perrigo 2016 third quarter financial results · 2 conduct portfolio review and api india facility...
TRANSCRIPT
Perrigo 2016 Third Quarter
Financial Results
NOVEMBER 10, 2016
Note: 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 particular, statements about the Company’s expectations, beliefs, plans, objectives, assumptions, future events or future
performance contained in this presentation are 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.
Please see the Company's documents filed with the Securities and Exchange Commission, including the Company's report filed on Form 10-KT
for the transition period from June 28, 2015 to December 31, 2015, quarterly reports on Form 10-Q, and any amendments thereto for a
discussion of certain important risk factors that relate to forward-looking statements contained in this presentation. 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, future impairment charges, the ability to achieve its guidance, and the ability to execute and achieve the desired benefits of
announced initiatives. These and other important factors 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
Strategic Vision & Action Plans Update
4
The Perrigo Advantage
VISION
QUALITY AFFORDABLE HEALTHCARE LEADERSHIP
Every Second of Every Day
use a Perrigo product PEOPLE
~2.2K
IMPACT IMPACT IMPACT In 2015 Perrigo Saved
Consumers Approximately
$7.5B That’s Over 20 Million Dollars of Saving Per Day
5
Action-Oriented
GOVERNING PRINCIPLES:
OPERATIONAL EXECUTION
ACTION- ORIENTED
TRANSPARENCY PROFITABILITY & CASH FLOW CONVERSION
ACTIONS PROGRESS
1 Corporate Governance New independent directors Geoff Parker and Ted Samuels
2 Conduct Portfolio Review VMS divestiture, pet treats plant, European sports nutrition brand,
and API India facility sales
Tysabri® strategic review, Rx evaluation, to be completed Q1 2017
3 Capitalize on BCH Opportunity Alternatives processes for South Africa, Russia and Argentina businesses
As announced last quarter, on track for $40M supply chain savings over next 2 years
4 Optimizing Organizational Effectiveness
Ireland supply chain initiatives are generating ~$40M run rate contribution to net income
Continue evaluations to optimize organizational efficiencies
5 Execute in CHC & Rx Segments Strong U.S. OTC market position & favorable dynamics in CHC
Leading position in extended topicals
6 6
New Independent Directors Strengthen Board Committees
Geoff Parker added to the Audit Committee
New Independent Directors with Significant Experience and Successful Track Records of Delivering
Shareholder Value
Geoff Parker and Ted Samuels bring substantial and directly relevant experience and expertise
Geoff Parker – former CFO of Anacor Pharmaceuticals; former Goldman Sachs partner in charge of West
Coast healthcare investment banking
Ted Samuels – President of Capital Guardian Trust Company, and Portfolio Manager at Capital Group, which
has $1.39 trillion in assets under management
The Board continues to evolve in order to support strategic initiatives, strengthen governance and deliver value
New Directors with Track Records of Delivering Value 1 Corporate Governance
Additional Board of Directors Changes
Michael Jandernoa and Gary Kunkle have elected to not stand for reelection
7
Opportunities for Tysabri® Royalty 2 Conduct Portfolio Review
Board Authorized Evaluation
Engaged Consultants & Financial Advisors
Tysabri® Strategic Alternatives Evaluation
Expect to Conclude Review in Q1 2017
No Update Expected Until Conclusion of Review
Committed to Investment Grade Ratings
8
Comprehensive Review of Rx Underway 2 Conduct Portfolio Review
Rx Segment Evaluation
Thoughtful Considerations Regarding:
Interdependencies within our businesses
