EX-99.1 2 ex991-6302017xearningsrele.htm EXHIBIT 99.1 Q1 2017 EARNINGS RELEASE Ex99.1-6.30.2017-Earnings Release


Exhibit 99.1
endologoa08.jpg
ENDO REPORTS SECOND-QUARTER 2017 FINANCIAL RESULTS
Second-quarter 2017 revenues of $876 million and reported $3.12 diluted (GAAP) loss per share from continuing operations
Second-quarter 2017 Branded Specialty Products revenues increased 16 percent to $110 million
Second-quarter 2017 Sterile Injectables revenues increased 27 percent to $161 million
Second-quarter 2017 adjusted diluted earnings per share (EPS) from continuing operations increased 8 percent to $0.93
Second-quarter 2017 reported (GAAP) consolidated net loss of $1,397 million, including $775 million to increase the mesh product liability accrual primarily related to the resolution of virtually all known U.S. mesh product liability claims
Second-quarter 2017 adjusted income from continuing operations increased 8 percent to $207 million
Second-quarter 2017 adjusted EBITDA increased 11 percent to $388 million
Company updates 2017 financial guidance to reflect the previously announced Somar divestiture, OPANA® ER withdrawal and manufacturing network restructuring
Company reports $725 million of impairment charges relating primarily to market and competitive factors impacting certain products, its manufacturing network restructuring, Somar divestiture and the market withdrawal of OPANA® ER
DUBLIN, August 8, 2017 -- Endo International plc (NASDAQ: ENDP) today reported second-quarter 2017 financial results, including:
Revenues of $876 million, a 5 percent decrease compared to second-quarter 2016 revenues of $921 million.
Reported net loss from continuing operations of $696 million compared to second-quarter 2016 reported net income from continuing operations of $390 million.
Reported diluted loss per share from continuing operations of $3.12 compared to second-quarter 2016 reported diluted earnings per share from continuing operations of $1.75.
Adjusted income from continuing operations of $207 million, an 8 percent increase compared to second-quarter 2016 adjusted income from continuing operations of $192 million.
Adjusted diluted EPS from continuing operations of $0.93, an 8 percent increase compared to second-quarter 2016 adjusted diluted EPS from continuing operations of $0.86.
Adjusted EBITDA of $388 million, an 11 percent increase compared to second-quarter 2016 adjusted EBITDA of $350 million.
"We are very pleased to report another solid quarter of operating performance, with impressive contributions from our core growth areas. Sterile Injectables and Branded Specialty Products continue to

1



perform well, as each unit again achieved strong double-digit growth," said Paul Campanelli, President and CEO of Endo. This performance provides evidence of the progress we are making on the strategic priorities we outlined earlier this year.
"In addition to solid quarterly execution, we continue to make significant progress across an array of strategic initiatives, including settling mesh litigation, divesting Litha, signing a definitive agreement to divest Somar, and the restructuring of our manufacturing network. Through these actions, we continue to position Endo to compete and succeed in the future," Mr. Campanelli added.
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
 
Three Months Ended June 30,
 
 
 
Six Months Ended June 30,
 
 
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
Total Revenues
$
875,731

 
$
920,887

 
(5
)%
 
$
1,913,331

 
$
1,884,426

 
2
%
Reported (Loss) Income from Continuing Operations
$
(696,020
)
 
$
389,812

 
NM

 
$
(861,443
)
 
$
301,049

 
NM

Reported Diluted Weighted Average Shares
223,158

 
222,863

 
 %
 
223,086

 
223,021

 
%
Reported Diluted (Loss) Income per Share from Continuing Operations
$
(3.12
)
 
$
1.75

 
NM

 
$
(3.86
)
 
$
1.35

 
NM

Adjusted Income from Continuing Operations
$
207,201

 
$
192,341

 
8
 %
 
$
482,446

 
$
433,072

 
11
%
Adjusted Diluted Weighted Average Shares1
223,785

 
222,863

 
 %
 
223,560

 
223,021

 
%
Adjusted Diluted EPS from Continuing Operations
$
0.93

 
$
0.86

 
8
 %
 
$
2.16

 
$
1.94

 
11
%
(1)
Diluted per share data is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.
CONSOLIDATED RESULTS
Total revenues decreased by 5 percent to $876 million in second-quarter 2017 compared to the same period in 2016 primarily due to generic competition adversely impacting the Branded Established Products portfolio. GAAP net loss from continuing operations in second-quarter 2017 was $696 million compared to GAAP net income from continuing operations of $390 million during the same period in 2016. This decrease was primarily attributable to charges associated with the Company's manufacturing network restructuring; after-tax impairment charges associated with market and competitive factors impacting certain products' revenues, the pending Somar divestiture and the market removal of OPANA® ER; and second-quarter 2016 recognition of certain net tax benefits. GAAP net loss per share from continuing operations for the second-quarter 2017 was $3.12, compared to diluted GAAP EPS from continuing operations of $1.75 in second-quarter 2016.

