Fourth Quarter & Calendar Year 2016 Earnings Conference ... C… · Improved corporate governance...
Transcript of Fourth Quarter & Calendar Year 2016 Earnings Conference ... C… · Improved corporate governance...
Fourth Quarter & Calendar Year 2016 Earnings Conference Call
May 23, 2017
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; 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 we do; pricing pressures from customers and consumers; potential third-party claims
and litigation, including litigation relating to our 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 our ability to realize the desired benefits thereof; our ability to achieve our guidance, and our 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, may encounter unanticipated material issues or additional adjustments that could delay the filing of required periodic reports
with the United States Securities and Exchange Commission, or may be unable to regain compliance with the NYSE continued listing rules. 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
3 3
John Hendrickson
Agenda
4 4
Call Agenda
I. Foundation for Growth
IV. Noteworthy Impacts of the Restatement
VI. Calendar Year 2017 Guidance
III. Calendar Year & Fourth Quarter 2016 Results
V. Fourth Quarter 2016 Financial Results
II. Form 10-K Filing
VII. Durable Business Model
5 5
I. Foundation for Growth Focused 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; file Q1
financials as soon as practical
Pharmaceutical
Supply
Chain
Fast Moving
Consumer
Goods
Pharmaceutical
Supply Chain
FMCG
Quality Affordable
Healthcare Products®
6 6
2016 Form 10-K (“Jumbo 10-K”)
• Updated financial information for the fiscal years ended
June 28, 2014 and June 27, 2015; the transition period
from June 28, 2015 to December 31, 2015
2016 Forms 10-Q/A
• Updated financial information for the quarterly periods
ended April 2, 2016, July 2, 2016 and October 1, 2016
Recast historical financial results to be filed on Form 8-
K to assist in modeling
Information Filed
II. Form 10-K Filing
Completed All Historical Filings within Four Weeks
7 7 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
.
Updated
2016
Guidance
Announced
8/10/2016
Impact of
Tysabri®
Accounting
Change
Final 2016 Guidance
(adjusted for Tysabri®
accounting change)
Restated
Financial
Results
Announced
5/22/2017
Performance
vs. Final Guidance
Consolidated
Adjusted Net Sales1 $5.3 - $5.5B $(352M) $5.0B - $5.2B $5.2B High End of Range
Adjusted EPS1 $6.85 - $7.15 $(2.14) $4.70 - $5.00 $5.07 Outperformed Range
Operating Cash
Flow >$0.9B $(351M) >$550M $611M Outperformed Range
III. Performance vs. Updated 2016 Guidance – Excluding Tysabri® Outperformed or Performed at High End of Final Guidance Ranges
Strong finish to end the year
Achieved Final 2016 Guidance
Solid cash flow
Calendar 2016 Key Takeaways
8 8
($ in millions) Q4 2016 Q4 2015 % Change
Y/Y
% Change Constant
Currency Y/Y
Adjusted Consolidated Perrigo Net Sales(2) $1,331 $1,315 1 % 4 %
Adjusted Operating Income 259 266 (3 %)
Adjusted CHC Americas Net Sales(2) 627 599 5 % 5 %
Adjusted Operating Income 139 125 11 %
CHC International Net Sales 420 434 (3 %) 3 %
Adjusted Operating Income 36 53 (31 %)
Rx Pharmaceuticals Net Sales 266 259 3 % 3 %
Adjusted Operating Income 115 109 5 %
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) For comparative purposes, fourth quarter 2015 net sales have been adjusted in this presentation to exclude $44 million of sales attributable to the U.S. VMS business, which was sold in the third quarter 2016; this 2015 net sales
