Attached files

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8-K - FORM 8-K - Endo International plcd930606d8k.htm
EX-23.1 - EX-23.1 - Endo International plcd930606dex231.htm
EX-99.2 - EX-99.2 - Endo International plcd930606dex992.htm
EX-23.4 - EX-23.4 - Endo International plcd930606dex234.htm
EX-23.3 - EX-23.3 - Endo International plcd930606dex233.htm
EX-99.3 - EX-99.3 - Endo International plcd930606dex993.htm
EX-99.1 - EX-99.1 - Endo International plcd930606dex991.htm
EX-23.2 - EX-23.2 - Endo International plcd930606dex232.htm

Exhibit 99.4

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information of Endo International plc (“Endo”) is presented to illustrate the estimated effects of (i) the pending acquisition of Par Pharmaceutical Holdings, Inc. (“Par”), (ii) the issuance of $1,750.0 million of Endo shares to other investors, (iii) the pending sale of the American Medical Systems Holdings, Inc. (“AMS”) Men’s and Prostate Health businesses, (iv) the consummated acquisition of Auxilium Pharmaceuticals, Inc. (“Auxilium”) by Endo and (v) the related debt offerings to finance the foregoing transactions (See Note 1). Such information is based in part on certain assumptions regarding the Pro Forma Transactions (as defined below) that we currently believe are factually supportable and expected to have a continuing impact on the consolidated results. The following unaudited pro forma condensed combined balance sheet as of March 31, 2015 is based upon, derived from and should be read in conjunction with the unaudited consolidated financial statements of Endo (which are available in Endo’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) and the historical unaudited financial statements of Par (which are available in Endo’s Current Report on Form 8-K filed with the SEC on June 2, 2015). The following unaudited pro forma condensed combined statement of operations for the quarter ended March 31, 2015 is based upon, derived from and should be read in conjunction with the unaudited consolidated financial statements of Endo (which are available in Endo’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) and the historical unaudited financial statements of Par (which are available in Endo’s Current Report on Form 8-K filed with the SEC on June 2, 2015). The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014 is based upon, derived from and should be read in conjunction with the historical audited financial statements of Endo (which are available in Endo’s Current Report on Form 8-K filed with the SEC on June 2, 2015), the historical audited financial statements of Par (which are available in Endo’s Current Report on Form 8-K filed with the SEC on June 2, 2015) and the historical audited financial statements of Auxilium (which are available in Endo’s Current Report on Form 8-K filed with the SEC on June 2, 2015). The acquisition of Par will be treated as, and the acquisition of Auxilium has been treated as, a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification 805, “Business Combinations,” which we refer to as ASC 805 for purposes of these pro forma financial statements. The unaudited pro forma condensed combined financial information set forth below give effect to the following, which we refer to, collectively, as the “Pro Forma Transactions”:

 

    the completion of the acquisition of Par (see information presented in the “Par Pro Forma Adjustments” column in the unaudited pro forma condensed combined balance sheet and statements of operations);

 

    the anticipated incurrence of $2,235.0 million of Senior Notes due 2025, which we refer to in this section as the New Senior Notes, by Endo; the anticipated re-payment of the existing Term Loan B and incurrence of $2,250.0 million in term loan debt, which we refer to in this section as the Incremental Term Loan B Facility and the anticipated issuance of $1,504.1 million of Endo shares to Par shareholders (see information presented in the “Par Pro Forma Adjustments” column in the unaudited pro forma condensed combined balance sheet and statements of operations);

 

    the anticipated issuance of $1,750.0 million of Endo shares to other investors (see information presented in the “Equity Offering Pro Forma Adjustments” column in the unaudited pro forma condensed combined balance sheet);

 

    the completion of the pending sale of the AMS Men’s and Prostate Health businesses (see information presented in the “AMS Pro Forma Adjustments” column in the unaudited pro forma condensed combined balance sheet and statements of operations);

 

    the completion of the acquisition of Auxilium on January 29, 2015 and the incurrence of $1,200.0 million of Senior Notes due 2025 on January 27, 2015, which we refer to in this section as the 2015 Senior Notes, by Endo (see information presented in the “Auxilium Pro Forma Adjustments” column in the unaudited pro forma condensed combined statements of operations);

The pro forma adjustments are preliminary and are based upon available information and certain assumptions, described in the accompanying notes to the unaudited pro forma condensed combined financial information that management believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. Under ASC 805, assets acquired and liabilities assumed are recorded at fair value. The fair value of Par’s identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate by management of fair value as of March 31, 2015. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. The establishment of the fair value of assets acquired and liabilities assumed for acquisitions requires the extensive use of significant estimates and


management’s judgment. Significant judgment is required in determining the estimated fair values of in-process research and development which we refer to as IPR&D, identifiable intangible assets, certain tangible assets and certain liabilities assumed. Such a valuation requires estimates and assumptions including, but not limited to, determining the timing and estimated costs to complete each in-process project, projecting the timing of regulatory approvals, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. Preliminary fair value estimates may change as additional information becomes available and such changes could be material.

The unaudited pro forma condensed combined statements of operations for the quarter ended March 31, 2015 and the fiscal year ended December 31, 2014 assume the completion of the Pro Forma Transactions on January 1, 2014. The unaudited pro forma condensed combined balance sheet as of March 31, 2015 assumes the acquisition of Par and the related financings, the equity offering and the disposition of AMS as if the events occurred on March 31, 2015. The completion of the Auxilium acquisition occurred on January 29, 2015 and the incurrence of the $1,200.0 million in aggregate principal amount of the 2015 Senior Notes by Endo occurred on January 27, 2015 and, as such; both are reflected in the historical unaudited condensed combined balance sheet of Endo as of March 31, 2015. See Note 5 for a description of the increase in interest expense if Endo’s sale of the Men’s and Prostate Health businesses to Boston Scientific does not close before the consummation of the Acquisition, resulting in Endo borrowing under the Asset Sale Bridge Facility.

The unaudited pro forma condensed combined financial information has been prepared by management in accordance with the regulations of the SEC and is not necessarily indicative of the combined financial position or results of operations that would have been realized had the Pro Forma Transactions occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that Endo will experience after the Pro Forma Transactions. In addition, the accompanying unaudited pro forma condensed combined statements of operations do not include any expected cost savings or restructuring actions which may be achievable subsequent to the Pro Forma Transactions or the impact of any non-recurring activity and one-time transaction related costs or certain other adjustments which are considered significant. Certain financial information of Par and Auxilium as presented in their respective consolidated financial statements has been reclassified to conform to the historical presentation in Endo’s consolidated financial statements for purposes of preparation of the unaudited pro forma condensed combined financial information.

