PRGO - Earnings call transcript Q4 2017

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Operator

Good morning. My name is Justin, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Perrigo Fourth Quarter and Calendar Year 2017 Results Conference Call. [Operator Instructions] Thank you. It is now my pleasure to turn the call over to our host, Mr. Global and of Communications. VP Joseph, Investor Internal Relation Brad

conference. You your may begin

Bradley Joseph

hope a for and Thank release the XXXX is the calendar I and you. we is earnings site, as available call. all welcome call. to A Good release morning issued everyone last Perrigo's copy the to chance review fourth this night. quarter conference on presentation you press Web had of slide year our

CEO, during issued and Roehrhoff; Chairman, like forward-looking Laurie these participants the Brlas; CFO, and in for to today's Winowiecki. and will press important refer Joining are night. Ron investors regarding President Perrigo's statements our shareholders call Perrigo to last Perrigo remind this make Uwe I Safe would and language information release Please everyone statements. that call Harbor

the In for reconciliations we for presented. have non-GAAP presentation, provided today's financial measures addition, all in appendix

X. agenda Turning the on to Slide

the the introduce Laurie will CEO Perrigo then into and will year discuss fourth before consumer is metrics, and search XXXX discuss by results. how on well our of his Directors diving conducted process this leadership insights introduction Uwe. guidance. in philosophy First, into balance will XXXX healthcare with our the discuss strength calendar Uwe positioned performance build then industry. Ron will He of the then and and highlight quarter our the then Board sheet

priorities his questions. will which Uwe Finally, XXXX will after open out with call line the we the for close

to both you and like on appointments. Uwe Ron new turn the their alongside merited to Laurie, call of forward personally look I over congratulate your capacities. I’d Before to in I and working

to to call over Laurie. like I’d the turn Now

Laurie. the like call over Now turn to to I'd

Laurie Brlas

as firms of few executive is morning, down qualified transition everyone, selection included the launched to before most John for leading thanks Board's moments his and and to Thank the Board we process When a identify announced take joining Hendrickson the us you, CEO CEO process well much a search started, search, last get that thorough today. to Uwe decision candidate. the step CEO of underway. that engagement I’d CEO like discuss appropriate search Brad. June, so the Good and

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and history next have Boar, management commitment his of to a and leadership, And our set company the was employees, will to I appointed call for now period for Perrigo. in the John its I over want the of John Uwe behalf operational stage on into strategic team to CEO focus Finally company leave its the to evolution. and turn Uwe. entire during thank XX-yers once challenging nearly again Hendrickson

Uwe Roehrhoff

Thank you, Laurie, Good very those words. morning, for kind everyone.

first about XXXX release decision the excitement reschedule to my I'd Before and to earnings our discussing call. address full Perrigo, conference like

procedures completed. to decision review doing work Let me processes. correct to due simply first to time that all and fully to apologize and the for We certain not procedures committed underestimated needed need of and this we improve our complete to We do made text we’re were these delay. the amount

of Now, providing to to attention opportunity affordable Perrigo as the my please solution. turn Slide to your legacy serve a where healthcare I with of X, for want excitement such a asset company and discuss deliver great consumer I forward to working shareholders. with Board the and for management leverage who in healthcare company's positioned industry. value the well is unique base experienced Directors look the team to of CEO

After Perrigo's first XXX environment want trusted an impressive I an CEO, affordable has rising healthcare healthcare healthcare benefit mission why provides made weeks with to an for share and increasing a about cost. impression a affordable deliver years, reputation excited for consumer, on to solutions I’m industry six as to you our to true patient, Perrigo approximately and business. products, provide As within partner society with focus the family. in quality my

XXXX deliver across our business model performance leading results XXXX, First, position end market dynamic we delivering in Americas are We unit trend to world's unique. turnkey brand of Giving from a share. The businesses. provide markets. businesses strong -- entering a our has CHC results. Perrigo store is solutions in market leading that business

In business healthcare consumers over business that partner and We its strategy levering strategies The International, product relationships. topical focused Rx including service to the of categories store growth expansion CHC choice. deliver which This our are driving meet process. the are product focuses and leverages regional and on patients OTC of customer in the pharmacy healthcare XXX,XXX of best new for and system. excellence, diversified channel Perrigo by invests development its extended opportunity, value ecommerce, on investments, branded we suited all differentiated make brand are and needs

supply replicate. chain Second, leader is supply excellence. Perrigo to complex and a global operating chain challenging an efficient is in that

to by one my to Fourth, an approach, across management organization's Third, expectations one his thank caliber for commitment on focus affordable us period. team dedication to quality operational a including ongoing Perrigo's its I’m outstanding is and driving and of passionate foundation My the to fifth, and commitment integrity. entire the a by John Delivering is philosophy has in and core and reputation and energized is drive the high demonstrates the by customer. customer us meaningful quality the and I’ve Hendrickson. many business with the demand and priorities. of employee. products. customers quality with culture compliance a employees that And on passionate solutions high-level customer's steady of high business of dedication which guidance integrity value customer for in been positive service. of team. high Perrigo and John timely I’d of have crucial top to This Perrigo team, talent impressed -- encouraged to practices. I’m businesses like organization rely And excellence is on service. meet leadership strives company's that the greater to stakeholder provided a deliver this healthcare and to His transition all during an

his Finally, appointment like team will I’d an to to the now CFO. Ron as Congratulations. I finish congratulate call turn to excellent the and Perrigo on over on XXXX Ron.

