Perrigo Company plc (PRGO) Q2 2021 Earnings Call Transcript

Perrigo Company plc (NYSE: PRGO) Q2 2021 earnings call dated Aug. 11, 2021

Corporate Participants:

Bradley Joseph — Vice President, Global Investor Relations and Corporate Communications

Murray S. Kessler — President and Chief Executive Officer

Raymond Silcock — Executive Vice President and Chief Financial Officer

Analysts:

Elliot Wilbur — Raymond James — Analyst

Katarina — J.P. Morgan — Analyst

David Steinberg — Jefferies — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, and welcome to the Perrigo Second Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please also note, today’s event is being recorded.

At this time, I’d like to turn the conference call over to Bradley Joseph, VP of Investor Relations and Communications. Sir, please go ahead.

Bradley Joseph — Vice President, Global Investor Relations and Corporate Communications

Thank you, and good morning everybody and welcome to Perrigo’s second quarter fiscal 2021 earnings conference call. I hope you all had a chance to review the press release we issued this morning. A copy of the earnings release and presentation for today’s earnings discussion are available within the Investor section of the perrigo.com website. Joining today’s call are President and CEO, Murray Kessler and CFO, Ray Silcock.

I’d like to remind everyone that during this call, participants will make certain forward-looking statements. Please refer to the important information for shareholders and investors and Safe Harbor language regarding these statements in our press release issued earlier this morning.

A few notes before we start. First, unless stated, all financial results discussed and presented are on a continuing operations basis. They do not include any contributions from the Rx business, which is accounted for as discontinued operations in the second quarter. In addition to other non-GAAP adjustments as described in the appendix, adjusted profit measures, including adjusted EPS and adjusted operating income exclude from both periods, certain costs incurred to support the operations of the Rx Business, which are reported in continuing operations. See the appendix for additional details and for reconciliations of all non-GAAP financial measures presented. And second, organic growth excludes acquisitions, divestitures and currency in both comparable periods.

With that, I’m pleased to turn the call over to Murray.

Murray S. Kessler — President and Chief Executive Officer

Thank you, Brad and good morning, everyone. Self-Care continues to be front of mind for our consumers and customers and now that our portfolio reconfiguration to a pure-play consumer company is complete, we believe Perrigo is into a great position to capitalize on this trend. I’m proud of how the Perrigo team has successfully adjusted during these challenging times, which have impacted channel dynamics, sales mix, input costs and consumer behavior. The good news is that the business and markets we’re in are normalizing with sharp rebounds and consumer take away as the world is slowly and steadily reopening. Barring a broad scale step backwards due to new COVID-19 restrictions, I believe Perrigo’s broad diversity of product lines and geographies has helped the company weather this unprecedented storm.

Let’s look at the metrics. Perrigo net sales for the second quarter were $981 million, 3.4% higher than year ago with organic net sales up 0.5%. Second quarter growth came despite comparison to the prior year demand surge in April, and the residual impact of this year’s historically weak cough/cold season. A couple of big takeaway’s on net sales. It was a solid quarter for all of our businesses, ex the impact of cough/cold and customer inventory adjustments, which I’ll detail in just a moment. The rest of the portfolio and favorable currency covered the entire negative impact of those two issues and the quarter got stronger and stronger as it progressed, led by a strong consumer take away.

This top-line growth did not translate to earnings growth for three reasons. First, advertising and promotion. As you will recall, our teams pulled almost all A&P spending in last year’s second quarter as the world locked down. There was no point advertising to empty shelves in Q2 and in the face of massive uncertainty, we prioritized liquidity. That spending was moved to the fourth quarter last year in order to preserve it. This second quarter, 2021, we deliberately returned that branded advertising and promotional support to its pre-COVID levels where it has always been and where it is most effective. This along with higher R&D negatively impacted the Q2 earnings by $14 million excluding currency.

Second, we had unfavorable plant overhead absorption in the quarter as a consequence of the historically low cough/cold season. And third, input costs, including freight, distribution and commodities, to name a few, rose quickly during the quarter. The team did a great job offsetting these inflationary costs with our Project Momentum cost savings and pricing actions in the quarter. But as a result, the planned savings did not pass through to the bottom line the way we had planned. They will, when if input costs normalize.