The pro forma information is based upon certain assumptions with respect to our financing of the Acquisition. Whether the assumed financing sources are available, and, if available, the terms of our future financings, will be subject to market conditions. The actual sources of financing and the terms on which it is obtained may not be as favorable as those reflected in the pro forma condensed combined financial information. Differences between preliminary estimates in the pro forma condensed combined financial information and the final acquisition accounting, as well as between the assumed and actual financing sources and terms, will occur and could have a material impact on the pro forma condensed combined financial information and the combined company’s financial position and future results of operations.


Endo International plc

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2015

(In thousands)

 

    Endo
Historical
    AMS Pro
Forma
Adjustments
    Equity
Offering Pro
Forma
Adjustments
    Total Pro
Forma
Before Par
Acquisition
    Par
Adjusted
Historical
(Note 2)
    Par Pro
Forma
Adjustments
    Total Pro
Forma
 

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 377,461      $ 1,638,000 (5a)    $ 1,703,250  5(e)    $ 3,718,711      $ 185,880      $ (2,849,630 )(5f)    $ 1,054,961   

Restricted cash and cash equivalents

    534,162        —          —          534,162        —          —          534,162   

Marketable securities

    1,103        —          —          1,103        —          —          1,103   

Accounts receivable, net

    1,235,383        —          —          1,235,383        73,833        392,608 (5g)      1,701,824   

Inventories, net

    611,401        —          —          611,401        166,761        73,239 (5h)      851,401   

Prepaid expenses and other current assets

    54,601        —          —          54,601        26,076        —          80,677   

Income taxes receivable

    169,753        —          —          169,753        —          39,893 (5i)      209,646   

Deferred income taxes

    650,411        (66,714 )(5d)      —          583,697        68,057        (26,183 )(5o)      625,571   

Assets held for sale

    1,693,594        (1,640,754 )(5b)      —          52,840        —            52,840   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

$ 5,327,869    $ (69,468 $ 1,703,250    $ 6,961,651    $ 520,607    $ (2,370,073 $ 5,112,185   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Marketable securities

  3,349      —        —        3,349      —        —        3,349   

Property and equipment, net

  406,757      —        —        406,757      223,748      —        630,505   

Goodwill

  3,025,070      —        —        3,025,070      1,036,958      3,377,742 (5j)    7,439,770   

Other intangibles, net

  5,070,074      —        —        5,070,074      1,006,177      3,653,823 (5k)    9,730,074   

Deferred income taxes

  3,019      —        —        3,019      —        —        3,019   

Other assets

  309,539      —        —        309,539      88,445      129,536 (5l)    527,520   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

$ 14,145,677    $ (69,468 $ 1,703,250    $ 15,779,459    $ 2,875,935    $ 4,791,028    $ 23,446,422   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$ 312,016    $ —      $ —      $ 312,016    $ 81,793    $ —      $ 393,809   

Accrued expenses

  1,234,255      —        —        1,234,255      135,235      376,045 (5g)(5m)    1,745,535   

Current portion of legal settlement accrual

  1,593,121      —        —        1,593,121      —        —        1,593,121   

Current portion of long-term debt

  160,613      —        —        160,613      18,753      (503 )(5n)    178,863   

Income taxes payable

  42,819      —        —        42,819      —        —        42,819   

Deferred income taxes

  84      —        —        84      —        —        84   

Liabilities held for sale

  99,112      (90,409 )(5b)    —        8,703      —        —        8,703   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

$ 3,442,020    $ (90,409 $ —      $ 3,351,611    $ 235,781    $ 375,542    $ 3,962,934   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income taxes

  754,258      (141,148 )(5d)    —        613,110      228,272      1,297,433 (5o)    2,138,815   

Long-term debt, less current portion, net

  5,386,547      60,000 (5c)    —        5,446,547      2,318,510      1,727,490 (5p)    9,492,547   

Other liabilities

  423,136      —        —        423,136      21,910      —        445,046   

Commitments and contingencies

Stockholders’ equity:

Euro deferred shares

  42      —        —        42      —        —        42   

Common Stock

  18      —        2 (5e)    20      784      (782 )(5q)    22   

Additional paid-in capital

  5,067,562      —        1,703,248 (5e)    6,770,810      323,828      1,180,254 (5q)    8,274,892   

(Accumulated deficit) retained earnings

  (670,803   74,434 (5d)    —        (596,369   (245,809   203,750 (5q)    (638,428

Accumulated other comprehensive (loss) income

  (257,221   27,655 (5b)    —        (229,566   (5,380   5,380 (5q)    (229,566

Treasury stock

  —        —        —        —        (1,961   1,961 (5q)    —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Endo International plc stockholders’ equity

$ 4,139,598    $ 102,089    $ 1,703,250    $ 5,944,937    $ 71,462    $ 1,390,563 (5q)  $ 7,406,962   

Noncontrolling interests

  118      —        —        118      —        —        118   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

$ 4,139,716    $ 102,089    $ 1,703,250    $ 5,945,055    $ 71,462    $ 1,390,563    $ 7,407,080   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

$ 14,145,677    $ (69,468 $ 1,703,250    $ 15,779,459    $ 2,875,935    $ 4,791,028    $ 23,446,422   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note: Certain Par amounts have been reclassified to conform to Endo’s presentation. The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.


