The Perrigo Company (NASDAQ: PRGO)(TASE: PRGO) today announced results for its fiscal year 2007 first quarter that ended September 30, 2006.
Perrigo Company
(in thousands, except per share amounts)
Fiscal 2007 Fiscal 2006
1st Quarter Ended 1st Quarter Ended
9/30/06 9/24/05
Sales $340,868 $319,734
Net Income $17,549 $12,911
Diluted EPS $0.19 $0.14
Diluted Shares 93,521 94,314
Sales for the first quarter of fiscal 2007 were $340.9 million, an increase of seven percent. Net income was $17.5 million, or $0.19 per share, compared with $12.9 million, or $0.14 per share, a year ago.
The first quarter of fiscal 2006 included an acquisition-related write-off of the step-up in the value of inventory acquired ($3.7 million after-tax, or $0.04 per share). Excluding this adjustment, net income was $16.6 million, or $0.18 per share. A reconciliation of non-GAAP measures is shown in Table II at the end of this press release.
Joseph Papa, Perrigo's President and CEO, stated, "Fiscal 2007 is off to a good start, with year-over-year sales increases across our entire business portfolio. New product launches led by the smoking cessation category continue to be a driver for Consumer Healthcare's performance. At the same time, we are in the process of launching over twenty newly reformulated cough/cold products in order to meet the retailers' and consumers' needs for the current season. The Rx Pharmaceutical and API businesses grew sales in a marketplace that continues to be very competitive."
Mr. Papa added, "I am very excited about all of our on-going activity related to bringing new products to the marketplace and the significant work being done by our global research and development teams to allow for additional new product launches in the future."
Consumer Healthcare
Consumer Healthcare segment sales in the quarter were $242.5 million compared with $227.1 million in the first quarter last year, an increase of $15.1 million, or seven percent. These results were driven by new product introductions of $7.3 million, primarily in the smoking cessation and vitamin categories, as well as growth of $5.1 million or 19 percent in the Mexican and U.K. operations.
Reported operating income was $18.1 million, compared with $13.3 million a year ago, reflecting higher gross profit from increased sales volume in both the domestic and international operations.
On September 25, the Company announced it had received approval from the Food and Drug Administration for over-the-counter Famotidine tablets, 20 mg (Maximum Strength Pepcid® AC tablets) indicated for the prevention and treatment of heartburn due to acid indigestion. Shipments began immediately.
Subsequent to the end of the first quarter, the Company also began shipping coated mint nicotine polacrilix gum. This is the store brand equivalent to Nicorette® Fresh Mint™ coated gum which has estimated retail sales of more than $100 million.
Rx Pharmaceuticals
The Rx Pharmaceuticals segment reported sales of $31.4 million, including $5.4 million in non-product revenues, compared with $29.1 million a year ago. Operating income was $5.8 million up from $3.8 million last year.
API
The API segment reported sales of $29.8 million compared with sales of $26.8 million a year ago. Operating income was $4.7 million compared with $6.6 million last year, reflecting a combination of lower margins on existing product sales, and higher research and development and selling and administration expenses. Excluding inventory step-up charges, adjusted operating income was $8.3 million a year ago.
Other
The Other category, which consists of Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products operating segments, reported sales of $37.2 million compared with $36.7 million last year. Reported operating income was $2.7 million compared with an operating loss of $0.9 million last year. Excluding inventory step-up charges, adjusted operating income was $1.8 million last year.
Outlook
Looking forward, Mr. Papa noted, "Our portfolio of broad healthcare solutions continues to enable us to deliver value in a challenging marketplace. I am confident in our ability to effectively manage through the operational complexities of the launches of our new and reformulated products this year. We are continuing to invest in strong new product opportunities for future years in all of our businesses. Throughout the organization, we continue our focus on quality, with parallel efforts on continued cost reduction and working capital management."
Perrigo will host a conference call to discuss fiscal 2007 first quarter results at 10:00 a.m. (ET) on Tuesday, October 31. The conference call will be available live via web cast to interested parties on the Perrigo website http://www.perrigo.com/ or by phone 800-473-1292, International 973-409-9262 and, reference ID#7959085. A taped replay of the call will be available beginning at approximately 2:30 p.m. (ET) Tuesday, October 31 until midnight Monday, November 13. To listen to the replay, call 877-519-4471, International 973-341-3080, access code #7959058.