All these factors, in addition to the impact from divested businesses, led to EPS of $0.50 per share, $0.09 below year-ago. While the adjusted EPS was lower than we were looking for, we will get back the A&P impact later in the year and we believe the COVID-related headwinds are temporary. Most importantly, our business remains strong and is getting stronger.

As I said earlier, once we lapped the prior year pantry load and exited the cough/cold season, we experienced higher growth and strong sales momentum across our businesses with organic growth of plus 1.7% in May and organic growth of plus 4.2% in June. We expect this strength to continue into the second half of this year, especially as we compare against weak comps from the prior year’s second half de-load and historically weak cold/cough season.

This sales momentum that we observed occurred in both CSCA and CSCI. Despite the impact from cough/cold in the quarter and last year’s demand surge, CSCI delivered strong growth. Strong performance in our Self-Care brands that were impacted last year by country lockdowns amid the pandemic outbreak drove the results. CSCA experienced a more pronounced headwind from cough/cold than in CSCI as a result of trade inventory adjustments, which I’ll also show you in just a minute, but the sales momentum throughout the quarter was also evident here. As the cough/cold headwind from the prior year waned in May and June, performance in CSCA increased. Outside of cough/cold, organic net sales in the quarter grew 1.3%, ending the quarter with organic growth of nearly 4% in June, gives us confidence in our top-line expectations as we head into the back half of the year. I think it’s worth repeating, all of our businesses grew in both the Americas and International compared to last year, except for, as I mentioned, U.S. OTC.

As I said, the strong CSCI performance in the quarter was led by our Self-Care brands, many of which were negatively impacted at the height of the pandemic one year ago. These Self-Care products, including Weight Loss, Sun and Skin Care and Oral Care were up 6%, excluding currency. The loosened pandemic-related restrictions across Europe and new product launches timed with the return of brand advertising and promotion investments were the big drivers of the performance. Cough/cold was still a headwind for CSCI in the quarter, and while the cough/cold season [Phonetic] across Europe will likely be lower than normal as pharmacies take a wait-and-see approach to the season, we expect a strong second half for CSCI.

Within CSCA, growth in Oral Care and Nutrition were very strong in the quarter, up 17.9% and 10.7% versus a year ago, respectively. Oral Care was driven by POS strength at retail as consumers returned to in-store purchases for their oral care needs and sales of travel-related toothbrushes increased with return of travel in the U.S. Nutrition had a great quarter. We launched the first national brand equivalent infant formula for babies with colic. Sales of our electrolyte hydration drinks are increasing due to consumer buying behavior and our third-party infant formula contract partners are taking share from other national brands.

This strengthening of our business throughout the quarter reflects a sharp rebound in consumer purchasing in the U.S. and Europe. This was exactly what we were looking to see. As you know, consumer take away is always the leading indicator for factory shipments. The one exception, as I mentioned, was OTC in the USA, where the rebound in consumer take away far outpaced shipments. That’s unusual. And we attribute this to factors in both this year and last. Last year, there was a significant restocking of retail shelves and inventories that were wiped out earlier due to the pandemic-related demand surge that obviously didn’t reoccur this year. This year, the opposite actually happened. Retailers had excess inventories of cough/cold products due to the low demand this season and they appear to be a bit more conservative buying in at normal levels going into next cough/cold season.

So as you see on Slide 10, our shipments were outpacing consumer take away for the better part of last year. The good news is that this trend reversed itself in the second quarter and, since April 2021, Perrigo consumer take away is now cumulatively outpacing Perrigo factory shipments. So shipments should begin to realign with consumer take away. And to be clear, consumer take away for store brands in the OTC categories we compete in aren’t just up. They’re up significantly, growing 12.4% over the last 13 weeks versus year-ago. In fact, this is true for each of the individual categories for the latest 13 weeks as shown on the chart on the screen at the moment.

