Annual General Meeting July 20, 2017filecache.investorroom.com/mr5ir_perrigo/486/download/Perrigo...
Transcript of Annual General Meeting July 20, 2017filecache.investorroom.com/mr5ir_perrigo/486/download/Perrigo...
Annual General Meeting
July 20, 2017
2
Certain statements in this presentation are "forward-looking statements." These statements relate to future events or the Company's future financial
performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or
achievements of the Company or its industry to be materially different from those expressed or implied by any forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe,"
"estimate," "predict," "potential" or the negative of those terms or other comparable terminology. The Company has based these forward-looking statements
on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and
projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which
are beyond the Company's control, including: the timing, amount and cost of any share repurchases; future impairment charges; the success of
management transition; customer acceptance of new products; competition from other industry participants, some of whom have greater marketing
resources or larger market shares in certain product categories than the Company does; pricing pressures from customers and consumers; potential third-
party claims and litigation, including litigation relating to the Company’s restatement of previously-filed financial information; potential impacts of ongoing or
future government investigations and regulatory initiatives; general economic conditions; fluctuations in currency exchange rates and interest rates; the
consummation of announced acquisitions or dispositions, and the Company’s ability to realize the desired benefits thereof; the Company’s ability to achieve
its guidance; and the Company’s ability to execute and achieve the desired benefits of announced cost-reduction efforts and other initiatives. In addition,
the Company may identify and be unable to remediate one or more material weaknesses in its internal control over financial reporting. Furthermore, the
Company and/or its subsidiaries may incur additional tax liabilities in respect of 2016 and prior years as a result of any restatement or may be found to have
breached certain provisions of Irish company legislation in respect of prior financial statements and if so may incur additional expenses and penalties.
These and other important factors, including those discussed under "Risk Factors" in the Company's Form 10-K for the year ended December 31, 2016, as
well as the Company's subsequent filings with the United States Securities and Exchange Commission, may cause actual results, performance or
achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this presentation
are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Measures
This presentation contains non-GAAP measures. The reconciliation of those measures to the most comparable GAAP measures is included at the end of
this presentation. A copy of this presentation, including the reconciliations, is available on the Company’s website at www.perrigo.com.
2
Forward – Looking Statements
About Perrigo
Built on a 130-year legacy of operational excellence
✓ Founded in 1887 by Luther Perrigo in Allegan, Michigan
✓ Based in Dublin, Ireland, since 2013
Develops Quality Affordable Healthcare Products® to
improve the lives of consumers around the world
✓ World's largest manufacturer of OTC healthcare products and
supplier of infant formulas for the store brand market
✓ World class supply chain and manufacturing capabilities
Trusted by partners and families to provide safe and
effective products that meet their expanding and evolving
