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Perrigo Reports Record Second Quarter Revenue, Adjusted Earnings and Operating Cash Flow
Date:2/1/2013

ALLEGAN, Mich., Feb. 1, 2013 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE: PRGO) today announced results for its second quarter ended December 29, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120301/DE62255LOGO )

Perrigo's Chairman and CEO Joseph C. Papa commented, "The team delivered on another high-quality quarter with all-time record quarterly revenue, as well as record second quarter adjusted earnings and operating cash flow. The Consumer Healthcare segment had another great quarter with strong store brand OTC market share growth. The team is working hard to integrate and expand the reach of our recent acquisition of Sergeant's Pet Care Products, Inc. ("Sergeant's"). Retailers are excited about the launch of our new plastic container in the infant formula category, as evidenced by their increased marketing and advertising efforts promoting the store brand value proposition. We continue to deliver on our top priority of providing quality, affordable healthcare products for consumers and customers."

Note that fiscal second quarter 2012 included an extra week of operations compared to fiscal second quarter 2013. 

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 information. The Company's reported results are summarized in the attached Condensed Consolidated Statements of Income, Balance Sheets and Cash Flows. Perrigo Company(in thousands, except per share amounts)(see the attached Table I for reconciliation to GAAP numbers)Fiscal 2013

Fiscal 2012Second

Quarter

Ended

Second

Quarter

Ended

YoY12/29/2012

12/31/2011

% ChangeNet Sales

$882,959

$838,170

+5.3%Reported Net Income

$105,955

$99,739

+6.2%Adjusted Net Income

$128,083

$112,431

+13.9%Reported Diluted EPS

$1.12

$1.06

+5.7%Adjusted Diluted EPS

$1.36

$1.20

+13.3%Diluted Shares

94,450

94,043

+0.4%Second Quarter Results

Net sales in the quarter were $883 million, an increase of 5% over the second quarter of fiscal 2012, driven primarily by $34 million attributable to the Sergeant's and CanAm Care, LLC ("CanAm") acquisitions and new product sales of $25 million, partially offset by decreases in sales of certain existing products in the Rx segment in addition to the impact of the extra week of operations experienced in the second quarter of fiscal 2012. Excluding charges as outlined in Table I at the end of this release, second quarter fiscal 2013 adjusted net income increased 14% to $128 million, or $1.36 per diluted share. Reported net income increased 6% to $106 million, or $1.12 per diluted share.

 

Consumer Healthcare

 Consumer Healthcare Segment (in thousands)(see the attached Table II for reconciliation to GAAP numbers)Fiscal 2013

Fiscal 2012Second

Quarter

Ended

Second

Quarter

Ended

YoY12/29/2012

12/31/2011

% ChangeNet Sales

$539,288

$471,277

+14.4%Reported Gross Profit

$162,254

$148,813

+9.0%Adjusted Gross Profit

$173,168

$149,819

+15.6%Reported Operating Income

$86,078

$82,250

+4.7%Adjusted Operating Income

$98,641

$84,470

+16.8%Reported Gross Margin

30.1%

31.6%

-150 bpsAdjusted Gross Margin

32.1%

31.8%

+30 bpsReported Operating Margin

16.0%

17.5%

-150 bpsAdjusted Operating Margin

18.3%

17.9%

+40 bps 

Consumer Healthcare segment net sales increased 14% to $539 million, driven by an increase in sales of existing products of $38 million (contract,  analgesics and smoking cessation categories), $34 million attributable to the Sergeant's and CanAm acquisitions, and new product sales of $12 million (cough/cold, dermatologic and gastrointestinal categories). These combined increases were partially offset by a decline of $13 million in sales of existing products (allergy products and gastrointestinal category) and approximately $5 million in discontinued products.

Adjusted gross and operating margins expanded 30 and 40 basis points, respectively, due to new products and increased manufacturing efficiencies. The disparity between the reported and adjusted margins was due primarily to a charge of approximately $8 million to cost of sales as a result of the step-up of inventory acquired and sold related to the Sergeant's acquisition.

