Perrigo Company plc Reports Record Quarterly Revenue and Adjusted Operating Income Despite Weak Retail and Cough, Cold and Flu Seasons

DUBLIN, May 7, 2014 /PRNewswire/ -- 

  • Fiscal third quarter net sales increased 9% year-over-year to a record $1,004 million.
  • Fiscal third quarter adjusted net income increased 31% to $176 million, or $1.31 per diluted share; GAAP net income of $48 million, or $0.36 per diluted share, includes amortization expense and restructuring charges.
  • Fiscal third quarter adjusted operating income increased 16% to a record $241 million, a 140 basis point expansion as a percent to sales, with GAAP operating income of $103 million.
  • Record adjusted gross margin of 41.4%, with GAAP gross margin of 31.4%.
  • Given the weak retail season and the relatively weak cough, cold and flu season, management now expects full-year fiscal 2014 adjusted earnings range of $6.15 to $6.30 per diluted share and reported earnings of between $1.76 and $1.91 per diluted share.

Perrigo Company plc (NYSE: PRGO; TASE: PRGO) today announced results for its three months ended March 29, 2014.

Perrigo's Chairman, President and CEO Joseph C. Papa commented, "This was both a very active as well as challenging quarter. We launched over 35 new products, rapidly executed our integration plan for Elan to accelerate long-term savings, including the transfer of ELND005, and acquired a number of over-the-counter ("OTC") products in Australia and New Zealand. Despite a weak retail environment with slow foot traffic and a relatively weak cough, cold and flu season, we crossed the billion dollar revenue mark for the first time in any quarter in our history. The Rx team launched several exciting new products, while the Nutritionals team launched its first branded vitamin product, insync®. These accomplishments, among many others, are testament to the dedication of every employee at Perrigo."

Refer to Tables I, II and III 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 Condensed Consolidated Statements of Income, Balance Sheets and Cash Flows.

Perrigo Company

(in millions, except per share amounts)

(see the attached Table I for reconciliation to GAAP numbers)

(YoY % Change may not calculate due to rounding)



Fiscal 2014

Fiscal 2013




Third Quarter

Ended

Third Quarter

Ended

 

YoY


3/29/2014

3/30/2013

% Change

Net Sales

$1,004.2

$919.8

9%

Reported Net Income

$48.1

$111.9

-57%

Adjusted Net Income

$176.2

$134.0

31%

Reported Diluted EPS

$0.36

$1.18

-70%

Adjusted Diluted EPS

$1.31

$1.42

-8%

Diluted Shares

134.3

94.5

42%

Third Quarter Results

Net sales in the quarter were $1,004 million, an increase of 9% over the third quarter of fiscal 2013, driven primarily by $77 million in sales attributable primarily to the Elan Corporation plc ("Elan"), Rosemont Pharmaceuticals, Ltd. ("Rosemont"), Fera Pharmaceuticals, LLC ("Fera"), and Velcera, Inc. ("Velcera") acquisitions and new product sales of $60 million. Excluding charges as outlined in Table I at the end of this release, third quarter fiscal 2014 adjusted net income increased 31% to $176 million or $1.31 per diluted share. Reported net income was $48 million, or $0.36 per diluted share. The difference between the reported net income and adjusted net income was attributable primarily to amortization expense and restructuring charges.

Consumer Healthcare

Consumer Healthcare Segment

(in millions)

(see the attached Table II for reconciliation to GAAP numbers)

(YoY % Change may not calculate due to rounding)



Fiscal 2014

Fiscal 2013



Third Quarter

Ended

Third Quarter

Ended


YoY


3/29/2014

3/30/2013

% Change





Net Sales

$537.3

$536.8

—%

Reported Gross Profit

$169.0

$176.6

-4%

Adjusted Gross Profit

$172.5

$180.1

-4%

Reported Operating Income

$84.4

$95.9

-12%

Adjusted Operating Income

$91.3

$101.0

-10%





Reported Gross Margin

31.5%

32.9%

-140 bps

Adjusted Gross Margin

32.1%

33.5%

-140 bps

Reported Operating Margin

15.7%

17.9%

-220 bps

Adjusted Operating Margin

17.0%

18.8%

-180 bps

Consumer Healthcare segment net sales were $537 million, reflecting an increase in sales of existing products of $17 million (smoking cessation and dermatologic categories), new product sales of approximately $12 million and $6 million attributable to the recent acquisitions of Velcera and OTC products acquired from Aspen Global Inc. These combined increases were offset by a decline of $36 million in sales of existing products (cough/cold, contract manufacturing and analgesics categories) due primarily to a weak retail environment, a relatively weak cough/cold and flu season and the return to market of a national branded competitor.

