Perrigo Reports First Quarter 2024 Financial Results From Continuing Operations
Delivered Adjusted Diluted Earnings Per Share Results Above Projection, Due Primarily to Timing of Infant Formula Shipments; Reaffirm 2024 Financial Outlook
Advanced Augmenting and Strengthening of Infant Formula Facilities, Recovery of Manufacturing Volumes Underway
Progressed Blueprint to Build One
Recently Announced Plan to Divest HRA Rare Diseases Business; Expects to Redeploy Proceeds for Debt Paydown
First Quarter 2024 Highlights:
-
First
quarter net sales of
$1.1 billion declined 8.4% versus the prior year quarter. First quarter organic1 net sales decreased 7.0%, due primarily to 1) -4.3 percentage points impact due to lower net sales in infant formula, driven by actions to augment and strengthen the infant formula network, and 2) -3.6 percentage points impact from purposeful SKU prioritization actions to enhance margins as part of the Company's Supply Chain Reinvention Program. These two factors more than offset +0.9 percentage points impact from organic net sales growth in the rest of the business.
-
Consumer Self-Care International ("CSCI") net sales increased 4.7% compared to the prior year quarter as organic net sales grew 7.0%. Consumer Self-Care Americas ("CSCA") net sales decreased 15.7% compared to the prior year quarter, including an impact of -6.7 percentage points from infant formula and -5.6 percentage points from SKU prioritization actions.
-
First
quarter GAAP ("reported") gross margin was 33.1%, a 190 basis points decline compared to the prior year quarter. Non-GAAP ("adjusted") gross margin of 36.5% declined 90 basis points, including a -280 basis points impact from infant formula.
-
First
quarter reported diluted earnings per share ("EPS") was
$0.03 , compared to a loss of$(0.01) in the prior year quarter.
-
Adjusted diluted EPS was
$0.29 , compared to$0.45 in the prior year quarter, a decline of 35.6%, due primarily to a -$0.30 impact from infant formula.
-
Cash and cash equivalents2 on the balance sheet as of
March 30, 2024 were$659 million .
-
Launched Opill®, the first-ever over-the-counter birth control pill in the
U.S. , to major retailers nationwide.
Reaffirms Fiscal Year 2024 Outlook:
-
First quarter 2024 adjusted diluted EPS was ahead of projection by approximately
$0.06 due to timing of infant formula shipments to customers previously expected during the second quarter 2024.
-
Company reaffirms its fiscal 2024 organic net sales and total net sales growth outlook of 1.0%-3.0% and flat, respectively, versus the prior year. The Company also reaffirms its fiscal 2024 adjusted diluted EPS range outlook of
$2.50-$2.65 .
(1) See attached Appendix for details. Change in net sales on an organic basis excludes the effects of acquisitions, divestitures, exited product lines and the impact of currency. |
(2) The Company has |
(3) All tables and data may not add due to rounding. Percentages are based on actuals. |
President and CEO,
Lockwood-Taylor continued, "We also delivered a good first quarter by advancing our operational priorities, including the successful launch of Opill®, the first-ever over-the-counter oral contraceptive in the
Refer to Tables I through 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 Consolidated Statements of Operations, Balance Sheets and Statements of Cash Flows.
Project Energize
As part of the Company's sustainable, value accretive growth strategy, the Company launched Project Energize - a global investment and efficiency program to drive the next evolution of capabilities and organizational agility. This three-year program is expected to produce significant benefits in the Company's long-term business performance by enabling our One
Project Energize was initiated during the first quarter of 2024 and is expected to deliver an annualized pre-tax savings in the range of
Executive Transition for the CSCI Business
Lockwood-Taylor commented, "On behalf of the Board of Directors, the management team and the more than 9,000
Lockwood-Taylor concluded, "We are delighted to welcome Roberto to
First Quarter 2024 Net Sales Change Compared to Prior Year(3) |
||||
|
Reported
|
Constant |
Product Line |
Organic
|
CSCA |
(15.7) % |
(15.7) % |
(1.1) % |
(14.6) % |
CSCI |
4.7 % |
5.5 % |
(1.5) % |
7.0 % |
Total |
(8.4) % |
(8.2) % |
(1.2) % |
(7.0) % |
Reported net sales of
Organic net sales were impacted primarily by 1) -4.3 percentage points from lower net sales in infant formula, driven by actions to augment and strengthen the infant formula network, and 2) -3.6 percentage points from purposeful SKU prioritization actions to enhance margins as part of the Company's Supply Chain Reinvention Program.
These two factors more than offset +0.9 percentage points organic net sales growth in the rest of the business, which comprised strategic pricing actions of +3.0 percentage points and volume/mix of -2.1 percentage points. This growth was led by branded product offerings in CSCI, e-commerce and new products, including the launch of Opill® in the
Reported gross profit of
Reported gross margin was 33.1%, a 190 basis points decrease versus the prior year quarter. Adjusted gross margin declined 90 basis points to 36.5% driven by the same factors as adjusted gross profit, partially offset by benefits from purposeful SKU prioritization actions. Adjusted gross margin included an impact of -280 basis points from infant formula.