So on a year-to-date basis, it once again appears that shipments and consumer take away have come into alignment as the 10.7% decline in consumer take away aligns with the 11% decline in Perrigo OTC shipments. But the fact that we’re exiting the quarter growing and growing robustly, along with the apparent alignment, should translate into strong second half growth. Especially encouraging to see was the sharp rebound that also occurred in cough/cold with consumer take away of our cough/cold products of 34.6% for the quarter. That’s good news and seems to make sense as the incidence of cough/cold illnesses continue to trend above the prior year according to the most recent IQVIA data. This also supports a stronger upcoming cough/cold season than the prior year, which is essential to our second half projections.

Turning to guidance. Through the first half of the year, we are a bit behind, but we have a number of second half tailwinds. Consumer take away has rebounded sharply in the U.S. and Europe, including — and this is important, including U.S. OTC. Sales momentum realized through the second quarter is expected to continue into the second half of the year compared to the prior year’s second half pantry de-load. The upcoming cough/cold season is expected to normalize compared to the historically weak prior season a year ago. Retailer inventories have come down and consumer take away is now cumulatively above our shipments. While we can’t precisely predict retailer inventory behavior, this data suggest the major portion of the inventory headwind should be behind us.

We’ve taken a number of pricing actions, which have been accepted by retailers, given the global inflationary environment and those will help as well. And the divestiture of the Latin American businesses, which would have been a $50 million headwind in the second half is now expected to be offset by sales to our former Rx Business, which is now a major contract customer. And finally, we expect strong momentum from new products in the second half.

All of these factors support higher net sales in the second half, thus allowing us to reaffirm our revenue guidance. We expect this robust top-line performance, along with lower variable expenses, specifically like the Q4 reduction in A&P I referred to earlier and productivity improvements, to generate strong second half adjusted EPS growth, although for the full year, we will be shy of our operating growth income growth target of 5% due to the already realized lower volumes in the first half and higher input costs in the second half. So we expect our adjusted EPS within our original range, but towards the lower end of the $2.50 to $2.70 per share. To be clear, this EPS guidance is before we put any of the nearly $2 billion in cash we have at our disposal to work.

Now, let’s turn to the efforts to restore certainty to our business and euro investment. Over the last few months, we have made substantial progress on reducing uncertainty in the Irish tax NoA. For those of you less familiar with this dispute, Perrigo received a Notice of Assessment of EUR1.65 billion at the end of 2018 following an audit of the 2013 tax return for Elan, the company Perrigo subsequently merged with. The assessment relates to the tax treatment of Elan’s sale of its Tysabri drug. It asserts that intellectual property sales transactions were not part of Elan’s trade. As a result, the notice argues that these transactions should have been traded as chargeable gains subject to a 33% capital gains tax, rather than the 12.5% applicable to trading income. Perrigo maintains that Elan filed correctly.

On July 13, we filed an 8-K saying that after an extensive exchange of information, we received written confirmation from Irish Revenue that based on the information that they have now, that they didn’t have back in 2018, they would not object if the Tax Appeals Commission adjusted the amount of the assessment to less than EUR1 billion equating to a reduction of at least 40% from the original 2018 assessed amount. And to be clear, this was agreed to, without revenue conceding any point. They use the exact same methodology that they’ve been using all along with a more current information. So this is not any discussion or settlement, it is just a restatement of the high end of the range.

As I said in the interview with — in the Irish Times, even though we still believe that Elan filed correctly and that ultimately in a long drawn-out battle, we will win, we believe the right thing to do right now is to settle this case at a number that makes sense as that can be accomplished. But the starting point for any negotiation would be from this new lower starting point. And from that point, we will either come to a shareholder-friendly settlement through our ongoing discussions or we will proceed to the Tax Appeals Commission hearings to be held this November where we strongly believe in our position.

We also completed the sale of our generic Rx Business this quarter in July. This completed Perrigo’s transformation to a pure-play Consumer Self-Care leader. We were able to announce and close the sale within four months; a great effort by many in the organization to make this happen so quickly. And, as I said, we’ll have nearly $2 billion at our disposal to drive shareholder returns and accelerate our growth.

Our first priority is to be acquisitive going forward and put this cash to work. This is a big value-enhancing opportunity for Perrigo, but it’s got to be done with discipline and it has to be done within our five areas of focus. Our North American-based investment would likely center around private or value label. Our European-based investment would likely center around branded assets. Ultimately, any acquisition would need to be both revenue and margin-accretive and deliver a return above our weighted average cost of capital. We have a strong track record in this area and see it as a huge value-creation opportunity.