Gross margin contracted 140 bps due to an under absorption of fixed production costs on lower volume output versus last year.

Nutritionals

Nutritionals Segment

(in millions)

(see the attached Table II for reconciliation to GAAP numbers)

(YoY % Change may not calculate due to rounding)



Fiscal 2014

Fiscal 2013




Third Quarter

Ended

Third Quarter

Ended

 

YoY


3/29/2014

3/30/2013

% Change






Net Sales

$137.8

$133.3

+3%

Reported Gross Profit

$35.2

$31.0

+14%

Adjusted Gross Profit

$38.3

$34.0

+13%

Reported Operating Income

$7.3

$7.0

+5%

Adjusted Operating Income

$16.6

$14.3

+16%





Reported Gross Margin

25.6%

23.2%

+240 bps

Adjusted Gross Margin

27.8%

25.5%

+230 bps

Reported Operating Margin

5.3%

5.2%

+10 bps

Adjusted Operating Margin

12.1%

10.7%

+140 bps

The Nutritionals segment reported third quarter net sales of $138 million, compared with $133 million a year ago, an increase of more than 3%. New product sales of $7 million and an increase in existing product sales of $4 million were partially offset by $6 million in discontinued products.

Third quarter gross margin expansion was due primarily to improved operating efficiencies versus this time last year.

Rx Pharmaceuticals

Rx Pharmaceuticals Segment

(in millions)

(see the attached Table II for reconciliation to GAAP numbers)

(YoY % Change may not calculate due to rounding)



Fiscal 2014

Fiscal 2013




Third Quarter

Ended

Third Quarter

Ended


YoY


3/29/2014

3/30/2013

% Change






Net Sales

$223.4

$189.4

+18%

Reported Gross Profit

$112.9

$96.5

+17%

Adjusted Gross Profit

$130.2

$109.6

+19%

Reported Operating Income

$77.0

$73.4

+5%

Adjusted Operating Income

$100.3

$86.6

+16%





Reported Gross Margin

50.5%

51.0%

-50 bps

Adjusted Gross Margin

58.3%

57.9%

+40 bps

Reported Operating Margin

34.5%

38.8%

-430 bps

Adjusted Operating Margin

44.9%

45.7%

-80 bps

The Rx Pharmaceuticals segment third quarter net sales increased 18% to $223 million due primarily to new product sales of $33 million and $17 million in sales related to the Rosemont and Fera acquisitions, partially offset by a decrease in existing product sales of $9 million and $8 million in discontinued products.

The adjusted gross margin increased due primarily to acquisitions and favorable product mix, while the adjusted operating margin was impacted by investments to grow our specialty sales force and incremental operating expenses from acquisitions.

API

API Segment

(in millions)

(see the attached Table II for reconciliation to GAAP numbers)

(YoY % Change may not calculate due to rounding)



Fiscal 2014

Fiscal 2013




Third Quarter

Ended

Third Quarter

Ended


YoY


3/29/2014

3/30/2013

% Change






Net Sales

$32.0

$41.1

-22%

Reported Gross Profit

$14.0

$20.9

-33%

Adjusted Gross Profit

$14.5

$21.4

-32%

Reported Operating Income

$6.8

$11.7

-43%

Adjusted Operating Income

$7.3

$12.2

-40%





Reported Gross Margin

43.6%

50.9%

-730 bps

Adjusted Gross Margin

45.3%

52.1%

-680 bps

Reported Operating Margin

21.0%

28.5%

-750 bps

Adjusted Operating Margin

22.7%

29.7%

-700 bps

The API segment's third quarter net sales declined to $32 million due primarily to a decrease in sales of existing products of $17 million as a result of increased competition on certain products, partially offset by $8 million in new product sales.

Margins contracted due primarily to product mix, lower volumes resulting in lower absorption of fixed costs and increased investments.

Specialty Sciences

Specialty Sciences Segment

(in millions)

(see the attached Table II for reconciliation to GAAP numbers)



Fiscal 2014


Third Quarter

Ended


3/29/2014



Net Sales

$53.4

Reported Gross Loss

-$22.9

Adjusted Gross Profit

$53.4

Reported Operating Loss

-$54.5

Adjusted Operating Income

$38.7



Reported Gross Margin

-42.9%

Adjusted Gross Margin

100.0%

Reported Operating Margin

-102.1%

Adjusted Operating Margin

72.5%

During the third quarter, the Company recognized $53 million of revenue related to global sales of Multiple Sclerosis drug Tysabri®, which is manufactured and distributed by Biogen Idec, Inc.

Reported gross and operating losses were impacted by $76 million of amortization expense and $18 million of restructuring charges, respectively. Operating expenses included R&D investments related to the ELND005 clinical program and other administrative costs.