Reported operating loss of
Reported operating margin was (5.1)%, a 920 basis point decrease versus the prior year quarter. Adjusted operating margin was 8.6%, a decrease of 150 basis points versus the prior year quarter due primarily to infant formula.
Reported net income was $4 million, or
First Quarter 2024 Business Segment Results from Continuing Operations
Consumer Self-Care Americas Segment
First Quarter 2024 Net Sales Change Compared to Prior Year(3) |
||||
|
Reported
|
Constant |
Product Line |
Organic
|
CSCA |
(15.7) % |
(15.7) % |
(1.1) % |
(14.6) % |
CSCA reported net sales of $644 million decreased $120 million, or 15.7%, driven primarily by a decline in organic net sales of 14.6% and -1.1 percentage points from exited product lines.
Organic net sales were impacted by 1) -6.7 percentage points impact from lower net sales in infant formula driven by actions to augment and strengthen the infant formula network, 2) -5.6 percentage points impact from purposeful SKU prioritization actions to enhance margins as part of the Company's Supply Chain Reinvention Program, and 3) -2.3 percentage points impact in all other product lines as growth in e-commerce and new products, including the launch of Opill®, was more than offset by inventory de-stocking at retail customers, resulting in lower net sales of store brand offerings across most categories, and lower distribution in
Reported gross profit of $154 million decreased $57 million, or 27.2%. Adjusted gross profit declined $52 million to $163 million driven by the decline in net sales and actions to augment and strengthen infant formula. These factors were partially offset by Supply Chain Reinvention savings.
Reported gross margin was 23.8%, a 380 basis points decrease versus the prior year quarter. Adjusted gross margin declined 280 basis points to 25.3% driven by the same factors as adjusted gross profit, partially offset by benefits from SKU prioritization actions and higher margin new products, including Opill®. Adjusted gross margin included an impact of -520 basis points from infant formula.
Reported operating income was $16 million compared to $83 million in the prior year quarter. Adjusted operating income decreased $47 million, or 46.9%, to
Reported operating margin was 2.4%, a 850 basis points decrease versus the prior year quarter. Adjusted operating margin declined 480 basis points to 8.2% due primarily to infant formula.
Consumer Self-Care International Segment
First Quarter 2024 Net Sales Change Compared to Prior Year(3) |
||||
|
Reported
|
Constant |
Product Line |
Organic
|
CSCI |
4.7 % |
5.5 % |
(1.5) % |
7.0 % |
CSCI reported net sales growth was 4.7%, including -0.7 percentage points from foreign currency translation and -1.5 percentage points stemming from exited products.
Organic net sales increased 7.0% driven by growth in the
Reported gross profit of
Reported gross margin was 46.6%, a decrease of 200 basis points compared to the prior year quarter. Adjusted gross margin decreased 150 basis points to 53.0% driven by less favorable product volume/mix.
Reported operating income was
Reported operating margin was 6.1%, a 100 basis points increase versus the prior year quarter. Adjusted operating margin increased 290 basis points to 19.7% due primarily to operating leverage.
Cash Flow and Balance Sheet
First quarter 2024 cash from operations was a loss of
Fiscal 2024 Outlook
The Company reaffirms its fiscal year 2024 outlook:
- Organic net sales growth of 1.0% to 3.0% compared to the prior year,
- Reported net sales flat compared to the prior year,
- Interest expense of approximately
$180 million , - Full year adjusted tax rate of approximately ~20.5%,
- Adjusted diluted EPS range of between
$2.50 to$2.65 including- mid-teens adjusted EPS growth, excluding infant formula from both years, and
- Operating cash flow conversion (operating cash flow as a percentage of adjusted net income) of approximately 90% - 100%.
The Company cannot reconcile its expected organic net sales growth, adjusted diluted earnings per share to diluted earnings per share or adjusted tax rate under "Fiscal 2024 Outlook" without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time. These items include, but are not limited to uncertainty of non-recurring infant formula related charges and timing and amount of restructuring charges and the income tax effects of these items or other income tax-related events.
About
Webcast and Conference Call Information
The earnings conference call will be available live via webcast to interested parties in the investor relations section of the
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," "forecast," "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: supply chain impacts on the Company's business, including those caused or exacerbated by armed conflict, trade and other economic sanctions and/or disease; general economic, credit, and market conditions; the impact of the war in
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
- net sales growth on an organic basis, which excludes acquisitions, divested businesses, exited product lines, and the impact of currency,
- adjusted gross profit,
- adjusted net income,
- adjusted operating income,
- adjusted diluted earnings per share,
- adjusted operating margin, and
- adjusted gross margin.