So in summary, we have momentum and a number of tailwinds heading into the second half of the year. We’ve made significant progress to reduce uncertainty for shareholders and are looking to put our balance sheet to work with accretive acquisitions. Perrigo’s pure-play consumer business model is highly defensible. Our Self-Care solutions are differentiated and on trend. Our portfolio offerings are well-diversified across categories and geographies. We have world-class consumer industry talent and our business fundamentals are extremely durable.

With that, I will now turn the call over to our CFO, Ray Silcock, to discuss our financial results in more detail. Ray?

Raymond Silcock — Executive Vice President and Chief Financial Officer

Thank you, Murray, and good morning, everyone. Before we get into the quarterly results, I would like to echo Murray’s comments on the strong business trends we saw develop during the second quarter. Although we experienced some turbulence this quarter, which made for a difficult comparison to prior year as Murray explained earlier, I too remain encouraged by the sequential monthly top-line growth trends. We had improved growth versus prior year in each month of the quarter. In addition, we saw continued normalization of consumer take away in the quarter. This is not an easy operating environment, but our team performed exceptionally well in managing the various and evolving trends across our businesses. I would like to thank all our colleagues for their dedication and continued efforts in driving our business forward.

With that, let’s take a look at our second quarter results. As a reminder, all the figures presented today are from Perrigo’s continuing operations and exclude the Rx Business, which was divested on July 6. The Rx Business was accounted for as discontinued operations in the second quarter.

On a consolidated basis, the company reported a GAAP loss from continuing operations of $112 million for the second quarter of 2021 or a loss of $0.84 per diluted share. On an adjusted basis, consolidated net income from continuing operations was $68 million and adjusted diluted EPS from continuing operations was $0.50 a share, a 15.3% decline compared to the prior year. The adjusted EPS decline versus prior year is primarily because we reinstated advertising and promotion spending in the quarter to pre-COVID-19 levels. Lower cough/cold volumes were partially offset by strong performance across the balance of our portfolio, while unfavorable overhead absorption was offset by operating expense reductions. We also had a higher effective tax rate in the quarter, 23% as compared to 18% in Q2 last year. Last year’s adjusted ETR was favorably impacted by the passage of the CARES Act.

Non-GAAP expense adjustments of $179 million included impairment charges of $159 million, primarily from the held-for-sale Latin American business; $54 million of amortization, which we always add back; $13 million of unusual litigation expenses; and $9 million for restructuring costs. Non-GAAP adjustments to the tax rate for the quarter included $11 million of tax expense arising from the pre-tax non-GAAP adjustments; $62 million from the intra-company transfers of intellectual property as a result of the Rx divestiture; as well as the effect of a valuation allowance release in the U.S. Full details of these and other adjustments can be found in the non-GAAP reconciliation table attached to this morning’s press release.

From this point forward in this presentation, all dollar numbers, basis points and margin percentages will be on an adjusted continuing operations basis, unless stated otherwise. Since Murray has already covered net sales for the second quarter, I will begin with our gross profit. Consolidated gross profit was $4 million higher than prior year, primarily due to favorable currency translation, partially offset by adverse plant overhead absorption. Increased material costs, including resin and inbound freight, were largely offset by pricing and procurement actions taken in the quarter.

Consolidated gross margin for the quarter was 38.4%, 90 basis points lower than the prior year, primarily due to that lower overhead absorption and also to a less favorable product mix as compared to last year.

Consolidated operating income for the quarter was $118 million, $14 million below prior year, primarily driven by the reinstatement of the advertising and promotion spend.

Now let’s turn to the segment results, starting with CSCA. Gross profit in the quarter for CSCA of $197 million was $9 million lower than prior year as the impact of new product introductions and a strong performance in Oral Care were more than offset by lower plant overhead absorption and lower sales in OTC, as well as by raw material cost inflation. Procurement actions helped offset increased freight and raw material costs. Importantly, we were able to take some pricing in the quarter and overall CSCA pricing was held flat to prior year. Lower plant overhead absorption was the primary driver of a 120 basis points margin decline in the quarter.