healthcare needs
✓ Products provided across a wide variety of geographies primarily
in North America and Europe as well as other key markets
including Israel and China
3
The Perrigo Advantage
VISION
QUALITY AFFORDABLE HEALTHCARE LEADERSHIP
Every Second of Every Day
use a Perrigo productPEOPLE
~2.2K
IMPACTIMPACTIMPACT
Consumers Save
>$7B per year
That’s ~$19 Million of Saving Per Day
4
55
Unique Business Model Enables Vision Quality Affordable Healthcare Products®
Pharmaceutical
Supply Chain
FMCG
Pharmaceutical
Supply
Chain
Fast Moving
Consumer
Goods
A leading manufacturer and
developer of high quality
pharmaceutical products in
hundreds of dosage forms
Vast, highly complex,
integrated supply chain which
allows for custom packaging,
promotion and inventory
management
Products are marketed
for ease of consumer
self selection, providing
retailers a full ‘turn key’
offering
Quality Affordable Healthcare
Products®
In Sales Employees SKUs Formulations
>$5B >10K >26K >11K
Markets
>80
Operating
Locations
>30
6
Presence
Operations
Global HQ – Dublin
N.A. Base of
Operations - Allegan
Global Presence in 2016Positioned to Capture Expanding Global Healthcare Needs
77
Well Diversified Global Business
CHCA
Rx
CHCI
88
21.1%22.1%
21.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
CY14 CY15 CY16
in m
illio
ns (
$)
Rx + Other Consumer-Facing Businesses Adjusted Net Sales Consolidated Adjusted Operating Margin
73%
77%
78%
Consumer-Facing Business(1)
Durable Business ModelApproximately 80% of Perrigo is Consumer-Facing
Key Competitive Advantages
Consumer Focused Assets
Global Operating Platform
Efficient Supply Chain
130-Year Legacy as a Trusted
Partner
Leader in Innovation
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
Consumer Healthcare Americas (CHCA)
• Primarily focused on the sale of
OTC store brand products
• More than 400 store brand
products, >7,300 SKUs and
>130 customers
• CHCA products are comparable
in quality and effectiveness to
national brands
CHC
Americas
Generic
Rx
CHC
International
9
Consumer Healthcare International (CHCI)
• Develops, manufactures, markets,
and distributes well-known OTC
brands, primarily in Europe
• Distributes products through an
extensive network of pharmacies
in 30 countries
• Many products are top sellers in
the markets in which they
compete
CHC
Americas
Generic
Rx
CHC
International
10
Prescription Pharmaceuticals (Rx)
• Portfolio of generic and specialty
pharmaceutical prescription drugs
• Predominantly "extended topical"
and "specialty" products
• Includes select controlled
substances, injectables,
hormones, oral solid dosage
forms, and oral liquid
formulations
CHC
Americas
Generic
Rx
CHC
International
11
1212
Expected 2017 New Products
✓ Expect >$200M in new products
✓ Expect to launch over 100 new products
or ~2 per week
✓ New launches include store brand
Nexium® and further launches of store
brand versions of the Mucinex® family
New Products to Drive Growth
Executing Against Consumer & Rx StrategiesNew Products as Disclosed on 5/23/17
Committed to R&D Investments for
Long-term Growth
1313
Pain
(Rx-to-OTC Potential)
$900M
Overactive Bladder
(All Strengths / Forms)
$2.5B
Erectile Dysfunction
(Oral Dosage Form)
$3.5B
Acne
(< 5% strength)
$2.5B
Migraine
(Triptan Category)
$1.2B
Nasals
$900M
Ophthalmic
(Drops/Liquid Dosage Forms)
$3.7B
Asthma
(Inhalants Only)
$4.0B
MORE THAN $19B RX-TO-OTC MARKET OPPORTUNITY
47%
GRx Diclofenac
28%
15%
All Others 10%
17%
15%
6%
11%
8%
43%45%
12%
29%
14%
53%41%
6%
31%
GRx Rizatriptan
6%GRx Sumatriptan
35%
All Others28%
48%
9%
All Others43%
64%
GRx Mometasone
22%
All Others14%
39%
31%
21%
All Others
9%
GRx Tretinoin
GRx Tolterodine
All Other
All Other
All
Other
GRx
Clindomycin
