ALLEGAN, Mich., Oct. 27, 2011 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE: PRGO) today announced results for its first quarter ended September 24, 2011.
Perrigo's Chairman and CEO Joseph C. Papa commented, "We have started fiscal 2012 well, delivering record revenue and adjusted earnings for the quarter. Our Rx segment continued its excellent performance, which was driven by the acquisition of Paddock Labs, new product sales and strong organic Rx results, combined with our continued focus on quality and R&D. Store brand OTC market share continued to grow. We believe our value proposition will continue to resonate well with consumers."
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 Cash Flows. Perrigo Company(from continuing operations, in thousands, except per share amounts)(see the attached Table I for reconciliation to GAAP numbers)Fiscal 2012
Fiscal 2011First Quarter Ended
First Quarter Ended9/24/2011
$81,350Reported Diluted EPS
$0.79Adjusted Diluted EPS
93,269First Quarter Results
Net sales from continuing operations for the first quarter of fiscal 2012 were $725 million, an increase of 13% over the first quarter of fiscal 2011. Excluding charges as outlined in Table I at the end of this release, first quarter fiscal 2012 adjusted income from continuing operations was $103 million, or $1.10 per share, an increase of 27% from first quarter fiscal 2011. Reported income frntsAs AdjustedGAAPAs AdjustedNet sales
-$ 725,295$ 641,322$
-$ 641,32213%13%Cost of sales
10,264-10,2648,333-8,33323%23%Research and development
23,13817,727-17,72711%31%Selling and administration
12,570-12,57010,087-10,08725%25%Other expense (income), net
229-229(559)-(559)--Income from continuing operations before income taxes
88,75352,482141,235102,23911,287113,526-13%24%Income tax expense
32,176-36%18%Income from continuing operations
81,350-4%27%Diluted earnings per share from continuing operations
.87-5%26%Diluted weighted average shares outstanding
93,95393,95393,26993,269Selected ratios as a percentage of net sales Gross profit
31.4%37.2%33.4%34.5% Operating expenses
17.4%16.0%15.9%15.3% Operating income
14.0%21.2%17.4%19.2%(a) Deal-related amortization(b) Inventory step-up of $27,179(c) Proceeds from sale of pipeline research and development projects(d) Acquisition-related costs of $8,782(e) Total tax effect for non-GAAP pre-tax adjustmentsTable IIPERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedConsumer HealthcareSeptember 24, 2011September 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales
-$ 411,681$ 396,104$
-$ 396,1044%4%Cost of sales
73,433-10%-9%Selected ratios as a percentage of net sales Gross profit
30.7%31.0%31.7%31.9% Operating expenses
15.1%14.8%13.7%13.4% Operating income
15.7%16.2%18.0%18.5%Three Months EndedNutritionalsSeptember 24, 2011September 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales
-$ 119,861$ 122,684$
-$ 122,684-2%-2%Cost of sales
23,880-50%-22%Selected ratios as a percentage of net sales Gross profit
25.5%30.4%31.3%33.7% Operating expenses
18.0%15.0%16.6%14.3% Operating income
7.6%15.5%14.7%19.5%Three Months EndedRx PharmaceuticalsSeptember 24, 2011September 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales
9,33384%84%Cost of sales
20,21451%202%Selected ratios as a percentage of net sales Gross profit
33.6%60.6%40.1%43.6% Operating expenses
12.5%12.8%14.4%14.4% Operating income
21.0%47.8%25.6%29.2%(a) Deal-related amortization(b) Inventory step-up of $27,179(c) Proceeds of $3,500 from sale of pipeline research and development projects(d) Acquisition-related costs of $3,156Table II (Continued)PERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedAPISeptember 24, 2011September 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales
37,36128%28%Cost of sales
,81541%40%Selected ratios as a percentage of net sales Gross profit
45.9%47.0%44.9%46.2% Operating expenses
15.3%15.3%17.3%17.3% Operating income
30.6%31.7%27.6%28.9%Three Months EndedOtherSeptember 24, 2011September 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales
5,84017%17%Cost of sales
,226-45%-28%Selected ratios as a percentage of net sales Gross profit
30.8%33.2%34.2%36.9% Operating expenses
28.4%28.4%29.1%29.1% Operating income