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 presents these non-GAAP financial measures in order to provide transparency to our investors because they are measures that management uses to assess both management performance and the financial performance of our operations and to allocate resources. In addition, management believes that these measures may assist investors with understanding and evaluating our initiatives to drive improved financial performance and enables investors to supplementally compare our operating performance with the operating performance of our competitors including with those of our competitors having different capital structures. While we have excluded certain of these items from historical non-GAAP financial measures, there is no guarantee that the items excluded from non-GAAP financial measures will not continue into future periods. For instance, we expect to continue to experience and report restructuring-related charges associated with continued execution of our strategic initiatives.
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, where applicable, with 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 intangible asset amortization excluded from these non-GAAP financial measure represents the entire amount recorded within the Company's GAAP financial statements and is excluded because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. 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 net income, adjusted operating income, adjusted diluted EPS, adjusted gross margin and adjusted operating margin 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 also discloses net sales growth excluding the impact of currency on an organic basis. The Company believes these supplemental financial measures provide investors with consistency in financial reporting, enabling meaningful comparisons of past and present underlying operating results, and also facilitate analysis of the Company's operating performance and acquisition and divestiture trends.
A copy of this press release, including the reconciliations, is available on the Company's website at www.perrigo.com.
CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) (unaudited) |
|||
|
|||
|
Three Months Ended |
||
|
|
|
|
Net sales |
$ 1,082.1 |
|
$ 1,181.7 |
Cost of sales |
724.4 |
|
767.9 |
Gross profit |
357.7 |
|
413.8 |
|
|
|
|
Operating expenses |
|
|
|
Distribution |
24.9 |
|
28.6 |
Research and development |
29.0 |
|
31.1 |
Selling |
150.3 |
|
167.9 |
Administration |
130.4 |
|
135.0 |
Restructuring |
44.3 |
|
3.4 |
Other operating expense (income), net |
34.0 |
|
(0.7) |
Total operating expenses |
412.9 |
|
365.3 |
|
|
|
|
Operating (loss) income |
(55.2) |
|
48.5 |
|
|
|
|
Interest expense, net |
43.0 |
|
43.7 |
Other (income) expense, net |
0.4 |
|
0.5 |
Income (loss) from continuing operations before income taxes |
(98.6) |
|
4.3 |
Income tax (benefit) expense |
(102.7) |
|
5.4 |
Income (loss) from continuing operations |
4.1 |
|
(1.1) |
Income (loss) from discontinued operations, net of tax |
(2.1) |
|
(1.9) |
Net income (loss) |
$ 2.0 |
|
$ (3.0) |
|
|
|
|
Earnings (loss) per share |
|
|
|
Basic |
|
|
|
Continuing operations |
$ 0.03 |
|
$ (0.01) |
Discontinued operations |
(0.02) |
|
(0.01) |
Basic earnings (loss) per share |
$ 0.01 |
|
$ (0.02) |
Diluted |
|
|
|
Continuing operations |
$ 0.03 |
|
$ (0.01) |
Discontinued operations |
(0.02) |
|
(0.01) |
Diluted earnings (loss) per share |
$ 0.01 |
|
$ (0.02) |
|
|
|
|
Weighted-average shares outstanding |
|
|
|
Basic |
136.6 |
|
134.9 |
Diluted |
137.6 |
|
134.9 |
CONSOLIDATED BALANCE SHEETS (in millions, except per share amounts) (unaudited) |
|||
|
|||
|
|
|
|
Assets |
|
|
|
Cash, cash equivalents and restricted cash |
$ 658.5 |
|
$ 751.3 |
Accounts receivable, net of allowance for credit losses of |
780.0 |
|
739.6 |
Inventories |
