Segment Results (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of reportable segments information

The following represents selected information for the Company’s reportable segments for the three and nine months ended September 30, 2018 and 2017 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net revenues from external customers:
U.S. Branded - Specialty & Established Pharmaceuticals	$	220,100	$	233,803	$	632,972	$	729,150
U.S. Branded - Sterile Injectables	237,150		201,905		670,847		554,365
U.S. Generic Pharmaceuticals	257,969		294,749		748,445		1,227,584
International Pharmaceuticals (1)	30,247		56,430		108,425		189,119
Total net revenues from external customers	$	745,466	$	786,887	$	2,160,689	$	2,700,218
Adjusted income from continuing operations before income tax:
U.S. Branded - Specialty & Established Pharmaceuticals	$	84,891	$	123,754	$	262,454	$	380,841
U.S. Branded - Sterile Injectables	170,329		150,531		513,082		417,060
U.S. Generic Pharmaceuticals	82,555		86,236		247,137		415,172
International Pharmaceuticals	13,377		17,434		45,594		47,128
Total segment adjusted income from continuing operations before income tax	$	351,152	$	377,955	$	1,068,267	$	1,260,201

__________


(1)	Revenues generated by our International Pharmaceuticals segment are primarily attributable to external customers located in Canada and, prior to the sale of Litha on July 3, 2017 and Somar on October 25, 2017, South Africa and Latin America.

Schedule of reconciliations of consolidated loss from continuing operations before income tax

The table below provides reconciliations of our consolidated Loss from continuing operations before income tax, which is determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), to our total segment adjusted income from continuing operations before income tax for the three and nine months ended September 30, 2018 and 2017 (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Total consolidated loss from continuing operations before income tax	$	(143,068	)	$	(127,796	)	$	(671,559	)	$	(1,058,647	)
Interest expense, net	131,847			127,521			385,896			361,267
Corporate unallocated costs (1)	49,187			33,035			144,693			114,655
Amortization of intangible assets	161,275			161,413			471,662			615,490
Inventory step-up	71			66			261			281
Upfront and milestone payments to partners	4,731			775			43,027			6,952
Separation benefits and other cost reduction initiatives (2)	4,001			80,693			82,141			127,977
Certain litigation-related and other contingencies, net (3)	(1,750		)	(12,352		)	15,370			(14,016		)
Asset impairment charges (4)	142,217			94,924			613,400			1,023,930
Acquisition-related and integration items (5)	1,288			16,641			13,284			31,711
Loss on extinguishment of debt	—			—			—			51,734
Foreign currency impact related to the remeasurement of intercompany debt instruments	1,528			3,005			(1,560		)	(2,922		)
Other, net (6)	(175		)	30			(28,348		)	1,789
Total segment adjusted income from continuing operations before income tax	$	351,152		$	377,955		$	1,068,267		$	1,260,201

__________


(1)	Amounts include certain corporate overhead costs, such as headcount and facility expenses and certain other income and expenses.

(2)

Amounts for the three and nine months ended September 30, 2018 relate to employee separation costs of $2.1 million and $32.7 million, respectively, charges to increase excess inventory reserves of $0.2 million and $2.8 million, respectively, and other charges of $1.7 million and $11.4 million, respectively, each of which related primarily to our restructuring initiatives. Also included in the amount for the nine months ended September 30, 2018 is accelerated depreciation of $35.2 million, which related to the 2017 U.S. Generic Pharmaceuticals Restructuring Initiative. During the three and nine months ended September 30, 2017, amounts primarily relate to employee separation costs of $19.8 million and $41.3 million, accelerated depreciation of $59.8 million and $60.2 million, other charges of $1.1 million and $18.5 million, respectively, and charges to increase excess inventory reserves of $7.9 million during the nine months ended September 30, 2017. These charges were related primarily to the 2017 U.S. Generics Pharmaceuticals restructuring initiative. See Note 4. Restructuring for discussion of our material restructuring initiatives.


(3)	Amounts include adjustments for Litigation-related and other contingencies, net as further described in Note 14. Commitments and Contingencies.