Closing

Chairman, President and CEO Joseph C. Papa concluded, "Although this was a difficult quarter, we will continue to invest for the long-term by focusing on our new product pipeline and optimizing our global supply chain to support our mission of providing quality healthcare at affordable prices. Despite the challenges of this quarter, we remain upbeat as the megatrends in our durable business model remain unchanged, highlighted by the increasing number of products switching from prescription to OTC status. For that reason, we remain confident in our ability to make healthcare more affordable for consumers around the globe."

Excluding the charges outlined in Table III at the end of this release, the Company now expects fiscal 2014 adjusted earnings to be between $6.15 and $6.30 per diluted share as compared to $5.61 in fiscal 2013. This range implies a year-over-year growth rate in adjusted earnings of 10% to 12% over fiscal 2013's adjusted earnings per diluted share. The Company also expects fiscal 2014 reported earnings to be between $1.76 and $1.91 per diluted share as compared to $4.68 in fiscal 2013.

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 #32240829. A taped replay of the call will be available beginning at approximately 1:00 p.m. (ET) Wednesday, May 7, until midnight Friday, May 23, 2014. To listen to the replay, dial 855-859-2056, International 404-537-3406, and use access code 32240829.

From its beginnings as a packager of generic home remedies in 1887, Perrigo Company plc, headquartered in Ireland, has grown to become a leading global healthcare supplier. Perrigo develops, manufactures and distributes over-the-counter (OTC) and generic prescription (Rx) pharmaceuticals, nutritional products and active pharmaceutical ingredients (API), and has a specialty sciences business comprised of assets focused on the treatment of Multiple Sclerosis. The Company is the world's largest manufacturer of OTC healthcare products for the store brand market and an industry leader in pharmaceutical technologies. Perrigo's mission is to offer uncompromised "Quality Affordable Healthcare Products®," and it does so across a wide variety of product categories primarily in the United States, United Kingdom, Mexico, Israel and Australia, as well as more than 40 other key markets worldwide, including Canada, China and Latin America. Visit Perrigo on the Internet (http://www.perrigo.com).

Note: Certain statements in this report are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. 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 report, including certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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 Item 1A of the Form 10-K, which the Company is the successor registrant, for the year ended June 29, 2013 and Part II, Item 1A of the Company's Form 10-Q for a discussion of certain important risk factors that relate to forward-looking statements contained in this report. 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. 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. Any forward-looking statements 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.


PERRIGO COMPANY PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(unaudited)














Three Months Ended


Nine Months Ended


March 29, 2014


March 30, 2013


March 29,
 2014


March 30,
 2013













Net sales

$

1,004.2



$

919.8



$

2,916.6



$

2,572.6


Cost of sales

689.2



588.4



1,884.7



1,648.8


Gross profit

315.0



331.4



1,031.9



923.8














Operating expenses












Distribution

13.9



12.6



41.2



35.0


Research and development

44.7



28.5



114.5



84.2


Selling

52.5



49.1



150.0



129.6


Administration

81.1



62.6



314.2



176.0


Write-off of in-process research and development





6.0




Restructuring

19.5





36.5




              Total operating expenses

211.7



152.8



662.4



424.8














Operating income

103.3



178.6



369.5



499.0














Interest, net

26.2



16.1



77.3



47.2


Other expense, net

1.7



0.8



6.8



0.8


Loss on sales of investments

12.7



1.6



12.7



4.7


Loss on extinguishment of debt





165.8




Income before income taxes

62.7



160.1



106.9



446.3


Income tax expense

14.6



48.2



33.5



122.8


Net income

$

48.1



$

111.9



$

73.4



$

323.5














Earnings per share












Basic earnings per share

$

0.36



$

1.19



$

0.67



$

3.45


Diluted earnings per share

$

0.36



$

1.18



$

0.67



$

3.42














Weighted average shares outstanding












Basic

133.7



94.0



108.9



93.8


Diluted

134.3



94.5



109.4



94.4














Dividends declared per share

$

0.105



$

0.09



$

0.285



$

0.26


 

PERRIGO COMPANY PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)














Three Months Ended


Nine Months Ended


March 29, 2014


March 30, 2013


March 29, 2014


March 30, 2013

Net income

$

48.1



$

111.9



$

73.4



$

323.5


Other comprehensive income (loss):












Change in fair value of derivative financial instruments, net of tax

(1.0)



1.6



(11.6)



8.3


Foreign currency translation adjustments

6.2



4.8



59.3



38.2


Change in fair value of investment securities, net of tax

10.5



0.3



5.7



1.3


Post-retirement and pension liability adjustments, net of tax





(0.1)