2


Adjusted income from continuing operations in second-quarter 2017 increased by 8 percent to $207 million compared to second-quarter 2016. This increase was driven primarily by improved adjusted gross margin, which resulted, in part, from strong revenue growth in Sterile Injectables and Branded Specialty Products, as well as lower operating expenses. Adjusted EPS from continuing operations in second-quarter 2017 increased 8 percent to $0.93 compared to second-quarter 2016.
U.S. GENERIC PHARMACEUTICALS
During second-quarter 2017, the U.S. Generic Pharmaceuticals segment launched neostigmine methylsulfate injection following approval of its Abbreviated New Drug Application (ANDA) by the U.S. Food and Drug Administration (FDA). The Company also received FDA approval of its ANDA for vigabatrin for oral solution and expects to launch the product in the third-quarter of 2017.
Second-quarter 2017 U.S. Generic Pharmaceuticals results include:
Revenues of $563 million, virtually unchanged from second-quarter 2016, as decline in the Generics Base business was substantially offset by strong growth in Sterile Injectables and New Launches and Alternative Dosages.
Sterile Injectables increased 27 percent compared to second-quarter 2016; this increase was driven primarily by VASOSTRICT® and ADRENALIN®.
The Generics Base business decreased 34 percent compared to second-quarter 2016; this decrease primarily resulted from the impact on second-quarter 2017 related to 2016 competitive events and previously announced product discontinuances.
U.S. BRANDED PHARMACEUTICALS
During second-quarter 2017, the FDA requested that Endo voluntarily withdraw OPANA® ER from the market. After careful consideration and consultation with the FDA, the Company announced it would voluntarily remove the product from the market. In an effort to minimize treatment disruption for patients and allow patients sufficient time to seek guidance from their healthcare professionals, the Company has agreed with the FDA to cease shipments to customers by September 1, 2017.
Second-quarter 2017 U.S. Branded Pharmaceuticals results include:
Revenues of $245 million, a 15 percent decrease compared to second-quarter 2016; this decrease was primarily attributable to generic competition adversely impacting the Company's established products portfolio, including VOLTAREN® Gel, LIDODERM® and OPANA® ER , along with the divestiture of STENDRA®.

3


Specialty Products increased 16 percent in second-quarter 2017 versus the same period in 2016, driven by strong performance from XIAFLEX®, SUPPRELIN® LA and AVEED®. Sales of XIAFLEX®, our flagship Branded product, increased 18 percent compared to second-quarter 2016; this increase was primarily attributable to strong volume growth.
INTERNATIONAL PHARMACEUTICALS
Endo's previously announced sale of its South African business, Litha Healthcare Group, to Acino Pharma AG closed on July 3, 2017. Also in July, the Company announced it had entered into a definitive agreement to sell its Mexican subsidiary, Somar, to Advent International. The transaction is expected to close in the beginning of the fourth quarter of 2017, subject to customary conditions, including the expiration or termination of any waiting periods under applicable laws.
Second-quarter 2017 International Pharmaceuticals revenues were $67 million, virtually unchanged from the same period in 2016.
2017 FINANCIAL GUIDANCE
For the full twelve months ended December 31, 2017, at current exchange rates, Endo is providing updated guidance on revenue, GAAP and adjusted diluted income (loss) per share from continuing operations and adjusted EBITDA from continuing operations, along with certain assumptions used in determining these measures, to reflect the planned divestiture of Somar, the market removal of OPANA® ER and the recently announced manufacturing network restructuring. The Company estimates:
Total revenues to be between $3.38 billion to $3.53 billion;
Reported diluted GAAP loss per share from continuing operations to be between $4.76 and $4.46;
Adjusted diluted EPS from continuing operations to be between $3.35 to $3.65; and
Adjusted EBITDA from continuing operations to be between $1.48 billion to $1.56 billion.
The Company’s 2017 non-GAAP financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 62.5% to 63.5%;
Adjusted operating expenses as a percentage of revenues of approximately 22.5%;
Adjusted interest expense of approximately $490 million to $500 million;
Adjusted effective tax rate of approximately 14.0%; and
Adjusted diluted EPS from continuing operations assumes full-year adjusted diluted shares outstanding of approximately 224 million shares.

