Endo Reports Third-Quarter 2020 Financial Results And Raises Full Year 2020 Financial Guidance
11/05/2020 - 04:49 PM
DUBLIN , Nov. 5, 2020 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported financial results for the third-quarter ended September 30, 2020.
"Our third-quarter 2020 results reflect growth in our Branded Pharmaceuticals segment as utilization of physician administered products continues returning toward pre-COVID-19 levels. Additionally, our Sterile Injectables segment performed better than expected during the quarter driven by both favorable customer purchasing patterns and higher underlying utilization for certain critical-care products," said Blaise Coleman , President and Chief Executive Officer at Endo. "Given our year to date performance, we are raising our full-year 2020 financial guidance."
Mr. Coleman continued, "Our recently announced actions to further optimize our Company's operations and to acquire BioSpecifics support the advancement of our key strategic priorities and better position us to create long-term sustainable value."
THIRD-QUARTER FINANCIAL PERFORMANCE (in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019 (1)
Change
2020
2019 (1)
Change
Total Revenues, Net
$
634,860
$
729,426
(13)
%
$
2,142,853
$
2,149,564
—
%
Reported (Loss) Income from Continuing Operations
$
(68,974)
$
(41,431)
66
%
$
106,217
$
(152,095)
NM
Reported Diluted Weighted Average Shares
230,040
226,598
2
%
233,379
225,804
3
%
Reported Diluted Net (Loss) Income per Share from Continuing Operations
$
(0.30)
$
(0.18)
67
%
$
0.46
$
(0.67)
NM
Reported Net (Loss) Income
$
(75,887)
$
(79,415)
(4)
%
$
64,601
$
(203,993)
NM
Adjusted Income from Continuing Operations
$
122,275
$
152,686
(20)
%
$
494,375
$
430,847
15
%
Adjusted Diluted Weighted Average Shares (2)
233,442
230,907
1
%
233,379
231,751
1
%
Adjusted Diluted Net Income per Share from Continuing Operations
$
0.52
$
0.66
(21)
%
$
2.12
$
1.86
14
%
Adjusted EBITDA
$
286,700
$
335,656
(15)
%
$
1,044,307
$
1,012,836
3
%
__________
(1)
Certain prior period adjusted amounts have been revised as a result of a change in the Company's definition of its adjusted financial metrics. Refer to the "Supplemental Financial Information" section below for additional discussion.
(2)
Reported Diluted Net (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.
CONSOLIDATED RESULTS
Total revenues were $635 million in third-quarter 2020, a decrease of 13% compared to $729 million during the same period in 2019. This result was primarily attributable to decreased Generic Pharmaceuticals segment revenues.
Reported loss from continuing operations in third-quarter 2020 was $69 million compared to reported loss from continuing operations of $41 million during the same period in 2019. This result was driven by severance and other restructuring charges related to the previously announced strategic initiatives to further optimize Endo's operations. Reported diluted net loss per share from continuing operations in third-quarter 2020 was $0.30 compared to reported diluted net loss per share from continuing operations of $0.18 in third-quarter 2019.
Adjusted income from continuing operations in third-quarter 2020 was $122 million compared to $153 million in third-quarter 2019. This decrease was primarily attributable to lower adjusted gross margin in the Generic Pharmaceuticals segment due to a decline in revenues. Adjusted diluted net income per share from continuing operations in third-quarter 2020 was $0.52 compared to $0.66 in third-quarter 2019.
BRANDED PHARMACEUTICALS SEGMENT
Third-quarter 2020 Branded Pharmaceuticals segment revenues were $224 million , an increase of 3% compared to $217 million during third-quarter 2019.
Specialty Products revenues increased 6% to $140 million in third-quarter 2020 compared to $132 million in third-quarter 2019, with sales of XIAFLEX® increasing 7% to $88 million compared to $83 million in third-quarter 2019. Established Products revenues decreased 2% to $84 million in third-quarter 2020 compared to $85 million in third-quarter 2019 due to ongoing competitive pressures in the portfolio.