Other comprehensive income, net of tax

15.7



6.7



53.3



47.8


Comprehensive income

$

63.8



$

118.6



$

126.7



$

371.3


 

PERRIGO COMPANY PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)








March 29,
 2014


June 29,
 2013

Assets






Current assets






Cash and cash equivalents

$

609.4



$

779.9


Investment securities

7.7




Accounts receivable, net of allowance for doubtful accounts of $2.8 million and $2.1 million, respectively

793.1



651.9


Inventories

693.5



703.9


Current deferred income taxes

66.1



47.1


Income taxes refundable

74.4



6.1


Prepaid expenses and other current assets

60.2



48.0


Total current assets

2,304.4



2,236.9


Property and equipment

1,407.5



1,290.4


Less accumulated depreciation

(666.6)



(609.0)



740.9



681.4


Goodwill and other indefinite-lived intangible assets

3,276.1



1,174.1


Equity method investments

60.6



4.4


Other intangible assets, net

7,181.4



1,157.6


Non-current deferred income taxes

23.8



20.3


Other non-current assets

155.5



76.1



$

13,742.7



$

5,350.8








Liabilities and Shareholders' Equity






Current liabilities






Accounts payable

$

325.3



$

382.0


Short-term debt



5.0


Payroll and related taxes

103.5



82.1


Accrued customer programs

219.7



131.7


Accrued liabilities

152.5



95.6


Accrued income taxes

10.2



11.6


Current deferred income taxes

0.1



0.2


Current portion of long-term debt

141.7



41.2


Total current liabilities

953.0



749.4


Non-current liabilities






Long-term debt, less current portion

3,125.5



1,927.8


Non-current deferred income taxes

830.4



127.8


Other non-current liabilities

275.1



213.2


Total non-current liabilities

4,231.0



2,268.8


Shareholders' Equity






Controlling interest:






Preferred shares, $0.0001 par value, 10 million shares authorized




Ordinary shares, €0.001 par value, 10 billion shares authorized

6,670.5



538.5


Accumulated other comprehensive income

130.3



77.0


Retained earnings

1,757.3



1,715.9



8,558.1



2,331.4


Noncontrolling interest

0.6



1.2


Total shareholders' equity

8,558.7



2,332.6



$

13,742.7



$

5,350.8








Supplemental Disclosures of Balance Sheet Information






Preferred shares, issued and outstanding




Ordinary shares, issued and outstanding

133.8



94.1


 

PERRIGO COMPANY PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)








Nine Months Ended


March 29, 2014


March 30, 2013

Cash Flows From (For) Operating Activities






Net income

$

73.4



$

323.5


Adjustments to derive cash flows






Loss on extinguishment of debt

165.8




Write-off of IPR&D

6.0




Non-cash restructuring charges

17.6




Loss on sales of investments

12.7



4.7


Depreciation and amortization

237.6



112.8


Share-based compensation

18.5



14.0


Income tax benefit from exercise of stock options

(1.0)



(0.3)


Excess tax benefit of stock transactions

(6.4)



(15.4)


Deferred income taxes

(27.1)



(3.1)


Subtotal

497.1



436.2


Changes in operating assets and liabilities, net of acquisitions






Accounts receivable

(90.0)



(5.9)


Inventories

19.7



(81.3)


Accounts payable

(52.4)



(17.4)


Payroll and related taxes

(40.3)



(21.4)


Accrued customer programs

82.6



10.0


Accrued liabilities

8.8



10.1


Accrued income taxes

(21.3)



31.2


Other

(3.4)



18.6


Subtotal

(96.3)



(56.1)


Net cash from operating activities

400.8



380.1


Cash Flows (For) From Investing Activities






Acquisitions of businesses, net of cash acquired

(1,598.3)



(607.8)


Purchase of securities

(15.0)




Proceeds from sales of securities

81.4



8.6


Proceeds from sales of property and equipment

6.2




Additions to property and equipment

(120.0)



(63.5)


Net cash for investing activities

(1,645.7)



(662.7)


Cash Flows (For) From Financing Activities






Purchase of noncontrolling interest

(7.2)




Borrowings (repayments) of short-term debt, net

(5.0)



4.4


Premium on early retirement of debt

(133.5)




Net proceeds from debt issuances

3,293.6



40.8


Repayments of long-term debt

(2,000.0)



(40.0)


Deferred financing fees

(48.8)



(0.6)


Excess tax benefit of stock transactions

6.4



15.4


Issuance of common stock

8.9



8.7


Repurchase of common stock

(7.5)



(12.3)


Cash dividends

(32.0)



(24.5)


Net cash from (for) financing activities

1,074.9



(8.1)


Effect of exchange rate changes on cash

(0.5)



(11.0)