adjustment does not impact any other prior year amounts or metrics
III. Net Sales and Operating Income As Adjusted(1) – Q4 2016 Growth in All Segments
9 9
Noteworthy Impacts of the Restatement
Fourth Quarter 2016 Financial Results
Calendar Year 2017 Guidance
Ron Winowiecki
10 10
GAAP Net
Income ($M)
GAAP
EPS
2/27/17 Presentation $ (4,142) $ (28.91)
1. Tysabri® $ (77) $ (0.54)
2. Omega DTA $ (32) $ (0.22)
1. Tysabri® royalty asset treated as financial
asset rather than intangible asset
Remove Tysabri® royalty stream from net sales
Remove the amortization expense associated
with the intangible asset
Include quarterly changes in fair value of the
financial asset as a component of non-cash
other income/expense
2. Identification of certain Omega deferred tax
assets
Reduction of goodwill, offset by a
corresponding reduction to net deferred tax
liabilities at the date of the Omega acquisition
Noteworthy Impacts of Restatement
IV. Noteworthy Impacts of the Restatement
Changes From 2/27/17 GAAP Metrics
11 11
3. Impairment Adjustments
As a result of the reduction of goodwill related
to the identification of Omega deferred tax
assets, revision of goodwill impairments taken
since acquisition
Animal Health Reporting Unit impairment
identified in Q4 2016 determined to be related
to goodwill rather than intangible assets
originally identified
4. Finalization of Taxes
Certain deferred tax asset valuation allowances
were adjusted to reflect more recent forecasted
information including the sale of the Tysabri®
royalty stream in Q1 2017
5. Other Previously Identified Adjustments
Noteworthy Impacts of Restatement
IV. Noteworthy Impacts of the Restatement
GAAP Net
Income ($M)
GAAP
EPS
2/27/17 Presentation $ (4,142) $ (28.91)
1. Tysabri® $ (77) $ (0.54)
2. Omega DTA $ (32) $ (0.22)
3. Impairment Adjustments $ 126 $ 0.88
4. Finalization of Taxes $ 109 $ 0.76
5. Other Adjustments $ 3 $ 0.02
5/22/17 Reported GAAP $ (4,013) $ (28.01)
Total change in GAAP from
2/27/17 $ 129 $ 0.90
Changes From 2/27/17 GAAP Metrics
12 12 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
Updated
2016
Guidance
Announced
8/10/2016
Impact of
Tysabri®
Accounting
Change
Final 2016 Guidance
(adjusted for Tysabri®
accounting change)
Restated
Financial
Results
Announced
5/22/2017
Performance
vs. Final Guidance
Consolidated
Adjusted Net Sales1 $5.3 - $5.5B $(352M) $5.0B - $5.2B $5.2B High End of Range
Adjusted EPS1 $6.85 - $7.15 $(2.14) $4.70 - $5.00 $5.07 Outperformed Range
Operating Cash
Flow >$0.9B $(351M) >$550M $611M Outperformed Range
V. Performance vs. Updated 2016 Guidance – Excluding Tysabri® Outperformed or Performed at High End of Final Guidance Ranges
13 13
($ in millions, except per share amounts)
Q4 2016 Q4 2016 Q4 2015 Reported Non-GAAP Adjustments
Reported Adjusted(1) Reported Change YoY %
Net Sales $1,331 NM $1,359 (2 %)
Gross Profit $488 $554 $544 (10 %)
R&D Expense 42 42 47 (11 %)
Distribution, Selling & Administrative Expense ("DSG&A") 315 254 365 (13 %)
Restructuring and Impairments $615 — $240 156 %
Operating Income (Loss) $(485) $259 ($108) 350 %
Interest , Other and Expense Associated with change in fair value of the Tysabri® royalty stream
1,159 53 178 NM
Net Income (Loss) $(1,359) $178 $(218) NM
Diluted Earnings (Loss) Per Share $(9.48) $1.24 $(1.51) NM
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
NM = Not meaningful
V. Consolidated – Q4 2016 Financial Information
• Amortization of intangible assets
• Goodwill and intangible asset
impairment charges
• Tysabri® royalty stream change in
fair value
14 14
• Adjusted net sales increased 5% on a constant