Uniquely Positioned to Capitalize on Future Rx-to-OTC Switches
1414
Transforming Balance Sheet (B/S) into an Asset
14
Balance Sheet
✓ Committed to maintaining investment
grade rating
✓ Make-whole call on our $600M 2.300%
notes due 2018 completed on May 8,
2017; fully repaid ~$200M of outstanding
notes issued by Omega subsidiary on May
23, 2017
✓ May 31, 2017, cash tender of $1.4B
✓ Mid-year debt pay-down assumption yields
$40M lower second half interest than first
half
Total Cash on B/S
as of 4/1/2017$3.1B
($0.6B)
Total Debt on B/S
as of 4/1/2017$5.8B
May 8, 2017; Make-
whole
May 23, 2017; Omega
subsidiary notes
May 31, 2017;Tender
(~$0.2B)
($1.4B)
Total Debt
After Pay-downs$3.6B
1515
Calendar Year 2017 Calendar Year
2017Guidance
Net Sales $4.6B – $4.8B Adjusted DSG&A as % of Net Sales(2) ~20%
R&D as % of Net Sales(2) ~4%
Adjusted Operating Income $930M – $990M
Interest Expense ~$175M
Adjusted Effective Tax Rate ~19.5%
Adjusted EPS $4.15 – $4.50
Diluted Shares Outstanding ~144M
Operating Cash Flow >$575M
(1) See attached appendix for reconciliation of adjusted (non-GAAP) to reported (GAAP) amounts
(2) Percentages are +/- 75 basis points
CHC
Americas~$2.4B
CHC
International ~$1.4B
Rx Pharma ~$925M
Expect first half adjusted EPS results weighted towards first quarter; Full-year adjusted
EPS results weighted towards second half
Adjusted
Operating
MarginNet Sales
Guidance
Low
20%
Low to
Mid Teens
High
30%
Calendar Year 2017 Guidance(1) As Disclosed on 5/23/17
1616
Foundation for GrowthFocused Execution Against 2017 Plan
Key Actions to Create Value
✓ Moved efficiently to drive portfolio
strategies
✓ Improved corporate governance
✓ Implemented cost initiatives across the
organization
✓ New leadership team focused on driving
growth
✓ Debt pay-down strategy to enhance
financial flexibility
✓ Execute against 2017 plan
Pharmaceutical
Supply
Chain
Fast Moving
Consumer
Goods
Pharmaceutical
Supply Chain
FMCG
Quality Affordable
Healthcare Products®
1717
Contact & Appendix
Bradley Joseph
Vice President,
Global Investor Relations and Corporate Communications
(269) 686-3373
1818
Calendar YTD Consumer-Facing Net Sales excluding held-for-sale businesses Calendar 2014 Calendar 2015 Calendar 2016
Reported CHCA net sales $ 2,503.6 $ 2,554.2 $ 2,507.1
Reported CHCI net sales 348.7 1,360.6 1,652.2
Operating results attributable to held-for-sale businesses* (176.5) (162.6) (112.8)
Adjusted consumer-facing net sales $ 2,675.8 $ 3,752.2 $ 4,046.5
Consolidated net sales $ 3,853.8 $ 5,014.7 $ 5,280.6
Operating results attributable to held-for-sale businesses* (176.5) (162.6) (112.8)
Adjusted consolidated net sales $ 3,677.3 $ 4,852.1 $ 5,167.8
As a % of total adjusted net sales 73% 77% 78%
*Held-for-sale businesses include the U.S. VMS business and a European sports brand. The adjustments to 2014 and 2015 are for comparison purposes only and do not change any other prior year financial information or metrics since these businesses were not held-for-sale in 2014 or 2015.
1919
Full Year
2017 EPS Guidance
Reported $1.82 - $2.17
Amortization expense related primarily to acquired intangible assets 2.45
Restructuring charges 0.32
Loss on early debt extinguishment 0.12
Impairments 0.08
Operating results attributable to held-for-sale business* 0.01
Acquisition and integration-related expense (income) (0.09)
Tysabri® royalty stream (0.12)
Gain on divestitures (0.15)
Tax effect of non-GAAP adjustments (1) (0.29)
Adjusted $4.15 - $4.50
(1) Includes tax effect of pretax non-GAAP adjustments calculated based upon the specific rate of the applicable jurisdiction of the pretax item and certain adjustments for discrete tax items in the first nine months of the year.
*Held-for-sale business includes the India API business.