Net decrease in cash and cash equivalents

(170.5)



(301.7)


Cash and cash equivalents, beginning of period

779.9



602.5


Cash and cash equivalents, end of period

$

609.4



$

300.8








Supplemental Disclosures of Cash Flow Information






Cash paid/received during the period for:






Interest paid

$

54.7



$

31.2


Interest received

$

2.1



$

2.5


Income taxes paid

$

83.3



$

93.5


Income taxes refunded

$

3.6



$

1.3


 

 

Table I

PERRIGO COMPANY PLC

RECONCILIATION OF NON-GAAP MEASURES

(in millions, except per share amounts)

(unaudited)


























Three Months Ended







Consolidated

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

1,004.2



$



$

1,004.2



$

919.8



$



$

919.8



9

%


9

%

Cost of sales

689.2



101.2


(a)

588.0



588.4



20.5


(a,h)

567.9



17

%


4

%

Gross profit

315.0



101.2



416.2



331.4



20.5



351.9



-5

%


18

%

























Operating expenses
























Distribution

13.9





13.9



12.6





12.6



11

%


10

%

Research and development

44.7





44.7



28.5





28.5



57

%


57

%

Selling

52.5



5.5


(a)

47.0



49.1



5.3


(a)

43.8



7

%


7

%

Administration

81.1



11.1


(a,b,c,d)

70.0



62.6



3.8


(a,i)

58.8



30

%


19

%

Restructuring

19.5



19.5


(e)









NM


NM

              Total operating expenses

211.7



36.1



175.6



152.8



9.1



143.7



39

%


22

%

























Operating income

103.3



137.3



240.6



178.6



29.6



208.2



-42

%


16

%

Interest, net

26.2





26.2



16.1





16.1



63

%


63

%

Other expense, net

1.7



1.8


(f)

(0.1)



0.8





0.8



106

%


-113

%

Loss on sales of investments

12.7



12.7





1.6



1.6





NM


NM

Income before income taxes

62.7



151.8



214.5



160.1



31.2



191.3



-61

%


12

%

Income tax expense

14.6



23.8


(g)

38.3



48.2



9.1


(g)

57.3



-70

%


-33

%

Net income

$

48.1



$

128.0



$

176.2



$

111.9



$

22.1



$

134.0



-57

%


31

%

























Diluted earnings per share

$

0.36






$

1.31



$

1.18






$

1.42



-70

%


-8

%

























Diluted weighted average shares outstanding

134.3






134.3



94.5






94.5
































Selected ratios as a percentage of net sales**
























         Gross profit

31.4

%





41.4

%


36.0

%





38.3

%







         Operating expenses

21.1

%





17.5

%


16.6

%





15.6

%







         Operating income

10.3

%





24.0

%


19.4

%





22.6

%
























































Nine Months Ended







Consolidated

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

2,916.6



$



$

2,916.6



$

2,572.6



$



$

2,572.6



13

%


13

%

Cost of sales

1,884.7



162.2


(a)

1,722.5



1,648.8



57.1


(a,p)

1,591.7



14

%


8

%

Gross profit

1,031.9



162.2



1,194.1



923.8



57.1



980.9



12

%


22

%

























Operating expenses
























Distribution

41.2





41.2



35.0





35.0



18

%


18

%

Research and development

114.5





114.5



84.2





84.2



36

%


36

%

Selling

150.0



16.6


(a)

133.5



129.6



15.6


(a)

114.0



16

%


17

%

Administration

314.2



113.9


(a,j,k,l,m)

200.3



176.0



8.3


(a,q,r)

167.7



79

%


19

%

Write-off of IPR&D

6.0



6.0


(n)









NM


NM

Restructuring

36.5



36.5


(e)









NM


NM

              Total operating expenses

662.4



173.0



489.5



424.8



23.9



400.9



56

%


22

%

























Operating income

369.5



335.2



704.6



499.0



81.0



580.0



-26

%


21

%

Interest, net

77.3



10.0


(o)

67.3



47.2





47.2



64

%


43

%

Other expense, net

6.8



5.4


(f,o)

1.5



0.8





0.8



704

%


75

%

Loss on sales of investments

12.7



12.7





4.7



4.7





172

%


NM

Loss on extinguishment of debt

165.8



165.8











NM


NM

Income before income taxes

106.9



529.1



635.8



446.3



85.7



532.0



-76

%


20

%

Income tax expense

33.5



97.0


(g)

130.5



122.8



27.6


(g)