 

Nutritionals

 Nutritionals Segment (in thousands)(see the attached Table II for reconciliation to GAAP numbers)Fiscal 2013

Fiscal 2012Second

Quarter

Ended

Second

Quarter

Ended

 

 

YoY12/29/2012

12/31/2011

% ChangeNet Sales

$121,938

$128,147

-4.8%Reported Gross Profit

$30,145

$28,230

+6.8%Adjusted Gross Profit

$33,194

$31,252

+6.2%Reported Operating Income

$7,160

$4,552

+57.3%Adjusted Operating Income

$14,470

$11,189

+29.3%Reported Gross Margin

24.7%

22.0%

+270 bpsAdjusted Gross Margin

27.2%

24.4%

+280 bpsReported Operating Margin

5.9%

3.6%

+230 bpsAdjusted Operating Margin

11.9%

8.7%

+320 bps 

The Nutritionals segment reported second quarter net sales of $122 million, compared with $128 million a year ago, as existing product sales declined $9 million due primarily to the extra week of sales in fiscal 2012, partially offset by new product sales of $3 million (Vitamins, Minerals and Supplements and infant foods categories).

Second quarter gross profit and margin increased due primarily to price increases and favorable product mix. Operating profit and margin were positively impacted by lower employee-related expenses, along with the absence of operating expenses related to the Company's Florida location, which was closed in the fourth quarter of fiscal 2012.

 

Rx Pharmaceuticals

 Rx Pharmaceuticals Segment (in thousands)(see the attached Table II for reconciliation to GAAP numbers)Fiscal 2013

Fiscal 2012Second

Quarter

Ended

Second

Quarter

Ended

 

 

YoY12/29/2012

12/31/2011

% ChangeNet Sales

$162,541

$177,196

-8.3%Reported Gross Profit

$86,036

$91,378

-5.8%Adjusted Gross Profit

$94,493

$99,347

-4.9%Reported Operating Income

$64,059

$69,974

-8.5%Adjusted Operating Income

$74,042

$78,542

-5.7%Reported Gross Margin

52.9%

51.6%

+130 bpsAdjusted Gross Margin

58.1%

56.1%

+200 bpsReported Operating Margin

39.4%

39.5%

-10 bpsAdjusted Operating Margin

45.6%

44.3%

+130 bps 

The Rx Pharmaceuticals segment second quarter net sales decreased 8% as existing product sales were lower year-over-year by $11 million due to increased competition on certain existing products. This decrease was partially offset by new product sales of $9 million. The extra week of operations in second quarter fiscal 2012 accounted for most of the difference in net sales in the segment compared to fiscal 2012.

The adjusted gross margin increased due primarily to favorable product mix as well as higher margin on new product sales. The adjusted operating margin was impacted by higher distribution, selling, general and administrative costs.

 

API

 API Segment (in thousands)(see the attached Table II for reconciliation to GAAP numbers)Fiscal 2013

Fiscal 2012Second

Quarter

Ended

Second

Quarter

Ended

 

 

YoY12/29/2012

12/31/2011

% ChangeNet Sales

$40,854

$42,752

-4.4%Reported Gross Profit

$22,883

$20,151

+13.6%Adjusted Gross Profit

$23,364

$20,647

+13.2%Reported Operating Income

$13,820

$11,693

+18.2%Adjusted Operating Income

$14,301

$12,189

+17.3%Reported Gross Margin

56.0%

47.1%

+890 bpsAdjusted Gross Margin

57.2%

48.3%

+890 bpsReported Operating Margin

33.8%

27.4%

+640 bpsAdjusted Operating Margin

35.0%

28.5%

+650 bpsThe API segment's net sales declined by 4% to $41 million due primarily to a decrease in existing product sales of approximately $5 million as a result of increased competition, partially offset by $4 million related to the continued successful launch of a customer's product.

Gross and operating margins were positively impacted by the product launch referred to above, along with favorable mix of existing product sales, partially offset by higher research and development and selling, general and administrative expenses.

Other

The Other category reported second quarter net sales of $18 million, compared with approximately $19 million a year ago, due primarily to the impact of unfavorable changes in foreign currency exchange rates.

Adjusted operating income was $1 million, representing a decrease in adjusted operating margin of 140 basis points from last year due to product mix.