currency basis(2)
• Strong demand in U.S. Consumer Healthcare,
driven by increased sales in the infant formula,
antacid and smoking cessation categories
• New product sales of $27 million
• Margins driven by product mix and supply chain
efficiencies, partially offset by price erosion in
certain OTC categories
$223M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin(3) Adjusted Operating Margin (3)
$139M
35.5% 22.2%
+11 % +2 %
+270 bps
+150 bps
2016 Q4 Year-Over-Year Adjusted Net Sales Growth(2)
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) For comparative purposes, fourth quarter 2015 net sales have been adjusted in this presentation to exclude $44 million of sales attributable to the U.S. VMS business, which was sold in the third quarter 2016; this 2015 net sales
adjustment does not impact any other prior year amounts or metrics
(3) Q4 2016 and 2015 adjusted gross margin and operating margin use reported net sales as the denominator
V. CHC Americas Segment As Adjusted(1) – Q4 2016 in
mill
ion
s
$599
$627
$500.0
$530.0
$560.0
$590.0
$620.0
$650.0
Q4 2015 Q4 2016Q4 2015 Q4 2016
15 15
$434
$420
$380.0
$390.0
$400.0
$410.0
$420.0
$430.0
$440.0
$450.0
$460.0
Q4 2015 Q4 2016
2016 Q4 Year-Over-Year Net Sales
• Net sales on a constant currency basis
increased 3% as foreign currency had a negative
impact of $26 million
• New product sales of $26 million primarily from
line extensions
• Increases in net sales offset partially by lifestyle
and natural health/vitamins categories and lower
sales in the German and French markets
• Margins impacted by higher net sales in the
Belgian distribution business, which was exited
at the end of Q4
• Excluding the exited Belgium distribution
business from both years, adjusted gross margin
of 51.4% was 242 basis points lower year-over-
year
$176M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin(2) Adjusted Operating Margin(2)
$36M
41.9% 8.7%
-31 % -15 %
-340 bps
-590 bps
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Q4 2016 and 2015 adjusted gross margin and operating margin use reported net sales as the denominator
V. CHC International Segment As Adjusted(1) – Q4 2016 in
mill
ion
s
Q4 2015 Q4 2016
$445
constant currency
16 16 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Q4 2016 and 2015 adjusted gross margin and operating margin use reported net sales as the denominator
• Net sales on a constant currency basis increased
3% driven primarily by net sales from product
acquisitions and new product sales of $15 million
• Price erosion in line with expectations
• Adjusted operating margin increased 110 bps
2016 Q4 Year-Over-Year Net Sales Growth
$149M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin(2) Adjusted Operating Margin(2)
$115M
56.1% 43.2%
+5 % +3 %
+110 bps
+10 bps
V. Rx Pharmaceuticals Segment As Adjusted(1) – Q4 2016 in
mill
ion
s
$259 $266
$240.0
$250.0
$260.0
$270.0
$280.0
Q4 2015 Q4 2016Q4 2015 Q4 2016
17 17
V. Balance Sheet
17
Executing on Debt Pay-down Strategy
Committed to maintaining investment grade profile
Make-whole call on our $600M 2.300% notes due 2018 completed on May 8, 2017
2017 Mid-year debt pay-down assumption yields second half interest $40M lower than first half
Total Cash
$622M Total Debt
$5.8B
As of December 31, 2016
18 18
2017 Guidance
Announced
2/27/2017
Exclude
Tysabri®
New 2017
Guidance
Consolidated Net Sales $5.0B - $5.2B $(359M) $4.6B - $4.8B
Consumer Healthcare Americas ~$2.4B ~$2.4B
Consumer Healthcare International ~$1.4B ~$1.4B
Prescription Pharmaceuticals ~$925M ~$925M
