Perrigo Reports Record Quarterly Revenue and Earnings and Raises Full Year Adjusted EPS Guidance

ALLEGAN, Mich., Feb. 1, 2011 /PRNewswire/ --

• Fiscal second quarter revenue from continuing operations increased $135 million, or 23%, to $718 million
• Fiscal second quarter GAAP income from continuing operations increased 43% to an all-time record $90 million, or $0.96 per share
• Fiscal second quarter adjusted income from continuing operations increased 46% to $98 million, or $1.05 per share
• Record second quarter cash flow from operations of $129 million
• Management raises full-year fiscal 2011 adjusted diluted earnings from continuing operations guidance to $3.75-$3.90 per share from previously announced $3.60-$3.75 per share

Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its second quarter and six months ended December 25, 2010.

Perrigo's Chairman and CEO Joseph C. Papa commented, "We are very pleased with the performance this quarter. We delivered all-time record quarterly revenue and earnings, and record second quarter cash flow. Our Rx, Nutritionals and API segments all contributed to this strong performance. The performance came from core business strength, new product sales of over $63 million, and operating execution. Our Consumer Healthcare segment performed well and is enjoying strong demand for its products; however, despite improving sequentially, we continued to experience throughput pressures in manufacturing.  We will continue to improve during each coming quarter and expect to have those issues behind us by the end of our fiscal year. More consumers are benefitting from the value proposition of Perrigo's quality, affordable healthcare products and we look forward to serving even more of them in the future."  

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.

Second Quarter Results

Net sales from continuing operations for the second quarter of fiscal 2011 were approximately $718 million, an increase of 23% over fiscal 2010. The increase was driven primarily by the acquisitions of PBM Holdings, Inc. (PBM) and Orion Laboratories Pty Ltd. (Orion) as well as $63 million in new product sales. Reported income from continuing operations was $90 million, or $0.96 per share, a strong increase over $63 million, or $0.68 per share, a year ago. Excluding charges as outlined in Table I at the end of this release, second quarter fiscal 2011 adjusted income from continuing operations was $98 million, or $1.05 per share.  

Six Months Results

Net sales for the first half of fiscal 2011 were $1,359 million, an increase of 22% over fiscal 2010. The increase was driven primarily by strong results in the Rx, Nutritionals and API segments and included consolidated new product sales of approximately $112 million. Reported gross profit was $463 million, up 28% over last year, and the reported gross margin was 34.1%, up from 32.5% last year. Reported operating margin increased 270 basis points to 18.0%, and adjusted operating margin increased 200 basis points to 19.7%. Reported income from continuing operations was $163 million, an increase of 44%. Adjusted income from continuing operations was $180 million, or an increase of 34%.

Consumer Healthcare

Consumer Healthcare segment net sales for the second quarter were $430 million compared with $417 million for the second quarter last year, an increase of 3%. The increase resulted from approximately $24 million of existing product sales, primarily in the analgesics, smoking cessation and feminine hygiene categories, as well as $10 million from new product sales and approximately $7 million of incremental sales from the acquisition of Orion. These increases were partially offset by a decline of approximately $27 million in sales of existing products, primarily in the cough/cold, gastrointestinal and contract manufacturing categories. Reported operating income was $75 million, compared with $84 million a year ago. The decrease was largely driven by increased spending on quality and increased operating expenses. Reported operating margin decreased 280 basis points to 17.5%, and adjusted operating margin decreased 260 basis points to 18.0%.    

For the first six months of fiscal 2011, Consumer Healthcare net sales increased $28 million, or 4%, compared to fiscal 2010.  The increase resulted from approximately $31 million of existing product sales, primarily in the analgesics and feminine hygiene categories, and approximately $27 million of new product sales, as well as incremental sales of $14 million from the Company's acquisition of Orion. This growth was partially offset by approximately $37 million in decreased sales of existing products in the cough/cold, gastrointestinal, smoking cessation and contract manufacturing categories and a decrease of $5 million in international sales of existing products.      

On September 24, 2010, the Company announced that it had filed an Abbreviated New Drug Application (ANDA) for over-the-counter (OTC) omeprazole/sodium bicarbonate, a generic form of Zegerid OTC®. The Company also announced a patent infringement lawsuit by Schering-Plough Healthcare Products related to this product.    