Closing

Chairman, President and CEO Joseph C. Papa concluded, "Once again, the strength of our diversified business model was evident this quarter. Our Consumer Healthcare manufacturing operations are producing higher volumes and are operating more efficiently than at any time in our history. The Company continues to use our disciplined ROIC-centric process to make positive investments in operations and products. We expect further growth in store brand market penetration and strong new product launches, resulting in significant savings to consumers with quality, affordable healthcare products."

The Company expects fiscal 2013 reported earnings to be between $4.73 and $4.93 per diluted share as compared to $4.18 in fiscal 2012. Excluding the charges outlined in Table III at the end of this release, the Company continues to expect fiscal 2013 adjusted earnings to be between $5.45 and $5.65 per diluted share as compared to $4.99 in fiscal 2012. This range implies a year-over-year growth rate in adjusted earnings of 9% to 13% over fiscal 2012's adjusted earnings from continuing operations per diluted share.

The conference call will be available live via webcast to interested parties on the Perrigo website http://perrigo.investorroom.com/events-webcasts or by phone at 877-248-9413, International 973-582-2737, and reference ID# 87314407. A taped replay of the call will be available beginning at approximately 1:00 p.m. (ET) Friday, February 1, 2013 until midnight Friday, February 15, 2013. To listen to the replay, dial 855-859-2056, International 404-537-3406, and use access code 87314407.

From its beginnings as a packager of generic home remedies in 1887, Perrigo Company, based in Allegan, Michigan, has grown to become a leading global provider of quality, affordable healthcare products. The Company develops, manufactures and distributes over-the-counter ("OTC") and generic prescription ("Rx") pharmaceuticals, nutritional products and active pharmaceutical ingredients ("API") and is the world's largest manufacturer of OTC pharmaceutical products for the store brand market. Perrigo's mission is to offer uncompromised "quality, affordable healthcare products", and it does so across a wide variety of product categories primarily in the United States, United Kingdom, Mexico, Israel and Australia, as well as certain other markets throughout the world, including Canada, China and Latin America. 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 30, 2012, 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 INCOME(in thousands, except per share amounts)(unaudited)Three Months EndedSix Months EndedDecember 29, 2012December 31, 2011December 29, 2012December 31, 2011Net sales

$
882,959$
838,170$
,652,769$
,563,465Cost of sales

575,794543,2951,060,3351,041,011Gross profit

307,165294,875592,434522,454Operating expenses  Distribution

11,6999,09522,46619,359  Research and development

28,32331,14855,71850,786  Selling and administration

103,28693,964193,820190,089  Total operating expenses

143,308134,207272,004260,234Operating income

163,857160,668320,430262,220Interest, net

15,31415,64131,16728,211Other expense, net

7675214981Loss on sale of investment

3,049—3,049—Income before income taxes

145,418144,275286,200233,028Income tax expense

39,46344,53674,66562,831Net income

$
5,955$
99,739$
211,535$
70,197Earnings per shareBasic earnings per share

$
.13$
.07$
2.26$
.83Diluted earnings per share

$
.12$
.06$
2.24$
.81Weighted average shares outstandingBasic

93,90393,22193,75593,066Diluted

94,45094,04394,40893,983Dividends declared per share

$
.09$
.08$
.17$
.15See accompanying notes to condensed consolidated financial statements. PERRIGO COMPANYCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in thousands)(unaudited)Three Months EndedSix Months EndedDecember 29,

2012December 31,

2011December 29,

2012December 31,

2011Net income

$
5,955$
99,739$
211,535$
70,197  Other comprehensive income (loss):Change in fair value of derivative financial instruments, net of tax

5,244(1,496)6,706(9,292)Foreign currency translation adjustments

28,026(12,851)33,450(65,812)Change in fair value of investment securities, net of tax

1,037(933)1,037(933)Post-retirement liability adjustments, net of tax

—(24)(41)(41)  Other comprehensive income (loss), net of tax

34,307(15,304)41,152(76,078)Comprehensive income

$
40,262$
84,435$
252,687$
94,119See accompanying notes to condensed consolidated financial statements. PERRIGO COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)December 29,
2012June 30,
2012December 31,
2011AssetsCurrent assets  Cash and cash equivalents

