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
Endo Reports First Quarter Financial Results
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