1,121.3 |
|
1,140.9 |
Prepaid expenses and other current assets |
246.6 |
|
201.1 |
Total current assets |
2,806.4 |
|
2,832.9 |
Property, plant and equipment, net |
911.4 |
|
916.4 |
Operating lease assets |
176.7 |
|
183.6 |
|
3,498.1 |
|
3,534.4 |
Definite-lived intangible assets, net |
2,870.3 |
|
2,980.8 |
Deferred income taxes |
28.0 |
|
25.8 |
Other non-current assets |
349.4 |
|
335.2 |
Total non-current assets |
7,833.9 |
|
7,976.2 |
Total assets |
$ 10,640.3 |
|
$ 10,809.1 |
Liabilities and Shareholders' Equity |
|
|
|
Accounts payable |
$ 453.7 |
|
$ 477.7 |
Payroll and related taxes |
114.4 |
|
127.0 |
Accrued customer programs |
179.1 |
|
163.5 |
Other accrued liabilities |
359.0 |
|
335.4 |
Accrued income taxes |
7.7 |
|
42.1 |
Current indebtedness |
440.6 |
|
440.6 |
Total current liabilities |
1,554.5 |
|
1,586.3 |
Long-term debt, less current portion |
3,624.9 |
|
3,632.8 |
Deferred income taxes |
247.7 |
|
262.3 |
Other non-current liabilities |
526.2 |
|
559.8 |
Total non-current liabilities |
4,398.8 |
|
4,454.9 |
Total liabilities |
5,953.3 |
|
6,041.2 |
Contingencies - Refer to Note 15 |
|
|
|
Shareholders' equity |
|
|
|
Controlling interests: |
|
|
|
Preferred shares, |
— |
|
— |
Ordinary shares, €0.001 par value per share, 10,000 shares authorized |
6,803.0 |
|
6,837.5 |
Accumulated other comprehensive income |
(37.7) |
|
10.7 |
Retained earnings (accumulated deficit) |
(2,078.3) |
|
(2,080.3) |
Total shareholders' equity |
4,687.0 |
|
4,767.9 |
Total liabilities and shareholders' equity |
$ 10,640.3 |
|
$ 10,809.1 |
|
|
|
|
Supplemental Disclosures of Balance Sheet Information |
|
|
|
Preferred shares, issued and outstanding |
— |
|
— |
Ordinary shares, issued and outstanding |
136.3 |
|
135.5 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) |
|||
|
|||
|
Three Months Ended |
||
|
|
|
|
Cash Flows From (For) Operating Activities |
|
|
|
Net income (loss) |
$ 2.0 |
|
$ (3.0) |
Adjustments to derive cash flows: |
|
|
|
Depreciation and amortization |
81.4 |
|
88.7 |
Restructuring charges |
44.3 |
|
3.4 |
Share-based compensation |
15.6 |
|
24.9 |
Amortization of debt discount |
0.4 |
|
0.7 |
Gain on sale of assets |
— |
|
(3.9) |
Deferred income taxes |
(11.0) |
|
(9.9) |
Other non-cash adjustments, net |
(7.4) |
|
6.4 |
Subtotal |
125.3 |
|
107.3 |
Increase (decrease) in cash due to: |
|
|
|
Accrued income taxes |
(81.6) |
|
2.5 |
Accounts receivable |
(51.9) |
|
(39.8) |
Payroll and related taxes |
(51.6) |
|
(34.3) |
Accounts payable |
(16.7) |
|
(29.8) |
Prepaid expenses and other current assets |
(1.7) |
|
17.1 |
Inventories |
10.6 |
|
(28.6) |
Accrued customer programs |
18.2 |
|
6.8 |
Accrued liabilities |
30.6 |
|
8.0 |
Other operating, net |
17.4 |
|
10.2 |
Subtotal |
(126.7) |
|
(87.9) |
Net cash (for) from operating activities |
(1.4) |
|
19.4 |
Cash Flows From (For) Investing Activities |
|
|
|
Additions to property, plant and equipment |
(25.1) |
|
(23.2) |
Proceeds from sale of assets |
— |
|
1.8 |
Proceeds from royalty rights |
1.6 |
|
1.8 |
Net cash for investing activities |
(23.5) |
|
(19.6) |
Cash Flows For Financing Activities |
|
|
|
Cash dividends |
(37.6) |
|
(36.2) |
Payments on long-term debt |
(9.8) |
|
(5.9) |
Other financing, net |
(13.0) |
|
(8.6) |
Net cash for financing activities |
(60.4) |
|
(50.7) |
Effect of exchange rate changes on cash and cash equivalents |
(7.5) |
|
3.2 |
Net decrease in cash and cash equivalents |
(92.8) |
|
(47.7) |
Cash, cash equivalents and restricted cash of continuing operations, beginning of period |
751.3 |
|
600.7 |
Cash, cash equivalents and restricted cash of continuing operations, end of period |
$ 658.5 |
|
$ 553.0 |
TABLE I
RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) |
|||||||||
|
|||||||||
|
Three Months Ended |
|
Three Months Ended |
||||||
Consolidated Continuing Operations |
Gross Profit |
