Perrigo Company plc Reports Record Fourth Quarter & Calendar Year Net Sales And Adjusted Net Income

DUBLIN, Feb. 18, 2016 /PRNewswire/ -- Perrigo Company plc (NYSE: PRGO; TASE) today announced results for the fourth quarter and calendar year ended December 31, 2015.

Perrigo's Chairman and CEO Joseph C. Papa commented, "The team delivered record performance in the face of a busy year and the challenges associated with an eight month long unsolicited takeover attempt. I would like to thank our Consumer Healthcare ("CHC") and Rx teams for achieving all-time record net sales for the calendar year, and the Rx team for surpassing $1 billion in net sales. Since we closed the Branded Consumer Healthcare ("BCH") acquisition, Euro net sales have improved year over year, due to some exciting new product launches and the acquisition of our new portfolio of leading OTC brands from GSK. Although the segment did not meet our internal expectations, we are taking specific actions to address this performance. We are confident that our durable business model and future growth prospects will continue to deliver value for our shareholders and provide Quality Affordable Healthcare Products^® to our customers and patients worldwide."

Refer to Tables I, II, III, and IV at the end of this press release for a reconciliation of non-GAAP adjustments to the current year and prior year periods and additional non-GAAP information. The Company's reported results are summarized in the attached Consolidated Statements of Operations, which include selected balance sheet and cash flow data. All references in this press release to the fourth quarter are references to the fourth calendar quarter of the respective year.

Net sales for calendar year 2015 were $5.35 billion, an increase of 28% on a reported basis. On a constant currency basis, net sales for the year increased 30% over calendar year 2014, attributable primarily to $1.03 billion related to the inclusion of the BCH segment and 14% growth in the Rx segment on a constant currency basis. Legacy Perrigo new product sales were $365 million for the year. The increase in net sales was partially offset by $197 million in discontinued products and $80 million of unfavorable foreign currency movements.

Net sales in the quarter were $1.42 billion, an increase of 33% on a reported basis. On a constant currency basis, net sales in the quarter increased 34% over the fourth quarter of 2014, attributable primarily to $326 million related to the inclusion of the BCH segment and 6% growth in the CHC segment on a constant currency basis. Legacy Perrigo new product sales were $85 million. The increase in net sales was partially offset by $47 million in discontinued products.

Excluding charges as outlined in Table I at the end of this release, fourth quarter calendar year 2015 adjusted net income increased 7% to $262 million or $1.80 per diluted share versus $1.82 for the same period last year.

Segment Results

Consumer Healthcare

Net sales in the fourth quarter were $710 million, a 6% increase on a constant currency basis, reflecting new product sales of $60 million and an increase in sales of existing products of $32 million (primarily in the infant formula, cough/cold and smoking cessation categories). These increases were partially offset by discontinued products of $47 million and a decline of $19 million in existing products (primarily in the analgesics and diabetes categories). Net sales were impacted by $10 million of unfavorable foreign currency movements.

Record fourth quarter adjusted gross profit margin of 33.4% increased 140 basis points compared to last year primarily due to product mix, improved commodity costs and manufacturing efficiencies.

Adjusted operating income of $127 million in the fourth quarter improved $15 million, or 14%, compared to the prior year due to higher gross profit contribution and relatively flat operating expenses.

Branded Consumer Healthcare

Net sales of $326 million in the fourth quarter included new product sales of $32 million, highlighted by the launch of Bronchostop^® cough/cold syrup. Additionally, the Top 20 Brands grew 6% year-over-year.

Fourth quarter adjusted gross profit percent to sales was 53.9% and adjusted operating income was $42 million, or 12.8%.

Rx Pharmaceuticals

Net sales in the fourth quarter of $283 million, an increase of 2% over a record prior year, were driven by new product sales of $25 million, which were offset by a decrease in sales of existing products of $24 million.

Fourth quarter adjusted operating income of $124 million decreased by 3% compared to the prior year, driven by a full quarter of investments in the specialty pharmaceuticals sales force this year and marketing costs. 

Specialty Sciences

The Company recognized $84 million of royalty revenue in the fourth quarter related to global sales of the Multiple Sclerosis drug Tysabri^®. Net sales included $4 million in unfavorable foreign currency movements.

