Endo Reports First Quarter Financial Results

                 Endo Reports First Quarter Financial Results

PR Newswire

MALVERN, Pa., May 7, 2013

MALVERN, Pa., May7, 2013 /PRNewswire/ --

  oTotal quarterly revenues of $709 million, increased by 3 percent versus
    prior year.
  oFirst quarter reported diluted (GAAP) EPS of $0.14.
  oFirst quarter adjusted diluted EPS of $1.09 increased by 25 percent versus
    prior year.
  oCompany continues to expect 2013 revenues in the range of $2.80 billion to
    $2.95 billion.
  oCompany now expects reported diluted (GAAP) EPS in the range of $2.10 to
    $2.40.
  oCompany continues to expect 2013 adjusted diluted EPS in the range of
    $4.40 to $4.70.

Endo Health Solutions (Nasdaq: ENDP) today reported first quarter 2013 total
revenues of $709 million, compared to $691 million for the same quarter of
2012. Endo reported first quarter 2013 net income of $15 million, compared to
a reported net loss of $87 million for the comparable 2012 period. Reported
net income for the period includes a charge for the amount of $68 million for
the period to reflect the impact of an accrual for certain product liability
claims.

As detailed in the supplemental financial information below, adjusted net
income for the three months ended March 31, 2013 was $123 million, compared to
$106 million for the same period in 2012. Reported diluted EPS for the first
quarter 2013 was $0.14, compared to a $0.75 loss per share for the first
quarter of 2012. Adjusted diluted EPS was $1.09 compared to $0.87 for the same
period in 2012.

"2013 is a year of transition for Endo as we begin to manage the entry of
generic competition for LIDODERM^® and navigate through the headwinds that we
have faced recently, including those with OPANA^® ER. I continue to be very
optimistic about the future of Endo," said Rajiv De Silva, president and CEO
of Endo. "Since joining the company I have focused on assessing our current
strategy and operations with a view to identifying our best opportunities for
growth and improving profitability. I look forward to sharing these plans in
the months ahead."

FINANCIAL PERFORMANCE AT A GLANCE
($ in thousands, except per share amounts)
                                           1st Quarter
                                           2013        2012         Change
Total Revenues                             $ 708,519   $ 690,633    3%
Reported Net Income                        $ 15,349    $ (87,345)   NM
Reported Diluted EPS                       $ 0.14      $ (0.75)     NM
Adjusted Net Income                        $ 123,238   $ 106,300    16%
Adjusted Diluted EPS                       $ 1.09      $ 0.87       25%



ENDO PHARMACEUTICALS

First quarter 2013 branded pharmaceutical revenues were $358 million, a 2
percent decrease compared to first quarter 2012 branded pharmaceutical
revenues. This decline was primarily attributable to the decrease in net
sales of LIDODERM. First quarter 2013 net sales of LIDODERM decreased 11
percent compared to first quarter 2012. This decrease is primarily
attributable to the company's previously announced Supply Agreement with
Actavis. As part of that agreement, Endo is providing, at no cost, $12 million
per month of branded LIDODERM (valued at equivalent wholesale acquisition
cost) to the wholesale affiliate of Actavis for its distribution.

First quarter 2013 net sales of OPANA ER decreased 31 percent compared to
first quarter 2012. This decrease is primarily attributable to a supply
disruption at the end of first quarter 2012 that led some patients to switch
to other pain relief products. In addition, the brand is now subject to the
headwinds of a non-AB rated generic that launched in January 2013.

In Aug. 2012, Endo filed a Citizen Petition requesting, in part, that FDA
determine that the discontinued formulation of OPANA ER was withdrawn from the
market for reasons of safety. In Nov. 2012, the company supplemented this
Citizen Petition to include emerging safety data that the company believes
suggests that the first quarter 2012 introduction of the reformulated OPANA ER
designed to be crush-resistant is substantially reducing rates of abuse. More
recent data from an ongoing epidemiology study were submitted to the Citizen
Petition docket in March 2013. These data indicate that per 100,000
prescriptions dispensed, the past 30-day abuse rate of crush-resistant OPANA
ER was 79 percent lower than the abuse rate of generic versions of
extended-release oxymorphone that were on the market in 2012. The FDA is
expected to respond to this Citizen Petition on May 10.