On November 29, 2010, the Company announced that it had launched Naproxen Sodium Soft Gels, a generic equivalent of Aleve® Liquid Gels.

Nutritionals

Nutritionals segment net sales for the second quarter were $133 million, compared with $61 million for the second quarter last year, an increase of 119%. The increase was due primarily to additional sales of approximately $86 million attributable to the acquisition of PBM. The increase was partially offset by a decrease in sales of existing products of approximately $15 million. Reported operating income was $20 million, compared with approximately $3 million a year ago. The increase was driven largely by the acquisition of PBM. The Vitamins, Minerals and Supplements (VMS) category also added to the increase as a result of improvements in operational efficiencies and lower material costs. Reported operating margin increased 1080 basis points to 15.1%, and adjusted operating margin increased 1440 basis points to 19.4%.      

For the first six months of fiscal 2011, Nutritionals net sales increased $139 million or 119%, compared to fiscal 2010.  The increase resulted from $161 million of sales attributable to the acquisition of PBM and $3 million of new product sales in the VMS category. This growth was partially offset by $25 million in decreased sales of existing products in the VMS category.  

Rx Pharmaceuticals

The Rx Pharmaceuticals segment second quarter net sales were approximately $98 million, compared with $57 million a year ago, an increase of 72%. This increase was due primarily to new product sales of $31 million mainly related to the authorized generic of Aldara® and the generic version of Xyzal®, as well as approximately $5 million of increased sales volume in the Company's existing products. Reported operating income was $33 million, an increase of $15 million from last year. The increase was driven largely by new product sales and increased operating expense leverage. Reported operating margin increased 190 basis points from last year to 34.0%.  

For the first six months of fiscal 2011, net sales for the Rx Pharmaceuticals segment increased 61% from fiscal 2010 to $167 million. Net sales increased due primarily to $48 million in new product sales and $9 million in sales of existing products.  

On November 29, 2010, the Company announced that, together with its partner Synthon, final U.S. Food and Drug Administration (FDA) approval was received for levocetirizine tablets, a generic version of Xyzal®. Product shipments commenced immediately.  

API

The API segment reported second quarter net sales of $40 million compared with $35 million a year ago, an increase of 14%. The increase was due primarily to new product sales of $17 million related primarily to European sales of temozolomide. The increase was offset partially by an approximately $11 million decrease in sales of existing products and a decrease of approximately $2 million due to unfavorable changes in foreign currency exchange rates. Reported operating income increased $5 million due to higher margin new product sales, decreased operating expenses and improved financial operating leverage. Reported operating margin increased 1080 basis points to 24.9%, and adjusted operating margin increased 1080 basis points to 26.2%.  

For the first six months of fiscal 2011, net sales increased 14% to approximately $78 million, compared to $68 million in fiscal 2010. Reported operating margin increased 1310 basis points to 26.2% from last year's 13.1%.  

Other

Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported second quarter net sales of $16 million, compared with $12 million a year ago. The segment reported an operating loss of $8 thousand, compared to an operating loss of $800 thousand for fiscal 2010. Year-to-date net sales for fiscal 2011 increased 33% compared to fiscal 2010. The increase was due primarily to approximately $7 million in new product sales and approximately $3 million in increased sales of existing products. The increase was offset partially by a decrease of $1 million due to unfavorable changes in foreign currency exchange rates.  

Guidance

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 2011, we expect this strength to continue. Our teams are executing on their plans, which are the foundation for sustaining our growth. Reported fiscal 2011 earnings from continuing operations are now expected to be between $3.28 and $3.43 per share. Excluding the charges outlined in Table I at the end of this release, we now expect fiscal 2011 adjusted diluted earnings from continuing operations to be between $3.75 and $3.90 per share, up from our previously announced $3.60-$3.75 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 24% to 29% over fiscal 2010 adjusted EPS."            

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# 36915185.  A taped replay of the call will be available beginning at approximately 2:00 (ET) Tuesday, February 1, 2011, until midnight Friday, February 18, 2011. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 36915185.  

Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products, active pharmaceutical ingredients (API) and pharmaceutical and medical diagnostic products.  The Company is the world's largest store brand manufacturer of OTC pharmaceutical products and infant formulas. 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 26, 2010, 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