Operating income was $107 million, $17 million lower than prior year due to unfavorable gross profit flow-through and higher operating expenses, including customer freight and investments in A&P and R&D this quarter.

Moving on to Consumer Self-Care International. CSCI gross profit was $179 million, up $13 million from last year, an 8% increase. Favorable currency translation and proactive pricing and procurement actions in the quarter combined to more than offset higher input costs, reduced volumes and the impact of the Rosemont divestiture. Adverse product mix, primarily higher growth in lower margin categories such as pain, cough/cold, led to 180 basis point decline in gross margin versus last year. Operating income was $47 million, $3 million lower than last year as gross profit flow-through was more than offset by an increase in operating expenses, primarily driven by adverse currency translation impact and by the reinstatement of our advertising and promotion spending to pre-COVID-19 levels.

Moving now to the balance sheet and operating cash flow. Consolidated cash on the balance sheet at the end of the second quarter was $336 million, down $145 million from the $481 million cash balance at the end of the first quarter. This decrease was driven by three primary factors: $100 million in various Rx-related tax payments with no P&L impact; $60 million in investing and financing activities, including capex, all offset by cash collected during the quarter. Importantly, we believe that our goal of 100% operating cash flow conversion for the full year is achievable based on the positive business trends we see as we exit the second quarter. These include increased consumer take away, as well as monthly sequential sales volume increases. I would like to note that our $336 million of cash for the second quarter balance sheet does not include the $1.5 billion in proceeds from the sale of the Rx Business, which closed after the quarter ended.

In conclusion, our second quarter results represent the tremendous efforts made by the entire team as we continue to navigate through a challenging business environment. The positive trends we saw during the quarter, including increased consumer take away and growth momentum across our businesses, give us confidence in our strong second half expectations.

Operator, can you please open the line for questions?

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Elliot Wilbur from Raymond James. Please go ahead with your question.

Elliot Wilbur — Raymond James — Analyst

Thanks, good morning.

Murray S. Kessler — President and Chief Executive Officer

Good morning, Elliot.

Elliot Wilbur — Raymond James — Analyst

Good morning. First question for yourself, Murray. Just want to go back to some of your comments in connection with first quarter results and specifically looking at your expectations for the recovery in cough/cold, based on the IQVIA FAN data. Assuming you’re still relying on that tool to gauge your expectations to some extent, I wanted to know if there’s been any meaningful change in IQVIA’s outlook for second half volumes and given that they had expected such a significant increase. I think they expected volumes to roughly double in the current year cough/cold season versus last year. Wondering if even though your guidance was indicatively conservative, you’re still looking for recovery of roughly half that. Still seems like a significant increase in volumes versus what we’re currently seeing. Just want to know how good your line of sight is into customer orders for the balance of the year. Or do we really need to see these actual cough/cold numbers turn in terms of incident rates?

Murray S. Kessler — President and Chief Executive Officer

Well, I think you rightfully characterized it. It is a little bit complicated. I think all the IQVIA numbers versus first quarter are trending right in the same direction. The bigger issue, Elliot, for me is, our consumer take away numbers and our shipment numbers are normally within a point or two of each other. Look at the second quarter, our cough/cold consumer take away was up 40% and our actual factory shipments were still down. I don’t have the exact number in front of me, but 30% or something like that. It’s like a 50 point or 60 point swing, which is unusual. And again it’s — when you’re looking at shipments versus consumer take away, they always come back [Indecipherable], always. There will be periods of time when it’s up and down, and that’s what I tried to show in that one graph. There was a period of time when our shipments were outpacing consumption. They caught up and now it’s reversed itself and consumption fortunately is leading the way.

So to make our projections the way the consumer take away is trending, then we’ll hit our projections easily. I’m not going to say there is upside at this point, but it’s — our consumer metrics on all of our businesses are exactly what we forecasted. The lag in shipments are coming back a little slower, that looked like some inventory adjustment. And it feels like, when you look at it cumulatively over the past seven or eight months, they’ve now come to — pretty darn close to even. Okay? So other factors — will the buy-in be as high or there — will there be a little more caution, but that could result in the retailers, if it’s a good cough/cold season, scrambling to order more later on. So we’ll see how it plays out. But this has been a heck of a ride for the last two years and we’re still trying to get back to normal and manage our way out of what’s been a lot of volatility and certainly a dynamic marketplace.