2.4%4.8%5.1%7.7%(a) Deal-related amortization(b) Inventory step-up of $27,179(c) Proceeds of $3,500 from sale of pipeline research and development projects(d) Acquisition-related costs of $3,156Table IIIPERRIGO COMPANYFY 2012 GUIDANCE AND FY 2011 EPSRECONCILIATION OF NON-GAAP MEASURES(unaudited)Full YearFiscal 2012 Guidance*FY12 reported diluted EPS from continuing operations range
$3.92 - $4.07Deal-related amortization (1)
0.52 Charge associated with inventory step-up
0.18 Charges associated with acquisition-related costs
0.06 Earnings associated with sale of pipeline R&D projects
(0.03)FY12 adjusted diluted EPS from continuing operations range
$4.65 - $4.80Fiscal 2011*FY11 reported diluted EPS from continuing operations
$3.64Deal-related amortization (1)
0.34 Charges associated with acquisition-related costs
0.02 Charges associated with restructuring
0.01 FY11 adjusted diluted EPS from continuing operations
$4.01(1) Amortization of acquired intangible assets related to business combinations and asset acquisitions*All information based on continuing operations. om continuing operations was $70 million, or $0.75 per share, down 4% from $74 million, or $0.79 per share, a year ago. This decrease was primarily the result of $0.21 per diluted share of acquisition-related costs.
Consumer Healthcare segment net sales in the first quarter were $412 million compared with $396 million in the first quarter last year, an increase of $16 million or 4%. The improvement was due primarily to an increase in sales of existing products of $9 million, primarily in the cough/cold and smoking cessation categories, along with new product sales of $15 million, primarily in the cough/cold and analgesics categories. In addition, net sales increased by $3 million due to favorable changes in foreign currency exchange rates. These combined increases were partially offset by a decline of $12 million in sales of existing products within the gastrointestinal product category driven by competitive pressures on a key product. First quarter gross profit for fiscal 2012 increased 1%, or $1 million, compared to fiscal 2011. Adjusted gross margin decreased 90 basis points in the first quarter of fiscal 2012 compared to fiscal 2011 due primarily to increased competitive pressures within the gastrointestinal product category.
Reported operating income was $64 million, compared to $71 million a year ago, largely as a result of increased competitive pressures within the gastrointestinal product category. On an adjusted basis, operating income was $67 million compared to $73 million in fiscal 2011. Adjusted operating margin decreased 230 basis points year-over-year for the quarter due to higher research and development (R&D) as a result of higher Paragraph IV litigation expenses, increased spending on developmental materials and increased administrative expenses and selling and marketing investments in Australia.
On July 21, 2011, the Company announced that it received approval from the U.S. Food and Drug Administration (FDA) to market over-the-counter (OTC) coated nicotine polacrilex gum USP, 2 mg and 4 mg cinnamon flavor.
The Nutritionals segment reported first quarter net sales of $120 million, compared with $123 million a year ago. The decrease in sales was primarily the result of a decline in existing product sales in the vitamin, minerals and dietary supplements (VMS) category driven by increased competition. Adjusted operating income was approximately $19 million compared to $24 million last year resulting from infant nutrition product mix, an increase in R&D due to the timing of clinical trials and a rise in infant nutrition commodities costs.
Last week, the Company announced that it entered into a supply agreement with the Founder Group (Founder Pharma), a Beijing based conglomerate. The Company will supply Founder Pharma branded infant formula, manufactured in its U.S. facilities, for sale and distribution by Founder Pharma in China.
The Rx Pharmaceuticals segment first quarter net sales were $128 million compared with $69 million a year ago, an increase of 84%. The increase in revenue was due primarily to sales of $39 million from the first quarter fiscal 2012 acquisition of Paddock Labs, new product sales of over $5 million and a lower degree of pricing pressures as compared to the prior year. Adjusted operating income was $61 million, an increase of $41 million from last year.