Adjusted EPS(2) $6.30 - $6.65 $(2.15) $4.15 - $4.50
Operating Cash Flow >$850M $(300M)(1) >$575M
VI. Calendar Year 2017 Guidance to Exclude Tysabri®
No Change in Underlying
Strength of Business
(1) Tysabri® cash flow after-tax, assumes $2.1 billion mid-year debt reduction, which equates to estimated second half interest savings of $40 million
(2) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
Operating Cash Flow guidance increased by $25M from 2/27/2017
19 19
Calendar Year 2017 Calendar Year
2017 Guidance
Net Sales $4.6B – $4.8B
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
VI. Calendar Year 2017 Guidance(1)
Expect first half results weighted towards first quarter; Full-year results weighted towards
second half
Adjusted
Operating
Margin
Net Sales
Guidance
Low
20%
Low – Mid
Teens
High
30%
20 20
John Hendrickson
Leveraging the Perrigo Advantage
21 21
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)
VII. Durable Business Model Approximately 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
22 22
Contact
Bradley Joseph
Vice President,
Global Investor Relations and Corporate Communications
(269) 686-3373
23 23
Calendar Year 2016 Results
23
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Calendar-year data for 2015 was derived from the Company’s audited results for the six-month period ended December 31, 2015 and unaudited results for the fiscal quarters ended March 28, 2015 and June 27, 2015
(3) June 30, 2016 exchange rates were used as the basis for updated calendar year 2016 guidance
(4) Excludes the expected results of held-for-sale businesses
Calendar
Year 2015(2)
Calendar Year
2016 Guidance
at June 30,
2016 Rates
Presented Aug.
10, 2016;
Reaffirmed Nov,
10, 2016
Calendar Year
2016 Guidance
at June 30, 2016
Rates
Pro-forma
Without Tysabri®
Impact of Dec.
31, 2016 Rates
Compared to
June 30, 2016
Rates
Operational
Impact
(midpoint to
actual)
Calendar
Year 2016
Net Sales $5.0B $5.3 - $5.5B (1),(3),(4)
$5.0 - $5.2B (1),(3),(4)
$(14M) $82M $5.2B (1),(4)
Adjusted
Diluted
EPS(1)
$5.57/share $6.85 -
$7.15/share
$4.70 -
$5.00/share (3),(4)
$(0.00)/share $0.22/share $5.07/share
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TABLE I
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(in millions, except per share amounts)
(unaudited)
Three Months Ended December 31, 2016
Consolidated Net Sales Gross 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 Net Income
(Loss)
Diluted Earnings (Loss)
per Share
Reported $ 1,331.2 $ 487.7 $ 41.6 $ 315.4 $ 615.3 $ (484.6 ) $ 1,159.3 $ (1,359.1 ) $ (9.48 )
Adjustments:
Tysabri® royalty stream - change in fair value $ — $ — $ — $ — $ — $ (1,115.6 ) $ 1,115.6 $ 7.78
Impairment charges — — — (602.2 ) 602.2 1.7 600.5 4.18
Amortization expense related primarily to acquired intangible assets 62.0 (0.1 ) (32.8 ) — 94.9 — 94.9 0.67
Unusual litigation — — (18.4 ) — 18.4 — 18.4 0.13
Restructuring charges — — — (13.1 ) 13.1 — 13.1 0.09
Operating results attributable to held-for-sale businesses* 4.2 — (7.3 ) — 11.5 — 11.5 0.08
Acquisition and integration-related charges — — (3.0 ) — 3.0 (0.3 ) 3.3 0.02
Gain on divestitures — — — — — 7.8 (7.8 ) (0.05 )
Non-GAAP tax adjustments*** — — — — — — (312.9 ) (2.18 )
Adjusted $ 553.9 $ 41.5 $ 253.9 $ — $ 258.5 $ 52.9 $ 177.5 $ 1.24
As a % of adjusted net sales 41.6 % 19.4 %
Diluted weighted average shares outstanding
Reported 143.4
Effect of dilution as reported amount was a loss, while adjusted amount was income** 0.2
Adjusted 143.6
*Held-for-sale businesses include the European sports brand and the India API business.
