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Perrigo Company PLC (NYSE:PRGO)
Q1 2021 Earnings Call
May 11, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Perrigo First Quarter 2021 Financial Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Bradley Joseph. Mr. Joseph, please go ahead.

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

Thank you and good morning, everybody, and welcome to Perrigo's first quarter fiscal 2021 earnings conference call. I hope you all had a chance to review the press release we issued earlier this morning. A copy of the earnings release and presentation for today's discussion are available within the Investors 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 releases issued earlier this morning.

A few housekeeping items of note before we start. First, unless otherwise 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 addition to other non-GAAP adjustments as described in the appendix, adjusted profit measures, including adjusted EPS and adjusted operating income excludes 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.

And with that, I am pleased to turn the call over to Murray.

Murray S. Kessler -- President and Chief Executive Officer

Thank you, Brad, and good morning, everyone. Let's start with a recap of the tremendous progress that has been made on the Perrigo transformation by the collective efforts of my Perrigo colleagues all over the world. To be specific, we unveiled the Perrigo transformation plan at our investor conference two years ago -- two years ago, almost to the day. At that conference, we shared with you our aggressive plans to transform Perrigo from a healthcare company into a consumer self-care company in order to provide focus, increase certainty, restore growth and ultimately unlock significant value. We also introduced the vision that has guided everyone in the Company every day since to make lives better by bringing quality, affordable self-care products that consumers trust everywhere they are sold.

Two years ago, I shared that plan would take three years to implement. Today, only two years later, I'm proud to say that all of the major elements of the plan are now nearly complete about a year ahead of schedule. And while being a global leader in self-care will require continuous improvement, I believe Perrigo is at an inflection point right now.

Let's take a quick look at what has been accomplished. First, we have meaningfully reconfigured our portfolio with the most notable action being the divestiture of our non-core generic prescription pharmaceutical businesses, in addition to the divestiture of a number of smaller transactions. Proceeds from these divestitures to date along with our strong cash flow generation have been used for consumer bolt-on acquisitions that either broadened our self-care portfolio, notably in oral care with our acquisition of Ranir, or accelerated growth within our existing businesses. Once the Rx deal closes, we will have divested three companies generating $2 billion in proceeds and made seven acquisitions at a cost of just over $1 billion. As a result, Perrigo is now a pure-play consumer self-care company comparable to other publicly traded consumer companies, which will soon have over $2 billion available to invest to further build our business.

Second, in addition to reconfiguring our portfolio, we identified and executed against many areas in our business that needed to be improved to successfully evolve into a pure-play consumer company. We upgraded our new product pipeline, systems, processes and people. We have added top-tier consumer talent to our marketing organizations. We have centralized our R&D organization globally. And we have consistently met our internal goal of developing and then maintaining more than $500 million in our new product pipeline. Hundreds of consumer SKUs have been launched over the past two years and the entire program has been turbocharged by meaningful investments in e-commerce and digital capabilities. We also made investments in infrastructure, including increasing US tablet capacity, introduced business intelligence capabilities that have led to industry-first omnichannel market share data reporting and significantly improved customer service levels that has led to increased sales and more favorable customer discussions. Collectively, all of these factors have led to a revitalization of our business and taken Perrigo from four years of almost no growth to high single-digit growth over the last two years.

The third part of the transformation was to restore certainty to Perrigo, and we have come a long way in this regard as well. From years of inconsistency, our forecast have become much more reliable and even with all of the challenges of a global pandemic, we have consistently delivered on our financial commitments. The sale of generic Rx removes a huge concern over business volatility and we have strengthened our governance, diversity and inclusion, cyber security and commitment to ESG. We also are making meaningful progress with what currently concerns investors the most, the tax and legal overhang on the business, or on the stock.

Our third quarter 2020 conference call, we announced that the $843 million US Athena tax assessment was accepted by the mutual agreement program under the Irish-US income tax treaty designed to prevent double taxation, and we remain optimistic that this matter is on a good path toward resolution. And now, today, I'd also like to inform you that we're in discussions with Irish revenue about a potential settlement of the $1.6 billion plus [Phonetic] euro tax assesment. Discussions have been largely of a technical nature and grounded in law and have taken place over the last few months. There has been sufficient progress in these discussions for Perrigo to submit a Board approved offer to settle the matter. From our perspective, a reasonable resolution grounded in law is preferable to what could be years and years of litigation, but if resolution is not reached, be clear, Perrigo still maintains that its original tax filings were correct and is prepared to vigorously defend its position. But I repeat myself, the two parties have started talking and I believe we are on a path toward a resolution in a shareholder-friendly manner, but time will tell. This is all I will discuss on this topic today.

