Fourth Quarter & Calendar Year 2016 Earnings Conference Call May 23, 2017
Forward Looking Statements Certain statements in this presentation 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, 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 timing, amount and cost of any share repurchases; 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 we do; pricing pressures from customers and consumers; potential third-party claims and litigation, including litigation relating to our restatement of previously-filed financial information; potential impacts of ongoing or future government investigations and regulatory initiatives; general economic conditions; fluctuations in currency exchange rates and interest rates; the consummation of announced acquisitions or dispositions, and our ability to realize the desired benefits thereof; our ability to achieve our guidance, and our ability to execute and achieve the desired benefits of announced cost-reduction efforts and other initiatives. In addition, the Company may identify and be unable to remediate one or more material weaknesses in its internal control over financial reporting, may encounter unanticipated material issues or additional adjustments that could delay the filing of required periodic reports with the United States Securities and Exchange Commission, or may be unable to regain compliance with the NYSE continued listing rules. Furthermore, the Company and/or its subsidiaries may incur additional tax liabilities in respect of 2016 and prior years as a result of any restatement or may be found to have breached certain provisions of Irish company legislation in respect of prior financial statements and if so may incur additional expenses and penalties. These and other important factors, including those discussed under Risk Factors in the Company s Form 10-K for the year ended December 31, 2016, 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 presentation 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. Non-GAAP Measures This presentation contains non-gaap measures. The reconciliation of those measures to the most comparable GAAP measures is included at the end of this presentation. A copy of this presentation, including the reconciliations, is available on the Company s website at www.perrigo.com. 2
John Hendrickson Agenda 3
Call Agenda I. Foundation for Growth II. Form 10-K Filing III. Calendar Year & Fourth Quarter 2016 Results IV. Noteworthy Impacts of the Restatement V. Fourth Quarter 2016 Financial Results VI. Calendar Year 2017 Guidance VII. Durable Business Model 4
I. Foundation for Growth Focused Execution Against 2017 Plan Key Actions to Create Value Pharmaceutical Moved efficiently to drive portfolio strategies Improved corporate governance Implemented cost initiatives across the organization New leadership team focused on driving growth Debt pay-down strategy to enhance financial flexibility Execute against 2017 plan; file Q1 financials as soon as practical Fast Moving Consumer Goods FMCG Pharmaceutical Supply Chain Quality Affordable Healthcare Products Supply Chain 5
II. Form 10-K Filing Completed All Historical Filings within Four Weeks 2016 Form 10-K ( Jumbo 10-K ) Updated financial information for the fiscal years ended June 28, 2014 and June 27, 2015; the transition period from June 28, 2015 to December 31, 2015 2016 Forms 10-Q/A Information Filed Updated financial information for the quarterly periods ended April 2, 2016, July 2, 2016 and October 1, 2016 Recast historical financial results to be filed on Form 8- K to assist in modeling 6
III. Performance vs. Updated 2016 Guidance Excluding Tysabri Outperformed or Performed at High End of Final Guidance Ranges Updated 2016 Guidance Announced 8/10/2016 Impact of Tysabri Accounting Change Final 2016 Guidance (adjusted for Tysabri accounting change) Restated Financial Results Announced 5/22/2017 Performance vs. Final Guidance Consolidated Adjusted Net Sales 1 $5.3 - $5.5B $(352M) $5.0B - $5.2B $5.2B High End of Range Adjusted EPS 1 $6.85 - $7.15 $(2.14) $4.70 - $5.00 $5.07 Outperformed Range Operating Cash Flow >$0.9B $(351M) >$550M $611M Outperformed Range Calendar 2016 Key Takeaways Strong finish to end the year Achieved Final 2016 Guidance Solid cash flow 7 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
