On March 1, 2018 Perrigo Company plc reports fourth quarter & calendar year 2017 financial results (Press release, Perrigo Company, MAR 1, 2018, View Source [SID1234524322]).
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Fourth Quarter:
Realized fourth quarter 2017 GAAP ("reported") net sales of $1.3 billion, reported net income of $73 million and reported diluted earnings per share ("EPS") of $0.52 compared to a loss per share of $9.48 last year
Delivered fourth quarter adjusted net income of $180 million and adjusted diluted EPS of $1.28 compared to $1.24 last year, an increase of 3.2%
CHC Americas segment achieved fourth quarter reported net sales of $644 million or growth of 2.5% versus last year on a constant currency basis
CHC International segment delivered fourth quarter reported net sales of $374 million, down 10.8% versus last year; excluding exited European distribution businesses, net sales grew 3.3% versus last year on a constant currency basis
Calendar Year 2017
Realized calendar year 2017 reported net sales of $4.9 billion compared to reported net sales of $5.3 billion in the prior year, lower by 6.3%, reported net income of $120 million and reported EPS of $0.84
Achieved calendar year 2017 adjusted net sales growth of 1.3% compared to the prior year, excluding the year-over-year effect of exited European distribution businesses, the divestiture of the Israel API business and the impact of Entocort
Delivered calendar year 2017 adjusted net income of $703 million and adjusted diluted EPS of $4.93
CHC Americas segment achieved calendar year 2017 reported net sales of $2.4 billion compared to $2.5 billion last year, lower by 3.1%; adjusted net sales grew 1.4% on a constant currency basis
CHC International segment delivered calendar year 2017 reported net sales of $1.5 billion, down 9.8% versus last year, with reported operating margin of 0.8%; excluding the year-over-year effect of the exited European distribution businesses, net sales grew 2.6% versus last year on a constant currency basis, with an adjusted operating margin of 15.0%
RX segment realized calendar year 2017 reported operating margin of 31.7%; the segment’s extended topical strategy delivered an adjusted operating margin of 41.9%
Calendar year 2017 cash flow from operations was $699 million
Guidance
The Company expects calendar year 2018 reported diluted EPS to be in the range of $2.24 to $2.64. The Company expects calendar year 2018 adjusted diluted EPS guidance to be in the range of $5.05 to $5.45; see Guidance section below for detail.
Perrigo Company plc (NYSE; TASE: PRGO) reported results for the fourth quarter and calendar year ended December 31, 2017.
Additional fourth quarter reported results: Reported operating margin in the Consumer Healthcare Americas ("CHCA") segment was a fourth quarter record of 22.0%. Reported operating margin in the Consumer Healthcare International ("CHCI") segment was 1.0%. Reported operating margin in the Prescription Pharmaceuticals ("RX") segment was 26.1%.
Perrigo CFO Ron Winowiecki commented, "The Perrigo team delivered on its internal and external goals and commitments in calendar year 2017 driven by 1) actions taken to simplify, focus and execute on the company’s core businesses, 2) a focus on operational execution in challenging end-markets, 3) a cost optimization program that improved our cost structure, and 4) strong cash flow conversion and improved balance sheet flexibility.
Fourth quarter reported net sales in our CHCA segment grew 2.5% on a constant currency basis with record fourth quarter adjusted operating margin of 23.1%. Our CHCI segment delivered 3.3% net sales growth in the quarter, on a constant currency basis and excluding the exited European distribution businesses, with an adjusted operating margin of 15.3%. RX net sales were consistent with the prior year, excluding a $5 million year-over-year Entocort impact as new product launches more than offset expected price erosion. Adjusted operating margin in this business was 38.1% due to product mix and increased investments in our new product pipeline. Finally, our durable business model and efficient supply chain once again delivered excellent cash flow conversion to adjusted net income."
Refer to Tables I – VI at the end of this press release for a reconciliation of non-GAAP measures to the current year and prior year periods and additional non-GAAP information. The Company’s reported results are included in the attached Consolidated Statements of Operations, Balance Sheets and Statements of Cash Flows.
Calendar 2017
Calendar 2016
Constant
Currency
12/31/2017
12/31/2016
% change
% Change
Reported Net Sales
$4,946
$5,281
(6.3)%
Reported Net Income (Loss)
$120
$(4,013)
NM
Reported Diluted Earnings (Loss) per Share
$0.84
$(28.01)
NM
Reported Diluted Shares
142.6
143.3
(0.5)%
Adjusted Net Sales(1)
$4,926
$5,168
(4.7)%
(4.7)%
Adjusted Net Income
$703
$728
(3.5)%
Adjusted Diluted Earnings per Share
$4.93
$5.07
(2.8)%
Adjusted Diluted Shares
N/A
143.6
N/A
(1)
Calendar year 2017 net sales have been adjusted to exclude $21 million of sales attributable primarily to the divested Israel API business. Calendar year 2016 net sales have been adjusted to exclude $113 million of sales attributable primarily to the divested U.S. Vitamins, Minerals, and Supplements ("VMS") business.