Elliot Wilbur — Raymond James — Analyst

Okay. And if I could follow up that question and your response with just a query into the reduction in overall customer inventories. Was it pronounced in any one channel more than other? And on the Rx side, of course, you — most companies have fairly good insight into inventory held by the Big 3. I imagine that’s not necessarily true for you guys. But how good is your line of sight into actual inventory levels at your biggest brick-and-mortar customers?

Murray S. Kessler — President and Chief Executive Officer

Well, two things that — we’re normally very good as well. But it is not normal times. So normally, you’re just looking at the patterns that are consistent, but what’s happened over this last year is you had a complete shutdown last year of drugs channels, as an example, that — and then shifted to e-com and it shifted over to grocery stores and now it’s shifting back from grocery stores back into the normal store traffic levels, some get back in e-commerce, still growing, but a get back to where it was last year. So there — sort of your normal patterns don’t apply and inventory, relative to the customer and the way they’re managing it and the way we track it, has a numerator and a denominator.

It’s just not how much they have in the warehouse. You have to divide that by the consumer take away. Right? So as that’s coming up, with no change, their weeks of inventory come down and they’re trying to adjust for that. So as long as the consumption continues to grow the way it’s going, we should be fine. But it is — it’s been an interesting one to track versus what has been something we’re historically very good in and we would have to be good in.

Elliot Wilbur — Raymond James — Analyst

Okay. And then maybe last question for me. I understand many of the factors as to why gross margins underperformed external and internal expectations for the quarter, which still expect improvement in the second half of the year in both CSCA and CSCI, but trying to get a little bit better sense of what you think is now a good number in each of those segments or lack of a better term, sort of an aspirational target. I know we talked about 33% in the CSCA business in the second half of the year. That may be a little bit more challenging to reach in light of some of these issues that we’re talking about today. But is that still sort of your longer-term expectation, that’s kind of a good baseline number to improve off of? And similar question on the CSCI business.

Murray S. Kessler — President and Chief Executive Officer

Yeah, I mean, I’ll answer it and Ray, feel free to jump in. The factors — as Ray had said, we had a big bump in input costs in numerous areas. Right? You can take the — if you’re looking at operating margin or versus gross margin, just take the A&P as coming out of the fourth quarter went in the second quarter, just reversing itself from last year back to 2019. But the bigger issue is, with a weak, weak cough/cold season, now you’re feeling on margins — first off, those are high-margin items. So I’m actually — I know this may seem a bit odd, but the reality is, to have 20% of the business take a map [Phonetic] and still grow our franchise and hold it the way we did, but for the move in advertising and promotion, I think it’s pretty good and while we are weathering the storm, because if you add that back in, we were relatively flattish. At the gross margin line, you don’t produce as much you have or you don’t have as much bought-in in cough/cold of a high-margin item, so you hit the — hit there on the top, and then you lose it again in unfavorable plant absorption, right, because we have certain plants that do nothing but run cough/cold products. So that’s a negative hit.

Your question about whether that is permanent. Of course, it’s not permanent. When the cough/cold season comes back, the throughput goes through the plant, that unabsorbed overhead is no longer a factor in future years and you get the margin back — the gross margin back on the sale of the cough/cold products. So there is a number of those that are temporary in nature like that; the longer term input cost; when it comes to freight, difficulty getting some things out of China for Oral Care and others. Our purchasing people, originally, when we built the plant, believed, by the third quarter, we would be back to normal. Now they’re saying early next year.

And will it be all the way back to where it was before? We may give up a little bit of margin there, but we’re pushing harder on cost increases and don’t lose sight of the fact, that Ray said, that for the first time in years, we were actually able to pass through price increases, which has not been the case. So our customers are working with us and some of those will start to affect it. That’s a long way of me saying, I’m not backing off our margin goals. I don’t think we’ll get there in the second half of this year, but we will get there. Anything you want to add to that, Ray?