III. Net Sales and Operating Income As Adjusted (1) Q4 2016 Growth in All Segments ($ in millions) Q4 2016 Q4 2015 % Change Y/Y % Change Constant Currency Y/Y Adjusted Consolidated Perrigo Net Sales (2) $1,331 $1,315 1 % 4 % Adjusted Operating Income 259 266 (3 %) Adjusted CHC Americas Net Sales (2) 627 599 5 % 5 % Adjusted Operating Income 139 125 11 % CHC International Net Sales 420 434 (3%) 3 % Adjusted Operating Income 36 53 (31 %) Rx Pharmaceuticals Net Sales 266 259 3 % 3 % Adjusted Operating Income 115 109 5 % 8 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts (2) For comparative purposes, fourth quarter 2015 net sales have been adjusted in this presentation to exclude $44 million of sales attributable to the U.S. VMS business, which was sold in the third quarter 2016; this 2015 net sales adjustment does not impact any other prior year amounts or metrics
Ron Winowiecki Noteworthy Impacts of the Restatement Fourth Quarter 2016 Financial Results Calendar Year 2017 Guidance 9
IV. Noteworthy Impacts of the Restatement Noteworthy Impacts of Restatement 1. Tysabri royalty asset treated as financial asset rather than intangible asset Remove Tysabri royalty stream from net sales Remove the amortization expense associated with the intangible asset Include quarterly changes in fair value of the financial asset as a component of non-cash other income/expense 2. Identification of certain Omega deferred tax assets Changes From 2/27/17 GAAP Metrics GAAP Net GAAP Income ($M) EPS 2/27/17 Presentation $ (4,142) $ (28.91) 1. Tysabri $ (77) $ (0.54) 2. Omega DTA $ (32) $ (0.22) Reduction of goodwill, offset by a corresponding reduction to net deferred tax liabilities at the date of the Omega acquisition 10
IV. Noteworthy Impacts of the Restatement Noteworthy Impacts of Restatement 3. Impairment Adjustments As a result of the reduction of goodwill related to the identification of Omega deferred tax assets, revision of goodwill impairments taken since acquisition Animal Health Reporting Unit impairment identified in Q4 2016 determined to be related to goodwill rather than intangible assets originally identified 4. Finalization of Taxes Certain deferred tax asset valuation allowances were adjusted to reflect more recent forecasted information including the sale of the Tysabri royalty stream in Q1 2017 Changes From 2/27/17 GAAP Metrics GAAP Net GAAP Income ($M) EPS 2/27/17 Presentation $ (4,142) $ (28.91) 1. Tysabri $ (77) $ (0.54) 2. Omega DTA $ (32) $ (0.22) 3. Impairment Adjustments $ 126 $ 0.88 4. Finalization of Taxes $ 109 $ 0.76 5. Other Adjustments $ 3 $ 0.02 5/22/17 Reported GAAP $ (4,013) $ (28.01) Total change in GAAP from 2/27/17 $ 129 $ 0.90 11 5. Other Previously Identified Adjustments
V. Performance vs. Updated 2016 Guidance Excluding Tysabri Outperformed or Performed at High End of Final Guidance Ranges Updated 2016 Guidance Announced 8/10/2016 Impact of Tysabri Accounting Change Final 2016 Guidance (adjusted for Tysabri accounting change) Restated Financial Results Announced 5/22/2017 Performance vs. Final Guidance Consolidated Adjusted Net Sales 1 $5.3 - $5.5B $(352M) $5.0B - $5.2B $5.2B High End of Range Adjusted EPS 1 $6.85 - $7.15 $(2.14) $4.70 - $5.00 $5.07 Outperformed Range Operating Cash Flow >$0.9B $(351M) >$550M $611M Outperformed Range 12 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
V. Consolidated Q4 2016 Financial Information ($ in millions, except per share amounts) Q4 2016 Q4 2016 Q4 2015 Reported Reported Adjusted (1) Reported Change YoY % Non-GAAP Adjustments Net Sales $1,331 NM $1,359 (2 %) Gross Profit $488 $554 $544 (10 %) R&D Expense 42 42 47 (11 %) Distribution, Selling & Administrative Expense ("DSG&A") 315 254 365 (13 %) Restructuring and Impairments $615 $240 156 % Amortization of intangible assets Goodwill and intangible asset impairment charges Tysabri royalty stream change in fair value Operating Income (Loss) $(485) $259 ($108) 350 % Interest, Other and Expense Associated with change in fair value of the Tysabri royalty stream 1,159 53 178 NM Net Income (Loss) $(1,359) $178 $(218) NM Diluted Earnings (Loss) Per Share $(9.48) $1.24 $(1.51) NM 13 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts NM = Not meaningful