Asset Impairment

During the Company's impairment testing for the quarter ended December 31, 2015, the Company identified an impairment of certain indefinite-lived intangible assets based on management's expectations for future revenues, profits and cash flows associated with these assets. The indefinite-lived intangible assets were purchased in conjunction with the Omega Pharma Invest NV acquisition and are included in the BCH segment. The assessment resulted in an impairment charge of $185 million, which represents the difference between the carrying amount of the intangible assets and their estimated fair value. The primary assumptions supporting the fair value of these assets and cash flow projections assume modest revenue growth based on product line extensions, product life cycle strategies and geographical expansion within the markets in which the BCH segment currently distributes products, and gross margins and advertising and promotion investments largely consistent with historical trends.

In addition, the Company began actively marketing its India API business during the fourth quarter and recorded an impairment charge of $29 million related to the assets held for sale.

Conclusion

Papa concluded, "Fourth quarter 2015 BCH financial performance was below our expectations. We are executing on our plan to drive improved BCH performance by taking select actions in the key areas of people, process, and products. First, we are changing the management structure of the BCH segment, incorporating Perrigo's matrix leadership model, which will drive better transparency and accountability, sharpening our focus on performance metrics. Second we are improving our processes in order to align systems, connectivity and functional accountability of the BCH business to Perrigo standards - while continuing to leverage the powerful marketing platform that BCH has in place. Finally, we have conducted a portfolio review, and are taking actions in BCH to exit slower growing or underperforming brands to reallocate these resources to higher growth products. I am confident that these actions, when taken together, will result in improved operating performance and an acceleration of growth in the BCH segment. I want to stress our commitment and conviction around the long-term prospects for the BCH business and the European OTC marketplace as a whole."

Guidance

The Company expects 2016 adjusted earnings to be between $9.50 and $9.80 per diluted share as compared to $7.59 in 2015, excluding the charges outlined in Table III at the end of this release. This range results in a year-over-year growth rate in adjusted earnings of 25% to 29% over 2015's adjusted earnings per diluted share. The Company also expects 2016 reported earnings to be between $5.55 and $5.85 per diluted share as compared to a loss of $0.23 in 2015. A reconciliation to GAAP measures is attached in Table III.

A conference call will begin at 8:00 a.m. (ET) live via webcast to interested parties in the investor relations section of the Perrigo website at http://perrigo.investorroom.com/events-webcasts or by phone at 877-248-9413, International 973-582-2737, and reference ID # 31741275. A taped replay of the call will be available beginning at approximately 1:00 p.m. (ET) on February 18, 2016 until midnight on March 4, 2016. To listen to the replay, dial 855-859-2056, International 404-537-3406, and use access code 31741275.

About Perrigo         

Perrigo Company plc, a top five global over-the-counter ("OTC") consumer goods and pharmaceutical company, offers patients and customers high quality products at affordable prices. From its beginnings in 1887 as a packager of generic home remedies, Perrigo, headquartered in Ireland, has grown to become the world's largest manufacturer of OTC products and supplier of infant formulas for the store brand market. The Company is also a leading provider of generic extended topical prescription products and receives royalties from Multiple Sclerosis drug Tysabri®. Perrigo provides Quality Affordable Healthcare Products® across a wide variety of product categories and geographies primarily in North America, Europe, and Australia, as well as other markets, including Israel and China.

A copy of this announcement will be available on Perrigo's website at www.perrigo.com.

Calendar-Year Data

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.  Calendar-year data for 2014 was derived from the Company's unaudited results for the fiscal quarters ended March 29, 2014, June 28, 2014, September 27, 2014 and December 27, 2014.

Forward-Looking Statements

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 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 share repurchases, and the ability to execute and achieve the desired benefits of announced initiatives. These and other important factors, including those discussed under "Risk Factors" in the Company's Form 10-K for the year ended June 27, 2015, as well as the Company's subsequent filings with the SEC, 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 press release contains non-GAAP measures. The reconciliation of these measures to the most comparable GAAP measures is included at the end of this press release. As a part of these non-GAAP measures, we report sales performance using the financial measure of "constant currency". We believe this provides meaningful information to assist our shareholders in understanding our financial results and true operational performance by assuming that foreign exchange rates had not changed between the prior and current period. The comparisons presented at constant currency reflect current year results translated at the prior year's exchange rates. This includes the royalty revenue related to Biogen Inc.'s sales of its Multiple Sclerosis drug Tysabri^® included in the Specialty Sciences Segment.

A copy of this press release, including the reconciliations, is available on our website at www.perrigo.com.