Manufacturing & shared service functions
Expected to Conclude Evaluation in Q1 2017
Engaged Advisors to Assist in Evaluation of:
Market Position
Growth Opportunities
Dis-synergies
9 9
European Branded Business Capitalize on BCH Opportunity
3
Our Action Plan Our Core
Strengths
BCH is a top 5 European OTC business
Similar to U.S., favorable demographics driving an increased use of OTC products
Distribution across the continent into all major OTC channels
Leading local brands across numerous markets
Our
Objectives
Capture substantial shareholder value by growing business, increasing
margins and driving profitability
CHC-Level Profitability
Maintain as a Top 5 European OTC Business
Growth at or Above Market
10 10
Performance Enhancement in European Branded Business Capitalize on BCH Opportunity 3
Enhance
Leadership
Geographic and
Brand Strategy
Optimize
Infrastructure
Increased
Innovation
Well performing countries have effective leaders who quickly adapt to
changing market dynamics
New country leaders in Belgium, Italy, Germany & France
Manage underperforming geographies and brands through divestiture
or partnership
Align investments with our ability to win by product and by market
Increase efficiency and align costs with revenues
Integrate BCH onto Irish platform; overlay CHC operational philosophies to
increase operating margins; incentivize business teams to focus on margin
growth
Increase brand investments in innovation
Reinvigorate Pan-European innovation process
11 11
Optimizing Cost Structure Enhancing Organizational Effectiveness 4
Globalization
Cost
Effectiveness
Maximize global infrastructure for products, sourcing & supply
Further leverage global center of excellence
Previously announced Ireland supply chain initiatives are generating
~$40M run rate contribution to net income
Enhance low cost, integrated supply network
Align cost structure with market dynamics
Evaluation to be complete by Q1 2017
12 12
0.9%
2.3%
-1.5%
6.4%
3.5%
1.2%
2.4%
3.3%
2.8%
-2.1%
13.3%
4.7%
-1.8%
3.2%
-3.1%
1.0%
9.1%
2.6%
2.6%
4.2%
0.6%
-5% 0% 5% 10% 15%
Analgesics
Cough, Cold, Allergy, Sinus
Infant Formula
Smoking Cessation
Gastrointestinal
Diabetes
Total OTC
Store Brand National Brand Category
Source: IRI MULO Latest 52 Weeks Ending October 2nd, 2016
Strong U.S. OTC Market Position Favorable Market Dynamics
Demographics will drive increased OTC
utilization
Fewer people to fund healthcare, driving
the need for greater efficiency
OTC delivers greater healthcare
efficiency and value
Store brand proposition further
enhances OTC’s efficiency and value
Products expected to continue to switch
from Rx to OTC status
$19 billion market opportunity in
potential Rx-to-OTC switches
Enhancing Execution Consumer Healthcare 5
1
2
3
4
5
6
13 13
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
Enhancing Execution Consumer Healthcare – Rx-to-OTC Switches 5
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 Others 28%
48%
9%
All Others 43%
64%
GRx Mometason
e 22%
All Others 14%
39%
31%
21%
All Others
9%
14 14
Enhancing Execution Consumer Healthcare – New Product Pipeline 5
CHC ANDA PIPELINE >$1B IN NATIONAL BRAND SALES
15 15
$0.0
$0.5
$1.0 27 ANDAS pending FDA approval
5 paragraph IV litigation
3 active clinical studies
#1
Extended Topicals Portfolio Position Growth Opportunities
#5 #2 #4 #3 #6 #7 #8 #9 #10
Source: IMS National Sales Perspectives, IMS Form (VA VAGINALS, TO OTHER TOPICALS, DD DERMATOLOGICALS, AN RECTALS. TOP) LTM ending July, 2016
Enhancing Execution Rx Pharmaceuticals 5
$ Billions*
16 16
Expected 2016 new products ~$300M
Successful launches of store brand
version of Flonase® and the generic
version of BenzaClin®
Expected new products by end of 2017