Endo International plc

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Three Months Ended March 31, 2015

(In thousands, except per share data)

 

    Endo
Historical
    Auxilium
Adjusted
Historical
(Note 2)
    Auxilium
Pro Forma
Adjustments
    AMS Pro
Forma
Adjustments
    Total Pro
Forma
Before Par
Acquisition
    Par
Adjusted
Historical
(Note 2)
    Par Pro
Forma
Adjustments
    Total Pro
Forma
 

Total revenues

  $ 714,128      $ 23,576      $ —        $ —        $ 737,704      $ 359,244      $ —        $ 1,096,948   

Costs and expenses:

               

Cost of revenues

    384,266        12,606        10,247 (5r)      —          407,119        214,171        5,298 (5r)      626,588   

Selling, general and administrative

    211,578        16,970        —          —          228,548        56,749        (1,365 )(5g)      283,932   

Research and development

    17,897        1,796        —          —          19,693        26,850        —          46,543   

Litigation-related and other contingencies

    13,000        —          —          —          13,000        (25     —          12,975   

Asset impairment charges

    7,000        —          —          —          7,000        —          —          7,000   

Acquisition-related and integration items, net

    34,640        —          (19,400 )(5s)      —          15,240        —          1,365 (5g)      16,605   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

$ 45,747    $ (7,796 $ 9,153    $ —      $ 47,104    $ 61,499    $ (5,298 $ 103,305   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

  73,139      3,518      1,482 (5t)    1,088 (5v)    79,227      29,494      31,771 (5t)    140,492   

Net loss on extinguishment of debt

  980      —        —        —        980      —        —        980   

Other (income) expense, net

  (11,995   12      —        —        (11,983   —        —        (11,983
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations before income tax

$ (16,377 $ (11,326 $ 7,671    $ (1,088 $ (21,120 $ 32,005    $ (37,069 $ (26,184
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax (benefit) expense

  (166,869   —        30,551 (5u)    —        (136,318   11,720      (23,796 )(5u)    (148,394
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations attributable to Endo International plc

$ 150,492    $ (11,326 $ (22,880 $ (1,088 $ 115,198    $ 20,285    $ (13,273 $ 122,210   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations per share attributable to Endo International plc

Basic

$ 0.89    $ 0.57   
 

 

 

               

 

 

 

Diluted

$ 0.85    $ 0.55   
 

 

 

               

 

 

 

Weighted average shares attributable to Endo International plc

Basic

  169,653           (5w)    214,981   

Diluted

  176,825           (5w)    222,153   

Note: Certain Par and Auxilium amounts have been reclassified to conform to Endo’s presentation. The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.


Endo International plc

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2014

(In thousands, except per share data)

 

    Endo
Historical
    Auxilium
Adjusted
Historical
(Note 2)
    Auxilium
Pro Forma
Adjustments
    AMS Pro
Forma
Adjustments
    Total Pro
Forma
Before Par
Acquisition
    Par
Adjusted
Historical
(Note 2)
    Par Pro
Forma
Adjustments
    Total Pro
Forma
 

Total revenues

  $ 2,380,683      $ 360,146      $ —        $ —        $ 2,740,829      $ 1,308,621      $ —        $ 4,049,450   

Costs and expenses:

               

Cost of revenues

    1,231,497        183,732        116,602 (5r)      —          1,531,831        829,506        30,706 (5r)      2,392,043   

Selling, general and administrative

    567,986        285,064        (15,271 )(5g)      —          837,779        189,591        (10,503 )(5g)      1,016,867   

Research and development

    112,708        40,868        —          —          153,576        119,095        —          272,671   

Litigation-related and other contingencies

    42,084        —          —          —          42,084        90,107        —          132,191   

Asset impairment charges

    22,542        19,920        —          —          42,462        146,934        —          189,396   

Acquisition-related and integration items, net

    77,384        (95,465     1,446 (5g)(5s)      —          (16,635     —          7,461 (5g)      (9,174
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

$ 326,482    $ (73,973 $ (102,777 $ —      $ 149,732    $ (66,612 $ (27,664 $ 55,456   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

  227,114      39,108      34,297 (5t)    4,350 (5v)    304,869      108,409      154,020 (5t)    567,298   

Net loss on extinguishment of debt

  31,817      —        —        —        31,817      3,989      —        35,806   

Other (income) expense, net

  (32,324   28,446      (28,400 )(5g)    —        (32,278   (500   3,042 (5g)    (29,736
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income tax

$ 99,875    $ (141,527 $ (108,674 $ (4,350 $ (154,676 $ (178,510 $ (184,726 $ (517,912
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

  38,267      34      (66,595 )(5u)    —        (28,294   (72,993   (104,796 )(5u)    (206,083
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

$ 61,608    $ (141,561 $ (42,079 $ (4,350 $ (126,382 $ (105,517 $ (79,930 $ (311,829
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Loss from continuing operations attributable to noncontrolling interests

  (399   —        —        —        (399   —        —        (399
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations attributable to Endo International plc

$ 62,007    $ (141,561 $ (42,079 $ (4,350 $ (125,983 $ (105,517 $ (79,930 $ (311,430
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations per share attributable to Endo International plc

Basic

$ 0.42    $ (1.52
 

 

 

               

 

 

 

Diluted

$ 0.40    $ (1.52
 

 

 

               

 

 

 

Weighted average shares attributable to Endo International plc

Basic

  146,896           (5w)    204,631   

Diluted

  156,730           (5w)    204,631   

Note: Certain Par and Auxilium amounts have been reclassified to conform to Endo’s presentation. The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.


Endo International plc

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1. Description of transaction

Par and Equity Offering

On May 18, 2015, Endo announced that it had entered into an agreement and plan of merger (the “Merger Agreement”) pursuant to which it will acquire all of the outstanding shares of common stock of Par and assume and pay Par’s debt in a cash and stock transaction valued at approximately $8,139.7 million (the “Acquisition”). The aggregate consideration will consist of $6,500.0 million in cash (subject to an increase adjustment for existing Par cash of $185.9 million, an estimated decrease adjustment for Par transaction costs of $50.3 million, and a post-close working capital adjustment) and 18,084,448 ordinary shares of Endo valued at $1,504.1 million (using the Endo stock price of $83.17 as of May 26, 2015), as further described in the Merger Agreement.

Completion of the Acquisition is subject to certain conditions, including customary closing conditions relating to the (i) expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“the HSR Condition”), (ii) absence of any order or laws prohibiting completion of the Acquisition (“the Orders Condition”), (iii) absence of a material adverse effect, as defined in the Merger Agreement, on Endo or Par, as applicable, (iv) the accuracy of each party’s representations and warranties (subject to certain qualifications) and (v) Endo’s and Par’s material compliance with their respective covenants and agreements contained in the Merger Agreement.