Ron Winowiecki

Thanks, Uwe.

our results area of has earnings call. to XXXX. been focus like I’d our material in our that take XXXX, covering a was this past for One minute remediate For tax to identified weakness rescheduled discuss year

the one, including: We three, key combination towards enhancing have to additional and of to in yearend Belgium, the and hires we review needed in improving tax process, design capabilities a our progress our to our and new new of this implement made complete controls. -- tax the progress, Despite Two, strengthening reform our our this U.S the precision resources. and tax overall underestimated procedures. goal time

improve as as to priority. our meeting deadlines processes continue top a We

to we’re employees, welcome me And next work Uwe's let of the chapter as a Perrigo to team, the to behalf Perrigo. writing welcome Now for track excited itself. a speaks On leadership team story. Perrigo. record Uwe and of moment with leadership the take him in Perrigo to

Turning can Slide to for the you highlights now XXXX. see X,

has consecutive in basis, sales this abilities share of experience the sales a grew team durability adjusted adjusted adjusted by XX% rebased operating rate illustrated This consolidated constant In level the year challenging an leadership XXXX now prior fully their X.X% of International, business $X.XX. adjusted Americas, exited net this CHC CHC year. a adjusted achieved drive is The currency the to operating per illustrates operating margin margin run our unique earnings platforms. for the leverage XXXX consumer business adjusted XX.X%, to of their and businesses. environment. years. net margin and strong, delivering a Perrigo's of of the distribution team two of businesses sales team to finished the excluding has on compared X.X% net billion XX.X% performance grew The of In in which $X.X with teams Our

than upper is teens, the to products were high achieve with in of the continue CHC pleased erosion, sales drive with which net roughly prior price more year, I’m of previously leadership the segment the with XXXX, launched adjusted As impact expectations. operating year-over-year to this making target. discussed, line new the team the in in in this was in progress margin line XX towards offsetting as excluding our we objective is Entocort. team In International single-digit The Rx,

this asset. operating XX% these is again results topical operating highlighting the seventh in achieved differentiated flow extended XXXX. diversified margin positive above delivered strategy consecutive quality cash the the strong once uniquely for adjusted of adorable year, Our Underpinning

million a in equates flow strong XXX% Excluding to a payments and cash million, of net tax to $XXX $XXX payment, total unusual income. operating which cash an was adjusted adjusted restructuring

XXXX and cash to execute business achievements a each and and the capital The our core steady our in our flow and generate future places for to actions highlights of business solid plan. Overall, segments in XXXX our strong to businesses. in of Our year deployment. was execute ability significant us conversion focus the position calendar consistency simplify,

compared turning results Reported $XX program. net Now cost our and was by to our restructuring you to tax related exclusion to the the XX, GAAP income. quarter. million. $X expense the Partially see and million million improvement product assets billion with difference pre-tax can of net in reported liabilities for of non-cash related payment. expenses, milestone of the is non-GAAP adjustments The $X.X percentage charges of GAAP $XX $XX pre-tax XX.X% effect results adjustments to to quarter driven non-GAAP sales amortization primary a of Slide these pre-tax a of and the were of was million are due to The were as GAAP income deferred consistent XX.X%. reported fourth -- the income rate exclusion and tax expense offsetting tax

Americas year. categories CHC sales of prior million X.X% were currency gastrointestinal compared the sales in a on to in constant in This higher $XXX quarter of to year sales million the Slide Turning compared was XX. by the net basis. growth results the primarily $XXX to driven prior analgesics net and increase the on Net or

driven these sales were positives New OTC nutrition XX and basis cost announced which points net products certain gross infant in the performance by version delivered prior the Adjusted was consecutive above of by year. actions. product supply previously fourth XX.X%, of in positive an was margin last quarter quarter contributions million. offset record in compared higher and certain and pricing sales XX%, to year. a adjusted administrative due of restructuring lower segment million margin certain smoking This OTC and offsetting categories of addition Nexium products a chain for efficiencies in drink to the store in driven categories products pricing increase and brand from pressures nutritional $X products. versus cessation gross were discontinued quarter. eighth category, of to operating pressure the of margin XX% Sell-through selling lower was The $XX Partially flow-through margin the

distribution Turning exited store by U.K driven discontinued in from prior with this gross fourth by the category personal-care in XX.X% in $XX from of of to sales million the million. in margin brand These the operating to XX.X%, $XX in net while International was net sales foreign the higher addition in adjusted sales million primarily to in the the year This unprofitable new quarter product of increased million. by movements we took $XX category segment XXXX. margin favorable increase XX, and X.X%, $X $XX sales by Adjusted CHC anti-parasite expanded of actions in basis expenses. year, Slide XXX the currency XX% lower previous along points the lower were to improvement million. excluding net business and and adjusted businesses grew partially increases The product operating operating over income increased the flow-through primarily margin offset gross driven segment

Rx Turning a Slide in were for with $X unfavorable Entocort. on impact the million excluding to Net relatively the year-over-year in this million $XXX XX. quarter of sales segment prior line year,

to expectations. in due due gross net in to existing experienced offset New price quarter product million sales variation price primarily in of with Adjusted sales was our $XX quarter and by lower the were was which mix in margin $XX the erosion XX.X% of million product products line erosion.

previous in XXX estimated of vary any this midpoint or from margin minus in points may to in segment XXX quarter discussed gross adjusted the plus calls, approximately basis As XX%. an

selling reference, sales increase R&D restructuring in for As a gross offset net our announced of investments pipeline, of support adjusted to segment by as in full-year of operating the lower margin the for strong was included was XX.X%.Adjusted result which XX.X%, actions. partially XXXX an previously X% margin expenses

XX. balance Turning on sheet Slide the to

at As nearly of total December approximately total the balance total the was of $X.X outstanding the debt debt XXXX, billion debt cash of end we billion. XXXX, or $X.X outstanding in of $XXX In XXXX. sheet and repaid XX% million XX, was

focus to with financial conversion improve cash has Our greatly our operating flow improved flexibility. capital our combined structure strong our proactively

differentiates million, of future reminder, for the opportunities. investment cash debt a As flexibility maturities believe We the and enabling XXXX, for combined $XXX to XXXX, are be total free this years majority approximate flow enhancing XXXX Perrigo. available

our context an Our total of the focused shareholder financial decisions capital commitment long-standing on are grade allocation returns to investment within policy.

balanced $XXX our management's repurchases As announced quarterly part strategy, we in compounded increase in our XX% share XXXX. which allocation per increase which prior in the growth. million equates $XX from a during flow of This February Board's approximately On capital completed cash to reflects and of business growth we and and our XX%, generation durable disciplined share paid annual rate of dividend, of dividends year. the and million dividends an represented X-year earnings model, confidence XX,

operating Slide our key actions Next, on let's discuss for XXXX XX.