So, as previously stated with our transformation activities nearing completion and with certainty significantly improved, Perrigo is poised to create meaningful shareholder value. Said simply, Perrigo is now a pure-play consumer self-care company with a growth algorithm that compares favorably to CPG companies that trade at significantly higher multiples. The company will have plenty of dry powder for disciplined M&A putting Perrigo in a unique position to supercharge its growth and create value in a consistent and sustainable manner.

Let's now briefly discuss our quarterly performance highlights. By the reported numbers, Perrigo net sales for continuing operations in Q1 2021 were $1.01 billion, down 6.8% versus a year ago and organic net sales were down 10.9% versus prior year. However, reported numbers this quarter don't tell the real story. Q1 results were significantly distorted by COVID-related consumer pantry loading in the year ago quarter having a 6.8 percentage point negative impact on comparisons and an estimated negative 6.4 percentage points impact from lower cough/cold sales in this year's quarter. These two distorting factors also impacted the year-over-year EPS comparison. Adjusted diluted EPS was $0.50 per share, $0.17 below year ago, pandemic-related consumer pantry loading inflated the year ago quarter by an estimated $0.16 per share and pandemic-related weak cough/cold sales in Q1 of this year had a negative $0.14 per share impact. I think the most important point to make is that the pantry load in the difficult cold/cough season we're known and accounted for in our projections and that Q1 results were in line with our expectations, no real surprises. Importantly, our business remains strong. Let me give you some perspective to why I say that.

For the first two months of this year, January, February, our sales were up 3.8% on top of last year's January, February that grew very strong 9.5%, but then came March 2020 and COVID 19, which drove a $73 million demand surge and a 29% increase in Perrigo total net sales versus a year ago. When compared to that huge month, March of this year declined 23%, which pulled down the entire first quarter to the minus 6.8% I've referred to. If you do the math, you'll see that absent the impact of the pantry load, our business would have still grown slightly for the quarter even with this year's historically weak cold/cough season. As most of that huge pantry load was reversed in subsequent month last year, it's depressed second half 2020 results. This means, we should have favorable comps in the back half of this year, which is accounted for in our projections.

Another way you can see the real strength of our business unaffected by last year's pantry loading is to compare our 2021 results to 2019. In this comparison, our two-year compound annual growth rate is 4.1% with our organic net sales flat although up 3.7% when excluding the impact from the historically low global incidence of cough/cold and flu. Notably, this organic CAGR does not include oral care businesses as they were not a part of Perrigo in Q1 2019 and they're obviously growing. We accomplished these results by growing market share, investing in e-commerce and launching successful new products.

The dynamics I just explained for total Perrigo are basically the same for our Consumer Self-Care Americas and Consumer Self-Care International business segments. The specifics of which you can see on Slide 10. In both segments, our business is growing versus 2019, plus 4.9% and plus 2.6%, respectively based on two-year CAGRs. In both segments, the Q1 results were negatively impacted by the year ago pantry load. In both segments, Q1 results were negatively impacted by the current year weak cough/cold season. And in both segments, the rest of the portfolio on average is growing. Obviously, the year ago pantry load and subsequent de-load are one-off that will have no continuing impact. So the real question is what about cold/cough, is that a one-off or is that the new normal?

Let's take a closer look, starting with Slide 11. As you know, the incidence of flu activity in the US and EU throughout the 2021 season was virtually non-existed. Flu were down 98% versus a year ago. This is -- this extremely low incidence is attributed by experts to social distancing, mask requirements, stay-at-home orders and school closings, all a byproduct of COVID-19. The incidence of cough/cold, which is more encompassing than flu and includes cough, cold, flu, fever, earaches, headaches, etc. during the 2021 season was nearly 40% below the 10-year seasonal average. Now, that many restrictions around the world are easing, the incidence of cough and colds are starting to trend up and above the prior year. This is according to the most recent IQVIA data. To be clear, this means that the historically low levels experienced this season are not expected to continue. In fact, according to estimates based on that same FAN data from IQVIA, the 2021-22 cough/cold season is projected to normalize, which would lead to sizable growth in our worldwide cough/cold categories. This is a contributing factor that supports our strong second half 2021 growth outlook. So we have taken a conservative approach and only built a partial recovery on cough/cold with respect to our guidance.