in millions V. CHC Americas Segment As Adjusted (1) Q4 2016 2016 Q4 Year-Over-Year Adjusted Net Sales Growth (2) $650.0 $620.0 Adjusted net sales increased 5% on a constant currency basis (2) $590.0 $560.0 $530.0 $599 $627 Strong demand in U.S. Consumer Healthcare, driven by increased sales in the infant formula, antacid and smoking cessation categories New product sales of $27 million $500.0 Adjusted Gross Profit Q4 2015 Q4 2016 Q4 2015 Q4 2016 Adjusted Operating Income Margins driven by product mix and supply chain efficiencies, partially offset by price erosion in certain OTC categories $223M +2% $139M +11% Adjusted Gross Margin (3) Adjusted Operating Margin (3) +150 bps 35.5% 22.2% +270 bps 14 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts (2) For comparative purposes, fourth quarter 2015 net sales have been adjusted in this presentation to exclude $44 million of sales attributable to the U.S. VMS business, which was sold in the third quarter 2016; this 2015 net sales adjustment does not impact any other prior year amounts or metrics (3) Q4 2016 and 2015 adjusted gross margin and operating margin use reported net sales as the denominator
in millions V. CHC International Segment As Adjusted (1) Q4 2016 $460.0 $450.0 $440.0 $430.0 $420.0 $410.0 $400.0 $390.0 $380.0 2016 Q4 Year-Over-Year Net Sales $434 Adjusted Gross Profit $176M $420 Q4 2015 Q4 2016-15% $445 constant currency Q4 2015 Q4 2016 Adjusted Operating Income $36M Adjusted Gross Margin (2) Adjusted Operating Margin (2) -31% Net sales on a constant currency basis increased 3% as foreign currency had a negative impact of $26 million New product sales of $26 million primarily from line extensions Increases in net sales offset partially by lifestyle and natural health/vitamins categories and lower sales in the German and French markets Margins impacted by higher net sales in the Belgian distribution business, which was exited at the end of Q4 Excluding the exited Belgium distribution business from both years, adjusted gross margin of 51.4% was 242 basis points lower year-overyear -590 bps 41.9% 8.7% -340 bps 15 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts (2) Q4 2016 and 2015 adjusted gross margin and operating margin use reported net sales as the denominator
in millions V. Rx Pharmaceuticals Segment As Adjusted (1) Q4 2016 2016 Q4 Year-Over-Year Net Sales Growth $280.0 $270.0 Net sales on a constant currency basis increased 3% driven primarily by net sales from product acquisitions and new product sales of $15 million $260.0 Price erosion in line with expectations $250.0 $259 $266 Adjusted operating margin increased 110 bps $240.0 Q4 2015 Q4 2016 Adjusted Gross Profit Adjusted Operating Income $149M +3% $115M +5% Adjusted Gross Margin (2) Adjusted Operating Margin (2) +10 bps 56.1% 43.2% +110 bps 16 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts (2) Q4 2016 and 2015 adjusted gross margin and operating margin use reported net sales as the denominator
V. Balance Sheet Executing on Debt Pay-down Strategy Committed to maintaining investment grade profile Make-whole call on our $600M 2.300% notes due 2018 completed on May 8, 2017 2017 Mid-year debt pay-down assumption yields second half interest $40M lower than first half As of December 31, 2016 $622M Total Cash $5.8B Total Debt 17
VI. Calendar Year 2017 Guidance to Exclude Tysabri 2017 Guidance Announced 2/27/2017 Exclude Tysabri New 2017 Guidance Consolidated Net Sales $5.0B - $5.2B $(359M) $4.6B - $4.8B Consumer Healthcare Americas ~$2.4B ~$2.4B No Change in Underlying Strength of Business Consumer Healthcare International ~$1.4B ~$1.4B Prescription Pharmaceuticals ~$925M ~$925M Adjusted EPS (2) $6.30 - $6.65 $(2.15) $4.15 - $4.50 Operating Cash Flow >$850M $(300M) (1) >$575M Operating Cash Flow guidance increased by $25M from 2/27/2017 18 (1) Tysabri cash flow after-tax, assumes $2.1 billion mid-year debt reduction, which equates to estimated second half interest savings of $40 million (2) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
VI. Calendar Year 2017 Guidance (1) Net Sales Calendar Year 2017 Guidance $4.6B $4.8B DSG&A as % of Net Sales (2) ~20% Calendar Year 2017 Net Sales Guidance Adjusted Operating Margin R&D as % of Net Sales (2) ~4% Adjusted Operating Income $930M $990M CHC Americas ~$2.4B Low 20% Interest Expense ~$175M Adjusted Effective Tax Rate ~19.5% Adjusted EPS $4.15 $4.50 CHC International ~$1.4B Low Mid Teens Diluted Shares Outstanding ~144M Operating Cash Flow >$575M Rx Pharma ~$925M High 30% Expect first half results weighted towards first quarter; Full-year results weighted towards second half 19 (1) See attached appendix for reconciliation of adjusted (non-gaap) to reported (GAAP) amounts (2) Percentages are +/- 75 basis points
John Hendrickson Leveraging the Perrigo Advantage 20
VII. Durable Business Model Approximately 80% of Perrigo is Consumer-Facing in millions ($) Key Competitive Advantages Consumer Focused Assets $6,000 $5,000 Consumer-Facing Business (1) 22.1% 21.1% 21.0% 78% 25.0% 20.0% Global Operating Platform $4,000 77% 15.0% Efficient Supply Chain 130-Year Legacy as a Trusted Partner $3,000 $2,000 $1,000 73% 10.0% 5.0% Leader in Innovation $0 CY14 CY15 CY16 0.0% Rx + Other Consumer-Facing Businesses Adjusted Net Sales Consolidated Adjusted Operating Margin 21 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts
Contact Bradley Joseph Vice President, Global Investor Relations and Corporate Communications (269) 686-3373 bradley.joseph@perrigo.com 22
Calendar Year 2016 Results Calendar Year 2015 (2) Calendar Year 2016 Guidance at June 30, 2016 Rates Presented Aug. 10, 2016; Reaffirmed Nov, 10, 2016 Calendar Year 2016 Guidance at June 30, 2016 Rates Pro-forma Without Tysabri Impact of Dec. 31, 2016 Rates Compared to June 30, 2016 Rates Operational Impact (midpoint to actual) Calendar Year 2016 Net Sales $5.0B $5.3 - $5.5B (1),(3),(4) $5.0 - $5.2B (1),(3),(4) $(14M) $82M $5.2B (1),(4) Adjusted Diluted EPS (1) $5.57/share $6.85 - $7.15/share $4.70 - $5.00/share (3),(4) $(0.00)/share $0.22/share $5.07/share 23 (1) See attached Appendix for reconciliation of Adjusted (Non-GAAP) to Reported (GAAP) amounts (2) Calendar-year data for 2015 was derived from the Company s audited results for the six-month period ended December 31, 2015 and unaudited results for the fiscal quarters ended March 28, 2015 and June 27, 2015 (3) June 30, 2016 exchange rates were used as the basis for updated calendar year 2016 guidance (4) Excludes the expected results of held-for-sale businesses
TABLE I PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) Consolidated Net Sales Gross Profit R&D Expense Three Months Ended December 31, 2016 DSG&A Expense Restructuring and Impairment Charges Operating Income (Loss) Interest, Other, and Change in Fair Value of Tysabri Royalty Stream Net Income (Loss) Diluted Earnings (Loss) per Share Reported $ 1,331.2 $ 487.7 $ 41.6 $ 315.4 $ 615.3 $ (484.6) $ 1,159.3 $ (1,359.1) $ (9.48) Adjustments: Tysabri royalty stream - change in fair value $ $ $ $ $ $ (1,115.6) $ 1,115.6 $ 7.78 Impairment charges (602.2) 602.2 1.7 600.5 4.18 Amortization expense related primarily to acquired intangible assets 62.0 (0.1) (32.8) 94.9 94.9 0.67 Unusual litigation (18.4) 18.4 18.4 0.13 Restructuring charges (13.1) 13.1 13.1 0.09 Operating results attributable to held-for-sale businesses* 4.2 (7.3) 11.5 11.5 0.08 Acquisition and integration-related charges (3.0) 3.0 (0.3) 3.3 0.02 Gain on divestitures 7.8 (7.8) (0.05) Non-GAAP tax adjustments*** (312.9) (2.18) Adjusted $ 553.9 $ 41.5 $ 253.9 $ $ 258.5 $ 52.9 $ 177.5 $ 1.24 As a % of adjusted net sales 41.6% 19.4% Diluted weighted average shares outstanding Reported 143.4 Effect of dilution as reported amount was a loss, while adjusted amount was income** 0.2 *Held-for-sale businesses include the European sports brand and the India API business. **In the period of a net loss, diluted shares outstanding equal basic shares outstanding. Adjusted 143.6 *** The non-gaap tax adjustment includes the following: (1) $(187.1) million of tax effects of pretax non-gaap adjustments that are calculated based upon the specific rate of the applicable jurisdiction of the pretax item; (2) a $20.6 million effect on non-gaap income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) Discrete income tax adjustments of $(26.9) million related to jurisdictional tax rate changes in France & Italy, $102.6 million net impact of valuation allowances on deferred tax assets commensurate with non-gaap pre-tax measures and $(222.1) million valuation allowance release due to the sales of Tysabri. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-gaap net income. 24
TABLE I (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) Consolidated Net Sales Gross Profit R&D Expense DSG&A Expense Three Months Ended December 31, 2015 Restructuring and Impairment Charges Operating Income (Loss) Interest and Other Expense Pretax Income (Loss) Reported $ 1,359.1 $ 543.7 $ 46.6 $ 364.5 $ 240.3 $ (107.7) $ 178.3 $ (286.0) $ (67.6) $ (218.4) $ (1.51) Adjustments: Tysabri royalty stream - change in fair value $ $ $ $ $ $ (116.6 ) $ 116.6 $ $ 116.6 $ 0.80 Amortization expense related primarily to acquired intangible assets 38.2 (0.2 ) (16.5 ) 54.9 54.9 54.9 0.38 Acquisition and integration-related charges (8.5 ) 8.5 (0.8 ) 9.3 9.3 0.06 Legal and consulting fees related to Mylan defense (71.3 ) 71.3 71.3 71.3 0.49 Impairment charges (215.6 ) 215.6 (10.7 ) 226.3 226.3 1.56 Unusual litigation 1.7 (1.7) (1.7) (1.7) (0.01) Losses on equity method investments (2.7 ) 2.7 2.7 0.02 Loss on debt extinguishment (0.9 ) 0.9 0.9 0.01 Restructuring charges (24.7 ) 24.7 24.7 24.7 0.17 Non-GAAP tax adjustments*** 84.2 (84.2) (0.58) Adjusted $ 581.9 $ 46.4 $ 269.9 $ $ 265.6 $ 46.6 $ 219.0 $ 16.6 $ 202.4 $ 1.39 As a % of reported net sales 42.8 % 19.5% Income Tax Expense (Benefit) Net Income (Loss) 2015 QTD Net Sales excluding the U.S. VMS business and the European sports brand Diluted weighted average shares outstanding Reported $ 1,359.1 Reported 144.9 Operating results attributable to held-for-sale businesses* (44.5) Effect of dilution as reported amount was a loss, while adjusted amount was income**. 