Operating |
Income from |
Diluted |
|
Gross Profit |
Operating |
Income (Loss) |
Diluted |
Reported |
$ 357.7 |
$ (55.2) |
$ 4.1 |
$ 0.03 |
|
$ 413.8 |
$ 48.5 |
$ (1.1) |
$ (0.01) |
As a % of reported net sales(2) |
33.1 % |
(5.1) % |
0.4 % |
|
|
35.0 % |
4.1 % |
(0.1) % |
|
Pre-tax adjustments: |
|
|
|
|
|
|
|
|
|
Amortization expense related primarily to acquired |
32.8 |
58.7 |
59.2 |
0.43 |
|
29.0 |
65.6 |
66.2 |
0.48 |
Restructuring charges and other termination benefits |
0.2 |
44.3 |
44.3 |
0.32 |
|
— |
3.4 |
3.4 |
0.03 |
Unusual litigation |
— |
37.2 |
37.2 |
0.27 |
|
— |
3.1 |
3.1 |
0.02 |
Infant formula remediation |
4.9 |
5.8 |
5.8 |
0.04 |
|
— |
— |
— |
— |
Acquisition and integration-related charges and |
— |
0.4 |
0.4 |
— |
|
— |
3.5 |
3.5 |
0.03 |
(Gain) loss on divestitures and investment securities |
— |
— |
— |
— |
|
— |
(4.6) |
(4.8) |
(0.03) |
Other (3) |
— |
1.8 |
1.9 |
0.01 |
|
— |
— |
— |
— |
Non-GAAP tax adjustments(4) |
— |
— |
(112.7) |
(0.82) |
|
— |
— |
(9.4) |
(0.07) |
Adjusted |
$ 395.5 |
$ 93.0 |
$ 40.2 |
$ 0.29 |
|
$ 442.8 |
$ 119.6 |
$ 61.0 |
$ 0.45 |
As a % of reported net sales(2) |
36.5 % |
8.6 % |
3.7 % |
|
|
37.5 % |
10.1 % |
5.2 % |
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding (in millions) |
|
|
|
|
|
|
|||
|
|
|
Reported |
137.6 |
|
|
|
|
134.9 |
Effect of dilution as reported amount was a loss, while adjusted amount was income(5) |
— |
|
|
|
|
1.6 |
|||
|
|
|
Adjusted |
137.6 |
|
|
|
|
136.5 |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) Individual pre-tax line item adjustments have not been tax effected, as tax expense on these items are aggregated in the "Non-GAAP tax adjustments" line item. |
(2) Reported net sales for the three months ended |
(3) Other pre-tax adjustments include |
(4) Non-GAAP tax adjustments for the three months ended |
(5) In the period of a net loss, reported diluted shares outstanding equal basic shares outstanding. |
TABLE II
RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) |
|||||||
|
|||||||
|
Three Months Ended |
|
Three Months Ended |
||||
Consolidated Continuing Operations |
R&D Expense |
DSG&A |
Restructuring |
|
R&D Expense |
DSG&A |
Restructuring |
Reported |
$ 29.0 |
$ 339.6 |
$ 44.3 |
|
$ 31.1 |
$ 330.8 |
$ 3.4 |
As a % of reported net sales(1) |
2.7 % |
31.4 % |
4.1 % |
|
2.6 % |
28.0 % |
0.3 % |
Pre-tax adjustments: |
|
|
|
|
|
|
|
Amortization expense related primarily to acquired |
(0.2) |
(25.7) |
— |
|
0.2 |
(36.9) |
— |
Restructuring charges and other termination benefits |
— |
— |
(44.1) |
|
— |
— |
(3.4) |
Acquisition and integration-related charges and |
— |
(0.4) |
— |
|
— |
(3.5) |
— |
Unusual litigation |
— |
(37.2) |
— |
|
— |
(3.1) |
— |
Infant formula remediation |
— |
(0.9) |
— |
|
— |
— |
— |
Loss on investment securities |
— |
— |
— |
|
— |
4.6 |
— |
Other (2) |
— |
(1.9) |
— |
|
— |
— |
— |
Adjusted |
$ 28.7 |
$ 273.6 |
$ 0.2 |
|
$ 31.3 |
$ 291.9 |
$ — |
As a % of reported net sales (1) |
2.7 % |
25.3 % |
— % |
|
2.6 % |
24.7 % |
— % |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) Reported net sales for the three months ended |
(2) Other pre-tax adjustments include |
TABLE III
RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) |
|||||
|
|||||
|
Three Months Ended |
|
Three Months Ended |
||
Consolidated Continuing Operations |
Interest and Other |
Income Tax Expense |
|
Interest and Other |
Income Tax Expense |
Reported |
$ 43.4 |
$ (102.7) |
|
$ 44.2 |
$ 5.4 |
As a % of reported net sales (1) |
4.0 % |
(9.5) % |
|
3.7 % |
0.5 % |
Effective tax rate |
|
104.2 % |
|
|
123.8 % |
Pre-tax adjustments: |
|
|
|
|
|
Amortization expense related primarily to acquired intangible assets |
(0.5) |
— |
|
(0.5) |
— |
(Gain) loss on investment securities |
— |
— |
|
— |
— |
Non-GAAP tax adjustments(2) |
— |
112.7 |
|
— |
9.4 |
Adjusted |
$ 42.7 |
$ 10.0 |
|
$ 43.8 |
$ 14.8 |