new launches. drive product First,

deliver working are million to $XXX capital the strong than approximately sales support investing pipeline, of of which We million our in in product launches $XX new net is expected XXXX. more to

for the approximately Building Second, this organic promotion XXXX, Consistent increase investments XX% XXXX theme, XXXX for and in a theme the strong foundation R&D team growth investing invest growth. and with year. core growth. expect compared to for the long-term on established XX% advertising is to to in by we prior

Third, operations. invest in

program data productivity privacy. gains. The our in global and I in capabilities, of discussed, offsetting on effects chain completion security the infrastructure, global ongoing fourth, cost of a are we're being including estimated And year. supply just investing and optimization in investments our productivity previously sales the improvements chain, and supply successful As made price of operating discussed erosion cyber top systems, integrated achieve

drives expected partnered product. Partially these to product the on XX. formula health loss is in and of partner categories Turning a offsetting will growth OTC year now a market-leading as marketing markets. distribution Americas, over unique a in this and animal growth position guidance includes CHC growth the our as take business, of the segment versus guidance our our infant last In Slide in

what these prior levels. the XXXX. businesses. To and X% or is $X.XX million remains once expect expected adjusted in year. in the exited this market. of of in growth a XXXX This Russia reduction net approximately with clear, a sales. margin constant investments expect currency durability of basis prior record taken challenging year, operating $X.XX in Included a The CHC a be sales to remaining consumer approximate again billion business be growth net evident on our is were in we in are net sales the We margin actions assumption in line this restructuring as the to year, segment approximately of be $XX International, business the the year-over-year of distribution completed prior includes increased result of versus as guidance In midyear approximately billion included actions approximately unprofitable at

Excluding margin the on adjusted with last margin X% currency our this and constant approximately organic are $XX impact, growth year. The assumption in basis. expected approximately this growth to just discussed. be is to investments million infrastructure I is for guidance this Included operating in line XXXX expected be segment in an

or As expect operating target sales In and mentioned, new making driven teens XXXX, this margin in billion XXXX includes a launch to $X.XX acquired international greater I we approximately adjusted for erosion goal. single-digit Rx, compared This for we guidance year net previously high continue CHC to achieve products average on investments our the upper strong than X% pipeline. from to the the price are by were growth the assumption. of

contributions expect prepare are the year not of, We we generic launch anticipate of from permitted that the a a meaningful the significant for products to as quarter new in ProAir. we two. version and, of disclose of launches one. product fourth

Included to net increased by extended our be Our approximately XXXX year, approximately R&D in new diversified margin to this investments are Rx adjusted strong prior operating strategy and margin launches. of with durable in sales. and the topical assumption is forecasted line driven product X%

generate bridge provided EPS can that today. can extremely excited On before, the the you XXXX see XX, be opportunities business in XXXX our increased Slide the adjusted to EPS guidance our that shareholders. believe adjusted walks Rx to extremely for attractive continue As and we pipeline R&D I’ve in mentioned investment about the returns

highlight me of guidance. factors in Let the our XXXX consider adjusted EPS three to context

First, from share is tax the $X.XX per U.S impact approximate reform.

the our for a our payments guidance rate is relatively that approximately distinction important next are As you compares XXXX XXXX. tax to very tax Tax XX.X% tax approximately impact In with is words, on effective our see cash income, Reform cash to rate. which U.S approximately XXXX, no will in has other in operating chart to pre-tax be flat XX.X% expected

share. contributing impact Second of business from The the divested year-over-year included was $X.XX approximately is per API our in XXXX, results first API a for business. half the

to include: as prior Third, new Taking representing adjusted is sums launch is movements you first, an share. into which of see to EPS guidance, contribution EPS of product and continue approximate approximately Building in XXXX increase expected positive of forma across base, our of EPS compared ProAir drivers an estimated of $X.XX versus quarter per performance the XXXX currency items with of our operational per all account, adjusted these an execution per can strong this benefit from generic year. favorable our XXXX approximately $X.XX the this XXXX. in $X.XX segments share that increase Included fourth to the pro pipeline, our share. from you see can the $X.XX

XXXX $X.XX growth Second, to capital These actions our equates of XXXX combined our approximately the adjusted EPS guidance. from the structure to our share $X.XX, XX% EPS completion approximately range adjusted our benefit XXXX $X.XX a of result pro midpoint. at forma XXXX to per were results in a of factors

Slide altogether this in Now pull let's XX.

product is Xx to organic organic discussed $XXX new an of $X Rx represents at of X.X% constant weighted two than launches currency than billion sales greater X% approximately guidance to fourth adjusted consolidated income in to to are constant in net basis. net net heavily on on leverage operating Included sales or growth be $X.XX $X.X in which income quarter greater expected of launches basis. this Adjusted This range expected the to are the the million, midpoint sales billion. to product expect $X.XX operating operating billion billion to I due new currency growth We growth the earlier. an

income into expected be we account, R&D to new be operating investments, fourth to launches. new are consolidated be to approximately of product growth -- X%. a the two fourth QX product Rx quarter percent of Operating sales on from Regarding XXXX. is as the launches Taking sequential in of are expected due moderately expecting investments realized to our adjusted to XX% income approximately quarter a QX net improved basis

Included support Our to million guidance is expected is notably new approximately the capital ProAir. launch cash fourth flow this product to in for quarter achieve of launch guidance operational XXXX. working our generic $XXX forecast in

out Before and our in EBITDA. commitment breakout more of as quarterly based investment I wrap feedback expenses, the CHC International earnings our the of promotional including community, business to are transparency a part up, I’d we in presentation like depreciation on our and advertising consolidated now appendix easily investments from point of calculate to segment operating including to and

modeling I would to plan. in appendix illustrated great call see year a bridge a as versus XXXX by leadership our and a to we XXXX the foundation I to results. plan like EPS set also These of culture earlier. took as which to delivering number Uwe. in provide will congratulate charts the our on the framework summary, operating XXXX. back similar our at will growth bridge a for turn on we should actions two now team on a to business testament net discussed XXXX You the Perrigo, our the we executed for sales In