0.5 Adjusted $ 1,314.6 Adjusted 145.4 *Held-for-sale businesses include the U.S. VMS business and European sports brand. **In the period of a net loss, diluted shares outstanding equal basic shares outstanding. Diluted Earnings (Loss) per Share *** The non-gaap tax adjustment includes the following: (1) $(91.4) million of tax effects of pretax non-gaap adjustments that are calculated based upon the specific rate of the applicable jurisdiction of the pretax item; (2) a $0.4 million effect on non-gaap income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) $6.8 million discrete income tax adjustments related to debt restructuring for the acquisition of Omega. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-gaap net income. 25
TABLE I (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) Twelve Months Ended December 31, 2016 Consolidated Net Sales Gross Profit R&D Expense DSG&A Expense Restructuring and Impairment Charges Operating Income (Loss) Interest, Other, and Change in Fair Value of Tysabri Royalty Stream Pretax Income (Loss) Income tax expense (benefit) Net Income (Loss) Diluted Earnings (Loss) per Share Reported $ 5,280.6 $ 2,051.8 $ 184.0 $ 1,205.5 $ 2,662.0 $ (1,999.7) $ 2,848.6 $ (4,848. 3) $ (835.5) $ (4,012.8) $ (28.01) Adjustments: Impairment charges $ $ $ $ $ (2,631.0) $ 2,631.0 $ (22.4) $ 2,653.4 $ $ 2,653.4 $ 18.48 Tysabri royalty stream - change in fair value (2,608.2) 2,608.2 2,608.2 18.16 Amortization expense related primarily to acquired intangible assets 226.7 (0.9) (136.3) 363.9 363.9 363.9 2.59 Restructuring charges (31.0) 31.0 31.0 31.0 0.22 Acquisition and integration-related charges 4.7 (19.6) 24.3 (1.1) 25.4 25.4 0.18 Unusual litigation (18.4) 18.4 18.4 18.4 0.13 Operating results attributable to held-for-sale businesses* (112.8) (11.4) (1.2) (25.5) 15.3 15.3 15.3 0.11 Losses on equity method investments (4.2) 4.2 4.2 0.03 Gain on divestitures 7.7 (7.7) (7.7) (0.05) Non-GAAP tax adjustments*** 971.3 (971.3) (6.77) Adjusted $ 5,167.8 $ 2,271.8 $ 181.9 $ 1,005.7 $ $ 1,084.2 $ 220.4 $ 863.8 $ 135.8 $ 728.0 $ 5.07 As a % of sales 44.0% 21.0% *Held-for-sale businesses include the U.S. VMS business, European sports brand, and India API business Diluted weighted average shares outstanding **In the period of a net loss, diluted shares outstanding equal basic shares outstanding. Reported 143.3 ***The non-gaap tax adjustment includes the following: (1) $(802.5) million of tax effects of pretax non-gaap adjustments that are Effect of dilution as reported amount was a loss, while calculated based upon the specific rate of the applicable jurisdiction of the pretax item; and (2) Discrete income tax adjustments of: adjusted amount was income** 0.3 $(49.3) million related to jurisdictional tax rate changes in Italy, UK, Germany & France, $102.6 million net impact of valuation allowances on deferred tax assets commensurate with non-gaap pre-tax measures, and $(222.1) million valuation allowance release Adjusted 143.6 due to the sale of Tysabri. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non- GAAP net income. 26
TABLE I (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (in millions, except per share amounts) (unaudited) Twelve Months Ended December 31, 2015 Diluted Restructuring Interest Income Net Earnings Gross R&D DSG&A and Impairment Operating and Other Pretax Tax Income (Loss) per Consolidated Net Sales Profit Expense Expense Charges Income Expense income Expense (Loss) Share Reported $ 5,014.7 $ 2,049.4 $ 186.3 $ 1,162.5 $ 250.2 $ 450.4 $ 391.2 $ 59.2 $ 61.1 $ (1.9) $ (0.01) Adjustments: Losses on acquisition-related foreign currency hedges $ $ $ $ $ $ (268.5) $ 268.5 $ $ 268.5 $ 1.87 Amortization expense related primarily to acquired intangible assets 156.1 (0.4) (95.1) 251.7 251.7 251.7 1.76 Impairment charges (0.4) (222.4) 222.8 (12.5) 235.3 235.3 1.64 Legal and consulting fees related to Mylan defense (100.3) 100.3 100.3 100.3 0.70 Acquisition and integration-related charges (35.2) 35.2 (0.5) 35.7 35.7 0.25 Restructuring