First quarter 2013 net sales of Voltaren^® Gel were $36 million. The company
did not report any sales of Voltaren Gel during first quarter 2012 as the
product was affected by the Novartis plant closure in Lincoln, Neb. The return
to prescription growth for Voltaren Gel has been strong and first quarter 2013
total prescription volume achieved a record high for the product.

First quarter 2013 net sales of FORTESTA^® Gel increased 152 percent compared
to first quarter 2012. This increase was primarily attributable to improved
formulary access that facilitated a significant year-over-year increase in
total prescription volumes for the product.

QUALITEST

First quarter 2013 generic product net sales of $178 million represent an
increase of 23 percent compared to first quarter 2012. This increase was
primarily attributable to strong demand for Qualitest's diversified product
portfolio and some benefit from favorable pricing. In addition to
prioritizing sales growth, Qualitest continues to focus on additional process
improvements and increased efficiencies in order to enhance profitability.

In March 2013, Qualitest received through its partner, Alembic Pharmaceuticals
Limited, FDA approval of Valsartan/HCTZ Tablets. Total combined branded and
generic sales for Valsartan/HCTZ Tablets in the U.S. for the 12 months ended
Dec. 31, 2012 were approximately $1.7 billion, according to IMS Health.

AMS

First quarter 2013 sales of Devices were $123 million, a reported decrease of
6 percent, at current exchange rates, compared to first quarter 2012. This
decrease is primarily attributable to a decrease in U.S.-based sales. First
quarter 2013 International-based sales of AMS products increased approximately
3 percent compared to first quarter 2012.

The decrease in U.S.-based sales is primarily attributable to a continued
decline in Women's Health sales, which decreased 16 percent in the first
quarter 2013, compared to the same period last year. The decrease in Women's
Health sales is attributable to year-over-year declines in U.S.-based
procedural volumes reflecting recent industry shifts following the FDA's
September 2011 advisory committee meeting regarding the use of surgical mesh
in pelvic organ prolapse. AMS remains focused on educational activities as
part of an overall effort to continue to encourage patients and physicians to
discuss the risks and benefits of AMS's surgical mesh devices as an important
treatment option for patients who suffer from stress urinary incontinence and
pelvic organ prolapse.

First quarter 2013 sales of AMS's benign prostatic hyperplasia (BPH) business
decreased 8 percent compared to first quarter 2012. This decrease is
primarily attributable to lower sales of GreenLight™ consoles and was
partially offset by an increase in GreenLight fiber sales. First quarter 2013
Men's Health sales increased slightly compared to first quarter 2012.

HEALTHTRONICS

First quarter 2013 Services sales of $50 million decreased 3 percent compared
to first quarter 2012. This decrease in sales is primarily attributable to
decreased volumes in lithotripsy services and prostate services.

2013 Financial Guidance

Endo's estimates are based on estimated results for the twelve months ended
Dec. 31, 2013 and management's current belief about prescription trends,
pricing levels, inventory levels and the anticipated timing of future product
launches and events. The company's guidance for reported (GAAP) earnings per
share does not include any estimates for potential new corporate development
transactions. For the full twelve months ended Dec. 31, 2013, at current
exchange rates, Endo estimates:

  oTotal revenue to be between $2.80 billion and $2.95 billion
  oReported (GAAP) diluted earnings per share to be between $2.10 and $2.40
  oAdjusted diluted earnings per share to be between $4.40 and $4.70