Raymond Silcock — Executive Vice President and Chief Financial Officer

No, no. You covered it well for us [Phonetic], Murray.

Elliot Wilbur — Raymond James — Analyst

All right, thank you.

Murray S. Kessler — President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Chris Schott from J.P. Morgan. Please go ahead with your question.

Katarina — J.P. Morgan — Analyst

Hi, this is actually Katarina on for Chris. Thank you so much for taking our questions. And actually to jump on your price increase comment, I think you’ve mentioned this for the first time in a while. Can you elaborate a bit more on the customer relationships and broader market dynamics that are enabling you to take kind of price increases? And then my second question will be, can you talk a bit about more on the demand trends that you’ve been seeing across consumer categories in July and maybe the first two weeks of August? Any early visibility into what 3Q could look like there? Thank you so much.

Murray S. Kessler — President and Chief Executive Officer

Okay. Well, on the the latter part of the question, we did show through the first couple of weeks. Now, we’re on July?

Raymond Silcock — Executive Vice President and Chief Financial Officer

Yes, through July 11.

Murray S. Kessler — President and Chief Executive Officer

Through July 11.

Raymond Silcock — Executive Vice President and Chief Financial Officer

Yeah.

Murray S. Kessler — President and Chief Executive Officer

So then that data that we put in a pill [Phonetic] a couple of days ago said through the middle of June and we got in the latest period, so we brought that in. I’ll just say that it moved those numbers up a little bit, not down. So from right now, the data that we have in consumer take away is through July 11. And through July 11, that trend accelerated, not — it didn’t slow down. So that’s good news. That’s the most encouraging thing, right, because the shipments have to ultimately line up and catch it. It’s just taken a bit longer. Remind me, what the first part of your question was? Price increase. Right?

Raymond Silcock — Executive Vice President and Chief Financial Officer

Yeah.

Katarina — J.P. Morgan — Analyst

Yes, yes.

Murray S. Kessler — President and Chief Executive Officer

Price increases — we normally — when we started this and I joined Perrigo two years ago, we were — every quarter or year, we were — we had moved from a minus 1% to 2% price erosion a year to about a 2% to 3%. Our goal was to get it back to minus 1% to 2%. And the quarter, on almost a year, is flat so far. So that’s a pretty big swing versus what we normally plan in a year, because we would’ve budgeted it’d be down that 1% to 2% and that’s helped offsetting some of the volume reductions. So you basically had a good job by the organization that had higher input costs of almost $19 million, $20 million that were completely offset by the purchasing group working their side, then on the other side you had lower volume offset by pricing to some extent and by — and the input costs. So all of those coming together and — but for the A&P move, with about our EPS flat versus year ago — roughly flat versus year ago, a little bit of tax implications as well.

As it [Indecipherable] goes to customer relations, our customers — they’re partners. On a normal circumstance, if they thought we were coming in just to take price increases for margin or to boost our bottom-line, they would resist that heavily and, in fact, push the other way under normal circumstances. When — they’re not blind, they see what’s going on in the world and input cost is affecting them, it’s affecting everybody. They see what’s happening to their national brand competitors who have been taking price increases. So, yes, they have partnered with us and have accepted these price increases as good partners.

Katarina — J.P. Morgan — Analyst

Great, thank you so much.

Operator

[Operator Instructions] Our next question comes from David Steinberg from Jefferies. Please go ahead with your question.

Murray S. Kessler — President and Chief Executive Officer

Good morning, David.

David Steinberg — Jefferies — Analyst

Thanks, morning. Thanks. Thanks. A couple of questions. First, in terms of new products, I think you had mentioned that you’re expecting strong momentum in the second half. And so could you give us some flavor of some of the products you’re launching? And then sort of in the medium term thinking about potential Rx-to-OTC switches, you’ve discussed Nasonex coming up and you’ve discussed potential switches like Tamiflu, Cialis, Glaze. What line of sight do you have on these potential switches and, in fact, could some big categories like dermatology or migraine break loose over time in your view?