Uwe Roehrhoff

to In on top Slide would one, Thanks, for priorities ahead. outline like deliver closing plan. I our Ron. our the year Number on XX,

productivity, ecommerce to durable deliver are trends our new our on our We challenging well commitment operational Three, launches. our businesses and Two, and across Continue focus the businesses strategy, and execution healthcare drive operational on customer to execution. markets. across growth. on positioned of our end sharpen with on in product service, supply focus capitalize all quality maintain the chain platform to

guidance develop that assumes value organic And roadmap. in evidenced growth to four, long-term fact a drive businesses. to growth is an our to commitment Our XX% XX% approximate across future investments by creation growth increase the XXXX our

know strategy, and the We will capital provide with Board which I that In to vision costs effective, high at Perrigo outcome team. unique a Perrigo's the affordable. develop we want and options I time and community. progress Board the long-term year opportunities and the industry. in to over I'll critical excited quality, model healthcare and past care the as colleagues strategic are of management families yet getting Over the continue and to to our savings within meets closing, after look health business am that discuss by all and work families forward turn allocation by needs the I’m to and occupies our of I Brad. with next consumers continue energized investment space now six will the you over ahead. the entire consumer to coming to consumers my weeks and months. and rise. healthcare management back Perrigo's call months, the

Bradley Joseph

with Operator, every answered. limit -- get now for to one get open question, everybody and can the that we we me, would Uwe, Ron, so question ask Uwe. questions yourself Thanks, like and call everyone please to

Operator

comes first line [Operator from Instructions] from of the Chen question Cantor. Your Louise

your open. is questions. Please Your line ask

Louise Chen

Hi. taking question. my for Thanks

So your your in assumed cash your strategy? meaningfully be of expected then free to flow you us color XXXX on Could year. this is And cash Thanks. going guidance? be your capital improving allocation flow how is more deployed much give to

Ron Winowiecki

Yes.

Thanks start, the for So let me Louise. question.

$XXX $XXX in your items strong out basis you cash to take of [ph] net operating $XX million conversion XXX% 'XX So neutral operating saw listen, point, from flow and income, very million of just guidance on when cash to reported the sort we an million, a in XXXX. flow some standpoint, a

our grade capital don’t that way total If location policy due is the in look XXXX you material you tenants, talked next any shareholder We fundamental XXXX payments that. on saw also in we in based process, framework. And you about act look and years. have the this and it's It's returns debt right. three an at and investment two for

interest pay this down not particularly we low -- that priority have at maturity So given curve. a the company for profile nice the a point, is the debt

this And will at that of policy there's disruption return it to to is look if you us. saw the at point. rate. to growth of equity, in in volatility dividend understand But time having the relative lot compounded We You core to growth there's rate dividends, know, low, look continues market listen, at something be that. this our compounding shows know having relative to something not a how said of the confidence continue a part forward I sense We market XX% time. we moving yield our is a we’re the that, our XX% we time, But excited let and a from increasing, our to to shareholders we’re providing if make and that engaged about going is a business little process can model. speak, plays that forward. ultimately the how Uwe with the and we out will review strategic bit on talk it Uwe

… So

Uwe Roehrhoff

Ron. thanks, Yes,

investment grade within of our commitment I think an the will profile. decisions regarding our creation value capital allocation as Ron said to we be shareholder focused on context

of six we allocation outcome management and Board will develop work as we the you. said, to will long-term strategy and discuss for our the I strategy Perrigo. And capital next months, then the all Over altogether our with

Bradley Joseph

Great. Thank you.

question Next please.

Operator

comes from of Your next the Markets. Patrick Capital from question Trucchio Berenberg line

your ask question. is line Please open. Your

Patrick Trucchio

organic XX about My disconnect that brand several morning. At sell-through at right business. XXXX growth on see growth. Good then between the the CAGNY calls And now dampening is midpoint players noted Slide we conference the when we of for Thanks. presentation, in OTC CHCA last your guidance X%, week, growth. your at sell-in X% of are look store and questions branded for

improve, the sell-in high-end mismatch because scenario and to and and guidance X% could, so now. this in that scenario? if in very you retail? might then And if to have what much. between to get well? sell-through lead And look your Thanks the to sell-through would like plus to sell-in wondering of us I’m the So or this inventory And scenario, at levels then, dynamic is that low-end scenario related this might what what tell as to lead

Ron Winowiecki

That’s outstanding a by very like the phrase good how question. five it, you I way. part one it's

So done. well

key way, the last Healthcare look if brand you you referenced listen, the of grew think by X.X% Consumer gaining store segment I part Americas, note please So, the is year. share. is at that chart And

the always And think corridor, we I that think look shipments last XX-week, is It's as place always gain brand you you’re think know what's at ask fair the factor chart that if we’ve know call the about, So about your share variation, going before. to you to question. to in relative some will to a store it. in that. based R that’s you year, taking data. and the way way brand have that you’ve is There When it explained MULO I again category, on

As our we about is I as think continue grow corridor, market. how above the to positioned asset

of end the are inventories low the abating. corridor, On

We are of Obviously, as an industries you closings a were part when got core normalization just rationalization the not process. material you model a have of through play inventories. some customers, effect of that it listen store there one That’s seeing of like some as natural item. the

So, yes, OTC X% the help the the level are much growth into positions, with want nutrition, remind the help going of true. the supplier growth faster pet you a to that take effect X% it back this at it formula arrangement If you mean is and actually The next you, higher to look being growing because that a in loss those than you to that I about do and business market-leading we offset point. has pet I look we that not is business. year, and the we the effect. of call I’m is have talk reason have market-leading business. again some than material if that positions. a of diluted this loss at by at that’s core, in

sitting core that I I like within answer that’s that that that will about upper question. don’t worry end. want we're corridor much middle to and in say space why of I the So to lower too

If a you the of growth look we’ve 'XX healthy market-leading our at seeing segments, into positions going touch part market. we're consumer core where in

Bradley Joseph

the for question. Thanks

Operator

RBC next Markets. line from comes Your Stanicky Capital of question Randall the from

