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endo | 100 Endo Boulevard | Chadds Ford, Pennsylvania 19317 17
Executive Summary
This section (the CD&A) describes how Endo’s compensation programs are designed for our NEOs and how the Company’s
compensation philosophy aligns with our underlying business objectives and strategies. This Executive Summary is in-
tended to highlight key elements described in greater detail throughout the CD&A.
The Company made significant progress in the development and implementation of the long-term vision for the business
and progress in realizing value creation. Our business was broadly diversified with the acquisition of American Medical
Systems (AMS), a leader in urology medical devices, in June 2011, realizing $300 million in 2011 revenue for Endo. In addi-
tion, the Company acquired the two leading urology healthcare information technology businesses, critical in executing the
Company’s total solutions strategy and essential to creating critical mass around a single health information and practice
outcomes management platform. Along with the HealthTronics and Qualitest acquisitions, completed in 2010, we believe
the Company has a highly diversified and sustainable revenue stream.
The Company also achieved strong operating results in 2011. Notably, exceptional financial results were realized. Net rev-
enues were $2.730 billion, with strong growth in all businesses and a June closing of the AMS transaction, representing
nearly a 60% increase compared to 2010. The Company also achieved adjusted diluted EPS of $4.69, a 35% increase ver-
sus 2010. Significant progress was made in the development of the product pipeline. The Company received approval for
FORTESTA® Gel and commercially launched the product for men with low testosterone. The new formulation of OPANA®
ER, designed to be crush-resistant, was approved and is planned for commercial launch in the second calendar quarter of
2012. Further, other important programs in branded pharmaceuticals were advanced and planned Abbreviated New Drug
Application (or ANDA) filings were completed in the generics business, gaining a significant number of new product ap-
provals. In medical devices, the Company advanced novel Endo concepts into development in urinary incontinence, pros-
tate BPH and stone management, with significant new product assets acquired in the AMS merger.
1 Adjusted diluted EPS is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and may be different from
non-GAAP financial measures used by other companies. Endo refers to this non-GAAP financial measure in making operating decisions be-
cause it believes it provides meaningful supplemental information regarding the Company’s operational performance. For instance, Endo
believes that adjusted diluted EPS facilitates its internal comparisons to its historical operating results and comparisons to competitors’
results. The Company includes adjusted diluted EPS in its earnings announcements because it believes it is useful to investors in allowing
for greater transparency related to supplemental information used by Endo in its financial and operational decision-making. In addition,
Endo has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative num-
bers provides consistency in its financial reporting at this time. Further, Endo believes that adjusted diluted EPS may be useful to investors
as it is aware that certain of its significant stockholders utilize this measure to evaluate its financial performance. Finally, adjusted diluted
EPS is considered by the Compensation Committee of Endo’s Board of Directors in assessing the performance and compensation of sub-
stantially all of its employees, including its executive officers. Investors are encouraged to review the following reconciliation of adjusted
diluted EPS to its most directly comparable GAAP financial measure—diluted EPS.
Compensation Discussion and Analysis
Revenues (in millions)
$1,716
$1,461
$2,730
2011
2010
2009
Adjusted Diluted EPS (1)
$3.48
$2.84
$4.69
2011
2010
2009
2011 2010 2009
Adjusted diluted EPS $ 4.69 $ 3.48 $ 2.84
Upfront and milestone payments to partners $ (0.23) $ (0.20) $ (0.65)
Acquisition-related items, net $ (0.28) $ (0.16) $ 0.79
Cost reduction initiatives $ (0.18) $ (0.15) $ (0.02)
Asset impairment charges $ (0.96) $ (0.30) $ (0.59)
Amortization of intangible assets related to marketed products and customer relationships $ (1.57) $ (0.71) $ (0.53)
Inventory step-up $ (0.41) $ (0.05) $ (0.10)
Non-cash interest expense $ (0.16) $ (0.14) $ (0.12)
(Loss) gain on extinguishment of debt, net $ (0.10) $ - $ 0.03
Accrual for unfavorable court decision for litigation $ (0.09) $ - $ -
Other income (expense), net $ 0.02 $ - $ 0.03
Income tax $ 0.82 $ 0.43 $ 0.59
Diluted EPS $ 1.55 $ 2.20 $ 2.27