STERILE INJECTABLES SEGMENT
Third-quarter 2020 Sterile Injectables segment revenues were $251 million , a decrease of 5% compared to $264 million during third-quarter 2019. This decrease was primarily driven by reduced APLISOL® revenues due to a nonrecurring resupply benefit which occurred during third-quarter 2019 and ongoing competitive pressures on certain products. The foregoing decrease was significantly offset by increased VASOSTRICT® revenues.
During the quarter, Endo also announced a fill-finish manufacturing and services agreement for Novavax's COVID-19 vaccine candidate, NVX-CoV2373.
GENERIC PHARMACEUTICALS SEGMENT
Third-quarter 2020 Generic Pharmaceuticals segment revenues were $136 million , a decrease of 38% compared to $218 million during third-quarter 2019. This decrease was primarily attributable to continued competitive pressures on certain key products.
INTERNATIONAL PHARMACEUTICALS SEGMENT
Third-quarter 2020 International Pharmaceuticals segment revenues decreased 20% to $24 million compared to $30 million during third-quarter 2019.
FULL YEAR 2020 GUIDANCE
Endo is raising financial guidance for full-year 2020. The outlook ranges below reflect a number of assumptions that are subject to change including, among other things, uncertainties related to the COVID-19 pandemic.
Full-Year 2020
Prior Guidance
Current Guidance
Total Revenues, Net
$2.60B to $2.70B
$2.75B to $2.80B
Adjusted EBITDA
$1.19B to $1.23B
$1.30B to $1.32B
Adjusted Diluted Net Income per Share from Continuing Operations
$2.00 t o $2.15
$2.50 t o $2.55
Adjusted Gross Margin
~66.5% to ~67.0%
~67.0%
Adjusted Operating Expenses as a Percentage of Total Revenues, Net
~25.0% to ~25.5%
~23.5%
Adjusted Interest Expense
~$530M to ~$535M
~$525M
Adjusted Effective Tax Rate
~14.0% to ~15.0%
~13.5%
Adjusted Diluted Weighted Average Shares
~234M
~234M
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of September 30, 2020, the Company had approximately $1.7 billion in unrestricted cash; $8.3 billion of debt; and a net debt to adjusted EBITDA ratio of 4.7.
Third-quarter 2020 cash used in operating activities was $77 million , compared to $33 million of net cash provided by operating activities during third-quarter 2019.
CONFERENCE CALL INFORMATION
Endo will conduct a conference call with financial analysts to discuss this press release tomorrow, November 6, 2020 , at 7:30 a.m. EST . The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 4073637. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from November 6, 2020 at 10:30 a.m. ET until 10:30 a.m. ET on November 13, 2020 by dialing U.S./Canada (855) 859-2056 International (404) 537-3406, and entering the passcode 4073637.
A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations . In addition, a replay of the webcast will be available on the Company website for one year following the event.
FINANCIAL SCHEDULES
The following table presents Endo's unaudited Total revenues, net for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands):
Three Months Ended September 30,
Percent Growth
Nine Months Ended September 30,
Percent Growth
2020
2019
2020
2019
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®
$
88,167
$
82,756
7
%
$
211,022
$
226,118
(7)
%
SUPPRELIN® LA
28,229
20,772
36
%
63,344
66,542
(5)
%
Other Specialty (1)
23,724
28,470
(17)
%
68,795
78,397
(12)
%
Total Specialty Products
$
140,120
$
131,998
6
%
$
343,161
$
371,057
(8)
%
Established Products:
PERCOCET®
$
27,508
$
28,561
(4)
%
$
82,789
$
88,199
(6)
%
TESTOPEL®
18,068
13,236
37
%
26,877
40,830
(34)
%
Other Established (2)
37,986
43,518
(13)
%
104,449
129,765
(20)
%
Total Established Products
$
83,562
$
85,315
(2)
%
$
214,115
$
258,794
(17)
%
Total Branded Pharmaceuticals (3)
$
223,682
$
217,313
3
%
$
557,276
$
629,851
(12)
%
Sterile Injectables:
VASOSTRICT®
$
155,412
$
129,691
20
%
$
572,530
$
384,854
49
%
ADRENALIN®
30,662
40,311
(24)
%
120,335
133,468
(10)
%
Ertapenem for injection
16,784
21,853
(23)
%
46,648
79,619
(41)
%
APLISOL®
9,443
28,085
(66)
%
25,821
55,996
(54)
%
Other Sterile Injectables (4)
39,092
43,695
(11)
%
141,663
124,026
14
%
Total Sterile Injectables (3)
$
251,393
$
263,635
(5)
%
$
906,997
$
777,963
17
%
Total Generic Pharmaceuticals
$
135,508
$
218,012
(38)
%
$
602,670
$
654,322
(8)
%
Total International Pharmaceuticals
$
24,277
$
30,466
(20)
%
$
75,910
$
87,428
(13)
%
Total revenues, net
$
634,860
$
729,426
(13)
%
$
2,142,853
$
2,149,564
—
%
__________
(1)
Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED® .