$
459,514$
2,489$
531,410  Accounts receivable, net

583,903572,582530,178  Inventories

638,797547,455580,668  Current deferred income taxes

44,81345,73847,216  Income taxes refundable

4,3231,0474,111  Prepaid expenses and other current assets

42,77126,61040,509Total current assets

1,774,1211,795,9211,734,092Property and equipment

1,192,7871,118,8371,066,307  Less accumulated depreciation

(574,362)(540,487)(515,600)618,425578,350550,707Goodwill and other indefinite-lived intangible assets

962,804820,122808,531Other intangible assets, net

845,666729,253752,595Non-current deferred income taxes

14,93813,44412,330Other non-current assets

78,38286,95784,299$
4,294,336$
4,024,047$
3,942,554Liabilities and Shareholders' EquityCurrent liabilities  Accounts payable

$
321,205$
317,341$
324,349  Short-term debt

2,64890—  Payroll and related taxes

71,08189,93471,059  Accrued customer programs

122,651116,055116,888  Accrued liabilities

65,98176,40685,661  Accrued income taxes

11,29912,90528,684  Current portion of long-term debt

40,00040,00040,000Total current liabilities

634,865652,731666,641Non-current liabilities  Long-term debt, less current portion

1,329,8861,329,2351,452,546  Non-current deferred income taxes

47,48124,1269,163  Other non-current liabilities

173,644165,310183,393Total non-current liabilities

1,551,0111,518,6711,645,102Shareholders' EquityControlling interest:Preferred stock, without par value, 10,000 shares authorized

———Common stock, without par value, 200,000 shares authorized

524,124504,708486,665Accumulated other comprehensive income

80,55639,40450,972Retained earnings

1,502,4551,306,9251,090,5092,107,1351,851,0371,628,146Noncontrolling interest

1,3251,6082,665Total shareholders' equity

2,108,4601,852,6451,630,811$
4,294,336$
4,024,047$
3,942,554Supplemental Disclosures of Balance Sheet InformationAllowance for doubtful accounts

$
2,473$
2,556$
8,993Working capital

$
,139,256$
,143,190$
,067,451Preferred stock, shares issued and outstanding

———Common stock, shares issued and outstanding

93,98093,48493,287See accompanying notes to condensed consolidated financial statements. PERRIGO COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Six Months EndedDecember 29, 2012December 31,
2011Cash Flows From (For) Operating ActivitiesNet income$
211,535$
70,197Adjustments to derive cash flowsGain on sale of pipeline development projects—(3,500)Loss on sale of investment3,049—Depreciation and amortization69,93967,105Share-based compensation9,3638,977Income tax benefit from exercise of stock options1,074934Excess tax benefit of stock transactions(15,668)(11,215)Deferred income taxes9723,669Subtotal280,264236,167Changes in operating assets and liabilities, net of business acquisitionsAccounts receivable16,228(10,657)Inventories(44,980)(34,150)Accounts payable(18,072)(14,319)Payroll and related taxes(19,966)(12,012)Accrued customer programs6,596(1,412)Accrued liabilities(7,156)16,300Accrued income taxes12,83546,409Other3,854(6,204)Subtotal(50,661)(16,045)Net cash from operating activities229,603220,122Cash Flows (For) From Investing ActivitiesAcquisitions of businesses, net of cash acquired(326,944)(547,052)Proceeds from sale of intangible assets and pipeline development projects—10,500Additions to property and equipment(39,279)(55,659)Acquisitions of assets—(750)Net cash for investing activities(366,223)(592,961)Cash Flows (For) From Financing ActivitiesBorrowings (repayments) of short-term debt, net2,558(2,770)Borrowings of long-term debt40,6511,087,546Repayments of long-term debt(40,000)(485,000)Deferred financing fees(643)(5,097)Excess tax benefit of stock transactions15,66811,215Issuance of common stock7,6177,699Repurchase of common stock(12,159)(7,954)Cash dividends(16,005)(14,021)Net cash (for) from financing activities(2,313)591,618Effect of exchange rate changes on cash(4,042)2,527Net (decrease) increase in cash and cash equivalents(142,975)221,306Cash and cash equivalents, beginning of period602,489310,104Cash and cash equivalents, end of period$
459,514$
531,410Supplemental Disclosures of Cash Flow InformationCash paid/received during the period for:Interest paid$
29,244$
22,861Interest received$
2,741$
,301Income taxes paid$
7,863$
5,973Income taxes refunded$
,155$
802See accompanying notes to condensed consolidated financial statements. Table IPERRIGO COMPANYRECONCILIATION OF NON-GAAP MEASURES(in thousands, except per share amounts)(unaudited)Three Months EndedConsolidatedDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
882,959$
-$
882,959$
838,170$
-$
838,1705 %5 %Cost of sales