Further launches of store brand versions
of Mucinex® family
Launch of generic version of ProAir®
New Products to Drive Growth
New Products Executing on the Consumer & Rx Strategies 5
17 17
3Q 2016 Financial Review
Judy Brown
18 18
($ in millions, except per share amounts)
Q3 2016 Q3 2016 Q3 2015 Reported Change YoY %
Non-GAAP Adjustments Reported Adjusted(1) Reported
Net Sales $1,355 $1,333 $1,345 1 %
Gross Profit $506 $633 $549 (8 %)
R&D Expense 50 50 42 21 %
Distribution, Selling & Administrative Expense ("DSG&A") 285 239 316 (10 %)
Restructuring and Impairments $1,687 $0 $2 NM
Operating Income (Loss) $(1,515) $344 $189 NM
Interest & Other Expense 56 56 56 — %
Net Income (Loss) $(1,255) $236 $113 NM
Diluted Earnings (Loss) Per Share $(8.76) $1.65 $0.77 NM
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Held-for-sale businesses (U.S. VMS, European sports brand, and India API businesses)
NM = Not meaningful
Consolidated – Q3 2016 Selected Financial Information
• HFS(2) operating results
• Acquisition-related amortization
expenses
• Contingent consideration fair
value adjustment
• Restructuring
• Goodwill, intangible asset & held
for sale impairments
• Related tax effects
19 19
($ in millions) Q3 2016 Q3 2015 % Change
Y/Y % Change Constant
Currency Y/Y(1)(2)
Adjusted Consolidated Perrigo Net Sales(3) $1,333 $1,304 2 % 3 %
Adjusted Operating Income 344 359 (4 %)
Adjusted Consumer Healthcare (CHC) Net Sales(3) 648 634 2 % 3 %
Adjusted Operating Income 128 139 (7 %)
Adjusted Branded Consumer Healthcare (BCH) Net Sales(4) 304 302 1 % 2 %
Adjusted Operating Income 30 44 (31 %)
Prescription Pharmaceuticals (Rx) Net Sales 267 260 3 % 4 %
Adjusted Operating Income 114 110 4 %
Specialty Sciences Net Sales 93 85 10 % 11 %
Adjusted Operating Income 96 82 17 %
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Excludes impact of currency translation compared to prior year, including Fx impact on Tysabri® royalty stream
(3) Third quarter 2016 and 2015 net sales excludes net sales from held-for-sale businesses. Q3 2015 adjustment made for comparative purposes to sales only.
(4) Third quarter 2016 net sales excludes net sales from held-for-sale businesses.
Net Sales and Operating Income As Adjusted (1) – Q3 2016
20 20
$634 $648
$550
$575
$600
$625
$650
$675
Q2 2015 Q2 2016
• Adjusted net sales increased 3% on a constant
currency basis excluding sales from the U.S. VMS
business(2)
• Strong demand in U.S. Consumer Healthcare,
driven by increased sales in the infant formula and
smoking cessation categories
• New product sales of $33 million
$227M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin Adjusted Operating Margin
$128M
35.0% 19.8%
-7 % -7 %
-70 bps
-120 bps
2016 Q3 Year-Over-Year Adjusted Net Sales Growth
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Third quarter 2016 and 2015 net sales excludes net sales from the US VMS business of $21 million and $41 million, respectively. Q3 2015 adjustment made for comparative purposes to sales only.
Consumer Healthcare Segment As Adjusted(1) – Q3 2016
Q3 2015 Q3 2016
in m
illio
ns
21 21
2016 Q3 Year-Over-Year Adjusted Net Sales Growth
• Net sales increased 2% on a constant currency
basis excluding sales from the held-for-sale
European sports brand(2)
• GSK product portfolio and Yokebe contributed
$18 million
• New product sales of $26 million
$302 $304
$285
$290
$295
$300
$305
$310
Q2 2015 Q2 2016
$144M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin Adjusted Operating Margin
$30M
47.5% 10.0%
-31 % -15 %
-460 bps
-850 bps
(1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
(2) Third quarter 2016 net sales excludes net sales from a European sports brand, which is currently held-for-sale.