(2)
Products included within Other Established include, but are not limited to, EDEX® and LIDODERM® .
(3)
Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2020 and/or any product having revenues in excess of $25 million during any quarterly period in 2020 or 2019.
(4)
Products included within Other Sterile Injectables include ephedrine sulfate injection and others.
The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and nine months ended September 30, 2020 and 2019 (in thousands, except per share data):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
TOTAL REVENUES, NET
$
634,860
$
729,426
$
2,142,853
$
2,149,564
COSTS AND EXPENSES:
Cost of revenues
348,077
389,165
1,072,972
1,169,282
Selling, general and administrative
182,259
168,329
522,285
471,749
Research and development
32,055
36,519
94,165
96,353
Litigation-related and other contingencies, net
1,810
(14,414)
(23,938)
(4,093)
Asset impairment charges
8,412
4,766
106,197
258,652
Acquisition-related and integration items, net
(1,407)
16,025
17,100
(26,983)
Interest expense, net
135,648
136,903
397,689
404,387
Gain on extinguishment of debt
—
—
—
(119,828)
Other (income) expense, net
(7,194)
16,203
(25,318)
20,408
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(64,800)
$
(24,070)
$
(18,299)
$
(120,363)
INCOME TAX EXPENSE (BENEFIT)
4,174
17,361
(124,516)
31,732
(LOSS) INCOME FROM CONTINUING OPERATIONS
$
(68,974)
$
(41,431)
$
106,217
$
(152,095)
DISCONTINUED OPERATIONS, NET OF TAX
(6,913)
(37,984)
(41,616)
(51,898)
NET (LOSS) INCOME
$
(75,887)
$
(79,415)
$
64,601
$
(203,993)
NET (LOSS) INCOME PER SHARE—BASIC:
Continuing operations
$
(0.30)
$
(0.18)
$
0.46
$
(0.67)
Discontinued operations
(0.03)
(0.17)
(0.18)
(0.23)
Basic
$
(0.33)
$
(0.35)
$
0.28
$
(0.90)
NET (LOSS) INCOME PER SHARE—DILUTED:
Continuing operations
$
(0.30)
$
(0.18)
$
0.46
$
(0.67)
Discontinued operations
(0.03)
(0.17)
(0.18)
(0.23)
Diluted
$
(0.33)
$
(0.35)
$
0.28
$
(0.90)
WEIGHTED AVERAGE SHARES:
Basic
230,040
226,598
228,985
225,804
Diluted
230,040
226,598
233,379
225,804
The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020
December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
1,679,738
$
1,454,531
Restricted cash and cash equivalents
162,648
247,457
Accounts receivable
473,368
467,953
Inventories, net
354,903
327,865
Other current assets
132,163
88,412
Total current assets
$
2,802,820
$
2,586,218
TOTAL NON-CURRENT ASSETS
6,362,423
6,803,309
TOTAL ASSETS
$
9,165,243
$
9,389,527
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses, including legal settlement accruals
$
1,243,158
$
1,412,954
Other current liabilities
47,840
47,335
Total current liabilities
$
1,290,998
$
1,460,289
LONG-TERM DEBT, LESS CURRENT PORTION, NET
8,286,351
8,359,899
OTHER LIABILITIES
370,376
435,883
SHAREHOLDERS' DEFICIT
(782,482)
(866,544)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
$
9,165,243
$
9,389,527
The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2020 and 2019 (in thousands):
Nine Months Ended September 30,
2020
2019
OPERATING ACTIVITIES:
Net income (loss)
$
64,601
$
(203,993)
Adjustments to reconcile Net income (loss) to Net cash provided by operating activities:
Depreciation and amortization
391,463
468,409
Asset impairment charges
106,197
258,652
Other, including cash payments to claimants from Qualified Settlement Funds
(272,818)
(403,824)
Net cash provided by operating activities
$
289,443
$
119,244
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, excluding capitalized interest
$
(52,692)
$
(47,812)
Proceeds from sale of business and other assets, net
