charges or could otherwise negatively impact shareholder value, and there can be no assurance that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all, or that they will result in their intended benefits. 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.
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Additional information concerning risk factors, including those referenced above, 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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