**In the period of a net loss, diluted shares outstanding equal basic shares outstanding.
*** The non-GAAP tax adjustment includes the following: (1) $(187.1) 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 $20.6 million effect on non-GAAP income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) Discrete income tax adjustments of $(26.9) million related to jurisdictional tax rate changes in France & Italy, $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 sales of Tysabri. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-GAAP net income.
25 25
TABLE I (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(in millions, except per share amounts)
(unaudited)
Three Months Ended December 31, 2015
Consolidated Net Sales Gross Profit
R&D Expense
DSG&A Expense
Restructuring and Impairment
Charges Operating
Income (Loss)
Interest and Other
Expense Pretax Income
(Loss)
Income Tax Expense (Benefit)
Net Income (Loss)
Diluted Earnings (Loss) per
Share
Reported $ 1,359.1 $ 543.7 $ 46.6 $ 364.5 $ 240.3 $ (107.7 ) $ 178.3 $ (286.0 ) $ (67.6 ) $ (218.4 ) $ (1.51 )
Adjustments:
Tysabri® royalty stream - change in fair value $ — $ — $ — $ — $ — $ (116.6 ) $ 116.6 $ — $ 116.6 $ 0.80
Amortization expense related primarily to acquired intangible assets 38.2 (0.2 ) (16.5 ) — 54.9 — 54.9 — 54.9 0.38
Acquisition and integration-related charges — — (8.5 ) — 8.5 (0.8 ) 9.3 — 9.3 0.06
Legal and consulting fees related to Mylan defense — — (71.3 ) — 71.3 — 71.3 71.3 0.49
Impairment charges — — — (215.6 ) 215.6 (10.7 ) 226.3 — 226.3 1.56
Unusual litigation — — 1.7 — (1.7 ) — (1.7 ) (1.7 ) (0.01 )
Losses on equity method investments — — — — — (2.7 ) 2.7 — 2.7 0.02
Loss on debt extinguishment — — — — — (0.9 ) 0.9 — 0.9 0.01
Restructuring charges — — — (24.7 ) 24.7 — 24.7 — 24.7 0.17
Non-GAAP tax adjustments*** — — — — — — — 84.2 (84.2 ) (0.58 )
Adjusted $ 581.9 $ 46.4 $ 269.9 $ — $ 265.6 $ 46.6 $ 219.0 $ 16.6 $ 202.4 $ 1.39
As a % of reported net sales 42.8 % 19.5 %
2015 QTD Net Sales excluding the U.S. VMS business and the European sports brand Diluted weighted average shares outstanding
Reported $ 1,359.1 Reported 144.9
Operating results attributable to held-for-sale businesses* (44.5 ) Effect of dilution as reported amount was a loss, while adjusted amount was income**. 0.5
Adjusted $ 1,314.6 Adjusted 145.4
*Held-for-sale businesses include the U.S. VMS business and 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) $(91.4) 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 $0.4 million effect on non-GAAP income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) $6.8 million 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.
26 26
TABLE I (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(in millions, except per share amounts)
(unaudited)
Twelve Months Ended December 31, 2016
Consolidated Net Sales Gross 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
27 27
TABLE I (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(in millions, except per share amounts)
(unaudited)
Twelve Months Ended December 31, 2015
Consolidated Net Sales Gross Profit
R&D Expense
DSG&A Expense
Restructuring and Impairment
Charges Operating 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.