6,377
4,780
Other
(3,915)
(2,295)
Net cash used in investing activities
$
(50,230)
$
(45,327)
FINANCING ACTIVITIES:
(Payments on) proceeds from borrowings, net
$
(86,887)
$
247,897
Other
(11,470)
(28,333)
Net cash (used in) provided by financing activities
$
(98,357)
$
219,564
Effect of foreign exchange rate
(458)
780
NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
$
140,398
$
294,261
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD
1,720,388
1,476,837
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD
$
1,860,786
$
1,771,098
SUPPLEMENTAL FINANCIAL INFORMATION
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.
The tables below provide reconciliations of certain of the Company's non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.
Effective January 1, 2020 , the Company revised its definition of its adjusted financial metrics to exclude certain legal costs. The Company believes that such costs are not indicative of business performance and that excluding them more accurately reflects the Company's results and better enables management to compare financial results between periods. As a result of this change, the Company's adjusted financial metrics now exclude opioid-related legal expenses. Prior period adjusted results throughout this document have also been adjusted to reflect this change. The impact of excluding these costs during the three and nine months ended September 30, 2020 and 2019 is reflected in the Certain legal costs lines of each of the following reconciliation tables.
Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)
The following table provides a reconciliation of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Net (loss) income (GAAP)
$
(75,887)
$
(79,415)
$
64,601
$
(203,993)
Income tax expense (benefit)
4,174
17,361
(124,516)
31,732
Interest expense, net
135,648
136,903
397,689
404,387
Depreciation and amortization (13)
120,974
147,621
376,787
468,409
EBITDA (non-GAAP)
$
184,909
$
222,470
$
714,561
$
700,535
Upfront and milestone-related payments (2)
275
1,672
2,469
4,055
Continuity and separation benefits and other cost reductions (3)
67,692
11,023
100,356
15,172
Certain litigation-related and other contingencies, net (4)
1,810
(14,414)
(23,938)
(4,093)
Certain legal costs (5)
18,343
14,556
51,884
50,229
Asset impairment charges (6)
8,412
4,766
106,197
258,652
Fair value of contingent consideration (7)
(1,407)
16,025
17,100
(26,983)
Gain on extinguishment of debt (8)
—
—
—
(119,828)
Share-based compensation (13)
6,585
11,576
28,262
48,909
Other (income) expense, net (14)
(7,194)
16,203
(25,318)
20,408
Other (9)
362
13,795
31,118
13,882
Discontinued operations, net of tax (11)
6,913
37,984
41,616
51,898
Adjusted EBITDA (non-GAAP)
$
286,700
$
335,656
$
1,044,307
$
1,012,836
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, 2020 and 2019 (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
(Loss) income from continuing operations (GAAP)
$
(68,974)
$
(41,431)
$
106,217
$
(152,095)
Non-GAAP adjustments:
Amortization of intangible assets (1)
104,066
131,932
325,801
417,949
Upfront and milestone-related payments (2)
275
1,672
2,469
4,055
Continuity and separation benefits and other cost reductions (3)
67,692
11,023
100,356
15,172
Certain litigation-related and other contingencies, net (4)
1,810
(14,414)
(23,938)
(4,093)
Certain legal costs (5)
18,343
14,556
51,884
50,229
Asset impairment charges (6)
8,412
4,766
106,197
258,652
Fair value of contingent consideration (7)
(1,407)
16,025
17,100
(26,983)
Gain on extinguishment of debt (8)
—
—
—
(119,828)
Other (9)