575,79423,308

(a,b)

552,486543,29512,931

(a)

530,3646 %4 %Gross profit

307,16523,308330,473294,87512,931307,8064 %7 %Operating expensesDistribution

11,699-11,6999,095-9,09529 %29 %Research and development

28,323-28,32331,148-31,148-9 %-9 %Selling and administration

103,2867,476

(a,c,d)

95,81093,9645,428

(a,e)

88,53610 %8 %Total operating expenses

143,3087,476135,832134,2075,428128,7797 %5 %Operating income

163,85730,784194,641160,66818,359179,0272 %9 %Interest, net

15,314-15,31415,641-15,641-2 %-2 %Other expense, net

76-76752-752-90 %-90 %Loss on sale of investment

3,0493,049------Income before income taxes

145,41833,833179,251144,27518,359162,6341 %10 %Income tax expense

39,46311,705

(j)

51,16844,5365,667

(j)

50,203-11 %2 %Net income

$
5,955$
22,128$
28,083$
99,739$
2,692$
2,4316 %14 %Diluted earnings per share

$
.12$
.36$
.06$
.206 %13 %Diluted weighted average shares outstanding

94,45094,45094,04394,043Selected ratios as a percentage of net salesGross profit

34.8 %37.4 %35.2 %36.7 %Operating expenses

16.2 %15.4 %16.0 %15.4 %Operating income

18.6 %22.0 %19.2 %21.4 %Six Months EndedConsolidatedDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$   1,652,769$
-$   1,652,769$   1,563,465$
-$   1,563,4656 %6 %Cost of sales

1,060,33536,632

(a,b)

1,023,7031,041,01155,292

(a,g)

985,7192 %4 %Gross profit

592,43436,632629,066522,45455,292577,74613 %9 %Operating expensesDistribution

22,466-22,46619,359-19,35916 %16 %Research and development

55,718-55,71850,786(3,500)

(h)

54,28610 %3 %Selling and administration

193,82014,851

(a,c,f)

178,969190,08919,049

(a,i)

171,0402 %5 %Total operating expenses

272,00414,851257,153260,23415,549244,6855 %5 %Operating income

320,43051,483371,913262,22070,841333,06122 %12 %Interest, net

31,167-31,16728,211-28,21110 %10 %Other expense, net

14-14981-981-99 %-99 %Loss on sale of investment

3,0493,049------Income before income taxes

286,20054,532340,732233,02870,841303,86923 %12 %Income tax expense

74,66518,515

(j)

93,18062,83125,288

(j)

88,11919 %6 %Net income

$
211,535$
36,017$
247,552$
70,197$
45,553$
215,75024 %15 %Diluted earnings per share

$
2.24$
2.62$
.81$
2.3024 %14 %Diluted weighted average shares outstanding

94,40894,40893,98393,983Selected ratios as a percentage of net salesGross profit

35.8 %38.1 %33.4 %37.0 %Operating expenses

16.5 %15.6 %16.6 %15.7 %Operating income

19.4 %22.5 %16.8 %21.3 %(a) Deal-related amortization(b) Inventory step-up of $7,693(c) Severance costs of $1,526(d) Acquisition costs of $40(e) Severance costs of $599(f) Acquisition costs of $1,917(g) Inventory step-up of $27,179(h) Proceeds from sale of pipeline development projects(i) Acquisition-related and severance costs of $9,381(j) Total tax effect for non-GAAP pre-tax adjustments Table IIPERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedConsumer HealthcareDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
539,288$
-$
539,288$
471,277$
-$
471,27714 %14 %Cost of sales

377,03410,914

(a,b)

366,120322,4641,006

(a)

321,45817 %14 %Gross profit

162,25410,914173,168148,8131,006149,8199 %16 %Operating expenses

76,1761,649

(a)

74,52766,5631,214

(a)