Reported net sales for calendar year 2017 were $4.9 billion, which included new product sales of $210 million and discontinued products of $32 million. Adjusted net sales grew 1.3% compared to the prior year excluding the year-over-year effects of: 1) net sales from the exited European distribution businesses of $200 million, 2) net sales of $67 million from Entocort, and 3) net sales from the divested Israel API business of $41 million.
Reported net income was $120 million, or $0.84 per diluted share versus a net loss of $4.0 billion, or $28.01 per diluted share, in the prior year. Excluding charges as outlined in Table I, calendar year 2017 adjusted net income was $703 million, or $4.93 per diluted share, versus adjusted net income of $728 million, or $5.07 per diluted share, for the same period last year.
Fourth Quarter Results
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Perrigo Company plc
(in millions, except earnings per share amounts)
(see the attached Tables I – VI for reconciliation to GAAP numbers)
Fourth Quarter
Ended
Fourth Quarter
Ended
YoY
Constant
Currency
12/31/2017
12/31/2016
% change
% Change
Reported Net Sales
$1,283
$1,331
(3.6)%
Reported Net Income (Loss)
$73
$(1,359)
NM
Reported Diluted Earnings (Loss) per Share
$0.52
$(9.48)
NM
Reported Diluted Shares
141.2
143.4
(1.5)%
Adjusted Net Sales(1)
$1,279
N/A
(3.9)%
(5.9)%
Adjusted Net Income
$180
$178
1.5%
Adjusted Diluted Earnings per Share
$1.28
$1.24
3.2%
Adjusted Diluted Shares
N/A
143.6
N/A
(1)
Fourth quarter 2017 net sales have been adjusted to exclude $4 million of sales attributable to the divested Israel API business.
Reported net sales for the fourth quarter of 2017 were $1.3 billion, which included new product sales of $54 million and discontinued products of $6 million. Adjusted net sales grew 2.1% compared to the prior year excluding the year-over-year effect of: 1) net sales from the exited European distribution businesses of $82 million, 2) net sales from the divested Israel API business of $19 million, 3) net sales of $5 million from Entocort and, 4) favorable foreign currency movements of $27 million.
Reported net income was $73 million, or $0.52 per diluted share versus a net loss of $1.4 billion, or $9.48 per diluted share, in the prior year. Excluding charges as outlined in Table I, fourth quarter 2017 adjusted net income was $180 million, or $1.28 per diluted share, versus adjusted net income of $178 million, or $1.24 per diluted share, for the same period last year.
Segment Results
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Consumer Healthcare Americas (CHCA) Segment
(in millions)
(see the attached Tables I – VI for reconciliation to GAAP numbers)
Fourth Quarter
Ended
Fourth Quarter
Ended
YoY
Constant
Currency
12/31/2017
12/31/2016
% change
% Change
Reported Net Sales
$644
$627
2.7%
2.5%
Reported Gross Profit
$220
$210
4.5%
Reported Gross Margin
34.1%
33.5 %
60 bps
Reported Operating Income
$141
$83
69.7%
Reported Operating Margin
22.0%
13.3%
870 bps
Adjusted Gross Profit
$232
$223
4.1%
Adjusted Gross Margin
36.0%
35.5%
50 bps
Adjusted Operating Income
$149
$139
6.7%
Adjusted Operating Margin
23.1%
22.2%
90 bps
CHCA fourth quarter reported net sales were $644 million compared to $627 million last year. Net sales grew 2.5% on a constant currency basis, driven by higher net sales in the gastrointestinal and analgesics categories compared to the prior year. New product sales of $17 million were led by the store brand version of Nexium and smoking cessation products. These positive drivers were partially offset by lower net sales of nutritional drink products in the infant nutrition category, in addition to pricing pressure in certain OTC categories and discontinued products of $3 million.
The CHCA segment achieved fourth quarter reported gross profit margin of 34.1% and adjusted gross profit margin of 36.0%, an improvement of 50 basis points versus the prior year, primarily driven by increased net sales in relatively higher margin categories and positive contributions from supply chain efficiencies. These positive contributions were partially offset by price erosion in certain OTC categories versus the prior year.