Branded Consumer Healthcare Segment As Adjusted (1) – Q3 2016
Q3 2015 Q3 2016
in m
illio
ns
22 22 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
• Net sales increased 4% on a constant currency
basis driven primarily by sales from recent product
acquisitions and an increase in new product sales
• New product sales of $18 million
• Adjusted operating margins 40 basis points above
the prior year
2016 Q3 Year-Over-Year Net Sales Growth
$260 $267
$230
$240
$250
$260
$270
$280
Q2 2015 Q2 2016
$159M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin Adjusted Operating Margin
$114M
59.3% 42.5%
+4 % +7 %
+40 bps
+210 bps
Rx Pharmaceuticals Segment As Adjusted(1) – Q3 2016
Q3 2015 Q3 2016
in m
illio
ns
23 23 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
• Continued trend of positive patient adds
• Physicians continue to choose this therapy for
patients requiring high efficacy
• Well-understood safety profile after nearly 10
years on the market
2016 Q3 Year-Over-Year Net Sales Growth
$85
$93
$70
$75
$80
$85
$90
$95
$100
Q2 2015 Q2 2016
$93M
Adjusted Gross Profit Adjusted Operating Income
Adjusted Gross Margin Adjusted Operating Margin
$96M
100.0% 103.0%
+17 % +10 %
+610 bps
0 bps
Specialty Sciences Segment As Adjusted(1) – Q3 2016
Q3 2015 Q3 2016
in m
illio
ns
24 24
Balance Sheet
24
Balance Sheet
Committed to maintaining investment grade rating
Proactively repaid $500 million senior notes maturing in November
Strong cash flow conversion enabling capital allocation priorities focused on deleveraging
Total Cash(1)
$363M Total Debt(1)
$5.9B
(1) As of October, 1, 2016
25 25
(1) See attached Appendix for reconci l iat ion 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) December 31, 2015 exchange rates were used as the basis for calendar year 2016 guidance
(4) Excludes the expected results of held-for-sale businesses
Calendar Year 2016 Guidance
25
Calendar Year
2015(2)
Calendar Year
2016 Guidance
at June 30,
2016 Rates
Presented Aug.
10, 2016
Impact of Sept.
30, 2016 Rates
Compared to
June 30, 2016
Rates
Calendar Year
2016 Guidance
at Sept. 30,
2016 Rates
Reaffirmed Nov.
10, 2016
Net Sales $5.35B $5.3 - $5.5B (1),(3),(4)
$4.7M $5.3 - $5.5B
(1),(3),(4)
Adjusted
Diluted
EPS(1)
$7.59/share $6.85 -
$7.15/share $0.01/share
$6.85 -
$7.15/share
26 26
Calendar Year
2016 Segment Net Sales Guidance
Calendar Year 2016 Guidance
Calendar Year 2016
Guidance
Adjusted Net Sales $5.3B – $5.5B Adjusted DSG&A as % of Adjusted Net Sales(1) ~19.0%
Adjusted R&D as % of Adjusted Net Sales(1) ~3.5%
Adjusted Operating Income $1.38B – $1.43B
Interest Expense ~$225M
Adjusted Effective Tax Rate ~15%
Adjusted EPS $6.85 – $7.15
Diluted Shares Outstanding ~143.6M
Operating Cash Flow >$0.9B
(1) Percentages are +/- 75 basis points
(2) Guidance excludes the expected results of held-for-sale businesses
Consumer
Healthcare(2) ~$2.6B
Branded Consumer
Healthcare(2) ~$1.3B
Rx Pharmaceuticals ~$1.0B
27 27
John Hendrickson
Leveraging the Perrigo Advantage
28
Roadmap to Delivering Shareholder Value
GOVERNING PRINCIPLES:
OPERATIONAL EXECUTION
ACTION- ORIENTED
TRANSPARENCY PROFITABILITY & CASH FLOW CONVERSION
ACTIONS PROGRESS
1 Corporate Governance New independent directors Geoff Parker and Ted Samuels
2 Conduct Portfolio Review VMS divestiture, pet treats plant, European sports nutrition brand,
and API India facility sales
Tysabri® strategic review, Rx evaluation, to be completed Q1 2017
3 Capitalize on BCH Opportunity Alternatives processes for South Africa, Russia and Argentina businesses
As announced last quarter, on track for $40M supply chain savings over next 2-3 years
4 Optimizing Organizational Effectiveness
Ireland supply chain initiatives have generated ~$40M contribution to net income
Continue evaluations to optimize organizational efficiencies
5 Execute in CHC & Rx Segments Strong U.S. OTC market position & favorable dynamics in CHC
Leading position in extended topicals
29 29
Q&A / Contacts
Arthur J. Shannon
Vice President,
Global Affairs and European
Investor Relations
(269) 686-1709
Bradley Joseph
Vice President,
Global Investor Relations and
Corporate Communications
(269) 686-3373
Questions?