(1,898)
28,634
13,437
30,254
Tax adjustments (10)
(6,044)
(77)
(205,148)
(42,465)
Adjusted income from continuing operations (non-GAAP)
$
122,275
$
152,686
$
494,375
$
430,847
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, 2020 and 2019 (in thousands, except per share data):
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 (12)
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
Continuity and separation benefits and other cost reductions (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 (7)
-
-
-
1,407
(1,407)
-
(1,407)
-
(1,407)
-
(1,407)
Other (9)
-
-
-
(369)
369
2,267
(1,898)
-
(1,898)
-
(1,898)
Tax adjustments (10)
-
-
-
-
-
-
-
6,044
(6,044)
-
(6,044)
Exclude discontinued operations, net of tax (11)
-
-
-
-
-
-
-
-
-
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
Three Months Ended September 30, 2019
Total revenues, net
Cost of revenues
Gross margin
Gross margin %
Total operating expenses
Operating expense to revenue %
Operating income from continuing operations
Operating margin %
Other non-operating expense, net
(Loss) income from continuing operations before income tax
Income tax expense
Effective tax rate
(Loss) income from continuing operations
Discontinued operations, net of tax
Net (loss) income
Diluted net (loss) income per share from continuing operations (12)
Reported (GAAP)
$ 729,426
$ 389,165
$ 340,261
46.6 %
$ 211,225
29.0 %
$ 129,036
17.7 %
$ 153,106
$ (24,070)
$ 17,361
(72.1)%
$ (41,431)
$ (37,984)
$ (79,415)
$ (0.18)
Items impacting comparability:
Amortization of intangible assets (1)
-
(131,932)
131,932
-
131,932
-
131,932
-
131,932
-
131,932
Upfront and milestone-related payments (2)
-
(542)
542
(1,130)
1,672
-
1,672
-
1,672
-
1,672
Continuity and separation benefits and other cost reductions (3)
-
(1,004)
1,004
(10,019)
11,023
-
11,023
-
11,023
-
11,023
Certain litigation-related and other contingencies, net (4)
-
-
-
14,414
(14,414)
-
(14,414)
-
(14,414)
-
(14,414)
Certain legal costs (5)
-
-
-
(14,556)
14,556
-
14,556
-
14,556
-
14,556
Asset impairment charges (6)
-
-
-
(4,766)
4,766
-
4,766
-
4,766
-
4,766
Fair value of contingent consideration (7)
-
-
-
(16,025)
16,025
-
16,025
-
16,025
-
16,025
Other (9)
-
-
-
(14,053)
14,053
(14,581)
28,634
-
28,634
-
28,634
Tax adjustments (10)
-
-
-
-
-
-
-
77
(77)
-
(77)
Exclude discontinued operations, net of tax (11)
-
-
-
-
-
-
-
-
-
37,984
37,984
After considering items (non-GAAP)
$ 729,426
$ 255,687
$ 473,739
64.9 %
$ 165,090
22.6 %
$ 308,649
42.3 %
$ 138,525
$ 170,124
$ 17,438
10.3 %
$ 152,686
$ -
$ 152,686
$ 0.66
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 (12)
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
Continuity and separation benefits and other cost reductions (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 (7)
-
-
-
(17,100)
17,100
-
17,100
-
17,100
-
17,100
Other (9)
-
-
-
(31,118)
31,118
17,681
13,437
-
13,437
-
13,437
Tax adjustments (10)
-
-
-
-
-
-
-
205,148
(205,148)
-
(205,148)
Exclude discontinued operations, net of tax (11)
-
-
-
-
-
-
-
-
-
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
Nine Months Ended September 30, 2019
Total revenues, net
Cost of revenues
Gross margin
Gross margin %
Total operating expenses
Operating expense to revenue %
Operating income from continuing operations
Operating margin %
Other non-operating expense, net
(Loss) income from continuing operations before income tax
Income tax expense
Effective tax rate
(Loss) income from continuing operations
Discontinued operations, net of tax
Net (loss) income
Diluted net (loss) income per share from continuing operations (12)