Under the Merger Agreement, Endo and Par each have certain termination rights, including if: (i) the Acquisition is not completed by November 18, 2015 (as may be extended, the “Final Date”), which may be extended under certain circumstances to February 12, 2016, (ii) any law has been passed or any governmental authority of competent jurisdiction has issued a final, nonappealable order making the completion of the Acquisition illegal or otherwise prohibiting completion of the Acquisition or (iii) the other party has breached any of its representations, warranties or covenants in the Merger Agreement, subject to materiality qualifications and abilities to cure, such that the closing condition relating thereto cannot be satisfied.

In addition, Par may terminate the Merger Agreement if (i) (a) all mutual conditions to consummation of the Acquisition and all conditions of Endo to consummation of the Acquisition are satisfied, (b) Endo fails to consummate the Acquisition by the time required under the Merger Agreement and (c) at the time of such termination, Par is ready and willing to consummate the Acquisition; or (ii) (w) all mutual conditions to consummation of the Acquisition and all conditions of Endo to consummation of the Acquisition are satisfied, (x) Endo fails to consummate the Acquisition by the second Business Day (as defined in the Merger Agreement) prior to the Final Date and (y) at the time of such termination, Par is ready and willing to consummate the Acquisition regardless of whether the Marketing Period (as defined in the Merger Agreement) has initiated or concluded. If the Merger Agreement is terminated under the circumstances described in clauses (i) or (ii) directly above, Endo will be obligated to pay Par a termination fee of $750.0 million (the “Termination Fee”). In addition, Endo is also obligated to pay Par the Termination Fee if the Merger Agreement is terminated because (i) a law is passed or a governmental authority of competent jurisdiction issues a final, nonappealable order making the completion of the Acquisition illegal or otherwise prohibiting completion of the Acquisition or (ii) the Final Date has occurred and at such time, the HSR Condition or the Orders Condition is not satisfied but the other mutual conditions to consummation of the Acquisition and all conditions of Endo to consummation of the Acquisition are satisfied. In circumstances where Endo has committed an Intentional Breach (as defined in the Merger Agreement), the Termination Fee will not act as a limitation upon Endo’s liability in respect of such Intentional Breach.

In connection with the Par acquisition, for purposes of these unaudited pro forma condensed combined financial statements Endo has assumed it will issue $2,235.0 million of New Senior Notes, $2,250.0 million of Incremental Term Loan B Facility and $1,750.0 million of Endo shares to other investors. The aggregate principal amount of New Senior Notes and Incremental Term Loan B Facility actually incurred may differ from that assumed herein. As such, Endo’s interest expense may vary from that described herein and such differences may be material.

AMS

On February 24, 2015, the Board of Directors approved a plan to sell Endo’s AMS business, which comprises the entirety of our Devices segment. Subsequently, Endo entered into a definitive agreement to sell the Men’s Health and Prostate Health components of the AMS business to Boston Scientific Corporation (Boston Scientific) for up to $1.65 billion, with $1.60 billion in upfront cash. Endo is also eligible to receive a potential milestone payment of $50.0 million in cash conditioned on Boston


Scientific achieving certain product revenue milestones in the Men’s Health and Prostate Health components in 2016. In addition, Boston Scientific will pay $60.0 million in exchange for 60,000 shares of Series B Non-Voting Preferred Stock issued by American Medical Systems Holdings, Inc. The preferred stock entitles the holder to dividends payable quarterly at an initial annual rate of 7.25%, which will increase by 0.25% each year on January 1, from 2018 until the rate equals 11.50%. While the preferred stock remains outstanding, American Medical Systems Holdings, Inc. will be subject to certain affirmative and negative covenants, including an obligation to maintain assets in excess of the liquidation preference of the preferred stock, and restrictions on the sale of assets and the incurrence of certain indebtedness. The preferred stock matures and becomes mandatorily redeemable in 2035.

The transaction with Boston Scientific is expected to close in the third quarter of 2015, subject to customary conditions, including the expiration or termination of any applicable waiting periods under applicable competition laws.

Auxilium

On January 29, 2015, Endo acquired all of the outstanding shares of common stock of Auxilium in a transaction valued at approximately $2.6 billion.

Pursuant to the terms of the agreement and plan of merger (“the Auxilium Merger Agreement”), subject to cash and equity consideration limits, Auxilium shareholders were able to elect one of three options with respect to transaction consideration. Of the 55.0 million outstanding Auxilium shares eligible to make an election, 94.9% elected to receive transaction consideration equal to 0.4880 Endo shares per Auxilium share (“the Stock Election Consideration”), 0.4% elected to receive 100% cash, which equated to $33.25 of cash per Auxilium share (“the Cash Election Consideration”) and 4.7% elected or defaulted to receive a mix of $16.625 in cash and 0.2440 Endo shares per Auxilium share (“the Standard Election Consideration”). The result of the elections led to an oversubscription of the Stock Election Consideration and, in accordance with the proration method described in the Auxilium Merger Agreement and proxy statement/prospectus provided to Auxilium shareholders, each Auxilium share for which an election was made to receive the Stock Election Consideration was instead entitled to receive approximately 0.3448 Endo shares and $9.75 in cash.

In connection with the Auxilium acquisition, Endo issued $1,200.0 million of 2015 Senior Notes.

Interest rates

The interest rates under the existing credit facility are at LIBOR plus the applicable margin. For the purposes of these unaudited pro forma condensed combined financial statements, the Incremental Term Loan B Facility is assumed to be at LIBOR plus an applicable margin. For the purposes of these unaudited pro forma condensed combined financial statements, LIBOR was assumed to be 0.25%, resulting in an assumed combined weighted average interest rate of 3.54% and 3.56% for the pro forma amount of floating-rate debt for the quarter ended March 31, 2015 and the year ended December 31, 2014, respectively. For the purposes of these unaudited pro forma condensed combined financial statements, Endo used the stated interest rate on the 2015 Senior Notes of 6.00% and an assumed interest rate on the New Senior Notes.

Based on the assumed pro forma amount of floating-rate debt outstanding at March 31, 2015, each 1/8% rise in interest rates would result in approximately $4.1 million of incremental annual interest expense and each $250,000,000 increase in principal would result in approximately $8.8 million of incremental annual interest expense. Based on the assumed pro forma amount of the New Senior Notes issued, each 1/8% rise in interest rates would result in approximately $2.8 million of incremental annual interest expense and each and each $250,000,000 increase in principal would result in approximately $16.2 million of incremental annual interest expense. The aggregate principal amount of New Senior Notes and Incremental Term Loan B Facility actually incurred may differ from that assumed herein. If Endo’s sale of the Men’s and Prostate Health businesses to Boston Scientific does not close before the consummation of the Acquisition, Endo will incur borrowings under the an asset sale bridge facility ( the “Asset Sale Bridge Facility”) which will result in $35.0 million of incremental annual interest expense.