Our deep new product pipeline also supports our second half growth expectations. New product launches in the second half included surgeon brands such as our co-packing, a Bobby baby [Phonetic] formula; second, whitespace brand launches such as our new probiotic, Probify, which is launching across a number of countries in the EU; and three, new innovation in the store brand market with our launch of hypoallergenic infant formula in the US; and four, today's announcement of our introduction of nature baseline of children's products and infant formula under the Burt's Bees brand name via license. The Burt's Bees organic baby formula has recently launched and we expect the line of nature-based remedies for babies and kids to be on shelves and online at leading retailers and e-tailers later this year.

We understand our EPS forecast might look a bit back end loaded to some of you, but I'd remind you, in a typical year before COVID, our operating income has always typically been weighted toward the second half of the year and particularly toward the fourth quarter as we sell in cough/cold products to customers and illnesses begin to spread. This was not the case in 2020 as consumers loaded pantries earlier in the year and illnesses were at a historic low, which led to a more evenly spread phasing of operating income last year than typical or normal. In 2021, we expect this phasing to return to our normal split of approximately 44% of our operating income in the first half and approximately 56% in the second half. Again, factors supporting this beyond history is that there is no pantry load this year, cough/cold illnesses are expected to return to their pre-COVID levels and we have a number of new products launching in the second half. The rescheduling of brand advertising and promotions back to pre-COVID levels and timing also benefits our forecast for the remainder of this year. Again, we believe these factors set the stage for significant growth in the back half of this year as consumption patterns and consumer shopping trips trend back toward pre-COVID levels, which in fact is a trend we are already seeing in our third-party consumer offtake data in April.

Turning to guidance. So the first quarter numbers were down compared to year ago. As I said, that was expected. We did a little better in the EU, a little worse in the US, but we fared better than many of our peers. Given the tailwinds mentioned and that we are seeing a continued strength in e-commerce, an increase in store foot traffic, more consumers traveling again and more children expected to return to schools in the fall, we are reaffirming our guidance to deliver 3% organic revenue growth, 5% operating income growth and 7% EPS growth in 2021. Our plus 7% EPS commitment remains embedded at the midpoint of our guidance range of $2.50 to $2.70 per share. And also remember, this EPS guidance is before we put any of the $2 billion in cash we have at our disposal on the balance sheet to work.

So to summarize, we've made tremendous progress already this year by completing the portfolio reconfiguration to a pure-play consumer self-care leader with a growth profile in line with CPG peers that trade at much higher multiples; second, building over $2 billion in cash on our balance sheet, which will be available to drive growth; and three, creating a dialog that might resolve the Irish tax liability in the coming year. Bottom line, Perrigo's business model is highly defensible, our self-care solutions are differentiated in the marketplace and on trend, our portfolio offerings are well diversified across categories and geographies, we have world-class consumer talent and our business fundamentals are extremely durable. I'm more excited than ever about the future of Perrigo and the potential to create value, and I'm grateful to all of our teams around the world who have helped to transform our great company. Rest assured, we are passionate about building shareholder value just as we are passionate about making our vision a reality to make lives better by bringing quality, affordable self-care products that consumers trust everywhere they are sold.

And with that, I'll 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 all. Before getting into some of the details of our first quarter financials, I would like to extend a thank you to all our Perrigo colleagues, many of whom are listening to this call today, for their hard work and dedication, as they continue to deliver great results in spite of the challenges that COVID-19 continues to bring us whether you're working in a manufacturing facility or working from home. Thanks again, everyone.

In March, we signed an agreement to sell our generic pharmaceutical or Rx business, and we are now accounting for it as a discontinued operation. As a consequence, this quarter we're presenting financial information for continuing operations only, i.e. the CSC Americas segment, the CSC international segment and Corporate unallocated, and we're excluding our Rx business. We've prepared financial information in this continuing operations/discontinued operations format in accordance with Accounting Standards Code 205, that's because the sale of the Rx business. Given its key importance to Perrigo's becoming a pure-play consumer company, it's a strategic shift for our company, and also because the size of the Rx business relative to the rest of our company. This continuing operations framework also applies to the Q1 2020 figures that you see here today, including tax information and earnings per share.

