Perrigo Reports Record Third Quarter Revenue And Earnings And Raises Full Year EPS Guidance

ALLEGAN, Mich., May 8, 2012 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its third quarter ended March 31, 2012.

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Perrigo's Chairman and CEO Joseph C. Papa commented, "We are very pleased with our record fiscal third quarter revenue and earnings performance. These strong results were made possible by the continued operational excellence of the team. Headlining this execution were the $64 million in new product launches, mostly in OTC, which keep us on track to exceed our $190 million new product sales goal for fiscal 2012. Global Consumer Healthcare sales grew 6% in the quarter, driven mainly by U.S. OTC sales growth of 8% despite a historically mild cough/cold and flu season. In Nutritionals, we were able to improve adjusted margins from last quarter as measures put in place partially offset the volatility in raw materials pricing. Our Rx segment continues to exceed our expectations in both our existing and newly acquired business. We are continuing to make quality healthcare more affordable to consumers around the globe."

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.

Third Quarter Results

Net sales for the third quarter of fiscal 2012 were $778 million, an increase of 13% over fiscal 2011. The increase was driven primarily by $70 million of net sales attributable to the Paddock Laboratories, Inc. (Paddock) and CanAm Care, LLC acquisitions and new product sales of $64 million, partially offset by decreases in sales of certain existing products, primarily in the Consumer Healthcare and Nutritionals segments. Reported income from continuing operations was approximately $116 million, or $1.23 per diluted share, an increase over $92 million, or $0.98 per diluted share, a year ago. Excluding charges as outlined in Table I at the end of this release, third quarter fiscal 2012 adjusted income from continuing operations was $133 million, or $1.41 per diluted share, up 32% over fiscal 2011. In the quarter, there was a $0.20 per diluted share tax benefit as a result of the closing of various tax audits and statutory expirations. Reported gross margin increased 130 basis points to 35.9%, while adjusted gross margin increased 190 basis points to 37.6%. Reported operating margin increased 100 basis points to 18.8%, while adjusted operating margin increased by 250 basis points to 22.1%.    

Nine Months Results

Net sales for the first nine months of fiscal 2012 were $2,341 million, an increase of 14% over fiscal 2011. The increase was driven primarily by $177 million of net sales attributable to the Paddock and CanAm Care acquisitions and new product sales of $160 million, partially offset by decreases in sales of certain existing products, primarily in the Consumer Healthcare and Nutritionals segments. Reported gross profit was $802 million, an increase of 14% over fiscal 2011, and reported gross margin was 34.2%, as compared to 34.3% last year. Adjusted gross profit was approximately $871 million, an increase of 20% over fiscal 2011, and adjusted gross margin increased 180 basis points to 37.2%. Reported operating income was $408 million, an increase of 11% over fiscal 2011, and reported operating margin was 17.4%, as compared to 17.9% last year. Adjusted operating income was $505 million, an increase of 25% over fiscal 2011, and adjusted operating margin increased 190 basis points to 21.6%.

Consumer Healthcare

Consumer Healthcare segment net sales for the third quarter rose to $449 million from $425 million in the third quarter last year, an increase of 6%, due to new product sales of $34 million (primarily in the cough/cold and dermatological categories), an increase in sales of existing products of $5 million (primarily in the smoking cessation category), and net sales attributable to the acquisition of CanAm Care of approximately $8 million. These increases were partially offset by a decline of approximately $25 million in existing product sales due primarily to a historically mild cough/cold and flu season. Reported operating income increased by $2 million to approximately $75 million, while adjusted operating income increased by $3 million to $77 million, driven by profit contribution on new product sales. Gross and operating margins were impacted year-over-year by increased competition on a key product in the gastrointestinal category and under absorption of fixed production costs relative to lower volume output caused by a historically mild cough/cold and flu season.    

Year-to-date net sales increased 6% or $81 million compared to fiscal 2011 driven by new product sales of $76 million (mainly in the cough/cold, diabetes and dermatological care categories), along with an increase in sales of existing products of approximately $29 million in the cough/cold and smoking cessation categories. These increases were partially offset by a decline of $32 million in sales of existing products within the gastrointestinal and analgesics product categories.  

On January 6, 2012, the Company 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.

On January 12, 2012, the Company announced that the United States District Court for the Western District of Michigan granted summary judgment in its favor in patent litigation involving Guaifenesin Extended-Release Tablets, 600 mg, a generic version of Mucinex® tablets.

On February 14, 2012, the Company announced that it began shipping Loratadine-D 12 hour extended release tablets, the store brand equivalent to Schering-Plough's Claritin-D® 12 hour extended release tablets.