4


BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of June 30, 2017, the Company had $617 million in unrestricted cash; debt of $8.3 billion; net debt of approximately $7.7 billion and a net debt to adjusted EBITDA ratio of 4.3.
Second-quarter 2017 cash provided by operating activities was $173 million, compared to $604 million of net cash provided by operating activities in the comparable 2016 period. The 2016 period benefited from the receipt of a significant federal income tax refund that did not reoccur to the same extent in the 2017 period. Mesh-related payments also decreased in second-quarter 2017 compared to the 2016 period based on timing.
The Company recently announced that it has reached agreements to resolve virtually all known U.S. mesh product liability claims. Endo agreed to make installment payments beginning in the fourth-quarter of 2017 and continuing through the fourth-quarter of 2019. The Company increased its mesh product liability accrual by $775 million which is expected to cover approximately 22,000 U.S. mesh claims, as well as all known international mesh product liability claims and other mesh-related matters.
During second-quarter 2017, the Company recorded total combined pre-tax, non-cash asset impairment charges of $725 million, which primarily consisted of intangible asset impairment charges of $477 million and goodwill impairment charges of $206 million, including the following items:
$501 million of non-restructuring goodwill and intangible asset impairments related to its U.S. Generic and Branded Pharmaceuticals segments, which included the market withdrawal of OPANA® ER and $115 million of goodwill and other intangible assets related to the Company’s planned Somar sale.
As part of its recently announced manufacturing network restructuring initiative, the Company will be ceasing operations and closing its manufacturing and distribution facilities in Huntsville, Alabama. The Company recorded an impairment charge of $90 million related to intangible assets and property, plant and equipment associated with the planned closure.
As previously announced, the Company expects to pay approximately $60 million in cash related to the manufacturing network restructuring over the next 12 to 18 months. As a result of these restructuring actions, Endo expects to redeploy as an investment into its core growth areas approximately $55 million to $65 million in annual net run rate pre-tax cost savings that it expects to realize by the fourth quarter of 2018.

5


CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release today at 8:30 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 45397076. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from August 8, 2017 at 11:30 a.m. ET until 11:59 p.m. ET on August 22, 2017 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 45397076.
A simultaneous webcast of the call can be accessed by visiting www.endo.com. In addition, a replay of the webcast will be available until 11:59 p.m. ET on August 22, 2017. The replay can be accessed by clicking on the Investor Relations section of the Endo website.

6


FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total Revenues for the three and six months ended June 30, 2017 and 2016 (in thousands):
 
Three Months Ended June 30,
 
Percent Growth
 
Six Months Ended June 30,
 
Percent Growth
 
2017
 
2016
 
 
2017
 
2016
 
U.S. Generic Pharmaceuticals:
 
 
 
 
 
 
 
 
 
 
 
U.S. Generics Base
$
218,935

 
$
331,095

 
(34
)%
 
$
455,082

 
$
678,524

 
(33
)%
Sterile Injectables
160,597

 
126,245

 
27
 %
 
311,946

 
249,934

 
25
 %
New Launches and Alternative Dosages
183,780

 
108,018

 
70
 %
 
518,267

 
220,290

 
135
 %
Total U.S. Generic Pharmaceuticals
$
563,312

 
$
565,358

 
 %
 
$
1,285,295

 
$
1,148,748

 
12
 %
U.S. Branded Pharmaceuticals:
 
 
 
 
 
 
 
 
 
 
 
Specialty Products:
 
 
 
 
 
 
 
 
 
 
 
XIAFLEX®
$
50,077

 
$
42,419

 
18
 %
 
$
99,602

 
$
86,464

 
15
 %
SUPPRELIN® LA
23,649

 
21,211

 
11
 %
 
42,830

 
38,463

 
11
 %
Other Specialty (1)
36,745

 
31,973

 
15
 %
 
72,773

 
64,942

 
12
 %
Total Specialty Products
$
110,471

 
$
95,603

 
16
 %
 
$
215,205

 
$
189,869

 
13
 %
Established Products:
 
 
 
 
 
 
 
 
 
 
 