As a % of reported net sales (1) |
3.9 % |
0.9 % |
|
3.7 % |
1.2 % |
Adjusted effective tax rate |
|
20.0 % |
|
|
19.5 % |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) Reported net sales for the three months ended |
(2) Non-GAAP tax adjustments for the three months ended |
TABLE IV
RECONCILIATION OF NON-GAAP MEASURES SELECTED SEGMENT INFORMATION (in millions) (unaudited) |
|||||||||
|
|||||||||
|
Three Months Ended |
|
Three Months Ended |
||||||
Consumer Self-Care Americas |
Gross Profit |
R&D |
DSG&A |
Operating Income |
|
Gross Profit |
R&D |
DSG&A |
Operating Income |
Reported |
$ 153.5 |
$ 16.4 |
$ 105.0 |
$ 15.7 |
|
$ 210.8 |
$ 18.0 |
$ 108.3 |
$ 83.2 |
As a % of reported net sales(1) |
23.8 % |
2.5 % |
16.3 % |
2.4 % |
|
27.6 % |
2.4 % |
14.2 % |
10.9 % |
Pre-tax adjustments: |
|
|
|
|
|
|
|
|
|
Amortization expense related primarily to acquired intangible assets |
4.6 |
— |
(10.0) |
14.6 |
|
3.8 |
— |
(10.1) |
13.9 |
Infant formula remediation |
4.9 |
— |
(0.9) |
5.8 |
|
— |
— |
— |
— |
Restructuring charges and other termination benefits |
0.2 |
— |
— |
16.6 |
|
— |
— |
— |
1.2 |
Acquisition and integration-related charges and contingent consideration adjustments |
— |
— |
— |
— |
|
— |
— |
(0.8) |
0.8 |
Adjusted |
$ 163.2 |
$ 16.4 |
$ 94.0 |
$ 52.7 |
|
$ 214.7 |
$ 18.0 |
$ 97.4 |
$ 99.2 |
As a % of reported net sales |
25.3 % |
2.5 % |
14.6 % |
8.2 % |
|
28.1 % |
2.4 % |
12.8 % |
13.0 % |
|
Three Months Ended |
|
Three Months Ended |
||||||
|
Gross Profit |
R&D |
DSG&A |
Operating |
|
Gross Profit |
R&D |
DSG&A |
Operating |
Reported |
$ 204.2 |
$ 12.6 |
$ 149.5 |
$ 26.5 |
|
$ 203.0 |
$ 13.1 |
$ 167.9 |
$ 21.3 |
As a % of reported net sales(1) |
46.6 % |
2.9 % |
34.1 % |
6.1 % |
|
48.6 % |
3.1 % |
40.2 % |
5.1 % |
Pre-tax adjustments: |
|
|
|
|
|
|
|
|
|
Amortization expense related primarily to acquired intangible assets |
28.1 |
(0.2) |
(15.7) |
44.0 |
|
25.2 |
0.2 |
(26.8) |
51.7 |
Restructuring charges and other termination benefits |
— |
— |
— |
15.5 |
|
— |
— |
— |
0.9 |
(Gain) loss on divestitures |
— |
— |
— |
— |
|
— |
— |
4.6 |
(4.6) |
Acquisition and integration-related charges and contingent consideration adjustments |
— |
— |
— |
— |
|
— |
— |
(1.1) |
1.1 |
Adjusted |
$ 232.3 |
$ 12.4 |
$ 133.8 |
$ 86.1 |
|
$ 228.2 |
$ 13.3 |
$ 144.6 |
$ 70.3 |
As a % of reported net sales |
53.0 % |
2.8 % |
30.6 % |
19.7 % |
|
54.6 % |
3.2 % |
34.6 % |
16.8 % |
|
|
|
|
|
|
|
|
|
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) CSCA reported net sales for the three months ended |
TABLE V
RECONCILIATION OF NON-GAAP MEASURES CONSOLIDATED AND SELECTED SEGMENT INFORMATION (in millions, except per share amounts) (unaudited) |
|||||
|
|||||
|
Three Months Ended |
|
|
||
Consolidated Continuing Operations |
|
|
|
|
% Change |
|
$ 1,082.1 |
|
$ 1,181.7 |
|
(8.4) % |
Less: Currency impact(1) |
(3.0) |
|
— |
|
(0.3) % |
Constant currency net sales |
$ 1,085.0 |
|
$ 1,181.7 |
|
(8.2) % |
Less: Exited product lines(2) |
5.9 |
|
21.2 |
|
(1.2) % |
Organic net sales |
$ 1,079.1 |
|
$ 1,160.5 |
|
(7.0) % |
|
|||||
|
Three Months Ended |
|
|
||
Consumer Self-Care Americas |
|
|
|
|
% Change |
|
$ 644.1 |
|
$ 763.7 |
|
(15.7) % |
Less: Currency impact(1) |
— |
|
— |
|
— % |
Constant currency net sales |
$ 644.1 |
|
$ 763.7 |
|
(15.7) % |
Less: Exited product lines(2) |
0.2 |
|
9.6 |
|
(1.1) % |
Organic net sales |
$ 643.9 |
|
$ 754.1 |
|
(14.6) % |
|
|||||
|
Three Months Ended |
|
|
||
|
|
|
|
|
% Change |
|
$ 437.9 |
|
$ 418.1 |
|
4.7 % |
Less: Currency impact(1) |
(3.0) |
|
— |
|
(0.7) % |
Constant currency net sales |
$ 440.9 |
|
$ 418.1 |
|
5.5 % |
Less: Exited product lines(2) |
5.7 |
|
11.6 |
|
(1.5) % |
Organic net sales |
$ 435.2 |
|
$ 406.5 |
|