On March 1, 2012, the Company announced that it initiated market launch and made its first shipments of Minoxidil 5% Foam, comparable to Rogaine® 5% Foam Hair Regrowth Treatment, to its retail and wholesale customers.

Nutritionals

Nutritionals segment net sales for the third quarter decreased $6 million to $118 million compared to fiscal 2011 due to lower existing product sales of $27 million in the Vitamins, Minerals and Supplements (VMS) and infant formula categories. These decreases were largely offset by new product sales of $20 million, primarily in the infant formula category. The decrease in sales of existing infant formula products was primarily due to the transition to next generation formulas within the portfolio. Infant formula sales were also impacted by the absence of increased demand of approximately $8 million in net sales that the Company experienced last year as a result of a competitor's product recall, along with a decline in U.S. birth rates year-over-year, while the decrease in the VMS category was driven by increased competition. Reported operating margin decreased 1,140 basis points to 3.1%, impacted by restructuring at the Company's Florida facility disclosed last quarter. Adjusted operating margin decreased 430 basis points to 14.8% 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 change in product mix.

For the first nine months of fiscal 2012, net sales decreased approximately $15 million or 4% to $366 million, compared to fiscal 2011, due to a decline in existing product sales of $72 million partially offset by new product sales of $57 million, primarily in the infant formula category.

Rx Pharmaceuticals

The Rx Pharmaceuticals segment third quarter net sales increased 84%, or $71 million, to approximately $156 million compared to fiscal 2011. This increase was due to net sales of $62 million from the Paddock acquisition as well as continued growth of $9 million in the base business. Reported operating margin increased 780 basis points to 44.7%, while adjusted operating margin increased 990 basis points to 50.2%. These increases were due to gross profit contribution from the Paddock acquisition and new product sales, along with favorable pricing on select products.  

For the first nine months of fiscal 2012, net sales increased 83% or $209 million to $460 million, as compared to fiscal 2011. This increase was due to net sales of $169 million from the Paddock acquisition, new product sales of $18 million and favorable pricing on select products.

On January 23, 2012, the Company announced that it filed with the U.S. Food and Drug Administration (FDA) an Abbreviated New Drug Application (ANDA) for Azelastine Hydrochloride Nasal Spray (0.15%).

API

The API segment reported third quarter net sales of $37 million, a 10% decrease compared to fiscal 2011. The decrease was due to lower existing product sales of approximately $5 million driven by lower demand of certain products and pricing pressures on a key product. This decrease was partially offset by new product sales of $1 million. Reported operating margin increased 190 basis points to 29.4%, while adjusted operating margin increased 210 basis points to 30.8%.  

For the first nine months of fiscal 2012, net sales increased 7% or $8 million to $127 million, compared to $119 million in fiscal 2011. This increase was due to new product sales of $6 million, increased sales of existing products of $1 million, and favorable changes in foreign currency exchange rates of $1 million.

On March 21, 2012, the Company announced that it received a final "Approval for Registration" letter from the Australian Therapeutic Goods Administration permitting the Company to sell generic temozolomide in Australia.

Other

Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported third quarter net sales of $19 million, an increase of 12% compared to fiscal 2011. This increase was due to new product sales of $1 million, along with an increase in sales of existing products of $1 million. For the first nine months of fiscal year 2012, net sales were $56 million, an increase of 15% compared to fiscal 2011, driven by new product sales of $4 million and an increase in sales of existing products of approximately $4 million.

Guidance

Reported fiscal 2012 earnings from continuing operations are expected to be between $4.10 and $4.20 per diluted share. Excluding the charges outlined in Table III at the end of this release, expected fiscal 2012 adjusted earnings from continuing operations are expected to be between $4.90 and $5.00 per diluted share, up from previously announced guidance of $4.70 to $4.80 per diluted share, due to the inclusion of the $0.20 per diluted share tax benefit realized in the fiscal third quarter. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 22% to 25% over fiscal 2011 adjusted earnings per share.

Chairman and CEO Joseph C. Papa concluded, "The strength of our diversified business model and the excellent execution by the team was clearly evident this quarter. With numerous exciting new product launches expected, we are looking forward to a strong end to the fiscal year."

Perrigo will host a conference call to discuss fiscal third quarter 2012 results at 10:00 a.m. (ET) on Tuesday, May 8, 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# 69598952. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Tuesday, May 8, 2012, until midnight Friday, May 25, 2012. To listen to the replay, call 855-859-2056, International 404-537-3406, access code 69598952.

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 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.

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