As we already said on our fourth quarter earnings call, all cash generated by the Rx business will be retained by Perrigo until the transaction closes. With that, let's take a look at our first quarter results.

On a consolidated basis, we reported GAAP earnings from continuing operations of $3 million for the first quarter of 2021, $0.02 per diluted share. On an adjusted basis, consolidated net income from continuing operations was $67 million and diluted earnings per share from continuing operations were $0.50, a 25% decline as compared to the prior year, due primarily to last year's COVID demand surge and then this year's historically weak cough/cold season. Non-GAAP adjustments comprised largely the $57 million of amortization, which we always add back. We also made adjustments of $3 million for unusual litigation expenses, $2 million in restructuring charges and additionally, $5 million of transitional costs related to the Rx business. With respect to these Rx transitional costs, once the divestitures completed, these costs will either be part of the already negotiated transition services agreement to be put in place at closing, all will be eliminated. For this reason, we have excluded these costs from the Q1 non-GAAP continuing operations results presented here today. Full details of all these adjustments can be found in the non-GAAP reconciliation table attached to this morning's press release.

Our GAAP effective tax rate for Q1 2021 is 84%, primarily driven by $8.8 million of tax expense, which has no associated income with it. This expense was mainly the transfer of IP undertaken as part of the pending Rx transaction. In computing the adjusted effective tax rate of 22.2%, we adjusted for this expense and also for the effective tax on those non-GAAP adjustments for Q1 that I just went through. For Q1 last year, we recalculated the adjusted effective tax rate based as part of the continuing operations/good discontinued operations exercise in line with ASC 205. The Q1 tax rate was recalculated based on CSCA, CSCI and Corporate unallocated Q1 2020 pre-tax income only and the recalculated adjusted effective tax rate on this basis for the first quarter of 2020 was 25.8%. From this point forward in the presentation, all dollar numbers, basis points and margin percentages will be for continuing operations on an adjusted basis, unless stated otherwise.

Consolidated reported net sales in the first quarter of 2021 amounted to $1 billion, a 6.8% decrease versus the same quarter last year. The comparison between Q1 this year and Q1 last year is, as Murray has already pointed out, primarily as a result of the fact that the first two quarters of both years included two specific events, the combination of which had a large adverse impact on the year-over-year comparison. Pantry load at the beginning of the pandemic in the first quarter of 2020 positively impacted last year's Q1 sales, increasing them by approximately $73 million and that did not repeat this year than last year, and historically low cough/cold season -- excuse me, than this year, and historically low cough/cold season adversely impacted our Q1 sales, reducing them by approximately $68 million. Together, these factors have an adverse effect on this year's Q1 comp to prior year of approximately $141 million.

Organic net sales for the quarter were down 10.9%, excluding favorable impacts of $25 million for currency [Phonetic] and $32 million for the acquisitions of Dr. Fresh and the branded Sanofi products in the EU. There was also an unfavorable impact of $14 million from divesting the Rosemont's subsidiary.

Consolidated gross margin for the first quarter was 38.8%, 40 basis points higher than the prior year. This was primarily due to favorable pricing in CSC International as well as favorable currency impacts, which helped offset the lower sales volume. Consolidated operating income for Q1 was $118 million, $33 million lower than prior year, driven by lower gross profit flow-through, an increase in share-based compensation, which fell into the first quarter of this year and increased R&D spend. These adverse impacts were partially offset by lower A&P spending, particularly in the cough/cold categories and by the absence of prior year's one-time frontline plant employee bonus.

Now let's turn to the quarter specific segment results, starting with CSC Americas. CSCA's first quarter reported net sales was $641 million, a decrease of $60 million from the prior year, which included a pandemic-related pantry load benefit of an estimated $50 million. The historically weak 2021 cough/cold season had an unfavorable impact in the first quarter of approximately $35 million, which was partially offset by the Dr. Fresh acquisition, which added $24 million. Excluding the Dr. Fresh acquisition, year-over-year organic net sales declined by 11.8%. Gross profit in the quarter of $201 million was below prior year by $19 million, primarily due to lower volumes, which led to unfavorable plant overhead absorption. In addition, we had higher API costs, active pharmaceutical ingredients that is, on certain products and lower operating efficiencies in the nutrition business, which were partially offset by the addition of Dr. Fresh. Gross margin was flat to prior year, as favorable mix within the segment offset the adverse plant absorption. This was principally due to the fact that cough/cold products of which we had lower sales this quarter have lower than average margins. Operating income for the quarter was $111 million, $26 million lower than prior year, primarily driven by unfavorable gross profit flow-through plus higher R&D spend as we continue to invest in future growth opportunities.