The company's 2013 guidance is based on certain assumptions including:

  oAdjusted gross margin of between 64 percent and 66 percent
  oAdjusted effective tax rate of between 28.5 percent and 29.5 percent
  oThe company assumes the availability of a non-AB rated, full-line generic
    extended-release oxymorphone for the first six months of 2013. The company
    further assumes no generic competition thereafter due to the anticipated
    outcome of an FDA decision in May 2013 that could remove generic
    formulations of non-tamper-resistant extended-release oxymorphone from the
    market. Consistent with its Citizen's Petition, the company continues to
    believe that sufficient evidence exists to support a determination by FDA
    that the old formulation of OPANA ER was discontinued for reasons of
    safety, which serves the public health. The company's expected revenues
    for 2013 reflect a reduction in 2013 OPANA ER net sales of 20% versus 2012
    net sales, due to the effect of potential erosion in market share from the
    single, non-AB-rated generic competitor that launched in Jan. 2013
    combined with the impact of recent prescription trends reflecting flat
    market share.
  oThe company continues to expect a single generic competitor for LIDODERM
    in September 2013 as a result of a previously announced settlement
    agreement with Actavis (formerly Watson Pharmaceuticals).

Balance Sheet Update

During the first quarter of 2013, Endo made payments of approximately $100
million to reduce the outstanding principal of term loan debt associated with
the acquisition of AMS. This brings the total repayments on this debt to
approximately $752 million, inclusive of approximately $638 million in
cumulative voluntary prepayments, through first quarter of 2013.

Conference Call Information

Endo will conduct a conference call with financial analysts to discuss this
news release today at 8:30 a.m. ET. Investors and other interested parties may
call 800-510-9691 (domestic) or +1 617-614-3453 (international) and enter
passcode 52909269. Please dial in 10 minutes prior to the scheduled start
time.

A replay of the call will be available from May 7, 2013 at 10:30 a.m. ET until
11:59 p.m. ET on May 21, 2013 by dialing 888-286-8010 (domestic) or +1
617-801-6888 (international) and entering passcode 84659236.

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
May 21, 2013. The replay can be accessed by clicking on "Events" in the
Investor Relations section of the website.

Supplemental Financial Information

The following tables provide a reconciliation of our reported (GAAP)
statements of operations to our adjusted statements of operations (Non-GAAP)
for each of the three months ended March 31, 2013 and 2012 (in thousands,
except per share data):

Three Months Ended March 31,    Actual Reported  Adjustments       Non-GAAP
2013 (unaudited)                (GAAP)                             Adjusted
REVENUES                        $   708,519       $  —              $ 708,519
COSTS AND EXPENSES:
Cost of revenues                285,926           (46,526)    (1)   239,400
Selling, general and            236,382           (21,883)    (2)   214,499
administrative
Research and development        41,569            (5,815)     (3)   35,754
Litigation-related and other    68,232            (68,232)    (4)   —
contingencies
Asset impairment charges        1,100             (1,100)     (5)   —
Acquisition-related and         1,318             (1,318)     (6)   —
integration items, net
OPERATING INCOME                $   73,992        $  144,874        $ 218,866
INTEREST EXPENSE, NET           44,303            (5,450)     (7)   38,853
NET LOSS ON EXTINGUISHMENT OF   11,312            (11,312)    (8)   —
DEBT
OTHER (INCOME) EXPENSE, NET     (18,168)          19,227      (9)   1,059
INCOME BEFORE INCOME TAX        $   36,545        $  142,409        $ 178,954
INCOME TAX                      9,942             34,520      (10)  44,462
CONSOLIDATED NET INCOME         $   26,603        $  107,889        $ 134,492
Less: Net income attributable   11,254            —                 11,254
to noncontrolling interests
NET INCOME ATTRIBUTABLE TO ENDO $   15,349        $  107,889        $ 123,238
HEALTH SOLUTIONS INC.
DILUTED EARNINGS PER SHARE      $   0.14                            $ 1.09
DILUTED WEIGHTED AVERAGE SHARES 113,189                             113,189