OPANA® ER
$
31,582

 
$
38,554

 
(18
)%
 
$
67,300

 
$
83,224

 
(19
)%
PERCOCET®
30,889

 
35,708

 
(13
)%
 
61,834

 
69,301

 
(11
)%
VOLTAREN® Gel
20,270

 
27,290

 
(26
)%
 
34,544

 
63,037

 
(45
)%
LIDODERM®
11,678

 
27,039

 
(57
)%
 
24,854

 
46,751

 
(47
)%
Other Established (2)
40,298

 
64,148

 
(37
)%
 
91,610

 
144,973

 
(37
)%
Total Established Products
$
134,717

 
$
192,739

 
(30
)%
 
$
280,142

 
$
407,286

 
(31
)%
Total U.S. Branded Pharmaceuticals (3)
$
245,188

 
$
288,342

 
(15
)%
 
$
495,347

 
$
597,155

 
(17
)%
Total International Pharmaceuticals
$
67,231

 
$
67,187

 
 %
 
$
132,689

 
$
138,523

 
(4
)%
Total Revenues
$
875,731

 
$
920,887

 
(5
)%
 
$
1,913,331

 
$
1,884,426

 
2
 %
__________
(1)
Products included within Other Specialty include TESTOPEL®, NASCOBAL® Nasal Spray, and AVEED®.
(2)
Products included within Other Established include, but are not limited to, TESTIM® and FORTESTA® Gel, including the authorized generic.
(3)
Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $25 million during any quarterly period in 2017 or 2016. LIDODERM® is separately presented as its revenues exceeded $25 million in certain quarterly periods in 2016.

7


The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2017 and 2016 (in thousands, except per share data):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
TOTAL REVENUES
$
875,731

 
$
920,887

 
$
1,913,331

 
$
1,884,426

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of revenues
539,401

 
632,218

 
1,208,363

 
1,320,923

Selling, general and administrative
155,555

 
193,070

 
332,795

 
371,425

Research and development
40,869

 
50,589

 
83,878

 
92,281

Litigation-related and other contingencies, net
(2,600
)
 
5,259

 
(1,664
)
 
10,459

Asset impairment charges
725,044

 
39,951

 
929,006

 
169,576

Acquisition-related and integration items
4,190

 
48,171

 
15,070

 
60,725

OPERATING LOSS FROM CONTINUING OPERATIONS
$
(586,728
)
 
$
(48,371
)
 
$
(654,117
)
 
$
(140,963
)
INTEREST EXPENSE, NET
121,747

 
111,919

 
233,746

 
228,712

LOSS ON EXTINGUISHMENT OF DEBT
51,734

 

 
51,734

 

OTHER (INCOME) EXPENSE, NET
(6,709
)
 
5,175

 
(8,746
)
 
3,268

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(753,500
)
 
$
(165,465
)
 
$
(930,851
)
 
$
(372,943
)
INCOME TAX BENEFIT
(57,480
)
 
(555,277
)
 
(69,408
)
 
(673,992
)
(LOSS) INCOME FROM CONTINUING OPERATIONS
$
(696,020
)
 
$
389,812

 
$
(861,443
)
 
$
301,049

DISCONTINUED OPERATIONS, NET OF TAX
(700,498
)
 
(46,216
)
 
(708,903
)
 
(91,324
)
CONSOLIDATED NET (LOSS) INCOME
$
(1,396,518
)
 
$
343,596

 
$
(1,570,346
)
 
$
209,725

Less: Net income attributable to noncontrolling interests

 
18

 

 
16

NET (LOSS) INCOME ATTRIBUTABLE TO ENDO INTERNATIONAL PLC
$
(1,396,518
)
 
$
343,578

 
$
(1,570,346
)
 
$
209,709

NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—BASIC:
 
 
 
 
 
 
 
Continuing operations
$
(3.12
)
 
$
1.75

 
$
(3.86
)
 
$
1.35

Discontinued operations
(3.14
)
 
(0.21
)
 
(3.18
)
 
(0.41
)
Basic
$
(6.26
)
 
$
1.54

 
$
(7.04
)
 
$
0.94

NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—DILUTED:
 
 
 
 
 
 
 
Continuing operations
$
(3.12
)
 
$
1.75

 
$
(3.86
)
 
$
1.35

Discontinued operations
(3.14
)
 
(0.21
)
 
(3.18
)
 
(0.41
)
Diluted
$
(6.26
)
 
$
1.54

 
$
(7.04
)
 
$
0.94

WEIGHTED AVERAGE SHARES:
 
 
 
 
 
 
 
Basic
223,158

 
222,667

 
223,086

 
222,485

Diluted
223,158

 
222,863

 
223,086

 
223,021


8


The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2017 and December 31, 2016 (in thousands):
 