Moving on to Consumer Self-Care International, CSCI's first quarter reported net sales of $370 million was $13 million lower than the prior year, which included an estimated prior year pandemic-related pantry load benefit of $23 million, the weak cough/cold season had an estimated adverse impact on CSCI net sales of $33 million and the effect of divesting Rosemont was $14 million. These declines were partially offset by a $26 million favorable currency impact in the quarter. Organic net sales in the segment declined 9.1%. CSCI gross profit was $191 million, 3% lower than prior year due primarily to those lower net sales flowing through the P&L. Gross margin in this segment increased 30 basis points, mainly from manufacturing efficiencies. Operating income was $60 million, $4 million down from the prior year as adverse gross profit flow-through was partially offset by lower operating expenses, including reduced A&P in the cough/cold categories as we brought promotional activities in line with lower sales.

Moving now to the balance sheet. On a consolidated basis, continuing operations and discontinued operations combined, our cash position at the end of the quarter was $481 million, down from $642 million at the end of Q4 2020. Lower sales in both last quarter and this quarter, primarily as a result of the poor 2021 cough/cold season reduced our cash collections in Q1. Additional impact on our cash during the first quarter came from increased inventory, up approximately $84 million, primarily analgesics, approximately $70 million that we spent for two previously contracted IP acquisitions for the Rx business, $53 million of which will be reimbursed in the purchase price upon the closing of the Rx transaction, plus we funded $20 million in annual incentive programs in the quarter.

In closing, our business remains strong, reflected by the fact that we have just reiterated our guidance for 2021 in the range of $2.50 to $2.70 per share, and as Murray explicated earlier, we continue to make strong progress on our transformation journey where we are well ahead of our original expectations.

With that, operator, we would like to open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] And the first question comes from Chris Schott with JPMorgan.

Chris Schott -- JPMorgan -- Analyst

Great. Thanks so much for the updates and look forward to seeing how the tax discussions go. Just a couple of quick ones from me. On gross margins for the Americas business, I know there was a weak cold/cough and that impacted results, but just want to get my hands around what a normalized gross margin looks like for that business and just thoughts for the rest of the year? And I guess more specifically, I think we've been seeing margins in like a 33% range or so over the past three quarters, and I'm wondering if that's a decent proxy going forward or could margins remain a bit depressed here in the near-term? And I have one follow-up after that.

Murray S. Kessler -- President and Chief Executive Officer

Well, as we said last year and the beginning of the year, you had a lot of pain and lower margin and gross margin was a priority, the simple answer is I think it will progress back toward the 33% as the year goes on.

Raymond Silcock -- Executive Vice President and Chief Financial Officer

Yeah, yeah, we really prioritize lower margin products based on societal needs rather than profits last year and then you're seeing some of that in comp to last year.

Chris Schott -- JPMorgan -- Analyst

Okay. So the number bounces back going forward as we think about the percent this year.

Murray S. Kessler -- President and Chief Executive Officer

Yeah, because we have -- we sold existing inventory. The spike last year started in mid-March and we sold existing inventory in the first couple of weeks of the spike, which had a very solid effect on our first quarter, but then, as we made product to replace the inventories that we drew down at the end of March that was when we changed our pattern of manufacturing, as I mentioned, and that's why I think we're going to see that margins were hurt by that, but they're going to bounce back this year.

Chris Schott -- JPMorgan -- Analyst

Okay. And then at least talk a little bit about on the balance sheet, just some priorities as we think about capital deployment post the Rx divestitures, I guess you said a little bit of time since the deal was announced. Should we just be thinking about kind of this being potentially larger deals, or maybe just a faster cadence of small transactions? And I guess as part of you think -- you're thinking about capital deployment, do the current settlement discussions, I guess, impact your capacity or scope of what you're thinking about in BD? Thanks very much.