28 28
TABLE II
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED SEGMENT INFORMATION
(in millions)
(unaudited)
Three Months Ended Three Months Ended
December 31, 2016 December 31, 2015
Consumer Healthcare Americas Net Sales Gross Profit Operating Income Net Sales Gross Profit
Operating Income
Reported $ 626.8 $ 210.0 $ 83.3 $ 643.2 $ 206.2 $ 92.8
Adjustments:
Amortization expense related primarily to acquired intangible assets $ 12.6 $ 17.7 $ 12.2 $ 17.9
Unusual litigation — 10.2 — 0.3
Impairment charges — 27.1 — 1.5
Restructuring charges — (0.1 ) — 12.8
Acquisition and integration-related charges — 1.2 — —
Adjusted $ 222.6 $ 139.4 $ 218.4 $ 125.3
As a % of reported net sales 35.5 % 22.2 % 34.0 % 19.5 %
For Comparative Purposes*
Reported $ 643.2
Operating results attributable to held-for-sale business (44.3 )
Adjusted $ 598.9
*Q4 2015 net sales adjustment made for comparison purposes only and does not change any other prior year financial information or metrics since the U.S. VMS business was not held-for-sale in 2015. Q4 2015 gross margin and operating margin use reported net sales as the denominator.
29 29
TABLE II (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED SEGMENT INFORMATION
(in millions)
(unaudited)
Three Months Ended Three Months Ended
December 31, 2016 December 31, 2015
Consumer Healthcare International Net Sales Gross Profit Operating
Income (Loss) Net Sales Gross Profit Operating
Income (Loss)
Reported $ 419.5 $ 151.3 $ (76.1 ) $ 434.3 $ 196.3 $ (155.5 )
Adjustments:
Amortization expense related primarily to acquired intangible assets 20.8 48.4 11.4 23.0
Impairment charges — 34.1 — 185.1
Unusual litigation — 8.2 — —
Operating results attributable to held-for-sale business* 3.6 10.3 — —
Restructuring charges — 10.5 — 0.2
Acquisition and integration-related charges — 1.0 — (0.2 )
Adjusted $ 175.7 $ 36.4 $ 207.7 $ 52.6
As a % of reported net sales 41.9 % 8.7 % 47.8 % 12.1 %
*Held-for-sale business includes European sports brand
30 30
TABLE II (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED SEGMENT INFORMATION
(in millions)
(unaudited)
Three Months Ended Three Months Ended
December 31, 2016 December 31, 2015
Prescription Pharmaceuticals Net Sales Gross Profit Operating Income Net Sales Gross Profit
Operating Income
Reported $ 265.9 $ 121.0 $ (258.5 ) $ 259.1 $ 130.8 $ 94.3
Adjustments:
Amortization expense related to acquired intangible assets 28.0 28.1 14.2 14.3
Unusual litigation — — — (2.0 )
Restructuring charges — 2.1 — 2.6
Impairment charges — 342.4 — —
Acquisition and integration-related charges — 0.9 — —
Adjusted $ 149.0 $ 115.0 $ 145.0 $ 109.2
As a % of reported net sales 56.1 % 43.2 % 56.0 % 42.1 %
31 31
TABLE III
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CONSTANT CURRENCY
(in millions)
(unaudited)
Three Months Ended
December 31, 2016
December 31, 2015 Total Change FX Change
Constant Currency Change
Net sales
Consolidated* $ 1,331.2 $ 1,314.6 1% (3)% 4%
CHCA* 626.8 598.9 5% —% 5%
CHCI 419.5 434.1 (3)% (6)% 3%
RX 265.9 259.1 3% —% 3%
Twelve Months Ended
Net sales December 31,
2016 December 31,
2015 Total Change FX Change
Constant Currency Change
Consolidated* $ 5,167.8 $ 4,852.1 7% (1)% 8%
*Q4 2015, full year 2015, and full year 2016 net sales are adjusted to exclude sales attributable to held-for-sale businesses. See Tables I and II for non-GAAP reconciliations.
