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Segment Results
 3 Months Ended
Mar. 31, 2021
Segment Reporting [Abstract]  
SEGMENT RESULTS
NOTE 5. SEGMENT RESULTS
The Company’s four reportable business segments are Branded Pharmaceuticals, Sterile Injectables, Generic Pharmaceuticals and International Pharmaceuticals. These segments reflect the level at which the chief operating decision maker regularly reviews financial information to assess performance and to make decisions about resources to be allocated. Each segment derives revenue from the sales or licensing of its respective products and is discussed in more detail below.
We evaluate segment performance based on Segment adjusted income from continuing operations before income tax, which we define as Income from continuing operations before income tax and before certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, continuity payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; gains or losses from early termination of debt; debt modification costs; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; and certain other items.
Certain of the corporate expenses incurred by the Company are not directly attributable to any specific segment. Accordingly, these costs are not allocated to any of the Company’s segments and are included in the results below as “Corporate unallocated costs.” Interest income and expense are also considered corporate items and not allocated to any of the Company’s segments. The Company’s Total segment adjusted income from continuing operations before income tax is equal to the combined results of each of its segments.
Branded Pharmaceuticals
Our Branded Pharmaceuticals segment includes a variety of branded products to treat and manage conditions in the areas of urology, orthopedics, endocrinology and bariatrics, among others. The products in this segment include XIAFLEX®, SUPPRELIN® LA, NASCOBAL® Nasal Spray, AVEED®, PERCOCET®, TESTOPEL®, EDEX® and LIDODERM® among others.
Sterile Injectables
Our Sterile Injectables segment consists primarily of branded sterile injectable products such as VASOSTRICT®, ADRENALIN® and APLISOL®, among others, and certain generic sterile injectable products, including ertapenem for injection (the authorized generic of Merck Sharp & Dohme Corp.’s (Merck) Invanz®) and ephedrine sulfate injection, among others.
Generic Pharmaceuticals
Our Generic Pharmaceuticals segment consists of a product portfolio including solid oral extended-release, solid oral immediate-release, liquids, semi-solids, patches, powders, ophthalmics and sprays and includes products that treat and manage a wide of medical conditions.
International Pharmaceuticals
Our International Pharmaceuticals segment includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through our operating company Paladin Labs Inc. (Paladin). The key products of this segment serve various therapeutic areas, including attention deficit hyperactivity disorder, pain, women’s health, oncology and transplantation.
The following represents selected information for the Company’s reportable segments for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Net revenues from external customers:
Branded Pharmaceuticals$206,635 $204,073 
Sterile Injectables308,745 336,390 
Generic Pharmaceuticals180,873 251,283 
International Pharmaceuticals (1)21,666 28,659 
Total net revenues from external customers$717,919 $820,405 
Segment adjusted income from continuing operations before income tax:
Branded Pharmaceuticals$93,769 $98,422 
Sterile Injectables242,639 263,896 
Generic Pharmaceuticals34,104 57,327 
International Pharmaceuticals7,471 14,197 
Total segment adjusted income from continuing operations before income tax$377,983 $433,842 
__________
(1)Revenues generated by our International Pharmaceuticals segment are primarily attributable to external customers located in Canada.
There were no material revenues from external customers attributed to an individual country outside of the U.S. during any of the periods presented.
The table below provides reconciliations of our Total consolidated income from continuing operations before income tax, which is determined in accordance with U.S. GAAP, to our Total segment adjusted income from continuing operations before income tax for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Total consolidated income from continuing operations before income tax$47,783 $21,249 
Interest expense, net134,341 132,877 
Corporate unallocated costs (1)39,474 43,322 
Amortization of intangible assets95,130 117,237 
Upfront and milestone payments to partners556 1,750 
Continuity and separation benefits and other cost reduction initiatives (2)23,720 23,220 
Certain litigation-related and other contingencies, net (3)637 (17,176)
Certain legal costs (4)19,276 15,536 
Asset impairment charges (5)3,309 97,785 
Acquisition-related and integration items, net (6)(5,022)12,462 
Loss on extinguishment of debt13,753 — 
Foreign currency impact related to the remeasurement of intercompany debt instruments1,147 (7,094)
Other, net (7)3,879 (7,326)
Total segment adjusted income from continuing operations before income tax$377,983 $433,842 
__________
(1)Amounts include certain corporate overhead costs, such as headcount, facility and corporate litigation expenses and certain other income and expenses.
(2)Amounts for the three months ended March 31, 2021 include employee separation, continuity and other benefit-related costs of $8.5 million, accelerated depreciation charges of $6.9 million and miscellaneous charges of $8.3 million. Amounts for the three months ended March 31, 2020 include employee separation, continuity and other benefit-related costs of $13.8 million, accelerated depreciation charges of $6.6 million and miscellaneous charges of $2.8 million. These costs relate primarily to our restructuring activities as further described in Note 4. Restructuring, certain continuity and transitional compensation arrangements for certain senior management of the Company and certain other cost reduction initiatives.
(3)Amounts include adjustments to our accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by our subsidiaries. Our material legal proceedings and other contingent matters are described in more detail in Note 13. Commitments and Contingencies.
(4)Amounts relate to opioid-related legal expenses.
(5)Amounts primarily relate to charges to impair goodwill and intangible assets as further described in Note 9. Goodwill and Other Intangibles.
(6)Amounts primarily relate to changes in the fair value of contingent consideration.
(7)Amounts for the three months ended March 31, 2021 primarily relate to $3.9 million of third party fees incurred in connection with the March 2021 Refinancing Transactions, which were accounted for as debt modification costs. Refer to Note 12. Debt for additional information. Other amounts in this row primarily relate to gains on sales of businesses and other assets.
Asset information is not reviewed or included within our internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.
During the three months ended March 31, 2021 and 2020, the Company disaggregated its revenue from contracts with customers into the categories included in the table below (in thousands). The Company believes these categories depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.
Three Months Ended March 31,
20212020
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®
$95,270 $89,072 
SUPPRELIN® LA
28,028 19,720 
Other Specialty (1)20,032 25,505 
Total Specialty Products$143,330 $134,297 
Established Products:
PERCOCET®
$25,625 $27,703 
TESTOPEL®
11,189 8,192 
Other Established (2)26,491 33,881 
Total Established Products$63,305 $69,776 
Total Branded Pharmaceuticals (3)$206,635 $204,073 
Sterile Injectables:
VASOSTRICT®
$223,946 $202,904 
ADRENALIN®
29,437 56,512 
Other Sterile Injectables (4)55,362 76,974 
Total Sterile Injectables (3)$308,745 $336,390 
Total Generic Pharmaceuticals (5)$180,873 $251,283 
Total International Pharmaceuticals (6)$21,666 $28,659 
Total revenues, net$717,919 $820,405 
__________
(1)Products included within Other Specialty include NASCOBAL® Nasal Spray and AVEED®.
(2)Products included within Other Established include, but are not limited to, EDEX® and LIDODERM®.
(3)Individual products presented above represent the top two performing products in each product category for the three months ended March 31, 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.
(5)The Generic Pharmaceuticals segment is comprised of a portfolio of products that are generic versions of branded products, are distributed primarily through the same wholesalers, generally have no intellectual property protection and are sold within the U.S. No individual product within this segment has exceeded 5% of consolidated total revenues for the periods presented.
(6)The International Pharmaceuticals segment, which accounted for less than 5% of consolidated total revenues for each of the periods presented, includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through our operating company Paladin.