65,34914 %14 %Operating income

$
86,078$
2,563$
98,641$
82,250$
2,220$
84,4705 %17 %Selected ratios as a percentage of net salesGross profit

30.1 %32.1 %31.6 %31.8 %Operating expenses

14.1 %13.8 %14.1 %13.9 %Operating income

16.0 %18.3 %17.5 %17.9 %Six Months EndedConsumer HealthcareDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
989,704$
-$
989,704$
882,958$
-$
882,95812 %12 %Cost of sales

681,61511,929

(a,b)

669,686604,7872,028

(a)

602,75913 %11 %Gross profit

308,08911,929320,018278,1712,028280,19911 %14 %Operating expenses

142,7232,897

(a)

139,826126,7322,437

(a)

124,29513 %12 %Operating income

$
5,366$
4,826$
80,192$
51,439$
4,465$
55,9049 %16 %Selected ratios as a percentage of net salesGross profit

31.1 %32.3 %31.5 %31.7 %Operating expenses

14.4 %14.1 %14.4 %14.1 %Operating income

16.7 %18.2 %17.2 %17.7 %Three Months EndedNutritionalsDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
21,938$
-$
21,938$
28,147$
-$
28,147-5 %-5 %Cost of sales

91,7933,049

(a)

88,74499,9173,022

(a)

96,895-8 %-8 %Gross profit

30,1453,04933,19428,2303,02231,2527 %6 %Operating expenses

22,9854,261

(a)

18,72423,6783,615

(a)

20,063-3 %-7 %Operating income

$
7,160$
7,310$
4,470$
4,552$
,637$
,18957 %29 %Selected ratios as a percentage of net salesGross profit

24.7 %27.2 %22.0 %24.4 %Operating expenses

18.8 %15.4 %18.5 %15.7 %Operating income

5.9 %11.9 %3.6 %8.7 %Six Months EndedNutritionalsDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
225,361$
-$
225,361$
248,008$
-$
248,008-9 %-9 %Cost of sales

169,3816,099

(a)

163,282190,2098,871

(a)

181,338-11 %-10 %Gross profit

55,9806,09962,07957,7998,87166,670-3 %-7 %Operating expenses

44,9378,511

(a)

36,42646,0067,231

(a)

38,775-2 %-6 %Operating income

$
,043$
4,610$
25,653$
,793$
,102$
27,895-6 %-8 %Selected ratios as a percentage of net salesGross profit

24.8 %27.5 %23.3 %26.9 %Operating expenses

19.9 %16.2 %18.6 %15.6 %Operating income

4.9 %11.4 %4.8 %11.2 %Three Months EndedRx PharmaceuticalsDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
2,541$
-$
2,541$
77,196$
-$
77,196-8 %-8 %Cost of sales

76,5058,457

(a)

68,04885,8187,969

(a)

77,849-11 %-13 %Gross profit

86,0368,45794,49391,3787,96999,347-6 %-5 %Operating expenses

21,9771,526

(c)

20,45121,404599

(c)

20,8053 %-2 %Operating income

$
4,059$
9,983$
74,042$
9,974$
8,568$
78,542-8 %-6 %Selected ratios as a percentage of net salesGross profit

52.9 %58.1 %51.6 %56.1 %Operating expenses

13.5 %12.6 %12.1 %11.7 %Operating income

39.4 %45.6 %39.5 %44.3 %(a) Deal-related amortization(b) Inventory step-up of $7,693(c) Severance costs(d) Inventory step-up of $27,179(e) Proceeds of $3,500 from sale of pipeline development projects(f) Severance costs of $3,755 Table II (Continued)PERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Six Months EndedRx PharmaceuticalsDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
325,483$
-$
325,483$
304,823$
-$
304,8237 %7 %Cost of sales

152,76316,859

(a)

135,904171,98542,501

(a,d)

129,484-11 %5 %Gross profit

172,72016,859189,579132,83842,501175,33930 %8 %Operating expenses

40,1571,526

(c)

38,63138,379255

(e,f)

38,1245 %1 %Operating income

$
32,563$
8,385$
50,948$
94,459$
42,756$
37,21540 %10 %Selected ratios as a percentage of net salesGross profit