150.4



-73

%


-13

%

Net income

$

73.4



$

432.1



$

505.3



$

323.5



$

58.1



$

381.6



-77

%


32

%

























Diluted earnings per share

$

0.67






$

4.62



$

3.42






$

4.04



-80

%


14

%

























Diluted weighted average shares outstanding

109.4






109.4



94.4






94.4
































Selected ratios as a percentage of net sales**
























         Gross profit

35.4

%





40.9

%


35.9

%





38.1

%







         Operating expenses

22.7

%





16.8

%


16.5

%





15.6

%







         Operating income

12.7

%





24.2

%


19.4

%





22.5

%































* Amounts may not sum or cross-foot due to rounding



**Ratios as a % to net sales may not calculate due to rounding



NM - Calculations are not meaningful






(a) Acquisition-related amortization

(b) Elan transaction costs of $3.2 million

(c) Write-up of contingent consideration of $5.8 million

(d) Litigation settlement of $2.0 million

(e) Restructuring charges related to Elan, Minnesota, Georgia and Velcera

(f) Losses on Elan equity method investments

(g) Total tax effect for non-GAAP pre-tax adjustments

(h) Inventory step-up of $1.9 million

(i) Acquisition costs of $3.1 million

(j) Escrow settlement of $2.5 million

(k) Net write-up of contingent consideration of $0.8 million

(l) Elan transaction costs of $108.9 million

(m) Litigation settlement of $2.5 million

(n) Write-offs of IPR&D related to the Paddock and Rosemont acquisitions

(o) Elan transaction costs

(p) Inventory step-up of $9.6 million

(q) Severance costs of $1.5 million

(r) Acquisition costs of $5.0 million



 

 


Table II


PERRIGO COMPANY PLC


REPORTABLE SEGMENTS


RECONCILIATION OF NON-GAAP MEASURES


(in millions)


(unaudited)












Three Months Ended








Consumer Healthcare

March 29, 2014


March 30, 2013


% Change



GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted


Net sales

$

537.3



$



$

537.3



$

536.8



$



$

536.8



%


%


Cost of sales

368.3



3.5


(a)

364.8



360.1



3.4


(a)

356.7



2

%


2

%


Gross profit

169.0



3.5



172.5



176.6



3.4



180.1



-4

%


-4

%


Operating expenses

84.6



3.4


(a,b)

81.2



80.7



1.6


(a)

79.1



5

%


3

%


Operating income

$

84.4



$

6.9



$

91.3



$

95.9



$

5.0



$

101.0



-12

%


-10

%



























Selected ratios as a percentage of net sales**

























         Gross profit

31.5

%





32.1

%


32.9

%





33.5

%








         Operating expenses

15.8

%





15.1

%


15.0

%





14.7

%








         Operating income

15.7

%





17.0

%


17.9

%





18.8

%


































Nine Months Ended








Consumer Healthcare

March 29, 2014


March 30, 2013


% Change



GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted


Net sales

$

1,612.1



$



$

1,612.1



$

1,526.5



$



$

1,526.5



6

%


6

%


Cost of sales

1,094.4



10.3


(a)

1,084.1



1,041.8



15.3


(a,i)

1,026.5



5

%


6

%


Gross profit

517.7



10.3



528.0



484.7



15.3



500.0



7

%


6

%


Operating expenses

253.9



6.7


(a,g,h)

247.2



223.4



4.5


(a)

218.9



14

%


13

%


Operating income

$

263.8



$

17.0



$

280.8



$

261.3



$

19.8



$

281.1



1

%


%



























Selected ratios as a percentage of net sales**

























         Gross profit

32.1

%





32.8

%


31.8

%





32.8

%








         Operating expenses

15.7

%





15.3

%


14.6

%





14.3

%








         Operating income

16.4

%





17.4

%


17.1

%





18.4

%

































 

 



Three Months Ended







Nutritionals

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

137.8



$



$

137.8



$

133.3



$



$

133.3



3

%


3

%

Cost of sales

102.6



3.1


(a)

99.5



102.4



3.1


(a)

99.3



%


%

Gross profit

35.2



3.1



38.3



31.0



3.1



34.0



14

%


13

%

Operating expenses

27.9



6.2


(a,c)

21.7



24.0



4.3


(a)

19.7



16

%


10

%

Operating income

$

7.3



$

9.3



$

16.6



$

7.0



$

7.4



$

14.3



5

%


16

%

























Selected ratios as a percentage of net sales**
























         Gross profit

25.6

%





27.8

%


23.2

%





25.5

%







         Operating expenses

20.3

%





15.7

%


18.0

%





14.8

%







         Operating income

5.3

%





12.1

%


5.2

%





10.7

%
































Nine Months Ended







Nutritionals

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

406.6



$



$

406.6



$

358.7



$



$

358.7



13

%


13

%

Cost of sales

301.8



9.2


(a)

292.6



271.7



9.1


(a)