Reported (GAAP)
$2,149,564
$ 1,169,282
$ 980,282
45.6 %
$ 795,678
37.0 %
$ 184,604
8.6 %
$ 304,967
$ (120,363)
$ 31,732
(26.4)%
$ (152,095)
$ (51,898)
$ (203,993)
$ (0.67)
Items impacting comparability:
Amortization of intangible assets (1)
-
(417,949)
417,949
-
417,949
-
417,949
-
417,949
-
417,949
Upfront and milestone-related payments (2)
-
(1,942)
1,942
(2,113)
4,055
-
4,055
-
4,055
-
4,055
Continuity and separation benefits and other cost reductions (3)
-
(1,004)
1,004
(14,168)
15,172
-
15,172
-
15,172
-
15,172
Certain litigation-related and other contingencies, net (4)
-
-
-
4,093
(4,093)
-
(4,093)
-
(4,093)
-
(4,093)
Certain legal costs (5)
-
-
-
(50,229)
50,229
-
50,229
-
50,229
-
50,229
Asset impairment charges (6)
-
-
-
(258,652)
258,652
-
258,652
-
258,652
-
258,652
Fair value of contingent consideration (7)
-
-
-
26,983
(26,983)
-
(26,983)
-
(26,983)
-
(26,983)
Gain on extinguishment of debt (8)
-
-
-
-
-
119,828
(119,828)
-
(119,828)
-
(119,828)
Other (9)
-
-
-
(13,878)
13,878
(16,376)
30,254
-
30,254
-
30,254
Tax adjustments (10)
-
-
-
-
-
-
-
42,465
(42,465)
-
(42,465)
Exclude discontinued operations, net of tax (11)
-
-
-
-
-
-
-
-
-
51,898
51,898
After considering items (non-GAAP)
$2,149,564
$ 748,387
$1,401,177
65.2 %
$ 487,714
22.7 %
$ 913,463
42.5 %
$ 408,419
$ 505,044
$ 74,197
14.7 %
$ 430,847
$ -
$ 430,847
$ 1.86
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, 2020 and 2019 are as follows:
(1) Adjustments for amortization of commercial intangible assets included the following (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Amortization of intangible assets excluding fair value step-up from contingent consideration
$
103,249
$
128,865
$
323,350
$
400,203
Amortization of intangible assets related to fair value step-up from contingent consideration
817
3,067
2,451
17,746
Total
$
104,066
$
131,932
$
325,801
$
417,949
(2) Adjustments for upfront and milestone-related payments to partners included the following (in thousands):
Three Months Ended September 30,
2020
2019
Cost of revenues
Operating expenses
Cost of revenues
Operating expenses
Sales-based
$
125
$
—
$
542
$
—
Development-based
—
150
—
1,130
Total
$
125
$
150
$
542
$
1,130
Nine Months Ended September 30,
2020
2019
Cost of revenues
Operating expenses
Cost of revenues
Operating expenses
Sales-based
$
792
$
—
$
1,942
$
—
Development-based
—
1,677
—
2,113
Total
$
792
$
1,677
$
1,942
$
2,113
(3) Adjustments for continuity and separation benefits and other cost reductions included the following (in thousands):
Three Months Ended September 30,
2020
2019
Cost of revenues
Operating expenses
Cost of revenues
Operating expenses
Continuity and separation benefits
$
32,048
$
25,906
$
1,004
$
5,672
Accelerated depreciation charges
4,502
1,789
—
—
Other
—
3,447
—
4,347
Total
$
36,550
$
31,142
$
1,004
$
10,019
Nine Months Ended September 30,
2020
2019
Cost of revenues
Operating expenses
Cost of revenues
Operating expenses
Continuity and separation benefits
$
33,190
$
42,681
$
1,004
$
7,884
Accelerated depreciation charges
10,528
4,148
—
—
Other
(26)
9,835
—
6,284
Total
$
43,692
$
56,664
$
1,004
$
14,168
Included within the Continuity and separation benefits line are costs associated with certain continuity and transitional compensation arrangements for certain senior management of the Company. Additionally, amounts during the three and nine months ended September 30, 2020 include severance and other restructuring charges related to the previously announced strategic initiatives to further optimize Endo's operations.