32 32
TABLE IV
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
2017 GUIDANCE
(in millions, except per share amounts)
(unaudited)
Full Year
2017 EPS Guidance
Reported $0.22 - $0.57
Amortization expense related primarily to acquired intangible assets 2.40
Sale of Tysabri® royalty stream (2) (0.03)
Restructuring charges 0.28
Loss on early debt extinguishment 0.12
Tax effect of non-GAAP adjustments (1) 1.16
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.
(2) Subject to the finalization of the gain/loss on the sale of Tysabri®
Reported Amortization
expense Adjusted
Full year 2017 guidance EPS as of February 27, 2017 $0.60 - $0.95 $6.30 - $6.65
Impact of previous accounting for Tysabri on 2017 Guidance
Net sales $ 352.0 $ — $ 352.0
Cost of sales (290.0 ) 290.0 —
Operating income $ 62.0 $ 290.0 $ 352.0
Tax at 12.5% statutory rate $ (7.7 ) $ (44.0 )
Net income $ 54.3 $ 307.6
Diluted shares 143.6 143.6
Earnings per share impact removed from February 27, 2017 full year 2017 guidance $ 0.38 $ 2.14
Full year EPS range excluding impact of Tysabri $0.22 - $0.57 $4.15 - $4.50
33 33
TABLE IV (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
2017 GUIDANCE
(in millions)
(unaudited)
Full Year
2017 Guidance
Consolidated DSG&A as a % of Net Sales
Reported Approx. 23.3%
Amortization expense related primarily to acquired intangible assets (2.5)%
Restructuring charges (0.8)%
Adjusted Approx. 20.0%
Consolidated Operating Income
Reported $545 - $605
Amortization expense related primarily to acquired intangible assets 345
Restructuring charges 40
Adjusted $930 - $990
Effective Tax Rate Tax expense Pre-tax income Effective Tax Rate
Reported $ (13 ) $ 401 Approx. (3)%
Non-GAAP adjustments 168 399
Adjusted $ 155 $ 800 Approx. 19.5%
34 34
TABLE IV (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
2017 GUIDANCE
(in millions)
(unaudited)
Gross margin Operating margin
CHCA
Reported Approx. 33% Approx. 17 - 21%
Amortization expense related to acquired intangible assets 2% 3%
Adjusted Approx. 35% Approx. 20 - 24%
CHCI
Reported Approx (3)% -1%
Amortization expense related primarily to acquired intangible assets 13%
Adjusted Approx. 10 - 14%
RX
Reported Approx. 25 - 29%
Amortization expense related to acquired intangible assets 10%
Adjusted Approx. 35 - 39%
35 35
TABLE V
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
REVISED 2016 GUIDANCE AS OF MAY 22, 2017
(in millions)
(unaudited)
AS OF 5/22/17
Full Year
Revised 2016 EPS Guidance
Reported $(28.38) - $(28.08)
Amortization expense related primarily to acquired intangible assets 2.59
Operating results attributable to held-for-sale businesses (1) 0.11
Impairment charges 18.48
Restructuring charges 0.22
Tysabri® royalty stream - change in fair value 18.16
Gain on divestitures (0.05)
Acquisition and integration-related charges 0.18
Unusual litigation 0.13
Losses on equity method investments 0.03
Tax effect of non-GAAP adjustments (2) (6.77)
Adjusted $4.70 - $5.00
Full Year
(in billions) Revised 2016 Net Sales
Guidance
Consolidated Net Sales
Reported $5.1 - $5.3
Operating results attributable to held-for-sale businesses (1) (0.1)
Adjusted $5.0 - $5.2
(1)
Held-for-sale businesses include the U.S. VMS business, European sports brand, and the India API business.
(2) 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.
36 36
TABLE VI
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
August 10, 2016
(unaudited)
AS OF 8/10/16
Full Year
2016 EPS Guidance
Reported 2016 Guidance Diluted EPS Range $0.26 - $0.56
Amortization expense related primarily to acquired intangible assets 4.50
Goodwill, intangible asset, investment and held-for-sale impairment charges 3.29
Integration and restructuring-related charges 0.27
Other (1) 0.09
Tax effect of non-GAAP adjustments (2) (1.56)
Adjusted 2016 Guidance Diluted EPS Range $6.85 - $7.15
(1) Equity method investment losses, results of operations from held-for-sale businesses, and loss on early debt extinguishment
(2) 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.