2020
Full Year
2017 Guidance
Consolidated DSG&A as a % of Net Sales
Reported Approx. 22.5%
Amortization expense related primarily to acquired intangible assets (2.5)%
Adjusted Approx. 20%
Consolidated Operating Income
Reported Approx. $556 - $616 million
Amortization expense related primarily to acquired intangible assets 350
Impairment charges 12
Gain on divestitures (22)
Restructuring charges, acquisition-related items, and operating results attributable to held-for-sale businesses 34
Adjusted Approx. $930 - $990 million
Effective Tax Rate Tax expense Pre-tax income Effective Tax Rate
Reported $ 113 $ 435 Approx. 26%
Non-GAAP adjustments 42 365
Adjusted $ 155 $ 800 Approx. 19.5%
2121
Remainder of 2017 Full year 2017
Gross margin Operating margin
CHCA
Reported Approx. 32 - 33% Approx. 16 - 20%
Amortization expense related to acquired intangible assets 2% 3%
Integration and restructuring-related charges 1%
Adjusted Approx. 34 -35% Approx. 20 - 24%
CHCI
Reported Approx. (4) - 0%
Amortization expense related primarily to acquired intangible assets 14%
Adjusted Approx. 10 - 14%
RX
Reported Approx. 27 - 31%
Amortization expense related to acquired intangible assets 10%
Restructuring charges and acquisition-related items (1)%
Gain on divestitures (2)%
Impairment charges 1%
Adjusted Approx. 35 - 39%
2222
Twelve Months Ended December 31, 2016
Consolidated Net SalesGross Profit
R&D Expense
DSG&A Expense
Restructuring and Impairment
Charges
Operating Income (Loss)
Interest, Other, and Change in Fair Value of
Tysabri® Royalty Stream
Pretax Income (Loss)
Income tax
expense (benefit)
Net Income (Loss)
Diluted Earnings (Loss) per Share
Reported $ 5,280.6 $ 2,051.8 $ 184.0 $ 1,205.5 $ 2,662.0 $ (1,999.7) $ 2,848.6 $(4,848.
3) $ (835.5) $ (4,012.8) $ (28.01)
Adjustments:
Impairment charges $ — $ — $ — $ — $ (2,631.0) $ 2,631.0 $ (22.4) $ 2,653.4 $ — $ 2,653.4 $ 18.48
Tysabri® royalty stream - change in fair value — — — — — — (2,608.2) 2,608.2 — 2,608.2 18.16
Amortization expense related primarily to acquired intangible assets — 226.7 (0.9) (136.3) — 363.9 — 363.9 — 363.9 2.59
Restructuring charges — — — — (31.0) 31.0 — 31.0 — 31.0 0.22
Acquisition and integration-related charges — 4.7 — (19.6) — 24.3 (1.1) 25.4 — 25.4 0.18
Unusual litigation — — — (18.4) — 18.4 — 18.4 — 18.4 0.13
Operating results attributable to held-for-sale businesses* (112.8) (11.4) (1.2) (25.5) — 15.3 — 15.3 — 15.3 0.11
Losses on equity method investments — — — — — — (4.2) 4.2 — 4.2 0.03
Gain on divestitures — — — — — — 7.7 (7.7) — (7.7) (0.05)
Non-GAAP tax adjustments*** — — — — — — — — 971.3 (971.3) (6.77)
Adjusted $ 5,167.8 $ 2,271.8 $ 181.9 $ 1,005.7 $ — $ 1,084.2 $ 220.4 $ 863.8 $ 135.8 $ 728.0 $ 5.07
As a % of sales 44.0% 21.0%
*Held-for-sale businesses include the U.S. VMS business, European sports brand, and India API business Diluted weighted average shares outstanding
**In the period of a net loss, diluted shares outstanding equal basic shares outstanding. Reported 143.3
***The non-GAAP tax adjustment includes the following: (1) $(802.5) million of tax effects of pretax non-GAAP adjustments that are calculated based upon the specific rate of the applicable jurisdiction of the pretax item; and (2) Discrete income tax adjustments of: $(49.3) million related to jurisdictional tax rate changes in Italy, UK, Germany & France, $102.6 million net impact of valuation allowances on deferred tax assets commensurate with non-GAAP pre-tax measures, and $(222.1) million valuation allowance release due to the sale of Tysabri. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-GAAP net income.
