Perrigo Company plc Files First Quarter 2017 Form 10-Q And Reports First Quarter 2017 Financial Results

DUBLIN, May 30, 2017 /PRNewswire/ --

• Delivered first quarter 2017 GAAP ("reported") net sales of $1.2 billion, led by consumer-facing businesses net sales of $958 million
  
  
• Realized first quarter reported net income of $72 million and reported earnings per share ("EPS") of $0.50
  
  
• Achieved adjusted net income of $150 million and adjusted diluted EPS of $1.05
  
  
• First quarter cash flow from operations was $195 million; cash flow from operations of 272% as a percentage to net income and 130% as a percentage to adjusted net income
  
  
• CHCI profit improvement plan yielding positive results

Outlook:

• The Company expects calendar year 2017 reported diluted EPS to be in the range of $1.82 to $2.17 and reaffirms adjusted diluted EPS to be in the range of $4.15 to $4.50

Perrigo Company plc (NYSE; TASE: PRGO) today announced results for the first quarter ended April 1, 2017.

Perrigo CEO John T. Hendrickson commented, "I am pleased that our consolidated first quarter 2017 top and bottom line results were consistent with our plan, with our operations continuing to deliver strong cash flow conversion. I continue to anticipate 2017 will be a year of execution to reestablish our foundation, with a projected return to consolidated growth in 2018. First quarter CHC International GAAP operating margin was 0.1%.  Our consumer-facing businesses delivered strong adjusted margins as actions we have taken in our CHC International segment resulted in adjusted operating margin expansion of 130 basis points to 13.8%. RX GAAP operating income was $88 million. RX adjusted operating income was roughly in line with last year, excluding Entocort^® from both years, as our proactive approach to improve the cost structure in RX partially offset price erosion in the segment. Actions taken this quarter by the Perrigo leadership team to improve our cost structure have established a more efficient operating platform that enables margin expansion with new product launches. In addition, we continue to make progress on our debt pay down strategy. I am also pleased that with today's first quarter 2017 Form 10-Q filing, the Company is now up to date on filing its periodic reports with the Securities and Exchange Commission. We are capitalizing on our unique business model and focusing on Perrigo's core strengths in providing Quality Affordable Healthcare Products^® to customers, patients and families around the globe."

Refer to Tables I - VII 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 included in the attached Condensed Consolidated Statements of Operations and Balance Sheets.

First Quarter Results

Reported net sales for the first quarter of 2017 were $1.2 billion, a decrease of 11% from the prior year. The decrease was primarily due to lower year-over-year contributions from 1) net sales of existing products of $72 million 2) the U.S. Vitamin, Mineral, and Supplement (VMS) business of $47 million, which was sold in the third quarter of 2016, 3) the exit of the European distribution businesses of $38 million, 4) Entocort^® of $25 million, 5) unfavorable foreign currency movements of $22 million, and 6) discontinued products of $13 million. These effects were partially offset by new product sales of $62 million. 

Prior year first quarter adjusted net sales were $1.3 billion, which excluded $47 million of contributions from the U.S. VMS business. Excluding the year-over-year impact of the exited European distribution businesses, Entocort^® and unfavorable foreign currency movements outlined above, net sales were lower by approximately 2%.

Reported net income was $72 million, or $0.50 per share versus a net loss of $529 million, or $3.70 per share, in the prior year. Excluding charges as outlined in Table I at the end of this release, first quarter 2017 adjusted net income was $150 million, or $1.05 per share, versus adjusted net income of $189 million, or $1.32 per share for the same period last year.

Segment Results

Reported net sales in the CHCA segment were lower by 9% primarily due to the sale of the U.S. VMS business in the third quarter of 2016, which was included in the prior year. Reported net sales for the first quarter were $583 million compared to prior year adjusted net sales of $592 million, a decrease of 1% on a constant currency basis. Cough and cold sales were higher in the quarter due to the relatively more severe cough and cold season versus the prior year and new product sales of $25 million were driven by continued strong net sales of the store brand version of Flonase^®. These positive drivers were more than offset by lower sales of existing products of $28 million primarily in the antacids, smoking cessation and infant nutrition categories, along with discontinued products of $5 million.

The CHCA segment achieved first quarter reported gross profit margin of 32.3%, an increase of 160 bps over the prior year, and an adjusted gross profit margin of 34.5%, which was consistent with the prior year. Contributions from new products and supply chain and manufacturing efficiencies were balanced against price erosion in certain OTC categories.

Reported operating margin was 12.9%. Adjusted operating margin of 20.2% was consistent with the prior year.

Reported net sales decreased 15% compared to the first quarter of 2016, and net sales on a constant currency basis declined 10%. Excluding year-over-year contributions of $38 million from the exited unprofitable European distribution businesses and unfavorable foreign currency movements of $20 million, net sales decreased approximately 2%. A decrease in net sales of existing products of $19 million primarily due to lower sales in Germany and Belgium, and discontinued products of $8 million were offset partially by new product sales of $20 million.

First quarter reported gross margin was 45.2%.  Adjusted gross margin was 50.7%, an increase of approximately 240 bps over the previous year as the Company exited the unprofitable distribution businesses and realized benefits from insourcing production of certain products. These benefits were partially offset by lower net sales in Germany and Belgium and the unfavorable effects of foreign currency in the quarter.