30 30
Three Months Ended
October 1, 2016
September 26, 2015
Intangible asset amortization expense $ 162.1 $ 147.6
Depreciation expense 24.9 27.9
Operating cash flow 303.9 136.1
October 1, 2016
December 31, 2015
Cash and cash equivalents $ 362.7 $ 417.8
Total assets 17,467.6 19,393.9
Long-term debt, less current portion 5,638 4,971.6
PERRIGO COMPANY PLC SUPPLEMENTAL SELECTED FINANCIAL
INFORMATION
(in millions)
(unaudited)
31 31
TABLE I
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(in millions, except per share amounts)
(unaudited)
Three Months Ended October 1, 2016
Consolidated Net Sales Gross Profit R&D Expense DSG&A
Expense
Restructuring and Impairment
Charges Operating
Income (Loss) Interest and
Other Expense Net Income
(Loss)
Diluted Earnings (Loss)
per Share
Reported $ 1,354.9 $ 506.3 $ 50.2 $ 284.8 $ 1,686.5 $ (1,515.2 ) $ 56.3 $ (1,255.2 ) $ (8.76 )
Adjustments:
Amortization expense related primarily to acquired intangible assets $ — $ 129.4 $ (0.3 ) $ (34.1 ) $ — $ 163.8 $ — $ 163.8 $ 1.15
Impairment charges — — — — (1,679.9 ) 1,679.9 — 1,679.9 11.70
Restructuring charges — — — — (6.6 ) 6.6 — 6.6 0.05
Acquisition and integration-related charges — — — (0.5 ) — 0.5 — 0.5 —
Contingent consideration fair value adjustment — — — (4.8 ) — 4.8 (0.3 ) 5.1 0.04
Operating results attributable to held-for-sale businesses* (21.8 ) (2.8 ) (0.2 ) (6.2 ) — 3.6 (0.4 ) 4.0 0.03
Loss on early debt extinguishment — — — — — — 0.4 (0.4 ) —
Non-GAAP tax adjustments*** — — — — — — — (368.0 ) (2.56 )
Adjusted $ 1,333.1 $ 632.9 $ 49.7 $ 239.2 $ — $ 344.0 $ 56.0 $ 236.3 $ 1.65
As a % of adjusted net sales 47.5 % 25.8 %
Diluted weighted average shares outstanding
Reported 143.3
Effect of dilution as reported amount was a loss, while adjusted amount was income**. 0.3
Adjusted 143.6
*Held-for-sale businesses include the U.S. VMS business, European sports brand, and 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) $324.0 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 $21.6 million effect on non-GAAP income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) $22.4 million of discrete income tax adjustments related to impairment calculations for BCH intangible assets, which includes revisions to the weighted average blended tax rates used to calculate opening balance sheet deferred tax liabilities, jurisdictional tax rate changes in Italy, UK & Germany and the related impact on valuation allowances associated with the intangible assets. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-GAAP net income.