262.6



11

%


11

%

Gross profit

104.8



9.2



114.0



87.0



9.1



96.1



21

%


19

%

Operating expenses

76.5



14.8


(a,c)

61.6



69.0



12.8


(a)

56.2



11

%


10

%

Operating income

$

28.3



$

24.0



$

52.4



$

18.0



$

21.9



$

39.9



57

%


31

%

























Selected ratios as a percentage of net sales**
























         Gross profit

25.8

%





28.0

%


24.2

%





26.8

%







         Operating expenses

18.8

%





15.2

%


19.2

%





15.7

%







         Operating income

7.0

%





12.9

%


5.0

%





11.1

%























































 

 



Three Months Ended







Rx Pharmaceuticals

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

223.4



$



$

223.4



$

189.4



$



$

189.4



18

%


18

%

Cost of sales

110.5



17.3


(a)

93.2



92.9



13.1


(a,e)

79.8



19

%


17

%

Gross profit

112.9



17.3



130.2



96.5



13.1



109.6



17

%


19

%

Operating expenses

35.9



6.0


(a,d)

29.9



23.1



0.1


(a)

23.0



56

%


30

%

Operating income

$

77.0



$

23.3



$

100.3



$

73.4



$

13.2



$

86.6



5

%


16

%

























Selected ratios as a percentage of net sales**
























         Gross profit

50.5

%





58.3

%


51.0

%





57.9

%







         Operating expenses

16.1

%





13.4

%


12.2

%





12.2

%







         Operating income

34.5

%





44.9

%


38.8

%





45.7

%
































Nine Months Ended







Rx Pharmaceuticals

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

673.6



$



$

673.6



$

514.9



$



$

514.9



31

%


31

%

Cost of sales

319.4



54.8


(a)

264.6



245.7



30.0


(a,e)

215.7



30

%


23

%

Gross profit

354.2



54.8



409.0



269.2



30.0



299.2



32

%


37

%

Operating expenses

93.7



11.3


(a,j,k,l,m)

82.4



63.2



1.6


(a,n)

61.6



48

%


34

%

Operating income

$

260.5



$

66.1



$

326.6



$

206.0



$

31.6



$

237.6



26

%


37

%

























Selected ratios as a percentage of net sales**
























         Gross profit

52.6

%





60.7

%


52.3

%





58.1

%







         Operating expenses

13.9

%





12.2

%


12.3

%





12.0

%







         Operating income

38.7

%





48.5

%


40.0

%





46.1

%























































 

 



Three Months Ended







API

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

32.0



$



$

32.0



$

41.1



$



$

41.1



-22

%


-22

%

Cost of sales

18.0



0.5


(a)

17.5



20.2



0.5


(a)

19.7



-11

%


-11

%

Gross profit

14.0



0.5



14.5



20.9



0.5



21.4



-33

%


-32

%

Operating expenses

7.2





7.2



9.2





9.2



-21

%


-22

%

Operating income

$

6.8



$

0.5



$

7.3



$

11.7



$

0.5



$

12.2



-43

%


-40

%

























Selected ratios as a percentage of net sales**
























         Gross profit

43.6

%





45.3

%


50.9

%





52.1

%







         Operating expenses

22.6

%





22.6

%


22.3

%





22.3

%







         Operating income

21.0

%





22.7

%


28.5

%





29.7

%
































Nine Months Ended







API

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

105.2



$



$

105.2



$

118.4



$



$

118.4



-11

%


-11

%

Cost of sales

44.9



1.6


(a)

43.3



53.2



1.4


(a)

51.8



-16

%


-16

%

Gross profit

60.3



1.6



61.9



65.2



1.4



66.6



-7

%


-7

%

Operating expenses

22.9





22.9



26.3





26.3



-13

%


-13

%

Operating income

$

37.4



$

1.6



$

39.0



$

38.9



$

1.4



$

40.3



-4

%


-3

%

























Selected ratios as a percentage of net sales**
























         Gross profit

57.4

%





58.9

%


55.0

%





56.3

%







         Operating expenses

21.8

%





21.8

%


22.2

%





22.2

%







         Operating income

35.5

%





37.0

%


32.8

%





34.0

%























































 

 



Three Months Ended

Specialty Sciences

March 29, 2014


GAAP*


Non-GAAP Adjustments*


As Adjusted*

Net sales

$

53.4



$



$

53.4


Cost of sales

76.3



76.3


(a)


Gross profit

(22.9)



76.3



53.4


Operating expenses

31.6



16.9


(f)

14.7


Operating income (loss)

$

(54.5)



$

93.2



$

38.7











Selected ratios as a percentage of net sales**









         Gross profit

(42.9)%






100.0

%

         Operating expenses

59.1

%





27.5

%

         Operating income (loss)