Your open. line is question. Please your ask

Randall Stanicky

or on top does to of thinking just is question think rate X% U.S business the as online I CHCA it the shift the about Thanks. way to the overall that Then guys. was, should over about think we market? or be to time? consumer shift OTC Amazon, Thanks, right Great. something the growth time to about that follow-up, I had as over real to wanted we or hurt help X%

Ron Winowiecki

a question -- appreciate got in part good question. which really The the is way. we the I by Again, one. three

listen, So first market. all, of relative we to talk about

So X% to X% our to market. is threshold a good normalized relative

in I X.X%. .X% growth is market, to normalized like mean, dispatch markets the growing not that -- X% that and see we're you could the we’re we Now

to well-positioned think So market, that forward structure. above we continue and very is indexed business are market moving Randall, with we our

within gaining So look that choice of I brands what X% -- market. positioned, within to partner store the guide you is above but look you business if say quarter, X%, you or share, is at we grow that can't that at can space we’re X% I our at continue

So your think be to to it relative directly question. to market

lot solutions, about We So right. in none, Listen, a ecommerce we of broader to and is capabilities. look lot talk provide turnkey if provide a bar core two, competency. scale don’t there business it's -- one. provide end-to-end an persons interesting the that. a regulatory turnkey our U.S products We one. capabilities, A those our is you of to model, solutions Number our We marketplace, we provide solutions understand merchandising customers. number relative our at

the complex addition, chain, supply-chain supply environment. In a we manage within

mean, retail helping say the of our the so partner retail So developed the what to e-commerce we’re is partners, channel, an you short-term, competencies is X%, about competencies as ecommerce through I choice, X% business see the today. period, them, the I successful. the kind In a all that’s probably space intermediate of think you our think both we it stats, partners and being we’re excited I e-commerce arbitrage. to of channels and be of -- listen develop see it's

you probably provide to merchandising would maybe are to store consumer the gone the or probably arbitrage we Walmarts, You’re an this that on an where to Where customer. they’re excited side jet going at time. that’s the get is point, arbitration have buying over

look you So in consumer now with market, at the In the e-commerce, can at branded on get their walk up hands. product, to digital of the make you the kind the to own put future to Perrigo's product shelf, has choice their consumer diligence. look own

share, of product value That’s over them sell the the time understand the the not can product, creating that’s we effect. an brand, and time. the efficacy You but quality store of that’s see immediate over do

So, part question, Randall. answered hopefully, I your three

Randall Stanicky

Yup.

Bradley Joseph

Ron. Thanks, Great.

Operator

Jami question next Your Sachs. comes line from of Goldman the Rubin from

is line Your open. Please question. ask your

Jamilu Rubin

Thank you.

Just small you staying partnership? is as of to Ron, said, ecommerce, a what but overall ecommerce the business. it's lines of about is along know expand, I proportion can very the describe you today -- Amazon your that

do that describe can that that importantly pressure think your this going certain talked that also and help forward just You over what where imagine good is headwind should to next go five I that? pricing be years? expect the maybe more -- that It's or to is will a about margins? pricing pressure that for margins OTC Can hard is for is temporary? growth more And describe X% you going you X%, that to And implications you this your you what we said in something but model then have as to e-commerce Thanks. is categories. to

Ron Winowiecki

So, question. fair. pricing you the give When to listen, I down that’s you, maybe that, start so will about margin let think couple a on can he part Uwe component. and kind some profile gets again pressures, I Jamie. of Thank asked color, Amazon I

Uwe Roehrhoff

Well, thank you, Ron.

is and a offerings, a meeting store. purchase work in to retail of Let our me that. store partners as ecommerce online one history their element point and obviously long the And Perrigo start of that of all the with of has with value brand healthcare standing maximize we consumers of just

the of a us and OTC to on all our this in from is And partner across makes space consistent solutions. it store margin the choice healthcare profile, of for say, relatively this ecommerce is fair So that both customers.

Ron Winowiecki

Yes, said, echo just to right. Uwe what just

listen, If predominantly pricing I legacy will pressures walk into, you call the are into categories. the pressures,

the technologies, you after That’s where think margin pressure. have way in of about long the Jami, it's So space. the tablet to it. liquid particularly, some

being you say some look things, out clear, competitive If and time, in pressure some you at To be less you activity. some It type is seeing, in that’s where of if some building the of but nutrition, be over great gastrointestinal a multisource have there's this categories every at and pressure, category. Perrigo, the you call technologies. tablets I liquids of do bid will will of of But longer start the the it marketplace. commodity

Jamilu Rubin

e-commerce right on bigger just is increased of margins, you to presumably that would to effect your be not a a have volume, to So at it? as component depressive look becomes because overall revenue, way the your expect of that clear

Ron Winowiecki

we listen, the winners don’t think about it. to Jamie. Yes, think or It's losers, way

So we our is profile look position of across their they but our our profile their pricing That’s whoever maybe, in space, strategies base. margin strategies. are at of how all consistent cost our customers. products Their customer margin

So at relative any degradation seeing point of we’re this channel margins not to changes.

Jamilu Rubin

Thank you. All right.

Bradley Joseph

I Thanks, it. Great. Jamie. appreciate

Operator

comes the question of next from David Your line Maris.

open. your Your line ask is Please question.

Katie Kerfoot

This Hi. just I’m priorities Kerfoot we your about business Katie priority. heard capital expanding on forward, David. a wondering, inorganically earlier the is when allocation wasn't because for for going

the with fair on half Board, least why level mentioned -- the at or Thanks. year, this quiet priorities? that And side for you it you’re throughout and M&A to so is be you us you for those to might that as at year think this least of review the is that first it fair for of kind doing us

Uwe Roehrhoff

the thanks Yes, for question.

number one, -- top then priority, that is priority is if to a I is not that, need across it growth I the came think, obviously … that a correct organic

Katie Kerfoot

meant sir, acquisitions. inorganic. I I No meant

Uwe Roehrhoff

creation Yes, value go looking that holistic obviously, exercise at everything. when and our through will we will include you approach roadmap, and

six growth, to at opportunities subjects that will Looking over opportunities months at to optimize we’re that need announce that business, those to then fronts. at our going is on drive portfolio. we opportunities And conclude we inorganic all and of do look say what to from also it to fair for the looking in exercise but perspective, the next

Bradley Joseph

Great. Katie. Thank you,

Next question please.