32 32
TABLE I (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(in millions, except per share amounts)
(unaudited)
Three Months Ended September 26, 2015
Consolidated Net Sales Gross Profit R&D Expense DSG&A Expense Operating Income
Interest and Other Expense Net Income
Diluted Earnings per Share
Reported $ 1,344.7 $ 548.8 $ 41.6 $ 316.4 $ 188.6 $ 56.4 $ 112.6 $ 0.77
Adjustments:
Amortization expense related primarily to acquired intangible assets $ 109.1 $ (0.1 ) $ (38.4 ) $ 147.6 $ — $ 147.6 $ 1.00
Acquisition and integration-related charges — — (4.1 ) 4.1 0.2 3.9 0.03
Amortization of inventory fair value adjustments related to acquisitions 1.1 — — 1.1 — 1.1 0.01
Legal and consulting fees related to Mylan defense — — (15.6 ) 15.6 — 15.6 0.11
Derivative losses — — — — (4.8 ) 4.8 0.03
Losses from equity method investments — — — — (4.2 ) 4.2 0.03
Restructuring charges — — — 2.2 — 2.2 0.01
Non-GAAP tax adjustments** — — — — — (33.7 ) (0.23 )
Adjusted $ 659.0 $ 41.5 $ 258.3 $ 359.2 $ 47.6 $ 258.3 $ 1.76
As a % of reported net sales 49.0 % 26.7 %
For Comparative Purposes* Diluted weighted average shares outstanding 146.9
Reported $ 1,344.7
Operating results attributable to held-for-sale businesses (40.9 )
Adjusted $ 1,303.8
*2015 net sales adjustment made for 2016 adjusted net sales comparison purposes only and does not change any other prior year financial information or metrics as businesses were not held-for-sale in 2015.
** The non-GAAP tax adjustment includes the following: (1) $31.8 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) a $1.9 million effect on non-GAAP income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-GAAP net income.
33 33
TABLE II
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED SEGMENT INFORMATION
(in millions)
(unaudited)
Three Months Ended Three Months Ended
October 1, 2016 September 26, 2015
Consumer Healthcare (CHC) Net Sales Gross Profit Operating Income Net Sales Gross Profit
Operating Income
Reported $ 669.1 $ 216.8 $ 100.1 $ 675.2 $ 231.0 $ 117.3
Adjustments:
Amortization expense related to acquired intangible assets $ — $ 13.2 $ 19.2 $ 13.2 $ 19.3
Amortization of inventory fair value adjustments related to acquisitions — — — 0.6 0.6
Impairment charges — — 3.7 — —
Operating results attributable to held-for-sale business (21.0 ) (3.4 ) (0.1 ) — —
Restructuring charges — — 5.1 — 2.0
Contingent consideration fair value adjustment — — 0.2 — —
Acquisition and integration-related charges — — 0.1 — (0.5 )
Adjusted $ 648.1 $ 226.6 $ 128.3 $ 244.8 $ 138.7
As a % of adjusted net sales (2016) / As a % of reported net sales (2015) 35.0 % 19.8 % 36.2 % 20.5 %
For Comparative Purposes*
Reported $ 675.2
Operating results attributable to held-for-sale business (40.9 )
Adjusted $ 634.3
Three Months Ended
CHC Research and development expense October 1,
2016 September 26,
2015
Reported $19.6 $18.5
Operating results attributable to held-for-sale business (0.2) (0.5)
Adjusted $19.4 $18
Adjusted year-over-year change 8%
*Q3 2015 net sales adjustment made for Q3 2016 adjusted net sales 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. Q3 2015 gross margin and operating margin use reported net sales as the denominator.
