On Thursday, Perrigo Company (NASDAQ:PRGO) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.
EPS Growth Goal
Gregg Gilbert – Bank of America/Merrill Lynch: I have several, but I’ll stick with one and it will be a high level question, can you talk about that EPS growth goal relative to the revenue growth goal, other than the tax rate drag what makes it tough for you to double that rate on the bottom line that you’re going to see on the top line?
Joseph C. Papa – CEO and Chairman: I think you mentioned the tax. Tax is the biggest part of that question Gregg, and as Judy outlined and Judy may want to make few more comments on, but tax is the biggest change on that, but clearly we are excited about the new products that we’re going to launch, we’re excited about the Rx business. Clearly as Judy mentioned we — only at this time forecasting the 100 basis point improvement in store brand this year. Historically, last year in our fiscal year 2012, we gained 200 basis points so we are being a little conservative on that 100 basis point assumption, but Judy you want to make any more comments on the other factors?
Judy L. Brown – EVP and CFO: Just building on guidance information that we’ve provided on Slide 13. We are planning for some operating expansion. We’ve provided a range there. You can see we’re coming off the year of just shy of 22%. So looking forward to being able to increase that, but as we look at the timing and mix of products, we’re not building directly into guidance, dramatic change in operating margin and that would be where you’d see the translation of the sales growth going straight through into the operating income and then dropping down to EPS. We have increased interest year-over-year and obviously you had already mentioned the effective tax rate being the biggest headwind that we face being able to drop the growth in sales and operating income all the way down through the bottom line.
Gregg Gilbert – Bank of America/Merrill Lynch: And is it impossible to quantify the potential impact of discrete tax items in fiscal ’13, Judy?
Judy L. Brown – EVP and CFO: We’ll have a long detailed footnote in the 10-K that talks about the potential range of tax audit results we’re undergoing audits right now in both the U.S. and in Israel and there is a pretty big range that’s puts into the 10-K. It’s very hard to know how the odds will come out in both jurisdictions on very complicated multiple topics that are under audit right now. So, I believe the range goes anywhere between zero and $40 million you can see when the K comes out later today.
Linda Bolton-Weiser – Caris and Company: Can you just talk a little about the SAP related pre-buy in the infant formula business I believe you explained because I don’t remember you telling us about that I guess? Then can you also comment then does that shift your sales and earnings then away from the first fiscal quarter so we should be careful with modeling that? Then also related on the infant formula business, can you just say what you’re assuming for underlying core kind of U.S. growth and that excluding China and excluding the additional distribution? I would imagine modest decline because of the birth rate factor. Then if I could sneak in a second one on the Rx business, I guess the thing that jumped out at me a little bit was that the operating margin in the Rx business declined quite a bit sequentially and it was down modestly year-over-year, but the big sequential decline, I’m kind of wondering what that was all about? Related to that, I think it was the Duac, there was some posted shift in the quarter. Can you quantify if very much shipped at all or if most of that is going to be pushed into next fiscal year and that’s it?
Joseph C. Papa – CEO and Chairman: Let me start with the last one, because I think it’s the easiest one. As you know, we’ve been waiting for Duac for quite a long time. We had expectations of it earlier in the year. However, it did not get approved until the very last two days of the June quarter. I think it was June 26, if I’m not mistaken. So we shipped a modest amount, less than $5 million amount of Duac. It’s a great product for us. The branded product in the $140 million range, so great opportunity for us. So a very minimal amount shipped in our fourth quarter. On the question on the Rx operating margin, I have worked backward. This is something that we had expected there’ll be some ups and downs in the Rx operating margin depending on what’s new product launch and when they will launch. Because of what happened with Duac, there were some late changes that we needed to make in labeling, and as a result of that labeling change required some rework that was done. It just had to happen in order to get the product to the market in a very efficient way, and obviously it required some expedited shipping relative to how we’re going get labeled and other things amended, but that really was just a one-time event that needed to occur during the end of the quarter. On the final or the first part of your question, SAP related pre-buy, we just needed to shutdown the facility for a very short time less than a week’s time period to make the changes in the SAP system to get the system up and running and then, of course to get ourselves prepared for the plastic containers that we are planning to launch later this year that we think is a big opportunity for us because it will give the store brands the same look and feel as the national brand and that’s what we’re really excited about getting that into the marketplace. You also had to comment a question I think specifically about the infant formula birth rate, we do expect that right now as the recession continues or at least the economy is certainly challenged there will be some depression in the birth rate of approximately about 2% in the U.S. birth rate at this time. However, importantly we believe there is still significant opportunity for us in China and Asia to grow the business and that’s what we did – as I mentioned Linda that’s where we saw a large part of our growth rate in China. Judy, anything you want to add to SAP comment?
Judy L. Brown – EVP and CFO: I thought to elaborate just briefly you made the comment. This is the first you’ve heard about it. Originally, the SAP conversion was going to be a few months earlier and as we got into final fourth quarter decided that the most conservative approach would be to finalize that cut over on July 1 for a clean year-over-year, starting point from systems conversion in fiscal year-end and everything else in doing so we move right into the fourth of July week. So, there was impact, some pick up. We wanted to make sure that retailers had sufficient product for the whole 4th of July week, but again the closure was only for a few days, that end-to-end there was a weak worth of activity, but the plant was reopened after a few days. So the key point here is there was some early buy in the last 7 to 10 days of June, we’re not talking about a full month slowed of buying. There may be a slight put quarter-over-quarter sequentially, but if purchasing rates continue in their normal rhythm you’d probably should not see a dramatic shift on the quarter-over-quarter front because the shutdown was not that long.