Operator

Your of Goodman. next question the Marc from comes line

Your question. line is open. Please ask your

Marc Goodman

Yes.

for how product you expect give the impact? quarter, that us an how big sales a were have in first flu this sense sales growth can year you it First, to much you And mentioned animal product? and us that there impacted a and the you of then just quarter should of season Thanks. how was back. sense of giving an a Can give health, we

Ron Winowiecki

the Marc. those thanks I start. Yes, for will questions, to take

of dependent season upon "the Americas is out, it is, weather". I’d a aren't cough/cold back effect building about I’d is have of flu -- think you call So job like know portfolio. the and relative step kind as products it the categories CHC of first, what to why done within that fantastic

of at So example, infant cessation in smoking gastrointestinal nutrition kind is you products, point. cough/cold really categories, an this zero

on percentage to the that a of category cough/cold strip I call, of category. XX just talking, mean, it’s small clear, we like are be are revenues You're talking XX%. in if relatively segment and frankly pure that I

didn’t having the but a much, shipping effect. next those small. uptick, little in our not that, the we we into meaningful a selling but tick, Really If Now small mention not very had you is said season, QX, shipping thing QX, are on patterns at are call. look patterns into the

Looking an at uptick. QX, we’re seeing

sales through pull season. of some seeing given the are We

be number. disclose this to so that, want animal about then the model exact guidance, clear, our built to the business, sales we I very our at health said And that’s point. having don’t However, built in into think

to appropriate it say, is it's suffice any for product category. think particular I But point. go it a after to

You think pet health, it's interesting.

the one in space. is the MULO Our brand PetArmor brand number

core health not it's call December were consistent a say, that minimum. showed our categories let's at -- late So, our It if we Its but a a again, with it they strategy, the it of we been, this within disappointing, growth have made pet going if last a partnership. We well. fine. different year change, had would have -- suffice they did the effect was choice, notified to

would So you of the been. start relative have effect the can kind modeling of what out construction

Marc Goodman

Right.

Ron Winowiecki

Marc. Thanks,

Operator

the comes question from Schott JPMorgan. Christopher next Your from line of

question. your ask Please open. is line Your

Unidentified Analyst

is This Is area you In Chris. Rx of pure divestiture. for opportunity? an mix turned consumer the you get the Perrigo an had for Good potential business. Chris this about past morning. on into on And the feel of Do you current a the discussions portfolio?

Uwe Roehrhoff

obviously three going within of a think is that our businesses. next enter from once of again the creation and to views this all I forward have all, I we we’re business value exercise. challenge each can and through this, of segment our company we how to And opportunities. of position for And And trends, we this take will in positioning growth we will concluded our the say the you step take into of also first all go year. XXXX come back we to Well, it's on share

Bradley Joseph

Great. Thanks, Chris.

Next question please.

Operator

the comes line from of from Gregg question Deutsche Your next Gilbert Bank.

Your Please open. is question. ask your line

Gregg Gilbert

industry on more in others large have efficiently to once you those question separate OTC Yes, It potential drugs. that But very buyers was Thank there large that if buyer and coming any or synergy the generic together. thought generic products. how in formed as a with the customers buy Have the and to curious were customers? purchasing there no company was or buying approached generic you. changes and OTC synergy Bigger thank increasingly large that’s case still picture years you. is important company OTC noticed consortia between a have recent these

Ron Winowiecki

Gregg. for question. take Yes, the Thanks I to will start. that

to all, end right. really of you is store customers. The business brand the about model our delivering model, first solutions business could So, think

or think and Costco remember they consortiums have is will how who brand also would to their their you about what on to play the want or Walmart when brand. up brand is, give play So out, their target

mean effect brands to say who So and going merchandising in consortiums it a business in the turnkey to They have their that OTC buyer. these the hand it else really brand situation better to want that a store would situation, to somebody big our the a themselves. would be is space going are of they solutions,

say, don’t never. to So, listen, want I

effects of we’re Again, consortiums. those anticipating proactive serve. any say take at But not seeing any team emerging structural the trends his clear. model, to never structure marketplace looking and from or that or addressing Needham in types about are Jeff proactively and customers can the all it's industry this be of business very dynamics monitor things and brands You the remember it's condition. time, We very we the at that that very place.

We at point, your effect are question. immediate to any this Gregg seeing not

Gregg Gilbert

Thanks.

Bradley Joseph

Thanks, Gregg.

Operator

Leerink. Ami Your Fadia the line comes of from from next question

Your line is open. Please question. ask your

Ami Fadia

products how then, Thanks. international next some you were how -- saw initiatives how or a least good in just Hi, business Could some sense were should expansion in doesn't that. year? give launch -- it the year. So we you’re at where And winning of think larger year? But tax wanted of like of And this look the of that good you Rx some with respect expansion expansion with expecting and color a respect ongoing margins me to some like products were you consumer about to margins morning. similar the lastly, you with into we at should where on margins as gross rate, the the next we the think year? ProAir that end about in

Ron Winowiecki

asked. so the I remember every for -- thank way. try questions to the right. by Very good. question All you will The

pleased with So very with we are International. progress start Listen, in this the CH let’s business.