charges 0.4 (27.8) 28.2 28.2 28.2 0.20 Loss on debt extinguishment (20.5) 20.5 20.5 0.14 Initial payment made in connection with an R&D arrangement (18.0) 18.0 18.0 18.0 0.13 Losses on equity method investments (10.7) 10.7 10.7 0.07 Unusual litigation (0.3) 0.3 0.3 0.3 Tysabri royalty stream - change in fair value 88.8 (88.8) (88.8) (0.62) Non-GAAP tax adjustments*** 79.6 (79.6) (0.56) Adjusted $ 2,205.9 $ 167.9 $ 931.2 $ $ 1,106.9 $ 167.3 $ 939.6 $ 140.7 $ 798.9 $ 5.57 As a % of sales 44.0% 22.1% 2015 YTD Net Sales excluding the U.S. VMS business and the European sports brand Diluted weighted average shares outstanding Reported $ 5,014.7 Reported 144.6 Operating results attributable to held-for-sale businesses* (162.6) Weighted average effect of 6.8 million shares issued on November 26, 2014 to finance the Omega acquisition, which closed on March 30, 2015. In addition, effect of dilution as reported amount was a loss, while adjusted amount was income**. (1.2) Adjusted $ 4,852.1 Adjusted 143.4 *Held-for-sale businesses include the U.S. VMS business and the European sports brand. **In the period of a net loss, diluted shares outstanding equal basic shares outstanding. *** The non-gaap tax adjustment includes the following: (1) $(135.5) million of tax effects of pretax non-gaap adjustments that are calculated based upon the specific rate of the applicable jurisdiction of the pretax item; (2) a $2.5 million effect on non-gaap income taxes related to the interim tax accounting requirements within ASC 740, Income Taxes; and (3) $53.4 million of discrete income tax adjustments related to debt restructuring for the acquisition of Omega. The GAAP tax benefit recorded in the current quarter related to these items has been excluded from non-gaap net income. 27
TABLE II PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED SEGMENT INFORMATION (in millions) (unaudited) Three Months Ended Consumer Healthcare Americas Net Sales Gross Profit Three Months Ended December 31, 2016 December 31, 2015 Operating Income Net Sales Gross Profit Operating Income Reported $ 626.8 $ 210.0 $ 83.3 $ 643.2 $ 206.2 $ 92.8 Adjustments: Amortization expense related primarily to acquired intangible assets $ 12.6 $ 17.7 $ 12.2 $ 17.9 Unusual litigation 10.2 0.3 Impairment charges 27.1 1.5 Restructuring charges (0.1) 12.8 Acquisition and integration-related charges 1.2 Adjusted $ 222.6 $ 139.4 $ 218.4 $ 125.3 As a % of reported net sales 35.5% 22.2% 34.0% 19.5% For Comparative Purposes* Reported $ 643.2 Operating results attributable to held-for-sale business (44.3) Adjusted $ 598.9 *Q4 2015 net sales adjustment made for comparison purposes only and does not change any other prior year financial information or metrics since the U.S. VMS business was not held-forsale in 2015. Q4 2015 gross margin and operating margin use reported net sales as the denominator. 28
TABLE II (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED SEGMENT INFORMATION (in millions) (unaudited) Three Months Ended Consumer Healthcare International Net Sales Gross Profit Three Months Ended December 31, 2016 December 31, 2015 Operating Income (Loss) Net Sales Gross Profit Operating Income (Loss) Reported $ 419.5 $ 151.3 $ (76.1 ) $ 434.3 $ 196.3 $ (155.5) Adjustments: Amortization expense related primarily to acquired intangible assets 20.8 48.4 11.4 23.0 Impairment charges 34.1 185.1 Unusual litigation 8.2 Operating results attributable to held-for-sale business* 3.6 10.3 Restructuring charges 10.5 0.2 Acquisition and integration-related charges 1.0 (0.2) Adjusted $ 175.7 $ 36.4 $ 207.7 $ 52.6 As a % of reported net sales 41.9% 8.7 % 47.8% 12.1% *Held-for-sale business includes European sports brand 29
TABLE II (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED SEGMENT INFORMATION (in millions) (unaudited) Three Months Ended Prescription Pharmaceuticals Net Sales Gross Profit Three Months Ended December 31, 2016 December 31, 2015 Operating Income Net Sales Gross Profit Operating Income Reported $ 265.9 $ 121.0 $ (258.5) $ 259.1 $ 130.8 $ 94.3 Adjustments: Amortization expense related to acquired intangible assets 28.0 28.1 14.2 14.3 Unusual litigation (2.0) Restructuring charges 2.1 2.6 Impairment charges 342.4 Acquisition and integration-related charges 0.9 Adjusted $ 149.0 $ 115.0 $ 145.0 $ 109.2 As a % of reported net sales 56.1% 43.2% 56.0% 42.1% 30