June 30, 2017
 
December 31, 2016
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
616,534

 
$
517,250

Restricted cash and cash equivalents
364,796

 
282,074

Accounts receivable
580,123

 
992,153

Inventories, net
489,752

 
555,671

Assets held for sale
166,190

 
116,985

Other current assets
57,620

 
125,326

Total current assets
$
2,275,015

 
$
2,589,459

TOTAL NON-CURRENT ASSETS
10,003,075

 
11,685,650

TOTAL ASSETS
$
12,278,090

 
$
14,275,109

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable and accrued expenses, including legal settlement accruals
$
2,143,167

 
$
2,470,016

Liabilities held for sale
44,367

 
24,338

Other current liabilities
39,413

 
140,391

Total current liabilities
$
2,226,947

 
$
2,634,745

LONG-TERM DEBT, LESS CURRENT PORTION, NET
8,251,289

 
8,141,378

OTHER LIABILITIES
990,748

 
797,397

TOTAL SHAREHOLDERS' EQUITY
809,106

 
2,701,589

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
12,278,090

 
$
14,275,109


9


The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2017 and 2016 (in thousands):
 
Six Months Ended June 30,
 
2017
 
2016
OPERATING ACTIVITIES:
 
 
 
Consolidated net (loss) income
$
(1,570,346
)
 
$
209,725

Adjustments to reconcile consolidated net (loss) income to Net cash provided by operating activities:
 
 
 
Depreciation and amortization
499,656

 
476,911

Asset impairment charges
929,006

 
190,904

Other, including cash payments to claimants from Qualified Settlement Funds (1)
482,670

 
(318,929
)
Net cash provided by operating activities
$
340,986

 
$
558,611

INVESTING ACTIVITIES:
 
 
 
Purchases of property, plant and equipment
$
(59,729
)
 
$
(53,705
)
Proceeds from sale of business and other assets, net
18,531

 
6,631

Increase in restricted cash and cash equivalents (1)
(522,772
)
 
(327,359
)
Decrease in restricted cash and cash equivalents (1)
440,190

 
524,438

Other

 
(13,000
)
Net cash (used in) provided by investing activities
$
(123,780
)
 
$
137,005

FINANCING ACTIVITIES:
 
 
 
(Payments on) proceeds from borrowings, net
$
(2,550
)
 
$
(276,740
)
Other
(97,033
)
 
(24,861
)
Net cash used in financing activities
$
(99,583
)
 
$
(301,601
)
Effect of foreign exchange rate
$
2,786

 
$
1,459

Movement in cash held for sale
(21,125
)
 

NET INCREASE IN CASH AND CASH EQUIVALENTS
$
99,284

 
$
395,474

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
517,250

 
272,348

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
616,534

 
$
667,822

(1)
Included within the above Condensed Consolidated Statements of Cash Flows is the impact of payments into and out of QSFs for mesh-related product liability. Cash payments into QSFs result in a cash outflow for investing activities (CFI). Cash releases from QSFs result in a cash inflow for investing activities and a corresponding outflow for operating activities (CFO). The following table reflects the mesh-related payment activities for the six months ended June 30, 2017 and 2016 by cash flow component:
 
Six Months Ended June 30,
 
2017
 
2016
 
Impact on CFO (a)
 
Impact on CFI
 
Impact on CFO (a)
 
Impact on CFI
Cash contributions to Qualified Settlement Funds
$

 
$
(522,770
)
 
$

 
$
(326,795
)
Cash payments to claimants from Qualified Settlement Funds
(440,190
)
 
440,190

 
(524,438
)
 
524,438

Cash payments made directly to claimants
(3,794
)
 

 
(5,438
)
 

Total
$
(443,984
)
 
$
(82,580
)
 
$
(529,876
)
 
$
197,643

(a)
These amounts are included in "Other, including cash payments to claimants from Qualified Settlement Funds (1)" in the Condensed Consolidated Statements of Cash Flows above.

10


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 Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.
The tables below provide reconciliations of certain of our non-GAAP financial measures, both historical and forward-looking, 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 attributable to Endo International plc (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2017 and 2016 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net (loss) income attributable to Endo International plc (GAAP)
$
(1,396,518
)
 
$
343,578

 
$
(1,570,346
)
 
$
209,709

Income tax benefit
(57,480
)
 
(555,277
)
 
(69,408
)
 
(673,992
)
Interest expense, net
121,747

 
111,919

 
233,746

 
228,712

Depreciation and amortization (18)
212,801

 
231,478

 
496,910

 
464,912

EBITDA (non-GAAP)
$
(1,119,450
)
 
$
131,698

 
$
(909,098
)
 
$
229,341

 


 


 
 
 
 
