Perrigo Reports Record Quarterly Revenue and Earnings

ALLEGAN, Mich., Feb. 7, 2012 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its second quarter and six months ended December 31, 2011.

Perrigo's Chairman and CEO Joseph C. Papa commented, "We are very pleased with our performance this quarter. We delivered all-time record quarterly revenue, earnings and second fiscal quarter operating cash flow. Our recent Paddock Labs acquisition is performing ahead of our expectations, and our Consumer Healthcare, API and legacy Rx operations all contributed to the year over year growth. New products contributed $55 million of sales in the period, and we expect this strong momentum to continue into the second half of fiscal 2012. Adjusted operating margin for the second quarter increased 120 basis points to 21.4%. Our Consumer Healthcare segment performed well and is on track to meet our expectations for the full year."

Refer to Table I at the end of this press release for adjustments in the current year and prior year periods and additional non-GAAP disclosure information.

The Company's reported results are summarized in the attached Condensed Consolidated Statements of Income, Balance Sheets and Statements of Cash Flows.  Note that fiscal second quarter 2012 includes an extra week of activity.  

Second Quarter Results

Net sales for the second quarter of fiscal 2012 were $838 million, an increase of 17% over fiscal 2011. The increase was driven primarily by $69 million attributable to the Paddock Laboratories acquisition and new product sales of $55 million. Reported income from continuing operations was $100 million, or $1.06 per share, an increase of $10 million, up from $0.96 per share a year ago. Excluding charges as outlined in Table I at the end of this release, second quarter fiscal 2012 adjusted income from continuing operations was $112 million, or $1.20 per share, up 14% over 2011.

Six Months Results

Net sales for the first half of fiscal 2012 were $1,563 million, an increase of 15% over fiscal 2011. The increase was driven primarily by $107 million of net sales attributable to the Paddock Laboratories acquisition and consolidated new product sales of approximately $96 million. Reported gross profit was $522 million, an increase of 13% over fiscal 2011, while adjusted gross profit grew 21% to $578 million over the same period. Reported operating margin decreased 120 basis points to 16.8%, while the adjusted operating margin increased 160 basis points to 21.3%.

Consumer Healthcare

Consumer Healthcare segment net sales for the second quarter were $471 million compared with $430 million for the second quarter last year, an increase of 10%. The increase resulted from new product sales of $26 million, primarily Fexofenadine and the diabetes care category, along with an increase in sales of existing products of $20 million, across many product categories. These increases were offset by a decline of $4 million in sales of certain products within the analgesics category driven by fiscal 2011's increased sales due to a key competitor being absent from the market. Net sales were also negatively impacted by approximately $2 million of unfavorable changes in foreign currency exchange rates. Reported operating income was $77 million, compared with $75 million a year ago. The reported gross margin decreased 100 basis points, while the adjusted gross margin decreased 90 basis points due to increased competitive pressures on a key gastrointestinal product.    

For the first six months of fiscal 2012, Consumer Healthcare net sales increased $57 million, or 7%, compared to fiscal 2011. The increase was due to new product sales of $41 million, primarily in the cough/cold and diabetes care categories, along with an increase in sales of existing products of approximately $24 million in the cough/cold and smoking cessation categories. These increases were partially offset by a decline of $10 million in sales of existing products within the gastrointestinal category driven by competitive pressures on a key product.    

On November 28, 2011, the Company announced that it received final approval from the U.S. Food and Drug Administration (FDA) for its Abbreviated New Drug Application (ANDA) for Guaifenesin Extended-Release Tablets, 600 mg.

On December 27, 2011, the Company announced that it received final approval from the FDA for its ANDA for Desloratadine tablets (5 mg).

On January 9, 2012, the Company announced that it signed a definitive agreement to acquire substantially all of the assets of CanAm Care, a privately-held, Alpharetta, Georgia-based distributor of diabetes care products for approximately $36 million in cash.

Nutritionals

Nutritionals segment net sales for the second quarter were $128 million, compared with $133 million in fiscal 2011, a decrease of $5 million. The decrease was due to a decline in existing product sales of $26 million in the infant formula and Vitamins, Minerals and Supplements (VMS) categories. The decrease in the infant formula category was due primarily to the absence of increased demand of $12 million in net sales that the Company experienced last year as a result of a competitor's product recall. The decrease in existing products of infant formula was also due to a decline in U.S. birth rates year-over-year, while the decrease in the VMS category was driven by increased competition. These decreases were partially offset by new product sales of $21 million primarily in the infant formula category. Reported operating margin decreased 1000 basis points to 5.1%, and adjusted operating margin decreased 920 basis points to 10.2% due to under absorption of fixed production costs relative to lower volume output year-over-year, increased costs of raw materials for infant formula and product mix.      

For the first six months of fiscal 2012, net sales decreased $8 million or 3% to $248 million, compared to fiscal 2011 due to a decline in existing product sales of $45 million partially offset by new product sales of $37 million, primarily in the infant formula category.

On October 19, 2011, the Company announced it entered into a supply agreement with Founder Pharma Co., Ltd. to supply infant formula manufactured in its U.S. facilities for sale and distribution by Founder Pharma in China.