Notes to reconciliation of our GAAP statements of operations to our adjusted
statements of operations:
     To exclude amortization of commercial intangible assets related to
(1)  marketed products of $46,189 and certain separation benefits and other
     costs incurred in connection with continued efforts to enhance the
     company's operations.
     To exclude certain separation benefits and other costs incurred in
(2)  connection with continued efforts to enhance the company's operations,
     amortization of customer relationships and mesh litigation-related
     defense costs.
     To exclude milestone payments to partners and certain separation
(3)  benefits and other costs incurred in connection with continued efforts
     to enhance the company's operations.
(4)  To exclude the net impact of accruals primarily for mesh-related product
     liability.
(5)  To exclude asset impairment charges.
     To exclude acquisition-related and integration costs and a small loss
(6)  recorded to reflect the change in fair value of the contingent
     consideration associated with the Qualitest acquisition.
(7)  To exclude additional interest expense as a result of the prior adoption
     of ASC 470-20.
     To exclude the unamortized debt issuance costs written off and recorded
(8)  as a net loss on extinguishment of debt upon our March 2013 prepayment
     on our Term Loan indebtedness as well asupon the amendment and
     restatement of our existing credit facility.
(9)  To exclude patent litigation settlement income.
(10) To reflect the cash tax savings results from our recent acquisitions and
     the tax effect of the pre-tax adjustments above at applicable tax rates.



Three Months Ended March 31,     Actual Reported  Adjustments      Non-GAAP
2012 (unaudited)                 (GAAP)                            Adjusted
REVENUES                         $   690,633       $  —             $ 690,633
COSTS AND EXPENSES:
Cost of revenues                 364,820           (161,238)   (1)  203,582
Selling, general and             254,454           (13,867)    (2)  240,587
administrative
Research and development         88,688            (46,972)    (3)  41,716
Asset impairment charges         40,000            (40,000)    (4)  —
Acquisition-related and          3,749             (3,749)     (5)  —
integration items, net
OPERATING (LOSS) INCOME          $   (61,078)      $  265,826       $ 204,748
INTEREST EXPENSE, NET            46,896            (4,976)     (6)  41,920
NET LOSS ON EXTINGUISHMENT OF    5,426             (5,426)     (7)  —
DEBT
OTHER EXPENSE, NET               451               —                451
(LOSS) INCOME BEFORE INCOME TAX  $   (113,851)     $  276,228       $ 162,377
INCOME TAX                       (39,326)          82,583      (8)  43,257
CONSOLIDATED NET (LOSS) INCOME   $   (74,525)      $  193,645       $ 119,120
Less: Net income attributable to 12,820            —                12,820
noncontrolling interests
NET (LOSS) INCOME ATTRIBUTABLE   $   (87,345)      $  193,645       $ 106,300
TO ENDO HEALTH SOLUTIONS INC.
DILUTED (LOSS) EARNINGS PER      $   (0.75)                         $ 0.87
SHARE
DILUTED WEIGHTED AVERAGE SHARES  117,052                            122,591



Notes to reconciliation of our GAAP statements of operations to our adjusted
statements of operations:
    To exclude amortization of commercial intangible assets related to
    marketed products of $50,603, the impact of inventory step-up recorded as
(1) part of acquisition accounting and certain milestone payments and
    receipts, the accrual for the payment to Impax related to sales of OPANA
    ER of $110,000 and certain separation benefits and other costs incurred in
    connection with continued efforts to enhance the company's operations.
    To exclude certain separation benefits and other costs incurred in
(2) connection with continued efforts to enhance the company's operations and
    amortization of customer relationships.
(3) To exclude milestone and upfront payments to partners.
(4) To exclude asset impairment charges.
    To exclude acquisition-related and integration costs and a small gain
(5) recorded to reflect the change in fair value of the contingent
    consideration associated with the Qualitest Pharmaceuticals acquisition.
(6) To exclude additional interest expense as a result of the prior adoption
    of ASC 470-20.
    To exclude the unamortized debt issuance costs written off and recorded as
(7) a loss on extinguishment of debt upon our 2012 prepayments on our Term
    Loan indebtedness.
(8) To reflect the cash tax savings results from our recent acquisitions and
    the tax effect of the pre-tax adjustments above at applicable tax rates.