Note 2. Basis of presentation

The acquisition of Par will be accounted for, and the Auxilium acquisition was accounted for, as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification 805, “Business Combinations” (“ASC 805”). This unaudited pro forma condensed combined financial information does not give effect to immaterial transactions, such as the acquisitions of Boca Pharmacal LLC, Sumavel® DosePro®, Dava Pharmaceuticals, Inc., Grupo Farmacéutico Somar, NatestoTM or the authorized generic of potassium chloride oral solution by Endo, Actient Holdings LLC and STENDRA® by Auxilium or JHP Group Holdings, Inc. by Par. In addition, the impact of the Paladin transaction for the two months ended February 28, 2014 was not material to Endo and has not been included in the pro forma condensed combined statement of operations for the year ended December 31, 2014.


The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the consolidated results.

The acquisition method of accounting, based on ASC 805, uses the fair value concepts defined in ASC 820, “Fair Value Measurement,” which we refer to as ASC 820. ASC 820 defines fair value, establishes the framework for measuring fair value for any asset acquired or liability assumed under U.S. GAAP, expands disclosures about fair value measurements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. This is an exit price concept for the valuation of an asset or liability. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants, and as a result, assets may be required to be recorded which are not intended to be used or sold and/or to value assets at a fair value measurement that do not reflect management’s intended use for those assets. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.

ASC 805 requires, among other things, that most assets acquired and liabilities assumed in a business combination be recognized at fair value as of the acquisition date and that the fair value of acquired IPR&D be recorded on the balance sheet. As of the date of this filing, the accompanying unaudited pro forma purchase price allocation is preliminary and is subject to further adjustments as additional information becomes available and as additional analyses are performed.

The historical audited financial statements of Par were prepared in accordance with U.S. GAAP.

Endo is conducting a review of Par’s accounting policies in an effort to determine if differences in accounting policies require adjustment or reclassification of Par’s results of operations or reclassification of assets or liabilities to conform to Endo’s accounting policies and classifications. As a result of that review, Endo may identify differences between the accounting policies of the two companies that, when conformed, are not expected to have a material impact on these unaudited pro forma condensed combined financial statements. During the preparation of these unaudited pro forma condensed combined financial statements, Endo was not aware of any material differences between accounting policies of the two companies, except for certain reclassifications necessary to conform to Endo’s financial presentation, and accordingly, this unaudited pro forma condensed combined financial information does not assume any material differences in accounting policies between the two companies.

Financial information presented in the “Par Adjusted Historical” columns in the unaudited pro forma condensed combined balance sheet and statement of operations, and information presented in the “Auxilium Adjusted Historical” columns in in the unaudited pro forma statement of operations have been reclassified to conform to the historical presentation in Endo’s consolidated financial statements as follows:

Reclassification included in the unaudited pro forma condensed combined balance sheet for Par (in thousands):

 

     As of March 31, 2015  
     Before
Reclassification
     Reclassification      After
Reclassification
 

Payables due to distribution agreement partners

   $ 44,818       $ (44,818    $ —     

Accrued salaries and employee benefits

   $ 17,517       $ (17,517    $ —     

Accrued government pricing liabilities

   $ 23,942       $ (23,942    $ —     

Accrued legal fees

   $ 12,839       $ (12,839    $ —     

Accrued interest payable

   $ 16,563       $ (16,563    $ —     

Accrued expenses and other current liabilities

   $ 19,556       $ 115,679       $ 135,235   


Reclassification included in the unaudited pro forma condensed combined statement of operations for Par (in thousands):

 

     For the Three Months Ended March 31, 2015  
     Before
Reclassification
     Reclassification      After
Reclassification
 

Restructuring costs

   $ 363       $ (363    $ —     

Selling, general and administrative

   $ 56,386       $ 363       $ 56,749   

Interest income

   $ (17    $ 17       $ —     

Interest expense

   $ 29,511       $ (17    $ 29,494   

Reclassification included in the unaudited pro forma condensed combined statement of operations for Par (in thousands):

 

     For the Year Ended December 31, 2014  
     Before
Reclassification
     Reclassification      After
Reclassification
 

Restructuring costs

   $ 5,413       $ (5,413    $ —     

Loss on sale of product rights

   $ 3,042       $ (3,042    $ —     

Selling, general and administrative

   $ 181,136       $ 8,455       $ 189,591   

Interest income

   $ (18    $ 18       $   

Interest expense

   $ 108,427       $ (18    $ 108,409   

Reclassification included in the unaudited pro forma condensed combined statement of operations for Auxilium (in thousands):

 

     For the Period Ended January 29, 2015  
     Before
Reclassification
     Reclassification      After
Reclassification
 

Amortization of purchased intangibles

   $ 6,030       $ (6,030    $ —     

Cost of goods sold

   $ 6,576       $ 6,030       $ 12,606   

Reclassification included in the unaudited pro forma condensed combined statement of operations for Auxilium (in thousands):

 

     For the Year Ended December 31, 2014  
     Before
Reclassification
     Reclassification      After
Reclassification
 

Amortization of purchased intangibles

   $ 78,726       $ (78,726    $ —     

Cost of goods sold

   $ 105,006       $ 78,726       $ 183,732   

Note 3. Preliminary estimated acquisition consideration for Par

For the purposes of calculating the preliminary estimated acquisition consideration in the unaudited pro forma condensed combined financial statements, the effective date of the Acquisition is assumed to be May 26, 2015, on which date the Endo share price was $83.17 per share. The $83.17 Endo share price is used for pro forma purposes only. The consideration transferred will ultimately be based on the share price of Endo shares on the effective date of the Acquisition, and could be materially different than the share prices utilized in the unaudited pro forma condensed combined financial statements. The preliminary estimated acquisition consideration is as follows (in thousands, except for per share amounts):


Acquisition Consideration

 

Number of Endo shares issued

  18,084   

Price of Endo shares on May 26, 2015

$ 83.17   
  

 

 

    

Estimated fair value of 18.1 million Endo shares issued to Par stockholders

$ 1,504,084   

Cash distribution to Par stockholders

  4,228,482   

Cash distribution to pay assumed debt, including $44.4 million to settle senior notes make whole provision, and $16.6 million of accrued interest

  2,407,098   
     

 

 

 

Total preliminary estimated acquisition consideration

$ 8,139,664   
     

 

 

 

The sensitivity table below shows a range of acquisition consideration amounts based on hypothetical Endo share prices on the Merger Effective Date (as defined in the Merger Agreement). The total acquisition consideration figures below are calculated according to the terms of the Merger Agreement. As shown in the table below, an approximate $3.00 change in the Endo closing share price changes the acquisition consideration and the underlying goodwill by approximately $50 million.