TABLE III PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES CONSTANT CURRENCY (in millions) (unaudited) Three Months Ended Net sales December 31, 2016 December 31, 2015 Total Change FX Change Constant Currency Change Consolidated* $ 1,331.2 $ 1,314.6 1% (3)% 4% CHCA* 626.8 598.9 5% % 5% CHCI 419.5 434.1 (3)% (6)% 3% RX 265.9 259.1 3% % 3% Net sales Twelve Months Ended December 31, 2016 December 31, 2015 Total Change FX Change Constant Currency Change Consolidated* $ 5,167.8 $ 4,852.1 7% (1)% 8% *Q4 2015, full year 2015, and full year 2016 net sales are adjusted to exclude sales attributable to held-for-sale businesses. See Tables I and II for non-gaap reconciliations. 31
TABLE IV PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES 2017 GUIDANCE (in millions, except per share amounts) (unaudited) Full Year 2017 EPS Guidance Reported $0.22 - $0.57 Amortization expense related primarily to acquired intangible assets 2.40 Sale of Tysabri royalty stream (2) (0.03) Restructuring charges 0.28 Loss on early debt extinguishment 0.12 Tax effect of non-gaap adjustments (1) 1.16 Adjusted $4.15 - $4.50 (1) Includes tax effect of pretax non-gaap adjustments calculated based upon the specific rate of the applicable jurisdiction of the pretax item and certain adjustments for discrete tax items. (2) Subject to the finalization of the gain/loss on the sale of Tysabri Reported Amortization expense Adjusted Full year 2017 guidance EPS as of February 27, 2017 $0.60 - $0.95 $6.30 - $6.65 Impact of previous accounting for Tysabri on 2017 Guidance Net sales $ 352.0 $ $ 352.0 Cost of sales (290.0) 290.0 Operating income $ 62.0 $ 290.0 $ 352.0 Tax at 12.5% statutory rate $ (7.7) $ (44.0) Net income $ 54.3 $ 307.6 Diluted shares 143.6 143.6 Earnings per share impact removed from February 27, 2017 full year 2017 guidance $ 0.38 $ 2.14 32 Full year EPS range excluding impact of Tysabri $0.22 - $0.57 $4.15 - $4.50
TABLE IV (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES 2017 GUIDANCE (in millions) (unaudited) Full Year 2017 Guidance Consolidated DSG&A as a % of Net Sales Reported Approx. 23.3% Amortization expense related primarily to acquired intangible assets (2.5)% Restructuring charges (0.8)% Adjusted Approx. 20.0% Consolidated Operating Income Reported $545 - $605 Amortization expense related primarily to acquired intangible assets 345 Restructuring charges 40 Adjusted $930 - $990 Effective Tax Rate Tax expense Pre-tax income Effective Tax Rate Reported $ (13) $ 401 Approx. (3)% Non-GAAP adjustments 168 399 Adjusted $ 155 $ 800 Approx. 19.5% 33
TABLE IV (CONTINUED) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES 2017 GUIDANCE (in millions) (unaudited) Gross margin Operating margin CHCA Reported Approx. 33% Approx. 17-21% Amortization expense related to acquired intangible assets 2% 3% Adjusted Approx. 35% Approx. 20-24% CHCI Reported Approx (3)% -1% Amortization expense related primarily to acquired intangible assets 13% Adjusted Approx. 10-14% RX Reported Approx. 25-29% Amortization expense related to acquired intangible assets 10% Adjusted Approx. 35-39% 34
TABLE V PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES REVISED 2016 GUIDANCE AS OF MAY 22, 2017 (in millions) (unaudited) AS OF 5/22/17 Full Year Revised 2016 EPS Guidance Reported $(28.38) - $(28.08) Amortization expense related primarily to acquired intangible assets 2.59 Operating results attributable to held-for-sale businesses (1) 0.11 Impairment charges 18.48 Restructuring charges 0.22 Tysabri royalty stream - change in fair value 18.16 Gain on divestitures (0.05) Acquisition and integration-related charges 0.18 Unusual litigation 0.13 Losses on equity method investments 0.03 Tax effect of non-gaap adjustments (2) (6.77) Adjusted $4.70 - $5.00 (in billions) Consolidated Net Sales Full Year Revised 2016 Net Sales Guidance Reported $5.1 - $5.3 Operating results attributable to held-for-sale businesses (1) (0.1) Adjusted $5.0 - $5.2 (1) Held-for-sale businesses include the U.S. VMS business, European sports brand, and the India API business. (2) Includes tax effect of pretax non-gaap adjustments calculated based upon the specific rate of the applicable jurisdiction of the pretax item and certain adjustments for discrete tax items. 35