Inventory step-up and other cost savings (2)
$
100

 
$
29,103

 
$
215

 
$
97,579

Upfront and milestone-related payments (3)
3,082

 
2,688

 
6,177

 
4,105

Inventory reserve increase from restructuring (4)
7,899

 
6,706

 
7,899

 
33,633

Royalty obligations (5)

 

 

 
(7,750
)
Separation benefits and other restructuring (6)
16,715

 
15,468

 
39,385

 
26,997

Certain litigation-related and other contingencies, net (7)
(2,600
)
 
5,259

 
(1,664
)
 
10,459

Asset impairment charges (8)
725,044

 
39,951

 
929,006

 
169,576

Acquisition-related and integration costs (9)
2,240

 
24,287

 
6,936

 
47,515

Fair value of contingent consideration (10)
1,950

 
23,884

 
8,134

 
13,210

Loss on extinguishment of debt (11)
51,734

 

 
51,734

 

Share-based compensation
7,512

 
14,203

 
27,005

 
28,520

Other (income) expense, net (19)
(6,709
)
 
5,175

 
(8,746
)
 
3,268

Other adjustments
(114
)
 
5,783

 
(17
)
 
(1,395
)
Discontinued operations, net of tax (15)
700,498

 
46,216

 
708,903

 
91,324

Net income attributable to noncontrolling interests (16)

 
18

 

 
16

Adjusted EBITDA (non-GAAP)
$
387,901

 
$
350,439

 
$
865,869

 
$
746,398


11


Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)
The following table provides a reconciliation of our (Loss) income from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2017 and 2016 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
(Loss) income from continuing operations (GAAP)
$
(696,020
)
 
$
389,812

 
$
(861,443
)
 
$
301,049

Non-GAAP adjustments:

 

 

 

Amortization of intangible assets (1)
190,943

 
212,844

 
454,077

 
424,513

Inventory step-up and other cost savings (2)
100

 
29,103

 
215

 
97,579

Upfront and milestone-related payments (3)
3,082

 
2,688

 
6,177

 
4,105

Inventory reserve increase from restructuring (4)
7,899

 
6,706

 
7,899

 
33,633

Royalty obligations (5)

 

 

 
(7,750
)
Separation benefits and other restructuring (6)
16,715

 
15,468

 
39,385

 
26,997

Certain litigation-related and other contingencies, net (7)
(2,600
)
 
5,259

 
(1,664
)
 
10,459

Asset impairment charges (8)
725,044

 
39,951

 
929,006

 
169,576

Acquisition-related and integration costs (9)
2,240

 
24,287

 
6,936

 
47,515

Fair value of contingent consideration (10)
1,950

 
23,884

 
8,134

 
13,210

Loss on extinguishment of debt (11)
51,734

 

 
51,734

 

Non-cash and penalty interest charges (12)

 

 

 
4,092

Other (13)
(3,233
)
 
1,541

 
(4,168
)
 
(5,490
)
Tax adjustments (14)
(90,653
)
 
(559,202
)
 
(153,842
)
 
(686,416
)
Adjusted income from continuing operations (non-GAAP)
$
207,201

 
$
192,341

 
$
482,446

 
$
433,072


12


Reconciliation of Other Adjusted Income Statement Data (non-GAAP)
The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and six months ended June 30, 2017 and 2016 (in thousands, except per share data):
Three Months Ended June 30, 2017
 
Total revenues
 
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 attributable to Endo International plc
 
Diluted (loss) income per share from continuing operations (17)
Reported (GAAP)
$
875,731

 
$
539,401

 
$
336,330

 
38
%
 
$
923,058

 
105
%
 
$
(586,728
)
 
(67
)%
 
$
166,772

 
$
(753,500
)
 
$
(57,480
)
 
8
%
 
$
(696,020
)
 
$
(700,498
)
 
$
(1,396,518
)
 
$
(3.12
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(190,943
)
 
190,943

 
 
 

 
 
 
190,943

 
 
 

 
190,943

 

 
 
 
190,943

 

 
190,943

 
0.86

Inventory step-up and other cost savings (2)

 
(100
)
 
100

 
 
 

 
 
 
100

 
 
 

 
100

 

 
 
 
100

 

 
100

 

Upfront and milestone-related payments (3)

 
(682
)
 
682

 
 
 
(2,400
)
 
 
 
3,082

 
 
 

 
3,082

 

 
 
 
3,082

 

 
3,082

 
0.01

Inventory reserve increase from restructuring (4)

 
(7,899
)
 
7,899

 
 
 

 
 
 
7,899

 
 
 

 
7,899

 

 
 
 
7,899

 

 
7,899

 
0.04

Separation benefits and other restructuring (6)