(4) To exclude adjustments to accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by subsidiaries.
(5) To exclude opioid-related legal expenses.
(6) Adjustments for asset impairment charges included the following (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Goodwill impairment charges
$
—
$
—
$
32,786
$
151,108
Other intangible asset impairment charges
2,020
4,261
65,771
104,660
Property, plant and equipment impairment charges
—
505
1,248
2,884
Operating lease right-of-use asset impairment charges
6,392
—
6,392
—
Total asset impairment charges
$
8,412
$
4,766
$
106,197
$
258,652
(7) To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to our estimates regarding the timing and amount of the future revenues of the underlying products and changes in other assumptions impacting the probability of incurring, and extent to which the Company could incur, related contingent obligations.
(8) To exclude the gain on the extinguishment of debt associated with the Company's March 2019 refinancing.
(9) The Other row included in each of the above reconciliations of GAAP financial measures to Non-GAAP financial measures (except for the reconciliations of Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP)) includes the following (in thousands):
Three Months Ended September 30,
2020
2019
Operating expenses
Other non-operating expenses
Operating expenses
Other non-operating expenses
Foreign currency impact related to the re-measurement of intercompany debt instruments
$
—
$
1,663
$
—
$
(922)
(Gain) loss on sale of business and other assets
—
—
—
1
Debt modification costs
369
—
—
—
Other miscellaneous
—
(3,930)
14,053
15,502
Total
$
369
$
(2,267)
$
14,053
$
14,581
Nine Months Ended September 30,
2020
2019
Operating expenses
Other non-operating expenses
Operating expenses
Other non-operating expenses
Foreign currency impact related to the re-measurement of intercompany debt instruments
$
—
$
(2,426)
$
—
$
2,874
(Gain) loss on sale of business and other assets
—
(11,325)
—
(2,000)
Debt modification costs
31,118
—
—
—
Other miscellaneous
—
(3,930)
13,878
15,502
Total
$
31,118
$
(17,681)
$
13,878
$
16,376
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.
(10) Adjusted income taxes are calculated by tax effecting adjusted pre-tax income and permanent book-tax differences at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates. Adjusted income taxes include current and deferred income tax expense commensurate with the non-GAAP measure of profitability.
(11) To exclude the results of the businesses reported as discontinued operations, net of tax.
(12) Calculated as Net (loss) income from continuing operations divided by the applicable weighted average share number. The applicable weighted average share numbers are as follows (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
GAAP
230,040
226,598
233,379
225,804
Non-GAAP Adjusted
233,442
230,907
233,379
231,751
(13) Depreciation and amortization and Share-based compensation per the Adjusted EBITDA reconciliations do not include amounts reflected in other lines of the reconciliations, including Continuity and separation benefits and other cost reductions.
(14) To exclude Other (income) expense, net per the Condensed Consolidated Statements of Operations.
