Perrigo Company plc (NYSE: PRGO) ('Perrigo' or the 'Company'), a leading provider of Consumer Self-Care Products, today announced financial results for the third quarter ended October 1, 2022.
All comparisons are against the prior year fiscal third quarter, unless otherwise noted.
President and CEO, Murray S. Kessler commented, 'Perrigo third quarter results were strong. Net sales, adjusted gross margin, adjusted operating income and adjusted diluted EPS grew substantially compared to prior year in the face of continued macro-economic headwinds. We gained market share globally, including increases across every segment as store brands continued to gain share from national brands. Although revenue growth in the quarter was robust, it was below our estimates due to unfavorable currency translation, labor shortages effecting supply and slower category growth rates.'
Kessler continued, 'Importantly, business fundamentals are strong, the labor issue has improved and we just announced the first major step in our Supply Chain Reinvention Program through the infant formula investment. These, along with other margin enhancement programs being implemented, including further strategic pricing initiatives, will enable Perrigo to deliver outsized growth in 2023.'
Kessler concluded, 'Going forward, our focus is on execution. Successful integration of HRA, achievement of HRA synergies, integration of the Gateway plant, implementation of supply chain initiatives and reducing leverage as planned will position Perrigo to achieve strong top and bottom line growth for years to come.'
Reported net sales increased 5.5%, constant currency net sales increased 12.3% and organic net sales increased 7.7%. Reported net sales were driven by 1) $81 million in constant currency net sales from the acquisition of HRA, 2) $55 million in strategic pricing actions across both Consumer Self-Care segments, 3) U.S. store brand share gains versus national brands and store brand competitors, and growing share in the E.U. marketplace, and 4) an increase of $25 million in cough/cold-related product sales3 that primarily benefited the Upper Respiratory category. These drivers also benefited from e-commerce growth and new product sales. This growth was partially offset by 1) the impact of unfavorable currency translation of $70 million, 2) $31 million from the divested Latin American businesses and ScarAway brand, and 3) lower net sales in certain categories, particularly in the CSCI Healthy Lifestyles category.
Third quarter reported operating income was $33 million, compared to operating income of $438 million in the prior year period. This decrease was due primarily to $418 million related to the Omega arbitration award received in the prior year. Adjusted operating income grew $21 million, or 19.2%, to $133 million. Constant currency adjusted operating income increased 32.2% driven by 1) higher gross profit flow-through resulting from strategic price increases, higher sales volumes and the addition of HRA, and 2) the absence of two product recalls that occurred in the prior year. These increases were partially offset by 1) a $36 million impact from inflation, including higher freight & distribution expenses, 2) higher operating expenses, driven primarily by the addition of HRA, and 3) divested businesses.
Perrigo Company plc (NYSE: PRGO) is a leading provider of Consumer Self-Care Products and over-the-counter (OTC) health and wellness solutions that enhance individual well-being by empowering consumers to proactively prevent or treat conditions that can be self-managed.
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: the effect of the coronavirus (COVID-19) pandemic and its variants; supply chain impacts on the Company's business; general economic, credit, and market conditions; the impact of the war in Ukraine and any escalation thereof, including the effects of economic and political sanctions imposed by the United States, United Kingdom, European Union, and other countries related thereto; the outbreak or escalation of conflict in other regions where we do business; future impairment charges; customer acceptance of new products; competition from other industry participants, some of whom have greater marketing resources or larger market shares in certain product categories than the Company does; pricing pressures from customers and consumers; resolution of uncertain tax positions, including the Company's appeal of the draft and final Notices of Proposed Assessment ('NOPAs') issued by the U.S. Internal Revenue Service and the impact that an adverse result in any such proceedings would have on operating results, cash flows, and liquidity; pending and potential third-party claims and litigation, including litigation relating to the Company's restatement of previously-filed financial information and litigation relating to uncertain tax positions, including the NOPAs; potential impacts of ongoing or future government investigations and regulatory initiatives; uncertainty regarding the timing of, and the Company's ability to obtain and maintain, certain regulatory approvals, including the sale of daily over-the-counter oral contraceptives; potential costs and reputational impact of product recalls or sales halts; the impact of tax reform legislation and/or changes in healthcare policy; the timing, amount and cost of any share repurchases; fluctuations in currency exchange rates and interest rates; the Company's ability to achieve the benefits expected from the sale of its Rx business and the risk that potential costs or liabilities incurred or retained in connection with the transaction may exceed the Company's estimates or adversely affect the Company's business or operations; the Company's ability to achieve the benefits expected from the acquisition of HRA Pharma and the risks that the Company's synergy estimates are inaccurate or that the Company faces higher than anticipated integration or other costs in connection with the acquisition; risks associated with the integration of HRA Pharma, including the risk that growth rates are adversely affected by any delay in the integration of sales and distribution networks; the consummation and success of other announced and unannounced acquisitions or dispositions, and the Company's ability to realize the desired benefits thereof and the Company's ability to execute and achieve the desired benefits of announced cost-reduction efforts and other strategic initiatives and investments, including the Company's ability to achieve the expected benefits from its supply chain reinvention program. An adverse result with respect to the Company's appeal of any material outstanding tax assessments or pending litigation, including securities or drug pricing matters, could ultimately require the use of corporate assets to pay such assessments, damages from third-party claims, and related interest and/or penalties, and any such use of corporate assets would limit the assets available for other corporate purposes. There can be no assurance that the FDA will approve the sale of daily oral contraceptives without a prescription in the United States. These and other important factors, including those discussed under 'Risk Factors' in the Company's Form 10-K for the year ended December 31, 2021, as well as the Company's subsequent filings with the United States Securities and Exchange Commission, may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this press release are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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