 

Closing stock price per Endo share on effective date of the merger

$ 77.00    $ 80.00    $ 83.17    $ 86.00    $ 89.00   

Total acquisition consideration (in thousands)

$ 8,028,082    $ 8,082,336    $ 8,139,664    $ 8,190,843    $ 8,245,096   

Note 4. Preliminary estimated acquisition consideration allocation

The pro forma adjustments to allocate the acquisition consideration will remain preliminary until Endo’s management determines the final acquisition consideration and the fair values of assets acquired, net of liabilities assumed. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after the closing. The final fair value adjustments necessary to value the assets acquired and liabilities assumed could differ materially from the amounts presented in the unaudited pro forma condensed combined financial statements.

The preliminary allocation of the acquisition consideration to the fair value of Par’s acquired assets and liabilities assumed as if the acquisition date was March 31, 2015 is presented as follows (in millions):

 

Estimated acquisition consideration (see Note 3)

$ 8,139.7   

Recognized amounts of identifiable assets acquired and liabilities assumed

Book value of Par’s net assets

  4a      71.5   

Less settlement of pre-existing Par liabilities

  4b      (21.0

Less book value of Par goodwill and other intangible assets

  4c      (2,043.1

Less book value of Par debt and accrued interest, net of deferred financing costs

  4d      2,308.0   
     

 

 

 

Net assets to be acquired

  315.4   

Fair value adjustments of net assets acquired:

Inventory

  4e      73.2   

Identifiable intangible assets:

Product rights and other intangibles

  4f      2,780.0   

IPR&D

  4f      1,880.0   

Deferred tax liabilities

  4g      (1,323.6
     

 

 

 

Goodwill

  4h    $ 4,414.7   
     

 

 

 

Adjustments included in the table above are for the following:

a. Reflects the acquisition of the historical book value of net assets of Par as of March 31, 2015.


b. Represents $50.3 million of estimated transaction costs, less $29.3 million of estimated tax benefits, expected to be received by Par, which will reduce net assets to be acquired.

c. Par’s historical balance sheet includes $2,043.1 million of goodwill and other intangible assets, which will be adjusted to fair value in purchase accounting.

d. Reflects the book value of the Par debt of $2,337.2 million and accrued interest of $16.6 million, which was assumed and included as part of the acquisition consideration (Note 3). These items are offset by $45.8 million of deferred financing costs related to Par outstanding debt which is assumed to be written off when the debt is paid.

e. Represents the estimated adjustment to step-up inventory to fair value. This estimated step-up in inventory is preliminary and is subject to change based upon management’s final determination of the fair values of finished goods and work-in-process inventories. Endo will expense the fair value adjustment of Par’s inventory as the acquired inventory is sold. As there is no continuing impact of the inventory step-up on Endo’s results, the cost of goods sold associated with the increased inventory value is not included in the unaudited pro forma condensed combined statements of operations.

f. Of the total estimated consideration, approximately $2,780.0 million relates to definite-lived intangible assets which are estimated to be amortized over a weighted average useful life of 13 years. The final determination of the estimated useful lives may vary from the preliminary useful life determined for pro forma purposes. A one year decrease in the useful lives of the definite-lived intangible assets would result in additional annual amortization expense of $18.3 million. Amortization related to the value of the definite-lived intangible assets is reflected as a pro forma adjustment to the unaudited pro forma condensed combined statements of operations. IPR&D of $1,880.0 million will be capitalized and accounted for as indefinite-lived intangible assets and will be subject to impairment testing until completion or abandonment of the projects. Upon successful completion of the projects and launch of the products, Endo will make a separate determination of useful life of the IPR&D intangibles and amortization will be recorded as an expense. As IPR&D intangibles are not currently marketed, no amortization of these items is reflected in the unaudited pro forma condensed combined statements of operations.

The fair value estimate for definite-lived intangible assets and IPR&D assets is preliminary and is determined based on the assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This preliminary fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their best use. For purposes of the accompanying unaudited pro forma condensed combined financial information, it is assumed that all assets will be used in a manner that represents their highest and best use. The final fair value determination for definite-lived intangible assets and IPR&D assets may differ from this preliminary determination.

The fair value of definite-lived intangible assets is determined primarily using the “income approach”, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of the definite-lived intangible assets valuations, from the perspective of a market participant, include the estimated net cash flows for each year for each project or product (including net revenues, cost of sales, research and development costs, selling and marketing costs and working capital/asset contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream as well as other factors. The major risks and uncertainties associated with the timely and successful completion of the IPR&D projects include legal risk and regulatory risk. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change or the timely completion of each project to commercial success will occur. For these and other reasons, actual results may vary significantly from estimated results.

g. Reflects deferred income tax liabilities primarily resulting from fair value adjustments for the identifiable intangible assets and inventory. This estimate of deferred tax liabilities was determined based on the excess book basis over the tax basis of the fair value step-ups attributable to identifiable intangible assets and inventory acquired at an estimated 36% blended statutory tax rate. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon the final determination of Par’s blended statutory tax rate post-acquisition and management’s final determination of the fair values of tangible and identifiable intangible assets acquired and liabilities assumed by jurisdiction.

h. Goodwill, currently estimated at $4,414.7 million, represents the excess of the preliminary estimated acquisition consideration expected to be transferred over the preliminary values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. In accordance with ASC 350, “Intangibles—Goodwill and Other”, goodwill is not amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment.