Murray S. Kessler — President and Chief Executive Officer

Okay, well, let’s do the first one. First one, we have a number of new products that were recently launched that are public. I’m not going to share anything that’s not public. That’s part of our move to be more of a consumer company where we need to keep that confidential. But we haven’t — we’ve already shared with you that we have launched new versions of XL-S throughout Europe. We have launched Probify, which is a launch into probiotics throughout all of Europe a few months ago and expect that to impact the second half of the year. We launched our Hypoallergenic infant formula. We have signed a deal with a meaningful new contract on a branded infant formula that so far is looking incredibly promising. And we launched Burt’s Bees infant formula and we have said that later in the year, Burt’s Bees will be rolled out to a broader line of products. So — and that’s happening as we speak. Those are just some examples.

As it relates to Rx switch, I think the most relevant ones that are relatively new are Skies [Phonetic]. You also have the combo product from Advil with Ibuprofen-Acetaminophen combination. You have the Astepro. We’re not through on having all the sizes on our Voltaren equivalents yet. I mean those are just a few. The big ones whether — when they come or not come, whether it comes off Cialis and others, we still continue to hear rhetoric as those companies are launching and spinning off their consumer divisions. So, yeah, it’s been a positive contributor. And we expect that to continue.

David Steinberg — Jefferies — Analyst

Okay. And just some follow-up. So in thinking about cough/cold season, I don’t know if this is a good read to, but I was reading recently that Australia had the lowest historic levels of cough/cold in 2021 just coming out of the winter season, even lower than the last year’s level of hospitalizations. Do you see any read here from the Australian market into what could happen in the United States this fall and winter? And then just a follow-up on the price issue, I know you said you’re finally taking price versus price declines in the coming — in the last few days in the press release. If price was better, why did margins erode? Thanks.

Murray S. Kessler — President and Chief Executive Officer

Okay. Well, the second one’s easy. The price was just offsetting input costs. So…

Raymond Silcock — Executive Vice President and Chief Financial Officer

Cost inflation.

Murray S. Kessler — President and Chief Executive Officer

Yeah. I mean, for all of the [Speech Overlap]. So that was flat, was the impact of that. For Australia, yeah, I think, Australia is an example what would happen if the world shut down, but that is not the norm. Australia — and we have an Australian Board member who is — are still in complete lockdown and complete mask requirements and I caveated in my comments that if we went that far backwards again, sure, that would be a risk to our plan. As it’s happening now and schools reopening and lockdowns pretty much gone around the world with — there are some exceptions, we think things will open up and we’ve already seen a higher level of — a significantly higher level of illnesses and you see it in the consumer take away numbers that are so dramatic.

So if you want me to ask, if there — if the world was — the delta variant or some other variant was to shut the world all the way back down again, would it have an impact on our business? Of course, it would. But I think there’ll be some masking measures, but it doesn’t at least feel that way to us that anywhere in the world is willing to shut it down that hardly. Everybody needs to get the world vaccinated.

David Steinberg — Jefferies — Analyst

Great, thanks.

Operator

And ladies and gentlemen, at this time, I’m showing no additional questions. I’d like to turn the floor back over to management for any closing remarks.

Murray S. Kessler — President and Chief Executive Officer

Thank you. Like I said, this has been a challenging 18 months for sure, but I’m proud to say that the team continues to make the adjustments and has — is literally very close to right on track where we were, what or where we set up about two years ago with the transformation. You’ve seen — I’m not going to go through the wheel again but to sit there a couple of years and say, despite COVID, we have completely reconfigured this company, despite taking a hit on cough/cold, which is almost 20% of our business and to be still growing, to be in a year with these challenges and have already sold Rx, which I don’t think the world expected it and now have those resources which we’re working hard on to drive even stronger results in our 35[Phonetic] long-term promise and to be making major, major progress where we’ve — we believe we’ve cut in half the biggest risk to the company from an uncertainty standpoint, the company is still progressing and setting itself up long term for ultimately making lives better through our Self-Care vision.

So with that in mind, I like where we sit and I’m optimistic about the future and we just got to work our way through these inventory issues and input costs, which we will, that then will change the fundamental strength of the company and the long-term trajectory and the benefits that we ultimately believe our investors will get from all of this hard work over the past two years. So I thank all of the employees who’ve helped make that happen and I thank you for your interest in Perrigo.

Operator

[Operator Closing Remarks]