Reported operating margin was 0.1% compared to (90.2)% in the previous year primarily due to impairments of $404 million realized in 2016. Adjusted operating margin was 13.8%, an improvement of 130 bps, due to the improvement of gross profit margin and lower operating expenses as a result of cost improvement initiatives across the business and better alignment of promotional investments with sales.

Reported net sales in the first quarter were $217 million, a 12% decrease compared to last year due primarily to lower Entocort^® net sales year-over-year of $25 million and lower sales of existing products of $22 million, due primarily to price erosion, both of which were consistent with our expectations. Partially offsetting these declines were $17 million in new product sales.

First quarter reported gross margin was 44.3% and adjusted gross margin was 54.4%. These gross margin decreases were primarily due to Entocort^® competition and price erosion.

Reported operating margin of 40.5% included approximately $22 million of income related to the sale of certain Abbreviated New Drug Applications, partially offset by restructuring charges of approximately $6 million related to the specialty pharma sales force. Adjusted operating margin was impacted primarily due to Entocort^® competition, as base price erosion was largely offset by the proactive approach to restructure the specialty pharma sales force.

Guidance

The Company continues to expect calendar 2017 net sales to be in the range of $4.6 billion to $4.8 billion. Calendar 2017 GAAP diluted EPS is expected to be in the range of $1.82 to $2.17 and the Company continues to expect adjusted diluted EPS to be in the range of $4.15 to $4.50, including contributions from the Israel API business and excluding the charges outlined in Table I at the end of this release.

Conference Call

The Company will host a conference call at 8:30 a.m. ET (5:30 a.m. PT), May 31, 2017. The conference call will be available 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 #26810305. A taped replay of the call will be available beginning at approximately 12:00 p.m. (ET) Wednesday, May 31 until midnight Friday, June 9, 2017. To listen to the replay, dial 800-585-8367, International 404-537-3406, and use access code #26810305.

About Perrigo

Perrigo Company plc, a leading global healthcare company, delivers value to its customers and consumers by providing Quality Affordable Healthcare Products^®. Founded in 1887 as a packager of home remedies, Perrigo has built a unique business model that is best described as the convergence of a fast-moving consumer goods company, a high-quality pharmaceutical manufacturing organization and a world-class supply chain network. Perrigo is the world's largest manufacturer of over-the-counter ("OTC") healthcare products and supplier of infant formulas for the store brand market. The Company also is a leading provider of branded OTC products throughout Europe and the U.S., as well as a leading producer of "extended topical" prescription drugs. Perrigo, headquartered in Ireland, sells its products primarily in North America and Europe, as well as in other markets, including Australia, Israel and China. Visit Perrigo online at (http://www.perrigo.com).

Forward-Looking Statements

Certain statements in this press release 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 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 press release 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 certain non-GAAP measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts different from the most directly comparable measure calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP) in the statements of operation, balance sheets or statements of cash flows of the Company. Pursuant to the requirements the U.S. Securities and Exchange Commission, the Company has provided reconciliations for net sales on a constant currency basis, net sales excluding sales attributable to held-for-sale businesses, adjusted gross profit, adjusted operating income, adjusted net income, adjusted diluted earnings per share, adjusted gross margin, adjusted operating margin, and adjusted diluted shares within this press release to the most directly comparable U.S. GAAP measures for these non-GAAP measures. These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to the GAAP measures and may not be comparable to similarly named measures used by other companies.

The Company provides non-GAAP financial measures as additional information that it believes is useful to investors and analysts in evaluating the performance of the Company's ongoing operating trends, facilitating comparability between periods and companies in similar industries and assessing the Company's prospects for future performance. These non-GAAP financial measures exclude items, such as impairment charges, restructuring charges, and acquisition and integration-related charges, that by their nature affect comparability of operational performance or that we believe obscure underlying business operational trends. The non-GAAP measures the Company provides are consistent with how management analyzes and assesses the operating performance of the Company, and disclosing them provides investor insight into management's view of the business. Management uses these adjusted financial measures for planning and forecasting in future periods, and evaluating segment and overall operating performance. In addition, management uses certain of the profit measures as factors in determining compensation.

Non-GAAP measures related to profit measurements, which include adjusted gross profit, adjusted operating income, adjusted net income, and adjusted diluted earnings per share, are useful to investors as they provide them with supplemental information to enhance their understanding of the Company's underlying business performance and trends, and enhance the ability of investors and analysts to compare the Company's period-to-period financial results. Management believes that adjusted gross margin and adjusted operating margin are useful to investors, in addition to the reasons discussed above, by allowing them to more easily compare and analyze trends in the Company's peer business group and assisting them in comparing the Company's overall performance to that of its competitors. The Company discloses adjusted net sales, which excludes operating results attributable to held-for-sale businesses, in order to provide information about sales of the Company's continuing business. In addition, the Company discloses net sales growth and adjusted net sales growth on a constant currency basis to provide information about sales of the Company's continuing business excluding the exogenous impact of foreign exchange. The Company believes these supplemental financial measures provide investors with consistency in financial reporting, enabling meaningful comparisons of past, present and future underlying operating results, and also facilitate comparison of the Company's operating performance to the operating performance of its competitors.

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

SOURCE Perrigo Company plc

Related Links

http://www.perrigo.com