7.0 % |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) Currency impact is calculated using the exchange rates used to translate our financial statements in the comparable prior year period to show what current period US dollar results would have been if such currency exchange rates had not changed. |
(2) Exited product lines represents strategic actions taken across multiple product categories as part of our Supply Chain Reinvention Program, primarily driven by exited products within the Skincare category in CSCA and CSCI, the Nutrition category in CSCA and Upper Respiratory in CSCI. |
TABLE VI
RECONCILIATION OF NON-GAAP MEASURES SELECTED SEGMENT INFORMATION (in millions, except per share amounts) (unaudited) |
|||||
|
|||||
|
Three Months Ended |
|
|
||
CSCA Net Sales(1) |
|
|
|
|
% Change |
Upper Respiratory |
130.3 |
|
153.7 |
|
(15.2) % |
|
122.2 |
|
124.0 |
|
(1.4) % |
Nutrition |
$ 90.6 |
|
$ 138.5 |
|
(34.5) % |
Pain and Sleep-Aids |
82.6 |
|
103.4 |
|
(20.2) % |
Healthy Lifestyle |
71.3 |
|
73.4 |
|
(2.8) % |
|
64.7 |
|
83.3 |
|
(22.3) % |
|
49.6 |
|
69.8 |
|
(28.9) % |
|
27.2 |
|
12.3 |
|
121.5 % |
VMS and Other CSCA |
5.6 |
|
5.3 |
|
3.0 % |
Total CSCA Net Sales |
$ 644.1 |
|
$ 763.7 |
|
(15.7) % |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) We updated our global reporting product categories as a result of legacy Rx sales being moved out of Other CSCA and into respective categories. These product categories have been adjusted retroactively to reflect the changes and have no impact on historical financial position, results of operations, or cash flows. |
Primary CSCA First Quarter Category Drivers:
-
Upper Respiratory: Net sales of
$130 million decreased 15.2% due primarily to inventory de-stocking atU.S. retail customers, resulting in lower net sales of cough cold and allergy products, in addition to strong net sales in the prior year quarter. The category was also impacted by 2.7 percentage points reduction from exited product lines and portfolio optimization actions. -
Digestive Health : Net sales of$122 million decreased 1.4% as higher volumes of laxative products, including Polyethylene Glycol, were more than offset by a 5.3 percentage points reduction from portfolio optimization actions. -
Nutrition: Net sales of
$91 million decreased 34.5% due primarily to lower shipments to customers as the company works through its infant formula plant remediation plans, in addition to a -1.8 percentage points impact from exited product lines. -
Pain & Sleep-Aids: Net sales of
$83 million decreased 20.2% due primarily to exited product lines and purposeful SKU prioritization actions which had an aggregate impact of -13.0 percentage points. In addition, inventory reductions byU.S. retail customers resulted in lower net sales of pain and sleep-aid products. These impacts more than offset new products, including store brand Acetaminophen 250mg and Ibuprofen 125mg Tablets. -
Healthy Lifestyle: Net sales of
$71 million decreased 2.8% due primarily to inventory de-stocking atU.S. retail customers, resulting in lower net sales of smoking cessation products, and lower category consumption compared to the prior year. -
Oral Care : Net sales of$65 million decreased 22.3% due primarily to lower distribution at specific retail customers and the comparison to strong sales in the prior year as customer inventories recovered and normalized. -
Skin Care : Net sales of$50 million decreased 28.9% due primarily to exited product lines and portfolio optimization actions which had an aggregate impact of -30.9 percentage points. These headwinds more than offset strong double-digit growth of Mederma®. -
Women's Health : Net sales of$27 million increased 121.5% due primarily to the new product launch and channel fill of Opill®, which was partially offset by a -11.7 percentage points impact from exited product lines and portfolio optimization actions. -
Vitamins, Minerals, and Supplements ("VMS") and Other: Net sales of
$6 million increased 3.0%.