Reconciliation of Net Debt Leverage Ratio (non-GAAP)
The following table provides a reconciliation of the Company's Net (loss) income (GAAP) to Adjusted EBITDA (non-GAAP) for the twelve months ended September 30, 2020 (in thousands) and the calculation of the Company's Net Debt Leverage Ratio (non-GAAP):
Twelve Months Ended September 30, 2020
Net loss (GAAP)
$
(154,042)
Income tax benefit
(140,568)
Interest expense, net
532,036
Depreciation and amortization (13)
521,240
EBITDA (non-GAAP)
$
758,666
Upfront and milestone-related payments
$
5,037
Continuity and separation benefits and other cost reductions
119,782
Certain litigation-related and other contingencies, net
(8,634)
Certain legal costs
66,937
Asset impairment charges
373,627
Fair value of contingent consideration
(2,015)
Share-based compensation (13)
38,495
Other income, net
(29,049)
Other
31,027
Discontinued operations, net of tax
51,770
Adjusted EBITDA (non-GAAP)
$
1,405,643
Calculation of Net Debt:
Debt
$
8,320,501
Cash (excluding Restricted Cash)
1,679,738
Net Debt (non-GAAP)
$
6,640,763
Calculation of Net Debt Leverage:
Net Debt Leverage Ratio (non-GAAP)
4.7
Non-GAAP Financial Measures
The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These Non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP net income and its components and diluted net income per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, the company stresses that these are Non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted EBITDA and Non-GAAP adjusted net income from continuing operations and its components (unlike GAAP net income from continuing operations and its components) may not be comparable to the calculation of similar measures of other companies. These Non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance.
Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, gain / loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amounts of which could be significant.
See Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission for an explanation of Endo's non-GAAP financial measures.
About Endo International plc
Endo International plc (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. Endo has global headquarters in Dublin, Ireland and U.S. headquarters in Malvern, Pennsylvania . Learn more at www.endo.com or connect with us on LinkedIn .
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, including but not limited to the statements by Mr. Coleman, as well as other statements regarding product development, market potential, corporate strategy, optimization efforts, regulatory approvals and the proposed acquisition of BioSpecifics Technologies Corp., together with Endo's net income per share from continuing operations amounts, product net sales, revenue forecasts, the impact of and response to the COVID-19 pandemic and any other statements that refer to Endo's expected, estimated or anticipated future results. Because forecasts are inherently estimates that cannot be made with precision, Endo's performance at times differs materially from its estimates and targets, and Endo often does not know what the actual results will be until after the end of the applicable reporting period. Therefore, Endo will not report or comment on its progress during a current quarter except through public announcement. Any statement made by others with respect to progress during a current quarter cannot be attributed to Endo.
All forward-looking statements in this press release reflect Endo's current analysis of existing trends and information and represent Endo's judgment only as of the date of this press release. Actual results may differ materially from current expectations based on a number of factors affecting Endo's businesses, including, among other things, the following: changing competitive, market and regulatory conditions; changes in legislation; Endo's ability to obtain and maintain adequate protection for its intellectual property rights; the timing and uncertainty of the results of both the research and development and regulatory processes, including regulatory decisions, product recalls, withdrawals and other unusual items; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; technological advances and patents obtained by competitors; the performance, including the approval, introduction, and consumer and physician acceptance of new products and the continuing acceptance of currently marketed products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of any strategic and/or optimization initiatives; the timing or results of any pending or future litigation, investigations or claims or actual or contingent liabilities, settlement discussions, negotiations or other adverse proceedings; unfavorable publicity regarding the misuse of opioids; the timing and uncertainty of any acquisition, including the possibility that various closing conditions may not be satisfied or waived, uncertainty surrounding the successful integration of any acquired business and failure to achieve the expected financial and commercial results from such acquisition; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; and Endo's ability to obtain and successfully manufacture, maintain and distribute a sufficient supply of products to meet market demand in a timely manner. In addition, U.S. and international economic conditions, including higher unemployment, political instability, financial hardship, consumer confidence and debt levels, taxation, changes in interest and currency exchange rates, international relations, capital and credit availability, the status of financial markets and institutions, fluctuations or devaluations in the value of sovereign government debt, the impact of and response to the COVID-19 pandemic and the impact of continued economic volatility, can materially affect Endo's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Endo expressly disclaims any intent or obligation to update these forward-looking statements except as required to do so by law.
Additional information concerning the above-referenced risk factors and other risk factors can be found in press releases issued by Endo, as well as Endo's public periodic filings with the U.S. Securities and Exchange Commission and with securities regulators in Canada , including the discussion under the heading "Risk Factors" in Endo's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Endo's press releases and additional information about Endo are available at www.endo.com or you can contact the Endo Investor Relations Department by calling 845-364-4833.
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SOURCE Endo International plc