ITEM 2.02.
Results of Operations and Financial Condition
On
May 22, 2017
, Perrigo Company plc (the “Company”) released earnings for the
fourth
quarter and year ended
December 31, 2016
. The press release related to the Company’s earnings is attached as Exhibit 99.1.
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 companies in similar industries and assessing the Company's prospects for future performance. These non-GAAP financial measures exclude items, such as impairment charges, changes in the fair value of the Tysabri royalty stream, amortization expense related primarily to acquired intangible assets, restructuring charges, results attributable to certain held-for-sale assets, unusual litigation, gains on divestitures, losses on equity method investments, and acquisition and integration-related charges, as well as the related tax effects of these items that by their nature affect comparability of operational performance or obscure underlying business operational trends. 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 operating income, adjusted net income, adjusted diluted earnings per share, adjusted gross margin, adjusted operating margin, and adjusted diluted shares outstanding 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 discloses adjusted net sales, which excludes operating results attributable to held-for-sale businesses, in order to provide information about sales of the Company’s continuing business. In addition, the Company discloses net sales growth and adjusted net sales growth on a constant currency basis to provide information about sales of the Company’s continuing business excluding the exogenous impact of foreign exchange. The Company believes these supplemental financial measures provide investors with consistency in financial reporting, enabling meaningful comparisons of past, present and future underlying operating results, and also facilitate comparison of the Company’s operating performance to the operating performance of its competitors.
Reported results were adjusted for the following items:
Three Months Ended December 31, 2016
Results
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Tysabri
®
royalty stream - change in fair value
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Amortization of acquired assets related to business combinations and asset acquisitions
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•
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Goodwill and intangible asset impairment charges
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Restructuring charges related to organizational improvements
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Unusual litigation expense
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Operating results attributable to held-for-sale businesses
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Acquisition and integration-related charges
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Tax effects of non-GAAP adjustments
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Three Months Ended December 31, 2015
Results
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Goodwill, intangible, and equity method investment impairment charges
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•
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Tysabri
®
royalty stream - change in fair value
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•
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Legal and consulting fees related to hostile takeover defense
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Amortization of acquired assets related to business combinations and asset acquisitions
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Restructuring charges related to completed business acquisition and organizational improvements
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Acquisition and integration-related charges
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Equity method investment losses
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Loss on early debt extinguishment
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Tax effects of non-GAAP adjustments
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Twelve Months Ended December 31, 2016
Results
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Goodwill intangible asset, and held-for-sale impairment charges
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•
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Tysabri
®
royalty stream - change in fair value
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•
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Amortization of acquired assets related to business combinations and asset acquisitions
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•
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Restructuring charges related to organizational improvements
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•
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Acquisition and integration-related charges
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•
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Unusual litigation expense
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Operating results attributable to held-for-sale businesses
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Equity method investment losses
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Tax effects of non-GAAP adjustments
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Twelve Months Ended December 31, 2015
Results
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Goodwill, intangible, and equity method investment impairment charges
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•
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Tysabri
®
royalty stream - change in fair value
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•
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Legal and consulting fees related to hostile takeover defense
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•
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Amortization of acquired assets related to business combinations and asset acquisitions
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•
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Restructuring charges related to completed business acquisition and organizational improvements
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•
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Acquisition and integration-related charges
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•
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Equity method investment losses
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Loss on early debt extinguishment
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Losses on acquisition-related foreign-currency hedges
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Initial payment made in connection with an R&D arrangement
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Tax effects of non-GAAP adjustments
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2017 Full Year Guidance
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Amortization of acquired assets related to business combinations and asset acquisitions
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Sale of Tysabri
®
royalty stream
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Restructuring charges related to organizational improvements
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Loss on early debt extinguishment
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•
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Tax effects of non-GAAP adjustments
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Revised 2016 Guidance
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Amortization of acquired assets related to business combinations and asset acquisitions
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Operating results attributable to held-for-sale businesses
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•
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Goodwill intangible asset, and held-for-sale impairment charges
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•
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Restructuring charges related to organizational improvements
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•
|
Tysabri
®
royalty stream - change in fair value
|
|
|
•
|
Acquisition and integration-related charges
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|
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•
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Unusual litigation expense
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•
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Equity method investments losses
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•
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Tax effects of non-GAAP adjustments
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The information in this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.