(4)	Amounts primarily relate to charges to impair goodwill and intangible assets as further described in Note 9. Goodwill and Other Intangibles as well as charges to write down certain property, plant and equipment as further described in Note 7. Fair Value Measurements.

(5)

Amounts during the three and nine months ended September 30, 2018 are primarily related to charges due to changes in the fair value of contingent consideration of $0.8 million and $11.7 million, respectively. Amounts during the three and nine months ended September 30, 2017 include charges due to changes in the fair value of contingent consideration of $15.4 million and $23.6 million, respectively. All other amounts are directly related to costs associated with acquisition and integration efforts.


(6)	Amounts during the three and nine months ended September 30, 2018 primarily relate to gains on sales of businesses and other assets, as further described in Note 17. Other income, net.

Disaggregation of revenue

The Company disaggregates its revenue from contracts with customers into the categories included in the table below (in thousands). The Company believes these categories depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
U.S. Branded - Specialty & Established Pharmaceuticals:
Specialty Products:
XIAFLEX®	$	64,214	$	52,511	$	184,855	$	152,113
SUPPRELIN® LA	20,408		20,638		60,948		63,468
Other Specialty (1)	43,576		40,634		114,202		113,407
Total Specialty Products	$	128,198	$	113,783	$	360,005	$	328,988
Established Products:
PERCOCET®	$	30,730	$	31,349	$	93,539	$	93,183
VOLTAREN® Gel	15,057		19,102		44,185		53,646
OPANA® ER	—		14,756		—		82,056
Other Established (2)	46,115		54,813		135,243		171,277
Total Established Products	$	91,902	$	120,020	$	272,967	$	400,162
Total U.S. Branded - Specialty & Established Pharmaceuticals (3)	$	220,100	$	233,803	$	632,972	$	729,150
U.S. Branded - Sterile Injectables:
VASOSTRICT®	$	112,333	$	105,741	$	332,387	$	300,649
ADRENALIN®	35,460		25,335		101,858		50,464
Ertapenem for injection	25,798		—		25,798		—
Other Sterile Injectables (4)	63,559		70,829		210,804		203,252
Total U.S. Branded - Sterile Injectables (3)	$	237,150	$	201,905	$	670,847	$	554,365
Total U.S. Generic Pharmaceuticals (5)	$	257,969	$	294,749	$	748,445	$	1,227,584
Total International Pharmaceuticals (6)	$	30,247	$	56,430	$	108,425	$	189,119
Total Revenues	$	745,466	$	786,887	$	2,160,689	$	2,700,218

__________


(1)	Products included within Other Specialty include TESTOPEL^®, NASCOBAL^®Nasal Spray and AVEED^®.


(2)	Products included within Other Established include, but are not limited to, LIDODERM^®, EDEX^®, TESTIM^® and FORTESTA^® Gel, including the authorized generics.


(3)	Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $25 million during any quarterly period in 2018 or 2017.


(4)	Products included within Other Sterile Injectables include, but are not limited to, APLISOL^® and ephedrine sulfate injection.

(5)

The U.S. Generic Pharmaceuticals segment is comprised of a portfolio of products that are generic versions of branded products, are distributed primarily through the same wholesalers, generally have no intellectual property protection and are sold within the U.S. During the nine months ended September 30, 2017, combined sales of ezetimibe tablets and quetiapine ER tablets, for which we lost temporary marketing exclusivity during the second quarter of 2017, made up 9% of consolidated total revenue. No other individual product within this segment has exceeded 5% of consolidated total revenues for the periods presented.

(6)

The International Pharmaceuticals segment, which accounted for 4% and 5% of consolidated total revenues during the three and nine months ended September 30, 2018, respectively, and 7% of consolidated total revenues during both the three and nine months ended September 30, 2017, includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through our operating company Paladin Labs, Inc. (Paladin). This segment also included: (i) our South African business, which was sold in July 2017 and consisted of Litha and certain assets acquired from Aspen Holdings in October 2015 and (ii) our Latin American business consisting of Somar, which was sold in October 2017.