Reported Amortization expense Adjusted
Full year 2016 guidance EPS as of August 10, 2016 $0.26 - $0.56 $6.85 - $7.15
Impact of previous accounting for Tysabri on 2016 Guidance
Net sales $ 352.0 $ — $ 352.0
Cost of sales (290.0 ) 290.0 —
Operating income $ 62.0 $ 290.0 $ 352.0
Tax at 12.5% statutory rate $ (7.7 ) $ (44.0 )
Net income $ 54.3 $ 307.6
Diluted shares 143.6 143.6
Earnings per share impact excluded from August 10, 2016 full year 2016 guidance $ 0.38 $ 2.14
Full year EPS range excluding impact of Tysabri $(0.12) - $0.18 $4.70 - $5.00
37 37
TABLE V continued
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
August 10, 2016
(unaudited)
In billions AS OF 8/10/16
Full Year
2016 Guidance
Consolidated Net Sales
Reported $5.4 - $5.6
Operating results attributable to held-for-sale businesses (1) (0.1)
Adjusted $5.3 - $5.5
Less Tysabri® impact (0.3)
Adjusted net sales after change in accounting for Tysabri® $5.0 - $5.2
(1) Held-for-sale businesses include the U.S. VMS business, European sports brand, and the India API business.
38 38
TABLE VI
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(unaudited)
Three Months Ended
December 31, 2016
December 31, 2015
Total Change
Adjusted operating income
Consolidated $ 258.5 $ 265.6 (3 )%
CHCA 139.4 125.3 11 %
CHCI 36.4 52.6 (31 )%
RX 115.0 109.2 5 %
Adjusted gross profit
Consolidated $ 553.9 $ 581.9 (5 )%
CHCA 222.6 218.4 2 %
CHCI 175.7 207.7 (15 )%
RX 149.0 145.0 3 %
39 39
TABLE VII
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CONSUMER-FACING METRICS
(in millions)
(unaudited)
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.
40 40
TABLE VII (continued)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CY14 ADJUSTED OPERATING MARGIN
(in millions)
(unaudited)
Twelve Months Ended
December 27, 2014
Consolidated Net
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 %
41 41
TABLE VIII
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CHCI
(in millions)
(unaudited)
Consumer Healthcare International distribution sales
Three Months Ended
Three Months Ended
Three Months Ended
Three Months Ended Year Ended
April 1, 2016
July 1, 2016
September 30, 2016
December 31, 2016
December 31, 2016
Distribution sales $ 48.8 $ 38.6 $ 41.7 $ 81.8 $ 210.9
CHCI excluding BCH Belgium Distribution business
Three Months Ended Three Months Ended
December 31, 2016 December 31, 2015
Adjusted gross profit (1) Net sales Adjusted gross
margin (1) Adjusted gross
profit (1) Net sales Adjusted gross
margin (1) Change in adjusted
gross margin
CHCI $ 175.7 $ 419.5 $ 207.7 $ 434.3
Less: BCH Belgium Distribution Business — (81.8 ) — (48.7 )
Add: Change in fx rates 11.2 25.7
CHCI excluding distribution adjusted for change in fx rates $ 186.9 $ 363.4 51.4 % $ 207.7 $ 385.6 53.9 % (242 bps)
(1) CHCI gross profit is adjusted. See reconciliation in Table II. There are no adjustments to the BCH Belgium Distribution Business.
CHCI constant currency
Three Months Ended
December 31, 2016
CHCI net sales $ 419.5
Foreign exchange impact 25.7
CHCI constant currency net sales $ 445.2