Reported operating margin was a fourth quarter record of 22.0%. Adjusted operating margin was a fourth quarter record of 23.1%, which was higher compared to the prior year due to gross margin flow through and lower selling and administrative costs due to previously announced restructuring actions.
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Fourth Quarter
Ended
Fourth Quarter
Ended
YoY
Constant
Currency
12/31/2017
12/31/2016
% change
% Change
Reported Net Sales
$374
$420
(10.8)%
(16.9)%
Reported Gross Profit
$173
$151
14.0%
Reported Gross Margin
46.1%
36.1%
1,000 bps
Reported Operating Income (Loss)
$4
$(76)
NM
Reported Operating Margin
1.0%
(18.1)%
NM
Adjusted Gross Profit
$195
$176
10.7%
Adjusted Gross Margin
52.0%
41.9%
1,010 bps
Adjusted Operating Income
$57
$36
57.5%
Adjusted Operating Margin
15.3%
8.7%
660 bps
Reported net sales decreased 10.8% compared to the fourth quarter of 2016. Net sales grew approximately 3.3% excluding $82 million from the exited unprofitable distribution businesses and favorable foreign currency movements of $26 million. This increase was driven primarily by higher net sales in the personal care category and in the U.K. store brand business along with new product sales of $14 million dollars. These increases were partially offset by lower net sales in the anti-parasite category in addition to discontinued products of $2 million.
Fourth quarter reported gross and adjusted margins increased approximately 1,000 bps over the previous year driven by actions taken that improved business performance including exiting unprofitable distribution businesses, optimizing go-to-market strategies and manufacturing more products in-house.
Reported operating income was $4 million and reported operating margin was 1.0%. Adjusted operating income grew $21 million to $57 million, while adjusted operating margin expanded 660 bps to 15.3% due to higher gross margin contribution and lower advertising and promotional investments as a percentage to net sales.
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Prescription Pharmaceuticals (RX) Segment
(in millions)
(see the attached Tables I – VI for reconciliation to GAAP numbers)
Fourth Quarter
Ended
Fourth Quarter
Ended
YoY
Constant
Currency
12/31/2017
12/31/2016
% change
% Change
Reported Net Sales
$261
$266
(1.7)%
(1.8)%
Reported Gross Profit
$118
$121
(2.7)%
Reported Gross Margin
45.0%
45.5%
(50) bps
Reported Operating Income
$68
$(259)
NM
Reported Operating Margin
26.1%
(97.3)%
NM
Adjusted Gross Profit
$139
$149
(6.7)%
Adjusted Gross Margin
53.2%
56.1%
(290) bps
Adjusted Operating Income
$100
$115
(13.4)%
Adjusted Operating Margin
38.1%
43.2%
(510) bps
Reported net sales in the fourth quarter were $261 million compared to $266 million last year. Excluding the $5 million year-over-year impact of Entocort, net sales were relatively in line with the prior year as new product sales of $23 million were offset by lower net sales of existing products of $21 million, due primarily to price erosion, which was in line with our expectations.
Reported gross margin was 45.0% and adjusted gross margin was 53.2%, which were lower compared to the prior year primarily due to product mix driven by a relatively greater contribution from partnered products and price erosion.
Reported operating margin was 26.1%. Adjusted operating margin was 38.1%, which included an increase of $6 million in R&D investments compared to the prior year and lower selling expenses due to previously announced restructuring actions.
Guidance
The Company expects calendar year 2018 reported net sales to be in the range of $5.0 billion to $5.1 billion, reported operating income to be in the range of $682 million to $742 million, reported effective tax rate to be approximately 24.0%, and reported diluted EPS to be in the range of $2.24 to $2.64.
The Company also expects calendar year 2018 adjusted operating income to be in the range of $1.03 billion to $1.09 billion, adjusted effective tax rate to be approximately 20.5% and adjusted diluted EPS guidance to be in the range of $5.05 to $5.45.
Perrigo President and CEO Uwe Roehrhoff commented, "Perrigo’s durable businesses delivered strong results in a dynamic healthcare market. The management team’s continued focus on operational execution provides a solid foundation to deliver on our 2018 plan. Perrigo is uniquely positioned to provide Quality Affordable Healthcare Products to customers, patients and families."
Conference Call
The Company will host a conference call at 8:30 a.m. EST (5:30 a.m. PST), March 2, 2018. The conference call will be available live via webcast to interested parties in the investor relations section of the Perrigo website at View Source or by phone at 877-248-9413, International 973-582-2737, and reference ID #6491969. A taped replay of the call will be available beginning at approximately 12:00 p.m. (EST) Friday, March 2, until midnight Monday, March 12, 2018. To listen to the replay, dial 800-585-8367, International 404-537-3406, and use access code 6491969.