 
(5,026
)
 
5,026

 
 
 
(11,689
)
 
 
 
16,715

 
 
 

 
16,715

 

 
 
 
16,715

 

 
16,715

 
0.07

Certain litigation-related and other contingencies, net (7)

 

 

 
 
 
2,600

 
 
 
(2,600
)
 
 
 

 
(2,600
)
 

 
 
 
(2,600
)
 

 
(2,600
)
 
(0.01
)
Asset impairment charges (8)

 

 

 
 
 
(725,044
)
 
 
 
725,044

 
 
 

 
725,044

 

 
 
 
725,044

 

 
725,044

 
3.25

Acquisition-related and integration costs (9)

 

 

 
 
 
(2,240
)
 
 
 
2,240

 
 
 

 
2,240

 

 
 
 
2,240

 

 
2,240

 
0.01

Fair value of contingent consideration (10)

 

 

 
 
 
(1,950
)
 
 
 
1,950

 
 
 

 
1,950

 

 
 
 
1,950

 

 
1,950

 
0.01

Loss on extinguishment of debt (11)

 

 

 
 
 

 
 
 

 
 
 
(51,734
)
 
51,734

 

 
 
 
51,734

 

 
51,734

 
0.23

Other (13)

 

 

 
 
 

 
 
 

 
 
 
3,233

 
(3,233
)
 

 
 
 
(3,233
)
 

 
(3,233
)
 
(0.01
)
Tax adjustments (14)

 

 

 
 
 

 
 
 

 
 
 

 

 
90,653

 
 
 
(90,653
)
 

 
(90,653
)
 
(0.41
)
Exclude discontinued operations, net of tax (15)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
700,498

 
700,498

 

After considering items (non-GAAP)
$
875,731

 
$
334,751

 
$
540,980

 
62
%
 
$
182,335

 
21
%
 
$
358,645

 
41
 %
 
$
118,271

 
$
240,374

 
$
33,173

 
14
%
 
$
207,201

 
$

 
$
207,201

 
$
0.93

Three Months Ended June 30, 2016
 
Total revenues
 
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 attributable to Endo International plc (16)
 
Diluted (loss) income per share from continuing operations (17)
Reported (GAAP)
$
920,887

 
$
632,218

 
$
288,669

 
31
%
 
$
337,040

 
37
%
 
$
(48,371
)
 
(5
)%
 
$
117,094

 
$
(165,465
)
 
$
(555,277
)
 
336
%
 
$
389,812

 
$
(46,216
)
 
$
343,578

 
$
1.75

Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(212,844
)
 
212,844

 
 
 

 
 
 
212,844

 
 
 

 
212,844

 

 
 
 
212,844

 

 
212,844

 
0.95

Inventory step-up and other cost savings (2)

 
(29,103
)
 
29,103

 
 
 

 
 
 
29,103

 
 
 

 
29,103

 

 
 
 
29,103

 

 
29,103

 
0.13

Upfront and milestone-related payments (3)

 
(642
)
 
642

 
 
 
(2,046
)
 
 
 
2,688

 
 
 

 
2,688

 

 
 
 
2,688

 

 
2,688

 
0.01

Inventory reserve increase from restructuring (4)

 
(6,706
)
 
6,706

 
 
 

 
 
 
6,706

 
 
 

 
6,706

 

 
 
 
6,706

 

 
6,706

 
0.03

Separation benefits and other restructuring (6)

 
(6,405
)
 
6,405

 
 
 
(9,063
)
 
 
 
15,468

 
 
 

 
15,468

 

 
 
 
15,468

 

 
15,468

 
0.07

Certain litigation-related and other contingencies, net (7)

 

 

 
 
 
(5,259
)
 
 
 
5,259

 
 
 

 
5,259

 

 
 
 
5,259

 

 
5,259

 
0.02

Asset impairment charges (8)

 

 

 
 
 
(39,951
)
 
 
 
39,951

 
 
 

 
39,951

 

 
 
 
39,951

 

 
39,951

 
0.18

Acquisition-related and integration costs (9)

 

 

 
 
 
(24,287
)
 
 
 
24,287

 
 
 

 
24,287

 

 
 
 
24,287

 

 
24,287

 
0.11

Fair value of contingent consideration (10)

 

 

 
 
 
(23,884
)
 
 
 
23,884

 
 
 

 
23,884

 

 
 
 
23,884

 

 
23,884

 
0.11

Other (13)

 

 

 
 
 

 
 
 

 
 
 
(1,541
)
 
1,541

 

 
 
 
1,541

 