relative you sold the putting improved business to Number rationalization. part is unprofitables we’ve businesses. did Most brand to we’re the importantly portfolio building out one, got model. European We is some strategy a strategy. If focus a we remember multi distribution

again relative strategic clear in this force to how completed those sales of they’re well the well actions Number point, very a that trifactor very done of for at of kind rationalization, brand two, at to that? strategy, effectiveness, a big those always us see sure certain you lines year. of efficiency the effective at the their and in looking brands of are course that’s in be as we’ve last of and changes. has that, -- shift and last the markets. Sharon, over the is the disappointing point. gone improvement could that so We’ve focus more is to for We’re consolidated more with in number really his Could positioning team there So of But have that, marketplace, teams been the Married make this A&P. most marketplace. a triangle restructurings

in-sourcing -- brands commercial back to Underpinning acquired the branded brand drive for that The gone way architecture XX% have activities, in journey. what to about and that, A&P is again, I International, has well. and of will markets, the and it were his have. get action XX%-ish the about that CH the matching and kind now strategy working halfway a the really best [Indiscernible] how in -- very half and fantastic there. we’re focus we we talked XXXX. business we’re down range we through in They team outsourced through insource of promote So job our relative call we’re the and activities we done portfolio, about is goal kind that the that

operating And going that margin, directive reinvest want in again, we’ve this our margin that year. it’s always is been pretty from you on this so and business. clear. standpoint. targeted very about is We talked Upper very goal the been back teens towards, adjusted So knew. We’ve we’re focused teens. we playing to expansion that That upper well that

think things when improving next so integrated last to -- obviously And like year, you improvements We’ve funding now about You done. margin we’re improvements of sales our systems. expansion made fund the and process, by goes you this fund infrastructure, frontier. it in putting want through then a planning that’s operating what we’ve next this it management the with and phase

from help standpoint. You’re architectures innovation team putting systems that in R&D the some and

that Now going growth build helps the out profile forward.

yes, pause. So, a

gross range on point. margin level, XX% range. in the -- that from out 'XX, XX%-ish growing a if at teens So infrastructure margins a higher seeing you’re to back that But later in is, you’re those the year-over-year basis. expansion seeing business, of back model give again, on you guidance And kind margin a standpoint, of then in an investing

Rx asked you this to launch had shareholders next for you we’re create about to a continues We about into feel going about year. say business last good margins, pipeline, we that feel is, the going great think next going about I year. It's business. our into consistent good opportunities a the excited Rx. very value I’m year margin Listen, XX% very and

Bradley Joseph

'XX. And then lastly, it was tax rate going into

Ron Winowiecki

apology. that one. Oh, I tax missed 'XX. My Tax rate. rate in

So guidance XX.X%. listen is our

cash the from some work to it that in relative balance thinks the so system a that parts standpoint, under the That’s the the it your rate how in for basis, change have sheet any part of really Again on the and a parts not a we under tax versus of a with lot tax from important what’s operate, there's not mechanisms XX.X% our some discounted giving the you we’re cash saw relates deferred perpetuity accounting long discussion. effect. tax. And You seeing to accounting the in elements It's -- you company, XX%, the of do effects there that’s On flow accounting. different I’m the Reform, get therefore drives driving any rate. of in cash the the to -- or difference. on of guidance noncash different Tax the long tax no

at this point guidance is 'XX. Our XX.X% in

Bradley Joseph

for Great. questions, Ami. the Thanks

Next please.

Operator

the next Your Tsao comes from Douglas question Barclays. of line from

question. Please open. ask line your Your is

Douglas Tsao

Hi. Good taking the morning. Thanks for questions.

Just a couple.

of terms if just engagement you of action any a it in been think FDA small First, -- level any day Have you terms the mean, your will just today. review it the the you. in of how on the part of that status become more there? sort be of material And you I How of agency application. commentary -- an generic Thank sort terms timelines in ProAir, information of of then e-commerce, to business? curious have -- the the of business requests, just and seems much getting relatively on part the perspectives

Ron Winowiecki

Yes, A small small your part market. part first business, of of the of so on first it's e-commerce. piece a the

is So market that’s the but relative at that’s space, gave again, a it again numbers X% X%, it's to our small to yes, Perrigo, -- when I not Perrigo, right.

but So, guidance I want do growing going time be it any a to give growth that grow. is over listen, to know it’s effect, going to don’t to we market.

a the to in to from on have longer about the time, is expansion of kind other. think again, an capability so important growth. want responded is channel place guidance. a pretty CRL more. the the will any included consistent ProAir, to that’s saw this buy Over channel And to to takes probably open numbers. it we I I we’ve the probably And been at our CRL way so store short-term, share in focused On in did consumer really you standpoint. customers brand again it's empower it late term very that the we that’s issue launch the year arbitrage. back we’ve And response as everything given versus them. in goal a the FDA, And listen, are continue point to teams we’re looking in where one to that our Our you our FDA with probably XXXX, we’re mean, to don’t working $X.XX that grow that give a QX. in

So we’re objective. continuing to drive to that

Bradley Joseph

Thanks. Appreciate the question.

question please. Next

Operator

the Your of comes Samimy from next line from question Annabel Stifel.

open. line Your Please is question. ask your

Annabel Samimy

for taking question. Thanks my Hi.

that erosion back OTC. some So, component always Obviously, penetration or that further to X% Rx I price the the wanted categories to brand We go the to it. as to store from underpinning tailwinds for you expect long-term already business. going what growth new that is product market know of rate such X%

if much to we really and about Thank to. broader categories new way of tailwinds you can rate stand forward? haven't those product we that used some growth going you. within X% about the talk Because those heard So X% still

Ron Winowiecki

Yes.

the another to questions. So, ask way

So, I appreciate the dialogues.

market at So store growth, a share, business call store on stool the it brand look take for if brand as penetration, three again I right. this legs you

developments had about. channel RX So you is to third product a -- the OTC you and so that extension, OTC to Rx talked the line you innovation had have component

in like the brand have. that, may but dosing national product oral colors that and that brands also and think our extend example forms we follow -- the innovation. dosing not yes, many is of line, We’ve do dosage innovation, national instances, product technology we So own an

grow So above market. why see that don’t that’s an but area we lot talk you growth a us of about,

model, you of built there singles I a have and no have range thinking. Cetirizines do the but we any, omeprazoles will in OTC, are into home or doubles call we longer to take If Rx There's runs. built series -- don’t what our the

to OTC So Rx continue to that, we switches. see

is is albeit our by a pleased tangible small OTC, we're having it dysfunction, at A what this looking current tone developments the in example, marketplace addition, never regarding product, erectile the continuing point. example in say of FDA is there's more gives President, modernization change at monograph an exciting at Are In and bottle give products Listen, tone. of is the get that’s development, Act. things appropriate Consumer to it's other potentially It's that this X, see Products is CHPA, you're categories. they’re being can the skis the support currently where them, to and categories continuing Healthcare which drive about industry. Needham we’re and not talked Xyzal want the Association, fair those products we don’t to on date worked at going in active under very in at this we But Jeff regulatory within switch? to over That’s looking listen, we’ve time. the allergy in there we’re again do to this that. this area, like monitor those, not category But Cialis on the point,

Bradley Joseph

Annabel. Thanks,

Operator

the Raymond from from Your Elliot line Wilbur of next question comes James.