Effect of dilution as reported amount was a loss, while adjusted amount was income** 0.3
Adjusted 143.6
2323
Twelve Months Ended December 31, 2015
Consolidated Net SalesGross Profit
R&D Expense
DSG&A Expense
Restructuring and Impairment
ChargesOperating Income
Interest and Other Expense
Pretax income
Income Tax
Expense
Net Income (Loss)
Diluted Earnings (Loss) per
Share
Reported $ 5,014.7 $ 2,049.4 $ 186.3 $ 1,162.5 $ 250.2 $ 450.4 $ 391.2 $ 59.2 $ 61.1 $ (1.9) $ (0.01)
Adjustments:
Losses on acquisition-related foreign currency hedges $ — $ — $ — $ — $ — $ (268.5) $ 268.5 $ — $ 268.5 $ 1.87
Amortization expense related primarily to acquired intangible assets 156.1 (0.4) (95.1) — 251.7 — 251.7 — 251.7 1.76
Impairment charges — — (0.4) (222.4) 222.8 (12.5) 235.3 — 235.3 1.64
Legal and consulting fees related to Mylan defense — — (100.3) — 100.3 — 100.3 — 100.3 0.70
Acquisition and integration-related charges — — (35.2) — 35.2 (0.5) 35.7 — 35.7 0.25
Restructuring charges 0.4 — — (27.8) 28.2 — 28.2 — 28.2 0.20
Loss on debt extinguishment — — — — — (20.5) 20.5 — 20.5 0.14
Initial payment made in connection with an R&D arrangement — (18.0) — — 18.0 — 18.0 — 18.0 0.13
Losses on equity method investments — — — — — (10.7) 10.7 — 10.7 0.07
Unusual litigation — (0.3) — 0.3 — 0.3 — 0.3 —
Tysabri® royalty stream - change in fair value — — — — — 88.8 (88.8) — (88.8) (0.62)
Non-GAAP tax adjustments*** — — — — — — — 79.6 (79.6) (0.56)
Adjusted $ 2,205.9 $ 167.9 $ 931.2 $ — $ 1,106.9 $ 167.3 $ 939.6 $ 140.7 $ 798.9 $ 5.57
As a % of sales 44.0% 22.1%
2015 YTD Net Sales excluding the U.S. VMS business and the European sports brand Diluted weighted average shares outstanding
Reported $ 5,014.7 Reported 144.6
Operating results attributable to held-for-sale businesses* (162.6)
Weighted average effect of 6.8 million shares issued on November 26, 2014 to finance the Omega acquisition, which closed on March 30, 2015. In addition, effect of dilution as reported amount was a loss, while adjusted amount was income**. (1.2)
Adjusted $ 4,852.1 Adjusted 143.4
*Held-for-sale businesses include the U.S. VMS business and the European sports brand.
**In the period of a net loss, diluted shares outstanding equal basic shares outstanding.
*** The non-GAAP tax adjustment includes the following: (1) $(135.5) million of tax effects of pretax non-GAAP adjustments that are calculated based upon the specific rate of the applicable jurisdiction of the pretax item; (2) a $2.5 million effect on non-GAAP income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) $53.4 million of discrete income tax adjustments related to debt restructuring for the acquisition of Omega. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-GAAP net income.
2424
Twelve Months Ended
December 27, 2014
ConsolidatedNet
Sales Operating Income
Reported $ 3,853.8 $ 593.6
As a % of sales 15.4%
Adjustments:
Amortization expense related primarily to acquired intangible assets $ 132.2
Acquisition and integration-related charges 22.7
Restructuring charges 35.0
Initial payment made in connection with an R&D arrangement 10.0
Unusual litigation 17.8
Adjusted $ 811.3
As a % of sales 21.1%