TABLE VI PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES August 10, 2016 (unaudited) AS OF 8/10/16 Full Year 2016 EPS Guidance Reported 2016 Guidance Diluted EPS Range $0.26 - $0.56 Amortization expense related primarily to acquired intangible assets 4.50 Goodwill, intangible asset, investment and held-for-sale impairment charges 3.29 Integration and restructuring-related charges 0.27 Other (1) 0.09 Tax effect of non-gaap adjustments (2) (1.56) Adjusted 2016 Guidance Diluted EPS Range $6.85 - $7.15 (1) Equity method investment losses, results of operations from held-for-sale businesses, and loss on early debt extinguishment (2) Includes tax effect of pretax non-gaap adjustments calculated based upon the specific rate of the applicable jurisdiction of the pretax item and certain adjustments for discrete tax items. Reported Amortization expense Adjusted Full year 2016 guidance EPS as of August 10, 2016 $0.26 - $0.56 $6.85 - $7.15 Impact of previous accounting for Tysabri on 2016 Guidance Net sales $ 352.0 $ $ 352.0 Cost of sales (290.0) 290.0 Operating income $ 62.0 $ 290.0 $ 352.0 Tax at 12.5% statutory rate $ (7.7) $ (44.0) Net income $ 54.3 $ 307.6 Diluted shares 143.6 143.6 Earnings per share impact excluded from August 10, 2016 full year 2016 guidance $ 0.38 $ 2.14 36 Full year EPS range excluding impact of Tysabri $(0.12) - $0.18 $4.70 - $5.00
TABLE V continued PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES August 10, 2016 (unaudited) In billions AS OF 8/10/16 Full Year 2016 Guidance Consolidated Net Sales Reported $5.4 - $5.6 Operating results attributable to held-for-sale businesses (1) (0.1) Adjusted $5.3 - $5.5 Less Tysabri impact (0.3) Adjusted net sales after change in accounting for Tysabri $5.0 - $5.2 (1) Held-for-sale businesses include the U.S. VMS business, European sports brand, and the India API business. 37
TABLE VI PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES SELECTED CONSOLIDATED INFORMATION (unaudited) Adjusted operating income December 31, 2016 Three Months Ended December 31, 2015 Total Change Consolidated $ 258.5 $ 265.6 (3)% CHCA 139.4 125.3 11% CHCI 36.4 52.6 (31)% RX 115.0 109.2 5% Adjusted gross profit Consolidated $ 553.9 $ 581.9 (5)% CHCA 222.6 218.4 2% CHCI 175.7 207.7 (15)% RX 149.0 145.0 3% 38
TABLE VII PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES CONSUMER-FACING METRICS (in millions) (unaudited) Calendar YTD Consumer-Facing Net Sales excluding held-for-sale businesses Calendar 2014 Calendar 2015 Calendar 2016 Reported CHCA net sales $ 2,503.6 $ 2,554.2 $ 2,507.1 Reported CHCI net sales 348.7 1,360.6 1,652.2 Operating results attributable to held-for-sale businesses* (176.5) (162.6) (112.8) Adjusted consumer-facing net sales $ 2,675.8 $ 3,752.2 $ 4,046.5 Consolidated net sales $ 3,853.8 $ 5,014.7 $ 5,280.6 Operating results attributable to held-for-sale businesses* (176.5) (162.6) (112.8) Adjusted consolidated net sales $ 3,677.3 $ 4,852.1 $ 5,167.8 As a % of total adjusted net sales 73% 77% 78% *Held-for-sale businesses include the U.S. VMS business and a European sports brand. The adjustments to 2014 and 2015 are for comparison purposes only and do not change any other prior year financial information or metrics since these businesses were not held-for-sale in 2014 or 2015. 39
TABLE VII (continued) PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES CY14 ADJUSTED OPERATING MARGIN (in millions) (unaudited) Consolidated Net Sales Twelve Months Ended December 27, 2014 Operating Income Reported $ 3,853.8 $ 593.6 As a % of sales 15.4% Adjustments: Amortization expense related primarily to acquired intangible assets $ 132.2 Acquisition and integration-related charges 22.7 Restructuring charges 35.0 Initial payment made in connection with an R&D arrangement 10.0 Unusual litigation 17.8 Adjusted $ 811.3 As a % of sales 21.1% 40
TABLE VIII PERRIGO COMPANY PLC RECONCILIATION OF NON-GAAP MEASURES CHCI (in millions) (unaudited) Consumer Healthcare International distribution sales Three Months Ended April 1, 2016 Three Months Ended July 1, 2016 Three Months Ended September 30, 2016 Three Months Ended December 31, 2016 Year Ended December 31, 2016 Distribution sales $ 48.8 $ 38.6 $ 41.7 $ 81.8 $ 210.9 CHCI excluding BCH Belgium Distribution business Adjusted gross profit (1) Three Months Ended Three Months Ended December 31, 2016 December 31, 2015 Net sales Adjusted gross margin (1) Adjusted gross profit (1) Net sales CHCI $ 175.7 $ 419.5 $ 207.7 $ 434.3 Less: BCH Belgium Distribution Business (81.8) (48.7) Adjusted gross margin (1) Change in adjusted gross margin Add: Change in fx rates 11.2 25.7 CHCI excluding distribution adjusted for change in fx rates $ 186.9 $ 363.4 51.4% $ 207.7 $ 385.6 53.9 % (242 bps) (1) CHCI gross profit is adjusted. See reconciliation in Table II. There are no adjustments to the BCH Belgium Distribution Business. CHCI constant currency Three Months Ended December 31, 2016 CHCI net sales $ 419.5 Foreign exchange impact 25.7 CHCI constant currency net sales $ 445.2 41