Your question. line your open. Please is ask

Elliot Wilbur

the bit or to Ron, in terms a your of And some not from the [indiscernible] elaborate whether detail hearing just business. of the is structural? healthcare challenges to guys more you a in we’re or morning. transitory around of what little branded think Good couple challenges Thanks. companies. from see key can the they’re a alluded different in you that what times maybe you consumer follow-up But commentary business, -- you’ve

bit that? So Thanks. just a on little get to want color more

Ron Winowiecki

broken rephrase little it the up I was question at so think Yes, to a back, first. it

-- rephrase phrase way are in structural So nature? some the Are transitory OTC are challenges space, healthcare there's of space, overall growth. always I’m I that items or back the in is, Listen, right. about part the just a on they consumer to question. you they innovation, it's going think it they it to try key is

don’t focus would that. part see I that’s key transitory, a I or their want to structural bringing new whether innovation, -- products from of is pipeline, to standpoint on represent So, branded the

going We're standpoint, nature marketplace. Relative you demand itself, industry, some there an the see to The other have some I get when changing some relative consumers think take through the product taking place right. the pull the of in closing, the dynamics. see seeing that’s product. nothing brands place channel what’s to for transitory to Again, structural are but our would in our sell-through, stores dynamics words, respond is retail when the that that you still in to the that that eyes. that are themselves In in from changes to of there place you do eyes. take

layering that changes. normalizations You take may effects event get those and kind some you of those that of just have the be although place material, inventory drive an not

continue So I again that still which is don’t not want seeing I will a takeaway -- model to important in think we represent that transitory, to grow anything we continue we’re but business our structural by core market. or

We structural business are of key benefits still models, in our about that confident it. the think way we

Bradley Joseph

Elliot. Thanks,

Operator

from from of Jefferies. David Your next comes the question Steinberg line

open. Please Your question. ask line is your

David Steinberg

bought this Thanks. much. the do you at I year but then, still And at reason develop a curious your year, you hiatus, is strategy, allocation delayed capital last grow for -- is X think do you if generics shares. said in time, just point this you you given you can some centrally XXXX? ProAir the be million know capital may the take secondly, valuation? in thanks business will that like feel you external very On this valuation, allocation, your I’m current almost Yes,

Ron Winowiecki

Yes, question. you Great bet.

me so gives growth answer ProAir. without with latter. will support start Let I some 'XX just pipeline for in that the a we’ve Yes, affirmative us been saying time with an our

the So, answer is yes.

is bad. point the represent a want make in not I on long-term time. thought going we And allocation, make you not bad support We or the value. will particular -- That’s say again, short-term Uwe I’m to listen, certainly process. buy, to basis, guys, think. would never think a We sense represent I at and don’t on On as look good want to relative everything sure will disruption continue going any price I’m I good we we any in do that with think at buy. to call capital a long-term will to market way

Bradley Joseph

of bottom the to ex also And and line talking Rx add piece ProAir, Just ProAir. top on we’re

Ron Winowiecki

Thank Yes, Correct. agree. good I Yes, Brad. you, call.

Bradley Joseph

Great. it. question Last please. Thanks, David. I appreciate

Operator

comes line Tim of Your BTIG. question next the from Chiang from

Your question. your open. Please ask line is

Timothy Chiang

growing bit Hi. more Thanks. pharma fastest experiencing Ron, still and It the a on products. segment in little is to could comment the price your going this like looks on be base Rx business? yet erosion you’re you just 'XX just

other driving do across commented you XXXX get in the that for are what’s that that and expect about products You segment? ProAir, is approval the but there to year growth

Ron Winowiecki

the out year very going a pleased the Yes, there. with -- is so segment, we next The question. performance yes, into it strong performance have thanks guidance for we’re

Now products. the about don’t again, of at new end it’s want to predisclose the We any new products. day,

product We there's two certainly, continues. another Remember, we’re QX. an and information product, QX, discuss, there is will strong disclose you on the give updates again, one cannot there's as will we will new products we -- launch so year that agreement, in but based in

how modeling, your take please that So that out. of it in you model architecture into in effect

So, think other indicate, like the business. about thing long-term And call will to I the how business, pipeline. and talk we to that's because basis, again, great great probably it a

X% as business. shows of in net you next increasing that our We that are pipeline sales. year in confidence just R&D And the

we’re that approximately increase operating circling still R&D So with roughly XX% percent, margin. in adjusted

about very year. feel next we good So the business

Bradley Joseph

Great. Thanks, Tim.

Timothy Chiang

your a just would me is one price the last follow-up. pricing let term that sort that’s business I XXXX? the Ron, say right of on a a term or erosion or generic business sort that not And of you for base mean, from perspective bottomed

Ron Winowiecki

I or Yes, top, middle, guide bottom, want right. don’t to

consistent very we’ve is the seeing is think and we in Our way we what Listen, guidance guide market consistent. our we’re forward. this about approach in been the

of get to not So our skis. ahead we’re going

high at looking are We single year in experience digits last 'XX.

kind of to expectation out We same 'XX. are modeling that

want don’t to you will don’t but that we We again, want performance That’s want dynamics, we this or -- to see point. we represent, quarter-by-quarter -- I top. bottom at keep represent as updated

Bradley Joseph

Tim. Great. Thanks,

Timothy Chiang

Okay, great.

Bradley Joseph

and your We here appreciate look everybody. discussions to Thanks shortly. more time having forward

Have So good day. a thanks everyone.

Operator

conference Thank participating. This concludes today’s for you call.

You may now disconnect.

Perrigo (PRGO) 4 Mar 182017 Q4 Earnings call transcript