Murray S. Kessler -- President and Chief Executive Officer

Yeah, I mean, the answer to the last part is no. I mean, we have significant cash, we're generating cash and we will generate a lot more cash, and we have a large revolver. So -- and I'm not thinking about deals of that kind of magnitude. Having said that, I think you are focusing in on a difference of how I think about it versus a year ago. So good for you. We did a big one with Ranir and then we got to some smaller ones, in my ideal world, yeah, I'd love another Ranir within the realm of the five focus categories. There is now -- I'm not going to just go out there and buy anything, so we are going through a disciplined approach and there are targets out there and we've evaluated a number. First, I got to get the money, so we got to close the Rx deal and that's proceeding on track. But, yeah, I'm thinking a bit bigger, but we will remain very disciplined and hopefully keep up the good track record we've demonstrated. If anything gets in the way that, we would then consider some of the other balance sheet activities, but our first priority is disciplined M&A, probably second after that would be producing some debt.

Chris Schott -- JPMorgan -- Analyst

Okay, perfect. Thanks so much.

Operator

Thank you. And the next question comes from Gregg Gilbert with Truist Securities.

Gregg Gilbert -- Truist Securities -- Analyst

Good morning, folks. It's Gregg.

Murray S. Kessler -- President and Chief Executive Officer

Hi, Gregg.

Gregg Gilbert -- Truist Securities -- Analyst

On the US private label market, for which categories would you say that private label products still have the most share growth potential? And then I had a follow-up question.

Murray S. Kessler -- President and Chief Executive Officer

I mean in the categories that we have products and I'm assuming, right. So, our market shares and depending on where we are vary, we have in oral care and in nutrition, we have half the level of market share or penetration that we do in OTC. Within OTC, there are segments that are -- we're under penetrated and versus others, and you've heard me say this before and our team are very highly, a very high share and many of the traditional categories, the digestive products, the allergy products were all solid, pain products were solid, cough/cold work were solid, but there are forms that we are under-developed in like gel tabs and things like that, gel caps that represent significant opportunities. So, I mean, when you think over the long-term, those segments, even in OTC, they'll continue to grow.

I think I'd have to get Brad to point you back to a presentation I did not, trying to remember which conference that I did which I outlined sort of what the value of each share point in each of those segments was worth, but as I recall, if you went after it carefully and methodically, there was a couple of billion dollars of revenue opportunity across all of our portfolios by building an increasing penetration.

Gregg Gilbert -- Truist Securities -- Analyst

Got it. Very helpful. On the Irish tax situation, I understand you're not commenting on specifics, but I just want to make sure that I heard correctly that you submitted a settlement proposal to Irish Revenue?

And then just a quick one for Ray, when do you plan to issue prior year results for the quarters and years, so folks have credit models for continuing ops? Thank you.

Raymond Silcock -- Executive Vice President and Chief Financial Officer

Yeah, we don't have plans to do that right now, but they have to be audited and by our auditors in each quarter as we go forward. So -- but we -- I think that they are going to stabilize in the second quarter. Our first quarter last year was was impacted by not only by COVID, sales of albuterol, you might recall we got permission to launch albuterol in early -- in mid-February and we started in the end of the month and beginning of March. So we had a -- what this did was it gave a lot of the income in the first quarter last year was Rx related. So that's causing us so some problems as we try and lay out the tax for each quarter. But I would expect it to stabilize in the second quarter and you will be able to use that second quarter number to see forward into the rest of the year from last year.

Murray S. Kessler -- President and Chief Executive Officer

And the answer to the other question is yes.

Gregg Gilbert -- Truist Securities -- Analyst

Thank you.

Operator

Thank you. And the next question comes from David Steinberg with Jefferies.

Murray S. Kessler -- President and Chief Executive Officer

Hi, David.

David Steinberg -- Jefferies -- Analyst

Okay, thanks. I have three questions. First on cough/cold, you're obviously betting on a better year in the fall and I was just curious, the IQVIA FAN forecast that obviously could not have forecast this past year, but in previous years, how close to the mark was their forecast? And then, I think, you said you're expecting sort of the lower end of the range for the outlook, I guess how confident can you be in that outlook given your outlooks in the past since the rebound is so important?

Secondly, are you seeing any increased presence from OTC manufacturers like Dr. Reddy's in the smoking cessation or other categories, where they've launched products are conversely less competition? And then finally, could you just discuss the e-commerce trends you've been seeing, I know you've had some recent momentum in that area and you up to close to 10% of aggregate sales now in e-commerce? Thanks.