On November 8, 2011, the Company announced it entered into Cooperation and License agreements with Brilite Nutritionals (Shanghai) Co., Ltd. to supply its Bright Beginnings™ infant formula brand for sale and distribution in China.

On November 15, 2011, the Company announced it received FDA clearance to market and distribute the store brand Comfort Care™ Infant Formula, a comparable version of Gerber® GOOD START® Gentle Infant Formula.

Rx Pharmaceuticals

The Rx Pharmaceuticals segment second quarter net sales increased 82% or $80 million compared to fiscal 2011 due to net sales of $69 million from the Paddock Laboratories acquisition, legacy new product sales of $5 million, market share gains and favorable pricing on select products. Reported operating income was $72 million, an increase of $39 million from last year, while adjusted operating income increased $45 million. The reported operating margin increased 690 basis points while the adjusted operating margin increased 880 basis points.

Year-to-date net sales for fiscal 2012 increased 83% or $138 million compared to fiscal 2011 due to net sales of $107 million from the Paddock Laboratories acquisition, legacy new product sales of $10 million, market share gains and favorable pricing on select products.

On October 6, 2011, the Company announced it received tentative approval from the FDA for its ANDA for Clobetasol Propionate Emulsion Foam, 0.05%.

On October 18, 2011, the Company announced it filed with the FDA an ANDA for olopatadine hydrochloride nasal spray and that it has notified Alcon Laboratories, the owner of the New Drug Application (NDA). The filing involved contributions from the Company's partner, Impax Laboratories, Inc.

On November 1, 2011, the Company announced that its partner, PharmaForce/Luitpold Pharmaceuticals, received final approval for Epinastine HCl ophthalmic solution, 0.05%, a generic version of Elestat®.

On November 2, 2011, the Company announced it filed with the FDA a NDA for testosterone gel 1.0% and that it notified Abbott Products Inc., the owner of the Reference Listed Drug of its filing.

On November 7, 2011, the Company and its partner Synthon Pharmaceuticals, Inc. announced that the Company began shipping Levocetirizine Solution, 2.5 mg/5ml, a generic version of UCB's Xyzal® Oral Solution.

API

The API segment reported second quarter net sales of $43 million compared with $40 million a year ago, an increase of 6%. The increase was due to $1 million in higher sales of existing products and $1 million in new product sales. Reported gross profit increased 16% or $3 million compared to fiscal 2011, while the reported gross margin increased 430 basis points to 47.8%. Reported operating margin increased 340 basis points to 28.3% and adjusted operating margin increased 330 basis points to 29.5%.

For the first six months of fiscal 2012, net sales increased 16% or $13 million to $90 million, compared to fiscal 2011 due to an increase in sales of existing products of approximately $7 million, new product sales of $4 million and favorable changes in foreign currency exchange rates of $2 million. Reported operating margin increased 330 basis points to 29.5% and adjusted operating margin increased 310 basis points to 30.6%.  

Other

Second quarter net sales from continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, increased 16% or $3 million compared to fiscal 2011 due to higher sales of existing products of $2 million, along with a $1 million increase in new product sales.

Year-to-date net sales for fiscal 2012 increased 16% or $5 million compared to fiscal 2011 driven by new product sales of approximately $3 million, an increase in existing product sales of approximately $2 million and an increase of $1 million due to favorable changes in foreign currency exchange rates.

Outlook

Chairman and CEO Joseph C. Papa concluded, "The strength across our businesses continued this quarter, driving record results. As we look forward to the second half of fiscal 2012, we expect this strength to continue. Our teams are executing on their plans, which are the foundation for sustaining our growth. New product launches including the generic versions of Mucinex®, Prevacid®, Delsym®, and Allegra® D12 are expected in the second half of our fiscal year. Our Rx Pharmaceuticals segment continues to outperform our expectations. Furthermore, we are raising the lower end of the Company's full-year adjusted earnings from continuing operations guidance by $0.05 to a range of $4.70-$4.80 per diluted share and full-year reported earnings from continuing operations to be in a range of $3.90-$4.00 per diluted share, despite expecting our full-year effective tax rate to be at the top end of the previously disclosed range. We are excited about our future."    

Perrigo will host a conference call to discuss fiscal 2012 second quarter at 10:00 a.m. (ET) on Tuesday, February 7, 2012. The conference call will be available live via webcast to interested parties on the Perrigo website http://www.perrigo.com or by phone 877-248-9413, International 973-582-2737, and reference ID# 44258931. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Tuesday, February 7, 2012, until midnight Friday, February 24, 2012. To listen to the replay, call 855-859-2056, International 404-537-3406, access code 44258931.

Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products, and active pharmaceutical ingredients (API). The Company is the world's largest manufacturer of OTC pharmaceutical products and infant formulas, both for the store brand market. The Company's primary markets and locations of manufacturing and logistics operations are the United States, Israel, Mexico, the United Kingdom and Australia. Visit Perrigo on the Internet (http://www.perrigo.com).

Note: Certain statements in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or the Company's future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company or its industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential" or other comparable terminology. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections.  While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. These and other important factors, including those discussed under "Risk Factors" in the Company's Form 10-K for the year ended June 25, 2011, as well as the Company's subsequent filings with the Securities and Exchange Commission, may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this press release are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Perrigo Company