On July 26, 2011, the Company announced that it closed the acquisition of Paddock Labs for approximately $547 million in cash.
On August 30, 2011, the Company announced that it received final approval from the FDA for its Abbreviated New Drug Application (ANDA) for Ketoconazole Foam, 2%. The Company commenced shipping of the product and was first to file, enabling 180 days of marketing exclusivity.
The API segment reported first quarter net sales of $48 million compared with $37 million a year ago. This increase was due primarily to a $5 million increase in sales of existing products and new product sales of $3 million, along with $2 million resulting from favorable changes in foreign currency exchange rates.
Adjusted operating income grew to $15 million, or 31.7% of net sales, compared to $11 million, or 28.9% of net sales, a year ago.
Continuing operations for the Other category reported first quarter net sales of $18 million, compared with $16 million a year ago. This increase was due primarily to new product sales of $1 million, along with $1 million as a result of favorable changes in foreign currency exchange rates. Adjusted operating income was approximately $1 million, representing a decrease in adjusted operating margin of 290 basis points from last year due to product mix.
Chairman and CEO Joseph C. Papa concluded, "The strength of our diversified business model was evident this quarter, and as we look forward to the rest of fiscal 2012, we expect this to continue. We now expect reported fiscal 2012 earnings from continuing operations to be between $3.92 and $4.07 per share. Excluding the charges outlined in Table III at the end of this release, we now expect fiscal 2012 adjusted diluted earnings from continuing operations to be between $4.65 and $4.80 per share, up from our previously announced guidance of between $4.50 $4.65 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 16% to 20% over fiscal 2011 adjusted EPS. Additionally, the realization of an $0.08 tax benefit in the first quarter due to the closing of various tax audit resolutions and statutory expiries allows us to adjust our expected tax rate for the full-year to be in a range of 27% to 29% from our previous range of 29% to 31%."
Perrigo will host a conference call to discuss fiscal 2012 first quarter at 10:00 a.m. (ET) on Thursday, October 27, 2011. 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# 16311573. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Thursday, October 27, 2011, until midnight Friday, November 4, 2011. To listen to the replay, call 855-859-2056, International 404-537-3406, access code 16311573.
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.
PERRIGO COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)First Quarter20122011Cash Flows (For) From Operating Activities Net income
74,375 Adjustments to derive cash flows Gain on sale of pipeline research and development projects(3,500)-Depreciation and amortization34,72023,436Share-based compensation3,9353,682Income tax benefit from exercise of stock options2,1251,941Excess tax benefit of stock transactions(10,578)(9,465)Deferred income taxes(3,084)(59,069) Subtotal94,07634,900 Changes in operating assets and liabilities, net of business acquisitionAccounts receivable8,581(58,401)Inventories(7,156)(3,559)Accounts payable(47,249)(9,636)Payroll and related taxes(10,681)(21,191)Accrued customer programs(5,708)11,201Accrued liabilities17,678(12,899)Accrued income taxes(878)49,152Other5,4844,271 Subtotal(39,929)(41,062)Net cash from (for) operating activities54,147(6,162)Cash Flows (For) From Investing Activities Acquisitions of businesses, net of cash acquired(547,052)1,998Proceeds from sale of intangible assets and pipeline R&D projects10,500- Additions to property and equipment(18,953)(9,194)Other(250)-Net cash for investing activities(555,755)(7,196)Cash Flows (For) From Financing Activities Borrowings (repayments) of short-term debt, net980(7,476) Net borrowings under accounts receivable securitization program55,00063,000Borrowings of long-term debt250,787- Repayments of long-term debt-(95,000)Deferred financing fees(2,468)- Excess tax benefit of stock transactions10,5789,465 Issuance of common stock5,8843,987 Repurchase of common stock(7,899)(8,168) Cash dividends(6,535)(5,780)Net cash from (for) financing activities306,327(39,972)Effect of exchange rate changes on cash1,792(337)Net decrease in cash and cash equivalents(193,489)(53,667)Cash and cash equivalents of continuing operations, beginning of period310,104109,765Cash balance of discontinued operations, beginning of period--Cash and cash equivalents, end of period116,61556,098Less cash balance of discontinued operations, end of period--Cash and cash equivalents of continuing operations, end of period