TABLE VI (Continued)
RECONCILIATION OF NON-GAAP MEASURES SELECTED SEGMENT INFORMATION (in millions, except per share amounts) (unaudited) |
|||||||||
|
|||||||||
|
Three Months Ended |
|
|
|
|
|
Constant |
||
CSCI Net Sales |
|
|
|
|
% Change |
|
Currency |
|
|
|
$ 114.7 |
|
$ 83.4 |
|
37.5 % |
|
3.4 % |
|
41.0 % |
Upper Respiratory |
69.1 |
|
84.8 |
|
(18.5) % |
|
(1.7) % |
|
(20.2) % |
Healthy Lifestyle |
64.6 |
|
66.4 |
|
(2.7) % |
|
7.4 % |
|
4.7 % |
Pain and Sleep-Aids |
51.4 |
|
49.9 |
|
3.0 % |
|
(3.8) % |
|
(0.9) % |
VMS |
44.6 |
|
47.8 |
|
(6.7) % |
|
(1.0) % |
|
(7.8) % |
|
32.0 |
|
29.1 |
|
10.1 % |
|
(0.3) % |
|
9.9 % |
|
28.7 |
|
29.1 |
|
(1.5) % |
|
(2.0) % |
|
(3.5) % |
|
32.8 |
|
27.6 |
|
18.9 % |
|
(1.0) % |
|
17.9 % |
Total CSCI Net Sales |
$ 437.9 |
|
$ 418.1 |
|
4.7 % |
|
0.7 % |
|
5.5 % |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
|
(1) Currency impact is calculated using the exchange rates used to translate our financial statements in the comparable prior year period to show what current period US dollar results would have been if such currency exchange rates had not changed. |
Primary CSCI First Quarter Category Drivers:
-
Skin Care : Net sales of$115 million increased 37.5%, or 41.0% excluding the impact of currency, due to strong growth in Compeed driven by the new product launch of Compeed Spots and the absence of prior year distribution transitions. Category growth was also driven by performance of ACO and Sebamed, partially offset by a 2.2 percentage point reduction from exited product lines. -
Upper Respiratory: Net sales of
$69 million decreased 18.5%, or 20.2% excluding the impact of currency, due primarily to lower net sales of cough cold products stemming from lower incidence of cough cold throughout the E.U. compared to the prior year and supply constraints on several products in the category. The category was also impacted by a 2.4 percentage points reduction from exited product lines. -
Healthy Lifestyle: Net sales of
$65 million decreased 2.7%, or an increase of 4.7% excluding the impact of currency, due primarily to the seasonal sell in of anti-parasite products including Jungle Formula and Paranix, partially offset by lower category consumption in weight loss, impacting XLS Medical. The category was impacted by a 1.3 percentage points reduction from exited product lines. -
Pain & Sleep-Aids: Net sales of
$51 million increased 3.0%, or a decrease of 0.9% excluding the impact of currency, due primarily to lower net sales of store brand products. -
VMS: Net sales of
$45 million decreased 6.7%, or 7.8% excluding the impact of currency, due primarily to timing of sales of Granufink and Abte, in addition to promotional phasing of Davitamon. -
Women's Health : Net sales of$32 million increased 10.1%, or 9.9% excluding the impact of currency, due primarily to higher net sales of contraceptive products including EllaOne, driven by the absence of prior year distribution transitions. -
Oral Care : Net sales of$29 million decreased 1.5%, or 3.5% excluding the impact of currency, due primarily to lower net sales of store brand offerings. -
Digestive Health and Other: Net sales of
$33 million increased 18.9%, or 17.9% excluding the impact of currency, due primarily to higher net sales of store brand digestive health products.
TABLE VII
RECONCILIATION OF NON-GAAP MEASURES CONSOLIDATED AND SELECTED SEGMENT INFORMATION (in millions, except per share amounts) (unaudited) |
||||||||
|
||||||||
|
|
Three Months Ended |
|
|
|
|
||
Consolidated Continuing Operations |
|
|
|
|
|
Total Change |
||
Adjusted gross profit |
|
$ 395.5 |
|
$ 442.8 |
|
$ (47.4) |
|
(10.7) % |
Adjusted gross margin |
|
36.5 % |
|
37.5 % |
|
|
|
(90) bps |
Adjusted operating income |
|
$ 93.0 |
|
$ 119.6 |
|
$ (26.6) |
|
|
Adjusted operating margin |
|
8.6 % |
|
10.1 % |
|
|
|
(150) bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross profit |
|
$ 232.3 |
|
$ 228.2 |
|
$ 4.1 |
|
|
Adjusted gross margin |
|
53.0 % |
|
54.6 % |
|
|
|
(150) bps |
Adjusted operating income |
|
$ 86.1 |
|
$ 70.3 |
|
$ 15.8 |
|
22.5 % |
Adjusted operating margin |
|
19.7 % |
|
16.8 % |
|
|
|
290 bps |
|
|
|
|
|
|
|
|
|
Consumer Self-Care Americas |
|
|
|
|
|
|
|
|
Adjusted gross profit |
|
$ 163.2 |
|
$ 214.7 |
|
$ (51.5) |
|
|
Adjusted gross margin |
|
25.3 % |
|
28.1 % |
|
|
|
(280) bps |
Adjusted operating income |
|
$ 52.7 |
|
$ 99.2 |
|
$ (46.5) |
|
(46.9) % |
Adjusted operating margin |
|
8.2 % |
|
13.0 % |
|
|
|
(480) bps |
|
Note: amounts may not add or recalculate due to rounding. Percentages are based on actuals. |
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