34 34
TABLE II (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED SEGMENT INFORMATION
(in millions)
(unaudited)
Three Months Ended Three Months Ended
October 1, 2016 September 26, 2015
Branded Consumer Healthcare (BCH) Net Sales Gross Profit Operating
Income (Loss) Net Sales Gross Profit Operating Income
Reported $ 304.0 $ 131.6 $ (1,684.3 ) $ 302.2 $ 164.3 $ 4.4
Adjustments:
Amortization expense related primarily to acquired intangible assets — 12.5 40.6 4.5 36.3
Impairment charges — — 1,670.0 — —
Amortization of inventory fair value adjustments related to acquisitions — — — 0.5 0.5
Operating results attributable to held-for-sale business (0.1 ) 0.2 3.0 — —
Restructuring charges — — 1.3 — 0.2
Contingent consideration fair value adjustment — — (0.4 ) — —
Acquisition and integration-related charges — — 0.1 — 2.8
Adjusted $ 303.9 $ 144.3 $ 30.3 $ 169.3 $ 44.2
As a % of adjusted net sales (2016) / As a % of reported net sales (2015) 47.5 % 10.0 % 56.0 % 14.6 %
35 35
TABLE II (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED SEGMENT INFORMATION
(in millions)
(unaudited)
Three Months Ended Three Months Ended
October 1, 2016 September 26, 2015
Prescription Pharmaceuticals (Rx) Net Sales Gross Profit Operating Income Net Sales Gross Profit
Operating Income
Reported $ 267.4 $ 128.1 $ 77.9 $ 260.3 $ 130.4 $ 91.0
Adjustments:
Amortization expense related to acquired intangible assets 30.4 30.7 18.4 18.6
Contingent consideration fair value adjustment — 5.0 — —
Adjusted $ 158.5 $ 113.6 $ 148.8 $ 109.6
As a % of reported net sales 59.3 % 42.5 % 57.2 % 42.1 %
Three Months Ended Three Months Ended
October 1, 2016 September 26, 2015
Specialty Sciences Net Sales Gross Profit Operating Income Net Sales Gross Profit
Operating Income
Reported $ 93.4 $ 20.6 $ 23.3 $ 84.5 $ 12.0 $ 9.0
Adjustment:
Amortization expense related to acquired intangible assets 72.8 72.8 72.5 72.8
Adjusted $ 93.4 $ 96.1 $ 84.5 $ 81.8
As a % of reported net sales 100.0 % 103.0 % 100.0 % 96.9 %
36 36
TABLE III
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CONSTANT CURRENCY
(in millions)
(unaudited)
Three Months Ended
October 1, 2016 September 26,
2015 Total Change FX Change
Constant Currency Change
Net sales
Consolidated* $ 1,333.1 $ 1,303.8 2% 1% 3%
CHC* 648.1 634.3 2% 1% 3%
BCH* 303.9 302.2 1% 1% 2%
Rx 267.4 260.3 3% 1% 4%
Specialty Sciences 93.4 84.5 10% 1% 11%
*2016 and 2015 net sales are adjusted to exclude sales attributable to held-for-sale businesses. See Tables I and II for non-GAAP reconciliations.
37 37
TABLE IV
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CURRENT 2016 GUIDANCE
(in millions, except per share amounts)
(unaudited)
Full Year
2016 EPS Guidance
Reported 2016 Guidance Diluted EPS Range $(9.34) - $(9.04)
Amortization expense related primarily to acquired intangible assets 4.58
Goodwill, intangible asset, investment and held-for-sale impairment charges 14.99
Acquisition, integration and restructuring-related charges 0.27
Other (1) 0.09
Tax effect of non-GAAP adjustments (2) (3.74)
Adjusted 2016 Guidance Diluted EPS Range $6.85 - $7.15
(1) Equity method investment losses and results of operations from held-for-sale businesses
(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 in the first nine months of the year.
Full year 2016 Guidance
Effective Tax Rate Taxes Pre-Tax Income Effective Tax Rate
Reported $ (362 ) $ (1,681 ) Approx. 22%
Tax effect of non-GAAP adjustments 537 2,862
Adjusted $ 175 $ 1,181 Approx. 15%
38 38
TABLE IV (CONTINUED)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
CURRENT 2016 GUIDANCE
(in millions)
(unaudited)
Full Year
2016 Guidance
Consolidated Net Sales
Reported $5,400 - 5,600
Operating results attributable to held-for-sale businesses (100)
Adjusted $5,300 - 5,500
Consolidated DSG&A as a % of Net Sales
Reported Approx. 22.2%
Amortization expense related primarily to acquired intangible assets (2.6)%