Note 5. Pro forma adjustments

 

a. The adjustment to cash and cash equivalents reflects the following (in thousands):

 

Estimated net proceeds from the sale of the AMS Men’s and Prostate Health businesses (1)

$ 1,578,000   

Estimated proceeds from the sale of preferred stock (2)

  60,000   
  

 

 

 

AMS pro forma adjustments

$ 1,638,000   
  

 

 

 

Notes:

(1) The estimated proceeds from the sale of the Men’s and Prostate Health businesses to Boston Scientific of $1,600.0 million, net of estimated transaction costs of $22.0 million.
(2) The estimated proceeds from the sale of 60,000 shares of Series B Non-Voting Preferred Stock issued by American Medical Systems Holdings, Inc. to Boston Scientific as part of the sale of the Men’s and Prostate Health businesses.

 

b. Represents the elimination of the assets and liabilities of the AMS Men’s and Prostate Health businesses. In addition, represents the elimination of currency translation adjustments related to subsidiaries expected to be sold to Boston Scientific.

 

c. Reflects the liability related to the $60.0 million sale of AMS Series B Non-Voting Preferred Stock as it represents an unconditional obligation requiring AMS to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event that is certain to occur.

 

d. Represents the expected tax benefit recognized upon the sale of the Men’s and Prostate Health businesses to Boston Scientific as well as the elimination of deferred taxes related to the assets and liabilities sold.

 

e. The issuance of $1,750.0 million in additional equity, net of $46.8 million in transaction costs, representing approximately 21.0 million Endo shares, to finance the Acquisition. Each $1.00 increase (decrease) in the assumed public offering price of $84.14 per share, the last reported sale price of Endo’s ordinary shares on NASDAQ on June 1, 2015, would (decrease) increase the number of ordinary shares to be issued by Endo by approximately (0.24 million) and approximately 0.25 million, respectively, assuming the aggregate dollar amount of ordinary shares offered by Endo remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by Endo. Endo may also increase or decrease the aggregate dollar amount of ordinary shares it is offering. Each increase (decrease) of $1.0 million of shares offered by Endo would increase (decrease) the net proceeds to Endo by approximately $0.98 million, assuming that the assumed public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by Endo.

 

f. The adjustment to cash and cash equivalents reflects the following (in thousands):

 

Debt proceeds (1)

$ 4,485,000   

Repayment of Par’s existing debt and accrued interest (1)

  (2,407,098

Debt issuance costs (2)

  (183,000

Repayment of Endo’s existing Term Loan B (3)

  (420,750

Cash transaction costs (4)

  (95,300

Total estimated purchase price to be paid in cash (5)

  (4,228,482
  

 

 

 

Par pro forma adjustments

$ (2,849,630
  

 

 

 

Notes:

(1) The assumed issuance of $4,485.0 million in additional debt, which will be used for the acquisition of Par and the subsequent repayment of $2,407.1 million of the Par assumed debt, including a $44.4 million make-whole provision on outstanding senior notes and $16.6 million of accrued interest at March 31, 2015.
(2) The estimated debt issuance costs of $183.0 million related to the issuance of such additional debt.
(3) The repayment of $420.8 million of Endo’s existing Term Loan B.


(4) The incurrence of $45.0 million and $50.3 million of estimated direct transaction costs of Endo and Par, respectively, associated with the Acquisition.
(5) The estimated payment of $4,228.5 million in cash consideration to sellers for shares of Par common stock (see Note 3).

 

g. Reflects reclassification adjustments to the historical consolidated financial statements of Par and Auxilium to conform to the financial statement classification and presentation used by Endo to prepare its consolidated financial statements. The Par balance sheet adjustment is a reclassification of $392,608 sales deductions reserve from Accounts receivable, net to Accrued expenses. Further reclassification adjustments may be necessary. The Par statement of operations adjustments are a reclassification of acquisition-related costs of $1,365 and $7,461 for the three months ended March 31, 2015 and the year ended December 31, 2014, respectively, from Selling, general and administrative to Acquisition-related and integration items, net and a reclassification of loss on sale of product rights of $3,042 from Selling, general and administrative to Other income (expense), net. The Auxilium statement of operations adjustments are a reclassification of acquisition-related costs for the year ended December 31, 2014 of $15,271 and $28,400 from Selling, general and administrative and Other income (expense), net, respectively, to Acquisition-related and integration items, net.

 

h. Represents the estimated fair value adjustment to step-up inventory to fair value. This estimated step-up in inventory is preliminary and is subject to change based upon management’s final determination of the fair values of finished goods and work-in-process inventories. Endo will expense the fair value adjustment of Par’s inventory as the acquired inventory is sold. As there is no continuing impact of the inventory step-up on Endo’s results, expense on the increased inventory value is not included in the unaudited pro forma condensed combined statement of operations.

 

i. Reflects an adjustment to income tax receivable primarily related to a tax benefit resulting from the estimated tax deductible portion of the Acquisition transaction costs.

 

j. Represents the incremental adjustment to reflect $4,414.7 million of goodwill, which is the excess of the preliminary estimated acquisition consideration expected to be transferred over the preliminary values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed.

 

k. The adjustments reflect the incremental amount necessary to record the fair value of the Par intangible assets acquired of $4,660.0 million. Approximately $2,780.0 million relates to definite-lived intangible assets which are estimated to be amortized over a weighted average useful life of 13 years. The final determination of the estimated useful lives may vary from the preliminary useful life determined for pro forma purposes. A one year decrease in the useful lives of the definite-lived intangible assets would result in additional annual amortization expense of $18.3 million. Amortization related to the value of the definite-lived intangible assets is reflected as a pro forma adjustment to the unaudited pro forma condensed combined statements of operations. IPR&D of $1,880.0 million will be capitalized and accounted for as indefinite-lived intangible assets and will be subject to impairment testing until completion or abandonment of the projects. Upon successful completion of the projects and launch of the products, Endo will make a separate determination of useful life of the IPR&D intangibles and amortization will be recorded as an expense. As IPR&D intangibles are not currently marketed, no amortization of these items is reflected in the unaudited pro forma condensed combined statements of operations.

 

l. Represents an adjustment to reflect the estimated debt issuance costs of $183.0 million related to the issuance of additional debt to finance the Acquisition, partially offset by the write off of $45.8 million of deferred financing costs as the result of the repayment of Par’s outstanding debt and the write off of $7.7 million of deferred financing costs as the result of the repayment of Endo’s existing Term Loan B. The aggregate principal amount of New Senior Notes and Incremental Term Loan B Facility actually incurred may differ from that assumed herein. As such, Endo’s fees may vary from that described herein and such differences may be material.