(102.1)%






72.5

%











Nine Months Ended(1)

Specialty Sciences

March 29, 2014


GAAP*


Non-GAAP Adjustments*


As Adjusted*

Net sales

$

60.8



$



$

60.8


Cost of sales

85.0



85.0


(a)


Gross profit

(24.2)



85.0



60.8


Operating expenses

49.3



31.4


(f)

17.9


Operating income (loss)

$

(73.5)



$

116.4



$

42.9











Selected ratios as a percentage of net sales**









         Gross profit

(39.8)%






100.0

%

         Operating expenses

81.0

%





29.3

%

         Operating income (loss)

(120.8)%






70.7

%



















 

 












Three Months Ended







Other

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

20.2



$



$

20.2



$

19.2



$



$

19.2



5

%


5

%

Cost of sales

13.5



0.5


(a)

13.0



12.9



0.4


(a)

12.5



5

%


4

%

Gross profit

6.7



0.5



7.2



6.3



0.4



6.7



7

%


7

%

Operating expenses

5.9





5.9



4.7





4.7



26

%


26

%

Operating income

$

0.8



$

0.5



$

1.3



$

1.6



$

0.4



$

2.0



-49

%


-35

%

























Selected ratios as a percentage of net sales**
























         Gross profit

33.3

%





35.5

%


32.9

%





35.1

%







         Operating expenses

29.2

%





29.1

%


24.3

%





24.3

%







         Operating income

4.2

%





6.4

%


8.6

%





10.8

%
























































Nine Months Ended



Other

March 29, 2014


March 30, 2013


% Change


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP*


Non-GAAP Adjustments*


As Adjusted*


GAAP


As Adjusted

Net sales

$

58.3



$



$

58.3



$

54.1



$



$

54.1



8

%


8

%

Cost of sales

39.2



1.3


(a)

37.9



36.4



1.2


(a)

35.2



8

%


8

%

Gross profit

19.1



1.3



20.4



17.7



1.2



18.9



8

%


8

%

Operating expenses

16.5





16.5



15.0





15.0



10

%


10

%

Operating income

$

2.6



$

1.3



$

3.9



$

2.7



$

1.2



$

3.9



-4

%


%

























Selected ratios as a percentage of net sales**
























         Gross profit

32.7

%





35.0

%


32.7

%





35.0

%







         Operating expenses

28.2

%





28.2

%


27.7

%





27.7

%







         Operating income

4.5

%





6.8

%


5.0

%





7.3

%









* Amounts may not sum or cross-foot due to rounding


**Ratios as a % to net sales may not calculate due to rounding




(1) Only includes activity from December 18, 2013 to March 29, 2014

(a) Acquisition-related amortization

(b) Restructuring charges of $1.6 million related to Georgia and Velcera

(c) Litigation settlement of $2.0 million

(d) Write-up of contingent consideration of $5.8 million

(e) Inventory step-up charge of $1.9 million

(f) Elan restructuring and integration-related charges

(g) Restructuring charges of $2.8 million related to Georgia and Velcera

(h) Escrow settlement of $2.5 million

(i) Inventory step-up charge of $7.7 million

(j) Write-offs of IPR&D related to the Paddock and Rosemont acquisitions

(k) Net write-up of contingent consideration of $0.8 million

(l) Litigation settlement of $2.5 million

(m) Restructuring charges of $1.7 million related to Minnesota

(n) Severance costs of $1.5 million


 

 

Table III

PERRIGO COMPANY PLC

FY 2014 GUIDANCE AND FY 2013 EPS

RECONCILIATION OF NON-GAAP MEASURES

(unaudited)






Full Year



Fiscal 2014 Guidance


FY14 reported diluted EPS range

$1.76 - $1.91


Charges associated with acquisition and other integration-related costs

2.06


Acquisition-related amortization (1)

1.88


Charges associated with restructuring

0.27


Losses on sales of investments

0.10


Losses on Elan equity method investments

0.04


Charges associated with write-offs of in-process R&D

0.03


Charges associated with litigation settlements

0.02


Earnings associated with escrow settlement

(0.01)


FY14 adjusted diluted EPS range

$6.15 - $6.30






Fiscal 2013


FY13 reported diluted EPS

$4.68


Acquisition-related amortization (1)

0.668


Charges associated with inventory step-ups

0.077


Charges associated with acquisition, severance and other integration-related costs

0.061


Charge associated with write-off of in-process R&D

0.059


Losses on sales of investments

0.047


Charge associated with restructuring

0.018


FY13 adjusted diluted EPS

$5.61





(1)  Amortization of acquired intangible assets related to business combinations and asset acquisitions.

 

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SOURCE Perrigo Company plc



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