53.1 %58.2 %43.6 %57.5 %Operating expenses

12.3 %11.9 %12.6 %12.5 %Operating income

40.7 %46.4 %31.0 %45.0 %Three Months EndedAPIDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
40,854$
-$
40,854$
42,752$
-$
42,752-4 %-4 %Cost of sales

17,971481

(a)

17,49022,601496

(a)

22,105-20 %-21 %Gross profit

22,88348123,36420,15149620,64714 %13 %Operating expenses

9,063-9,0638,458-8,4587 %7 %Operating income

$
3,820$
481$
4,301$
,693$
496$
2,18918 %17 %Selected ratios as a percentage of net salesGross profit

56.0 %57.2 %47.1 %48.3 %Operating expenses

22.2 %22.2 %19.8 %19.8 %Operating income

33.8 %35.0 %27.4 %28.5 %Six Months EndedAPIDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
77,273$
-$
77,273$
90,396$
-$
90,396-15 %-15 %Cost of sales

33,030944

(a)

32,08648,6371,017

(a)

47,620-32 %-33 %Gross profit

44,24394445,18741,7591,01742,7766 %6 %Operating expenses

17,104-17,10415,851-15,8518 %8 %Operating income

$
27,139$
944$
28,083$
25,908$
,017$
26,9255 %4 %Selected ratios as a percentage of net salesGross profit

57.3 %58.5 %46.2 %47.3 %Operating expenses

22.1 %22.1 %17.5 %17.5 %Operating income

35.1 %36.3 %28.7 %29.8 %Three Months EndedOtherDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
8,338$
-$
8,338$
8,798$
-$
8,798-2 %-2 %Cost of sales

12,491407

(a)

12,08412,495438

(a)

12,057-0 %0 %Gross profit

5,8474076,2546,3034386,741-7 %-7 %Operating expenses

5,184-5,1845,379-5,379-4 %-4 %Operating income

$
3$
407$
,070$
924$
438$
,362-28 %-21 %Selected ratios as a percentage of net salesGross profit

31.9 %34.1 %33.5 %35.9 %Operating expenses

28.3 %28.3 %28.6 %28.6 %Operating income

3.6 %5.8 %4.9 %7.2 %Six Months EndedOtherDecember 29, 2012December 31, 2011% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales

$
34,948$
-$
34,948$
37,280$
-$
37,280-6 %-6 %Cost of sales

23,546800

(a)

22,74625,393875

(a)

24,518-7 %-7 %Gross profit

11,40280012,20211,88787512,762-4 %-4 %Operating expenses

10,314-10,31410,678-10,678-3 %-3 %Operating income

$
,088$
800$
,888$
,209$
875$
2,084-10 %-9 %Selected ratios as a percentage of net salesGross profit

32.6 %34.9 %31.9 %34.2 %Operating expenses

29.5 %29.5 %28.6 %28.6 %Operating income

3.1 %5.4 %3.2 %5.6 %(a) Deal-related amortization(b) Inventory step-up of $7,693(c) Severance costs(d) Inventory step-up of $27,179(e) Proceeds of $3,500 from sale of pipeline development projects(f) Severance costs of $3,755 Table IIIPERRIGO COMPANYFY 2013 GUIDANCE AND FY 2012 EPSRECONCILIATION OF NON-GAAP MEASURES(unaudited)Full YearFiscal 2013 GuidanceFY13 reported diluted EPS range (2)$4.73 - $4.93Deal-related amortization (1,2)0.63Charge associated with inventory step-up (2)0.05Charges associated with acquisition and severance costs(2)0.02Loss on sale of investment0.02FY13 adjusted diluted EPS range$5.45 - $5.65Fiscal 2012*FY12 reported diluted EPS from continuing operations$4.18Deal-related amortization (1)0.523Charge associated with inventory step-up0.181Charges associated with acquisition-related and severance costs0.062Charges associated with restructuring0.061Net charge associated with acquired R&D and proceeds from sale of IPR&D projects0.012Earnings associated with sale of pipeline development projects(0.026)FY12 adjusted diluted EPS from continuing operations$4.99(1) Amortization of acquired intangible assets related to business combinations and asset acquisitions(2) Does not include any estimate related to the Velcera acquisition*All information based on continuing operations. 

 


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