56,098Supplemental Disclosures of Cash Flow Information Cash paid/received during the period for:Interest paid
1,977Income taxes paid
29,856Income taxes refunded
893See accompanying notes to condensed consolidated financial statements.PERRIGO COMPANYCONDENSED CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts)(unaudited)First Quarter20122011Net sales
641,322Cost of sales497,716427,368Gross profit227,579213,954Operating expenses Distribution10,2648,333 Research and development19,63817,727 Selling and administration96,12576,127Total126,027102,187Operating income101,552111,767Interest, net12,57010,087Other expense (income), net229(559)Income from continuing operations before income taxes88,753102,239Income tax expense18,29528,561Income from continuing operations70,45873,678Income from discontinued operations, net of tax-697Net income
74,375Earnings per share (1) BasicContinuing operations
0.80Discontinued operations-0.01Basic earnings per share
0.81 DilutedContinuing operations
0.79Discontinued operations-0.01Diluted earnings per share
0.80Weighted average shares outstanding Basic92,90091,824 Diluted93,95393,269Dividends declared per share
0.0625(1) The sum of individual per share amounts may not equal due to rounding.See accompanying notes to condensed consolidated financial statements.PERRIGO COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) September 24, 2011June 25, 2011 September 25, 2010 Assets Current assets Cash and cash equivalents
56,098Investment securities --560Accounts receivable, net 521,263477,851417,870Inventories 563,257505,576461,244Current deferred income taxes 50,27630,47430,753Income taxes refundable 8,8913701,771Prepaid expenses and other current assets 38,78950,35042,082Current assets of discontinued operations -2,5686,615Total current assets 1,299,0911,377,2931,016,993 Property and equipment 1,037,2701,005,798906,100Less accumulated depreciation (504,389)(498,490)(454,490)532,881507,308451,610 Goodwill and other indefinite-lived intangible assets 812,924644,902635,189 Other intangible assets, net 771,677567,573583,226 Non-current deferred income taxes 13,47910,53112,707 Other non-current assets 84,03581,61472,031 $
2,771,756 Liabilities and Shareholders' Equity Current liabilities Accounts payable
261,959Short-term debt 3,7502,77064,524Payroll and related taxes 72,10681,45558,568Accrued customer programs 112,59291,37478,845Accrued liabilities 83,37457,51465,515Accrued income taxes 6,67710,55137,148Current portion of long-term debt 40,00015,000-Current liabilities of discontinued operations -4,0934,206Total current liabilities 622,048606,035570,765 Non-current liabilities Long-term debt, less current portion 1,155,787875,000840,000Non-current deferred income taxes 9,60410,60117,000Other non-current liabilities 182,207166,598139,200Total non-current liabilities 1,347,5981,052,199996,200 Shareholders' equity Controlling interest shareholders' equity: Preferred stock, without par value, 10,000 shares authorized ---Common stock, without par value, 200,000 shares authorized 478,035467,661435,482Accumulated other comprehensive income 66,277127,05078,418Retained earnings 998,256934,333689,0351,542,5681,529,0441,202,935Noncontrolling interest 1,8731,9431,856Total shareholders' equity 1,544,4411,530,9871,204,791 $
2,771,756Supplemental Disclosures of Balance Sheet Information Related to Continuing OperationsAllowance for doubtful accounts
443,819Preferred stock, shares issued and outstanding---Common stock, shares issued and outstanding93,18992,77892,205See accompanying notes to condensed consolidated financial statements.Table IPERRIGO COMPANYRECONCILIATION OF NON-GAAP MEASURES(in thousands, except per share amounts)(unaudited)Three Months EndedConsolidatedSeptember 24, 2011September 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP Adjustme
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