Murray S. Kessler -- President and Chief Executive Officer

Sure. Let me do them one at a time. Cough/cold, I think we're being conservative, but just to be clear, IQVIA and their estimates of flu have historically been very accurate and it sort of the trusted source. The FAN data is a methodology is patient level data, which is HIPAA-compliant and that's the largest longitudinal data set available and tracks over 306 million people in the US. The FAN program captures a live feed from healthcare providers on patient business, on actual physician diagnosed symptoms and the data is projected using the current census data to each DMA region. Total US by adult and pediatric down to the symptom. So it's our best source and in the year, I've only been in this business on this side of consumer packaged goods into the healthcare self-care over the past few years, but it's been right on as far as I've seen, I'm predicting the strong 2019 cold/cough seasons, the allergy seasons.

So I think it's pretty predictive and they're not the only ones, there was a article I saw come out over the weekend from NBC predicting a very high flu season in the upcoming year, because with all of the lockdown, people's immunity levels are down. So some are forecasting not even just a normal season, but a very strong one, but to be clear what Perrigo did, right, like, OK, so we know we can be -- we can't be any worse than zero, there was 99% decline. There were no flu basically around the world this year. So everything has got to be upside. I think you would agree to that. Going all the way to normal would be a big bet, so we have been more conservative that and I don't remember the exact number, but we're roughly halfway between what -- where it was and what normal would be. So to me, the way we forecasted it that's an upside to our plan, not a downside to our plan.

The e-commerce numbers and while I'm answering the next one, Brad, if you have the actual growth numbers for e-commerce, but I do believe it's, right now, it's still in that same 10% to 11%. It slowed somewhat, you've had a resurgence of people in store, which for us in a private label business is a good thing, where a lot of the price value comparisons are, the reality is, I think we've done better than any of our competitors because we invested early in e-comm and we're a leader, but our shares are still lower there versus the national brand than they are in-store and we'll build that over time. And I think it's logical, right, because you make the in-store comparison, you see that price right away and people switch and we're trying to get that done online. But given that it's, I think, it's still a comparable number, probably at 10% to 12% range.

And Brad, jump in if I'm off a little bit on that.

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

Murray, you're right. Overall cost in the entire business, e-comm grew about 52% compared to last year, a little bit higher in Americas and a little bit lower in I, but about 52% overall.

Murray S. Kessler -- President and Chief Executive Officer

Good, thanks. I'm not, I know the question was on e-comm, but I do think it's worth noting and I elaborating a little more than you even asked in the question, but I personally believe that though at least in the US, the program of vaccinating in drug stores and in supermarkets and and in Walmarts and to all of that has probably been the single biggest factor and bringing people back in stores and recreating in-store traffic, it sort of forced people back into the stores where they look around, I guess it's OK, I can come in here and start shopping again. So there is -- I'm pretty upbeat on the business. I know the first quarter was a challenge, but I look at the second half of cough/cold upside and people starting to live their normal lives again, as they get vaccinated and a lot of pent-up money and their tracking accounts and all that, I think you're going to see a roaring second half, not for just Perrigo but for the entire economy.

Operator

Thank you. And the next question comes from Elliot Wilbur with Raymond James.

Elliot Wilbur -- Raymond James -- Analyst

Thanks, good morning. Just wanted to get some clarification around the gross margin -- excuse me, gross margin profile of the cough/cold line, outside of, I guess, some of the Mucinex products, I would assume that's a much lower margin line and then overall average for the consumer segment, maybe that's an incorrect assumption, but just some clarification on how that may have impacted margin performance in the quarter?

And then just a couple of follow-up financial questions for Ray, specifically on operating cash flow. Could you just give us a sense of what the Rx business contributed to the result in the quarter and I don't know if you have the number in front of you, but if there's any way to break out separately depreciation for that business so that we can model consumer on more of an EBITDA basis going forward? That would be helpful. Thanks.

Murray S. Kessler -- President and Chief Executive Officer

Well, Ray is doing that. Just to be clear, gross margins, we're up versus a year ago and in the first quarter and relative to Chris' question in the beginning, I think you'll see them continue to progress and grow from here, but cough/cold, I think you're right. In general, I think there are a little bit lower of...