Non-GAAP Adjusted net income and its components and Non-GAAP Adjusted diluted
EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income
and its components and diluted EPS. Despite the importance of these measures
to management in goal setting and performance measurement, we stress that
Non-GAAP Adjusted income and its components are Non-GAAP financial measures
that have no standardized meaning prescribed by U.S. GAAP and, therefore, have
limits in their usefulness to investors. Because of the non-standardized
definitions, Non-GAAP Adjusted net income and its components (unlike U.S. GAAP
net income and its components) may not be comparable to the calculation of
similar measures of other companies. Non-GAAP Adjusted net income and its
components are presented solely to permit investors to more fully understand
how management assesses performance. See Endo's Current Report on Form 8-K
filed today with the Securities and Exchange Commission for an explanation of
Endo's reasons for using non-GAAP measures.



Reconciliation of Projected GAAP Diluted Earnings Per Share to Adjusted
Diluted Earnings Per Share Guidance for 2013
                                                            Year Ending
                                                            December31, 2013
Projected GAAP diluted income per common share              $ 2.10  To $ 2.40
Upfront and milestone-related payments to partners          0.17       0.17
Amortization of commercial intangible assets and inventory  1.65       1.65
step-up
Integration and restructuring charges                       0.32       0.32
Charges for litigation and other legal matters              0.75       0.75
Actavis (Watson) litigation settlement                      (0.38)     (0.38)
Interest expense adjustment for ASC 470-20 and other        0.30       0.30
treasury related items
Tax effect of pre-tax adjustments at the applicable tax
rates and certain other expected cash tax savings as a      (0.51)     (0.51)
result of recent acquisitions
Diluted adjusted income per common share guidance           $ 4.40  To $ 4.70



The company's guidance is being issued based on certain assumptions including:

  oCertain of the above amounts are based on estimates and there can be no
    assurance that Endo will achieve these results.
  oIncludes all completed business development transactions as of May7,
    2013.

About Endo
Endo Health Solutions Inc. (Endo) is a US-based diversified healthcare company
that is redefining healthcare value by finding solutions for the unmet needs
of patients along care pathways for pain management, pelvic health, urology,
endocrinology and oncology. Through our operating companies: Endo
Pharmaceuticals, Qualitest, AMS and HealthTronics, Endo is dedicated to
improving care through a combination of branded products, generics, devices,
technology and services that creates maximum value for patients, providers and
payers alike. Learn more at www.endo.com.

(Tables Attached)

The following tables present Endo's unaudited Net Revenues for the three
months ended March 31, 2013 and 2012:

Endo Health Solutions Inc.

Net Revenues (unaudited)

(in thousands)
                            Three Months Ended March 31,  Percent Growth
                            2013            2012
Endo Pharmaceuticals:
LIDODERM®                   $  187,024      $  210,014    (11)%
OPANA® ER                   56,327          81,086        (31)%
Voltaren® Gel               36,110          —             NM
PERCOCET®                   26,618          23,380        14%
FROVA®                      13,777          15,644        (12)%
SUPPRELIN® LA               13,426          13,446        —%
VANTAS®                     3,867           3,892         (1)%
VALSTAR®                    5,415           6,236         (13)%
FORTESTA® Gel               14,654          5,822         152%
Other Branded Products      273             (265)         NM
Royalty and Other Revenue   98              4,319         (98)%
Total Endo Pharmaceuticals  $  357,589      $  363,574    (2)%
Total Qualitest             $  178,253      $  145,345    23%
American Medical Systems:
Men's Health                67,568          67,440        —%
Women's Health              28,604          33,898        (16)%
BPH Therapy                 26,480          28,828        (8)%
Total AMS                   122,652         130,166       (6)%
HealthTronics               50,025          51,548        (3)%
Total Revenue               708,519         690,633       3%



The following table presents unaudited condensed consolidated Balance Sheet
data at March 31, 2013 and Dec. 31, 2012:

                                                    March31,     December31,
                                                    2013          2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                           $ 340,517     $ 547,916
Accounts receivable                                 711,193       690,850
Inventories, net                                    384,757       357,638
Other assets                                        362,552       372,830
Total current assets                                $ 1,799,019   $ 1,969,234
PROPERTY, PLANT AND EQUIPMENT, NET                  382,245       385,668
GOODWILL                                            2,017,363     2,014,351
OTHER INTANGIBLES, NET                              2,058,398     2,098,973
OTHER ASSETS                                        95,477        100,333
TOTAL ASSETS                                        $ 6,352,502   $ 6,568,559
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses               $ 1,349,021   $ 1,587,827
Other current liabilities                           73,162        140,193
Total current liabilities                           $ 1,422,183   $ 1,728,020
DEFERRED INCOME TAXES                               493,152       516,565
LONG-TERM DEBT, LESS CURRENT PORTION, NET           3,006,062     3,037,947
OTHER LIABILITIES                                   259,368       152,821
STOCKHOLDERS' EQUITY:
Total Endo Health Solutions Inc. stockholders'      $ 1,114,371   $ 1,072,856
equity
Noncontrolling interests                            57,366        60,350
Total stockholders' equity                          $ 1,171,737   $ 1,133,206
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $ 6,352,502   $ 6,568,559



The following table presents unaudited condensed consolidated Statement of
Cash Flow data for the three months ended March 31, 2013 and 2012:

                                                  Three Months Ended March 31,
                                                  2013            2012
OPERATING ACTIVITIES:
Consolidated net income (loss)                    $  26,603       $  (74,525)
Adjustments to reconcile consolidated net income
to Consolidated

net income (loss)
Depreciation and amortization                     66,819          66,957
Stock-based compensation                          15,331          14,518
Amortization of debt issuance costs and premium / 9,776           7,868
discount
Other                                             22,122          20,982
Changes in assets and liabilities which used cash (199,398)       (48,862)
Net cash used in operating activities             (58,747)        (13,062)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net   (23,645)        (28,921)
Acquisitions, net of cash acquired                (3,645)         —
Other                                             (10,000)        (5,000)
Net cash used in investing activities             (37,290)        (33,921)
FINANCING ACTIVITIES:
Issuance of common stock from treasury, net of    1,557           (31,588)
(purchases)
Cash distributions to noncontrolling interests    (12,832)        (13,120)
Principal (payments) borrowings on indebtedness,  (99,777)        (219,502)
net
Exercise of Endo Health Solutions Inc. stock      12,826          9,543
options
Other                                             (12,724)        2,545
Net cash used in financing activities             (110,950)       (252,122)
Effect of foreign exchange rate                   (412)           (212)
NET DECREASE IN CASH AND CASH EQUIVALENTS         (207,399)       (299,317)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD    547,916         547,620
CASH AND CASH EQUIVALENTS, END OF PERIOD          $  340,517      $  248,303



Safe Harbor Statement
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Statements including
words such as "believes," "expects," "anticipates," "intends," "estimates,"
"plan," "will," "may," "look forward," "intend," "guidance," "future" or
similar expressions are forward-looking statements. Because these statements
reflect our current views, expectations and beliefs concerning future events,
these forward-looking statements involve risks and uncertainties. Investors
should note that many factors, as more fully described under the caption "Risk
Factors" in our Form 10-K, Form 10-Q and Form 8-K filings with the Securities
and Exchange Commission and as otherwise enumerated herein or therein, could
affect our future financial results and could cause our actual results to
differ materially from those expressed in forward-looking statements contained
in our Annual Report on Form 10-K. The forward-looking statements in this
press release are qualified by these risk factors. These are factors that,
individually or in the aggregate, could cause our actual results to differ
materially from expected and historical results. We assume no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future developments or otherwise.

SOURCE Endo Health Solutions

Website: http://www.endo.com
Contact: Investors/Media: Blaine Davis, (484) 216-7158, or Investors: Jonathan
Neely, (484) 216-6645
 
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