 

m. Represents the payment of $16.6 million of accrued interest on Par’s debt at March 31, 2015.

 

n. Represents the payoff of Par’s current portion of long-term debt of $18.8 million and Endo’s current portion of existing Term Loan B of $4.2 million, partially offset by the current portion of new debt of $22.5 million. The new debt issuance costs related to the issuance of additional debt to finance the Par acquisition will be amortized using an effective-interest method over the life of the related debt instruments, which is at most 10 years.

 

o. Reflects deferred income tax liabilities primarily resulting from fair value adjustments for the identifiable intangible assets and inventory. This estimate of deferred tax liabilities was determined based on the excess book basis over the tax basis of the fair value step-ups attributable to identifiable intangible assets and inventory acquired at an estimated 36% blended statutory tax rate. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon the final determination of Par’s blended statutory tax rate post-acquisition and management’s final determination of the fair values of tangible and identifiable intangible assets acquired and liabilities assumed by jurisdiction.


p. The adjustment to long-term debt, less current portion, net consists of the following assumed components (in thousands):

 

New Senior Notes

$ 2,235,000   

Incremental Term Loan B Facility, net of $22.5 million current portion

  2,227,500   

Endo repayment of book value of Par debt, net of $18.8 million current portion

  (2,318,510

Endo repayment of existing Term Loan B, net of $4.2 million current portion

  (416,500
  

 

 

 

Net change

$ 1,727,490   
  

 

 

 

 

q. The adjustments to equity consist of the following components (in thousands):

 

Additional paid-in capital and common stock related to the issuance of common shares of Endo to Par shareholders as acquisition consideration (see Note 3)

$ 1,504,084   

The elimination of Par’s historical shareholder’s equity

  (71,462

Estimated direct transaction costs of Endo, net of estimated tax effect

  (34,382

Write off of deferred financing costs as the result of the repayment of Endo’s existing Term Loan B

  (7,677
  

 

 

 

Par pro forma adjustments

$ 1,390,563   
  

 

 

 

 

r. Reflects a net increase in amortization expense on the definite-lived intangible assets of Par and Auxilium, which were revalued upon acquisition. These assets have an estimated weighted average useful life of 13 years and 13 years, respectively.

 

s. Represents an elimination of the transactions costs associated with the Auxilium transaction.

 

t. The net adjustments for the three months ended March 31, 2015 and the year ended December 31, 2014 consist of the following components, assuming new financing including $2,235.0 million of New Senior Notes and $2,250.0 million of Incremental Term Loan B Facility (in thousands):

 

     Par      Auxilium  
     Three
Months
Ended
March 31,
2015
     Year Ended
December 31,
2014
     Three
Months
Ended
March 31,
2015
     Year Ended
December 31,
2014
 

Estimated interest expense (including the amortization of debt issuance costs) on new indebtedness

   $ 64,993       $ 275,529       $ 5,000       $ 73,405   

Historical interest expense associated with the Endo existing Term Loan B

     (3,728      (13,100      —           —     

Historical interest expense associated with the Auxilium debt

           (3,518      (39,108

Historical interest expense associated with the Par debt

     (29,494      (108,409      —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest expense adjustment

$ 31,771    $ 154,020    $ 1,482    $ 34,297   
  

 

 

    

 

 

    

 

 

    

 

 

 

After giving effect to the application of the proceeds from the New Senior Notes, the Incremental Term Loan B Facility and the consummation of the Transactions, as of March 31, 2015, Endo’s aggregate principal debt outstanding would have consisted of $3,309.5 million of floating rate debt and $6,364.4 million of fixed-rate debt. Based on the assumed pro forma amount of floating-rate debt outstanding at March 31, 2015, each 1/8% rise in interest rates would result in approximately $4.1 million of incremental annual interest expense and each $250,000,000 increase in principal would result in approximately $8.8 million of incremental annual interest expense. Based on the assumed pro forma amount of the New Senior Notes issued, each 1/8% rise in interest rates would result in approximately $2.8 million of incremental annual interest expense and each and each $250,000,000 increase in principal would result in approximately $16.2 million of incremental annual interest expense. If Endo’s sale of the Men’s and Prostate Health businesses to Boston Scientific does not close before the consummation of the Acquisition, Endo will incur borrowings under the Asset Sale Bridge Facility which will result in $35.0 million of incremental annual interest expense.

 

u. Income tax rates of approximately 36%, 36% and 36% for Endo, Par and Auxilium, respectively, have been used for the pro forma adjustments for the three months ended March 31, 2015 and for the year ended December 31, 2014. The income tax rates are the applicable blended statutory tax rates of Endo, Par and Auxilium on a standalone basis for the periods referenced and are estimates.


v. Represents interest expense on the $60.0 million sale of 60,000 shares of Series B Non-Voting Preferred Stock issued by AMS to Boston Scientific as part of the sale of the Men’s and Prostate Health businesses.

 

w. Represents the pro forma weighted average shares outstanding after giving effect to the conversion of each Par and Auxilium outstanding share to Endo shares (shares in thousands).

 

     Three
Months
Ended
March 31,
2015
     Year Ended
December 31,
2014
 

Basic

     

Endo weighted average number of shares outstanding

     169,653         146,896   

Endo shares issued to finance the Par acquisition

     21,041         21,041   

Endo shares issued in replacement of Par’s common shares

     18,084         18,084   

Endo shares issued in replacement of Auxilium’s common shares

     6,203         18,610   
  

 

 

    

 

 

 

Pro forma weighted average number of basic common shares outstanding

  214,981      204,631   
  

 

 

    

 

 

 

Diluted

Endo weighted average number of shares outstanding

  176,825      156,730   

Adjustment to remove dilution of equity awards due to the pro forma loss from continuing operations

  —        (9,834

Endo shares issued to finance the Par acquisition

  21,041      21,041   

Endo shares issued in replacement of Par’s common shares

  18,084      18,084   

Endo shares issued in replacement of Auxilium’s common shares

  6,203      18,610   
  

 

 

    

 

 

 

Pro forma weighted average number of diluted common shares outstanding

  222,153      204,631