 
1,541

 
0.01

Tax adjustments (14)

 

 

 
 
 

 
 
 

 
 
 

 

 
559,202

 
 
 
(559,202
)
 

 
(559,202
)
 
(2.51
)
Exclude discontinued operations, net of tax (15)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
46,216

 
46,216

 

After considering items (non-GAAP)
$
920,887

 
$
376,518

 
$
544,369

 
59
%
 
$
232,550

 
25
%
 
$
311,819

 
34
 %
 
$
115,553

 
$
196,266

 
$
3,925

 
2
%
 
$
192,341

 
$

 
$
192,323

 
$
0.86


13


Six Months Ended June 30, 2017
 
Total revenues
 
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 attributable to Endo International plc
 
Diluted (loss) income per share from continuing operations (17)
Reported (GAAP)
$
1,913,331

 
$
1,208,363

 
$
704,968

 
37
%
 
$
1,359,085

 
71
%
 
$
(654,117
)
 
(34
)%
 
$
276,734

 
$
(930,851
)
 
$
(69,408
)
 
7
%
 
$
(861,443
)
 
$
(708,903
)
 
$
(1,570,346
)
 
$
(3.86
)
Items impacting comparability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets (1)

 
(454,077
)
 
454,077

 
 
 

 
 
 
454,077

 
 
 

 
454,077

 

 
 
 
454,077

 

 
454,077

 
2.03

Inventory step-up and other cost savings (2)

 
(215
)
 
215

 
 
 

 
 
 
215

 
 
 

 
215

 

 
 
 
215

 

 
215

 

Upfront and milestone-related payments (3)

 
(1,351
)
 
1,351

 
 
 
(4,826
)
 
 
 
6,177

 
 
 

 
6,177

 

 
 
 
6,177

 

 
6,177

 
0.03

Inventory reserve increase from restructuring (4)

 
(7,899
)
 
7,899

 
 
 

 
 
 
7,899

 
 
 

 
7,899

 

 
 
 
7,899

 

 
7,899

 
0.04

Separation benefits and other restructuring (6)

 
(6,687
)
 
6,687

 
 
 
(32,698
)
 
 
 
39,385

 
 
 

 
39,385

 

 
 
 
39,385

 

 
39,385

 
0.18

Certain litigation-related and other contingencies, net (7)

 

 

 
 
 
1,664

 
 
 
(1,664
)
 
 
 

 
(1,664
)
 

 
 
 
(1,664
)
 

 
(1,664
)
 
(0.01
)
Asset impairment charges (8)

 

 

 
 
 
(929,006
)
 
 
 
929,006

 
 
 

 
929,006

 

 
 
 
929,006

 

 
929,006

 
4.16

Acquisition-related and integration costs (9)

 

 

 
 
 
(6,936
)
 
 
 
6,936

 
 
 

 
6,936

 

 
 
 
6,936

 

 
6,936

 
0.03

Fair value of contingent consideration (10)

 

 

 
 
 
(8,134
)
 
 
 
8,134

 
 
 

 
8,134

 

 
 
 
8,134

 

 
8,134

 
0.04

Loss on extinguishment of debt (11)

 

 

 
 
 

 
 
 

 
 
 
(51,734
)
 
51,734

 

 
 
 
51,734

 

 
51,734

 
0.23

Other (13)

 

 

 
 
 

 
 
 

 
 
 
4,168

 
(4,168
)
 

 
 
 
(4,168
)
 

 
(4,168
)
 
(0.02
)
Tax adjustments (14)

 

 

 
 
 

 
 
 

 
 
 

 

 
153,842

 
 
 
(153,842
)
 

 
(153,842
)
 
(0.69
)
Exclude discontinued operations, net of tax (15)

 

 

 
 
 

 
 
 

 
 
 

 

 

 
 
 

 
708,903

 
708,903

 

After considering items (non-GAAP)
$
1,913,331

 
$
738,134

 
$
1,175,197

 
61
%
 
$
379,149

 
20
%
 
$
796,048

 
42
 %
 
$
229,168

 
$
566,880

 
$
84,434

 
15
%
 
$
482,446

 
$

 
$
482,446

 
$
2.16

Six Months Ended June 30, 2016
 
Total revenues
 
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 attributable to Endo International plc (16)
 
Diluted (loss) income per share from continuing operations (17)
Reported (GAAP)
$
1,884,426

 
$
1,320,923

 
$
563,503

 
30
%
 
$
704,466

 
37
%
 
$
(140,963
)
 
(7
)%
 
$
231,980

 
$
(372,943
)
 
$