Operating results attributable to held-for-sale businesses (0.3)%
Restructuring and integration-related charges (0.3)%
Adjusted Approx. 19.0%
Consolidated R&D as a % of Net Sales
Reported Approx. 3.54%
Amortization expense related primarily to acquired intangible assets (0.02)%
Operating results attributable to held-for-sale businesses (0.02)%
Adjusted Approx. 3.50%
Consolidated Operating Income
Reported $(1,453) - $(1,403)
Amortization expense related primarily to acquired intangible assets 659
Goodwill, intangible asset, and held-for-sale impairment charges 2,127
Operating results attributable to held-for-sale businesses 9
Restructuring and integration-related charges 38
Adjusted $1,380 - $1,430
39 39
TABLE V
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
2016 SEGMENT GUIDANCE
(in millions)
(unaudited)
Full Year
2016 Guidance
CHC Net Sales
Reported $ 2,700
Operating results attributable to held-for-sale business (100 )
Adjusted $ 2,600
BCH Net Sales
Reported $ 1,300.1
Operating results attributable to held-for-sale business (0.1 )
Adjusted $ 1,300.0
Actuals Guidance
First Half of 2016 Second Half of 2016
CHC Operating Margin
Reported 15.4% Approx 17.8%
Amortization expense related to acquired intangible assets 3.0% 1.5%
Operating results attributable to held-for-sale business 0.5% 0.1%
Impairment charges 0.6% 0.1%
Integration and restructuring-related charges 0.2% 0.2%
Adjusted 19.7% Approx. 19.7%
BCH Operating Margin
Reported Approx. (125.6)%
Amortization expense related primarily to acquired intangible assets 6.3%
Impairment charges 128.5%
Integration and restructuring-related charges 0.4%
Operating results attributable to held-for-sale business 0.4%
Adjusted Approx. 10%
Rx Operating Margin
Reported Approx. 24.4% - 28.4%
Amortization expense related to acquired intangible assets 15.6%
Adjusted Approx. 40.0 - 44.0%
40 40
TABLE VII
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(unaudited)
Twelve Months Ended December 31,
2015 Diluted Earnings (Loss) per Share
Reported $ (0.23 )
Adjustments:
Amortization expense related to acquired intangible assets 3.65
Losses from derivatives associated primarily with the Omega acquisition 1.87
Goodwill, intangible asset, held-for-sale and investment impairment charges 1.64
Legal and consulting fees related to Mylan defense 0.70
Acquisition and integration-related charges 0.25
Restructuring charges 0.19
Omega financing fees and loss on early debt extinguishment 0.14
Amortization of inventory and fixed asset fair value adjustments related to acquisitions 0.13
Initial payment made in connection with an R&D arrangement 0.13
Losses from equity method investments 0.08
Tax effect of non-GAAP adjustments (1) (0.95 )
Adjusted $ 7.59
(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.
41 41
TABLE VIII
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(unaudited)
Three Months Ended
October 1, 2016
Consolidated Tysabri® Excluding Tysabri®
Operating cash flow $ 304.0 $ 89.3 $ 214.7
Adjusted net income $ 236.3 $ 90.9 $ 145.4
Cash conversion ratio 129 % 98 % 148 %
Three Months Ended
October 1, 2016
September 26, 2015 Growth
Reported Net Sales
US CHC $ 584.6 $ 584.4 — %
OUS CHC 84.5 90.8 (7 )%
Total reported net sales $ 669.1 $ 675.2 (1 )%
Reported US CHC sales $ 584.6 $ 584.4 — %
Operating results attributable to held-for-sale business (21.0 ) (40.9 ) (49 )%
Adjusted US CHC sales $ 563.6 $ 543.5 4 %
42 42
TABLE VIII (continued)
PERRIGO COMPANY PLC
RECONCILIATION OF NON-GAAP MEASURES
SELECTED CONSOLIDATED INFORMATION
(unaudited)
Three Months Ended
October 1, 2016
September 26, 2015
Total Change
Adjusted operating income
Consolidated $ 344.0 $ 359.2 (4 )%
CHC 128.3 138.7 (7 )%
BCH 30.3 44.2 (31 )%
Rx 113.6 109.6 4 %
Specialty Sciences 96.1 81.8 17 %
Adjusted gross profit
Consolidated $ 632.9 $ 659.0 (4 )%
CHC 226.6 244.8 (7 )%
BCH 144.3 169.3 (15 )%
Rx 158.5 148.8 7 %
Specialty Sciences 93.4 84.5 10 %