Raymond Silcock -- Executive Vice President and Chief Financial Officer

Commented in my prepared remarks, we saw some mix favorability because we had lower sales of lower margin products in some of our Ibuprofen and the acetaminophen products have quite low margins on them, especially those large bottles and so forth. So that's the fact, I mean, we saw it, but it is ironically, we saw favorability from that in the first quarter.

Murray S. Kessler -- President and Chief Executive Officer

Yeah. So it's really a kind of a split answer. If you're listening on the call, as gross margin is good or it's bad. We think it's progressing. This is the first -- one of the first quarters where across the Board, we saw gross margins increase as a result of programs that we put in place on SKU rationalization, etc. And then as the mix progresses through the year, we think you'll see it grow back up and in the US to the levels that Chris had mentioned closer to the 33% range.

Raymond Silcock -- Executive Vice President and Chief Financial Officer

On operating cash flow, you asked about Rx and I think the answer to the question is around $19.5 million, $20 million. [Speech Overlap] Positive cash flow, yeah, which is obviously a lot lower than we would normally see and there were some specific reasons for that in the -- but we're not going to really get into discontinued operations at this point.

Operator

Thank you. And the next question comes from David Risinger with Morgan Stanley.

Melina Santoro -- Morgan Stanley -- Analyst

Hi, this is Melina Santoro on for Dave. We have two questions. Can you please add more color on why the operating cash flow was weak in the first quarter and maybe talk about what the outlook is for the full year for cash flow? And also can you help us understand whether the $70 million of asset acquisitions in the quarter was revenue contributing? Thank you.

Murray S. Kessler -- President and Chief Executive Officer

So the answer to the second question is, no, not significantly, if at all. They were -- Rx acquisitions, they were pre -- they were basically -- they had been pre-approved, but they were related to -- yeah, we're going to get -- but we're going to get that cost of them back, but they had no significant impact on our results for the month apart from that factor.

So the operating cash flow, I think I went through a little bit in my prepared remarks, some of the reasons why that we had an impact on the balance sheet. I mean, the biggest single item was that we grew our inventories and that was a lot of that was analgesics and that related to the poor cough/cold season and related lower sales. We expect to have push that through. Obviously, as we go forward in the year, we would hope that -- we'd hope to get those inventories down to...

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

Yeah, we're expecting a normal...

Murray S. Kessler -- President and Chief Executive Officer

Pretty well normal cash year. I mean, this first quarter had a number of factors, but just to be clear on that one question you asked about Rx, that was when we describe the sale as a part that was cash and other considerations, that's because we knew the timing of these R&D activities at a third-party person that we had to pay were going to occur, we didn't know whether before or after we closed since its before we close, now the purchase price will be adjusted up for the bulk of those. It's not exactly, but it's -- I think it's back to the numbers we've talked about when we announced the sale. So, it's now going to be all cash at $15 million [Phonetic], $50 million [Phonetic] or whatever, something like that there probably be some other smaller adjustments.

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

Yeah. And the other reason is that we -- that is our first quarter ended into April, I think 3rd of April, so we had some -- we had to fund our employee bonus program, which was a little over $20 million, so that was also our cash flow in the first quarter. So we get that back obviously in the balance of the year.

Operator

Thank you. And this concludes our question-and-answer session. I would like to turn the conference back over to the Company for any closing comments.

Murray S. Kessler -- President and Chief Executive Officer

You know this has been an interesting journey over the past couple of years and there's been some ups and downs, but I do really feel like it's all coming together at the moment. I feel like the team is in place and engaging and demonstrated that they can manage through adversity last year and is consistent, the new products are flowing outside of the company, we're doing branded deals, more private label. We've got a strong track record in M&A, pulled off the difficult deal with Rx and, I mean, that will put us purely in the consumer world. And while we -- I'm sure there is still a long way to go, but it's -- we're finally getting to the point where I think we will make major ground this year on the overhang issues as well, which was my hope going into this year. You'd couple that with what should be easy comps in the second half of the year and a strong strategy and a big war chest, I think this is the inflection point for Perrigo and it's time for us to start building some meaningful value, and I think we're in the position to do so. So thank you for your interest in Perrigo.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call 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

Chris Schott -- JPMorgan -- Analyst

Gregg Gilbert -- Truist Securities -- Analyst

David Steinberg -- Jefferies -- Analyst

Elliot Wilbur -- Raymond James -- Analyst

Melina Santoro -- Morgan Stanley -- Analyst

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