The Perrigo Company is a leading global healthcare supplier and the world's largest manufacturer of over-the-counter (OTC) pharmaceutical and nutritional products for the store brand market. Store brand products are sold by food, drug, mass merchandise, dollar store and club store retailers under their own labels. The Company also develops, manufactures and markets prescription generic drugs, active pharmaceutical ingredients and consumer products, and operates manufacturing facilities in the United States, Israel, United Kingdom, Mexico, Germany and China. 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. Please see the "Cautionary Note Regarding Forward-Looking Statements" on page 1 of the Company's Form 10-K for the year ended July 1, 2006, as well as the Company's subsequent filings with the Securities and Exchange Commission, for a discussion of certain important factors that relate to forward-looking statements contained in this press release. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. 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 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
First Quarter
2007 2006
Net sales $340,868 $319,734
Cost of sales 245,225 232,818
Gross profit 95,643 86,916
Operating expenses
Distribution 7,384 7,150
Research and development 13,047 12,649
Selling and administration 48,474 46,388
Total 68,905 66,187
Operating income 26,738 20,729
Interest, net 4,586 4,026
Other income, net (61) (1,246)
Income before income taxes 22,213 17,949
Income tax expense 4,664 5,038
Net income $17,549 $12,911
Earnings per share
Basic $0.19 $0.14
Diluted $0.19 $0.14
Weighted average shares outstanding
Basic 92,168 93,188
Diluted 93,521 94,314
Dividends declared per share $0.043 $0.040
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, July 1, September 24,
2006 2006 2005
Assets (unaudited) (unaudited)
Current assets
Cash and cash equivalents $33,027 $19,018 $25,118
Investment securities 27,922 26,733 15,823
Accounts receivable 230,892 240,130 212,433
Inventories 326,648 302,941 269,695
Current deferred income taxes 52,215 52,058 49,870
Prepaid expenses and other current
assets 21,068 16,298 39,270
Total current assets 691,772 657,178 612,209
Property and equipment 617,813 606,907 594,464
Less accumulated depreciation 298,260 287,549 275,758
319,553 319,358 318,706
Restricted cash 400,000 400,000 400,000
Goodwill 183,205 152,183 144,362
Other intangible assets 134,078 132,426 144,315
Non-current deferred income taxes 43,380 43,143 26,828
Other non-current assets 44,449 46,336 44,617
$1,816,437 $1,750,624 $1,691,037
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $172,680 $179,740 $142,361
Notes payable 5,740 20,081 19,303
Payroll and related taxes 41,458 54,153 37,788
Accrued customer programs 45,084 49,534 40,129
Accrued liabilities 40,901 45,335 56,821
Accrued income taxes 17,860 14,132 25,903
Current deferred income taxes 9,837 8,456 10,980
Total current liabilities 333,560 371,431 333,285
Non-current liabilities
Long-term debt 678,272 621,717 670,814
Non-current deferred income taxes 105,427 81,923 56,586
Other non-current liabilities 36,922 34,809 37,715
Total non-current liabilities 820,621 738,449 765,115
Shareholders' equity
Preferred stock, without par value,
10,000 shares authorized - - -
Common stock, without par value,
200,000 shares authorized 510,132 516,098 523,093
Accumulated other comprehensive
income (loss) 17,461 3,593 (4,402)
Retained earnings 134,663 121,053 73,946
Total shareholders' equity 662,256 640,744 592,637
$1,816,437 $1,750,624 $1,691,037
Supplemental Disclosures of Balance
Sheet Information
Allowance for doubtful accounts $12,195 $11,178 $10,207
Allowance for inventory $40,882 $42,509 $37,164
Working capital $358,212 $285,747 $278,924
Preferred stock, shares issued - - -
Common stock, shares issued 92,556 92,922 93,561
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
First Quarter
2007 2006
Cash Flows From (For) Operating Activities
Net income $17,549 $12,911
Adjustments to derive cash flows
Depreciation and amortization 13,502 14,296
Share-based compensation 2,434 2,403
Deferred income taxes (1,157) (1,072)
Sub-total 32,328 28,538
Changes in operating assets and liabilities
Accounts receivable 7,897 (1,559)
Inventories (25,321) 3,776
Accounts payable (5,785) (723)
Payroll and related taxes (12,423) (4,631)
Accrued customer programs (4,450) (1,537)
Accrued liabilities (4,466) (2,938)
Accrued income taxes 3,833 2,757
Other 1,983 (5,961)
Sub-total (38,732) (10,816)
Net cash from (for)
operating activities (6,404) 17,722
Cash Flows (For) From Investing Activities
Purchase of securities (52,340) (19,438)
Proceeds from sales of securities 51,074 21,372
Additions to property and equipment (8,113) (8,228)
Net cash for investing activities (9,379) (6,294)
Cash (For) From Financing Activities
Repayments of short-term debt, net (14,331) (6,104)
Borrowings of long-term debt 55,000 15,000
Tax (expense) benefit of stock
transactions 616 (500)
Issuance of common stock 2,222 2,000
Repurchase of common stock (11,238) (8,558)
Cash dividends (3,939) (3,741)
Net cash (for) from
financing activities 28,330 (1,903)
Net increase in cash and
cash equivalents 12,547 9,525
Cash and cash equivalents, at
beginning of period 19,018 16,707
Effect of exchange rate changes on cash 1,462 (1,114)
Cash and cash equivalents, at end
of period $33,027 $25,118
Supplemental Disclosures of Cash
Flow Information
Cash paid/received during the
period for:
Interest paid $8,309 $9,210
Interest received $4,700 $5,641
Income taxes paid $1,797 $2,928
Income taxes refunded - $4,866
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
First Quarter
2007 2006
Segment Sales
Consumer Healthcare $242,462 $227,100
Rx Pharmaceuticals 31,425 29,094
API 29,779 26,791
Other 37,202 36,749
Total $340,868 $319,734
Segment Operating Income (Loss)
Consumer Healthcare $18,126 $13,327
Rx Pharmaceuticals 5,787 3,836
API 4,658 6,586
Other 2,664 (864)
Unallocated expenses (4,497) (2,156)
Total $26,738 $20,729
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter
2007 2006
Net sales $340,868 $319,734
Reported gross profit $95,643 $86,916
Inventory step-up - 4,762
Adjusted gross profit $95,643 $91,678
Adjusted gross profit % 28.1% 28.7%
Reported operating income $26,738 $20,729
Inventory step-up - 4,762
Adjusted operating income $26,738 $25,491
Reported net income $17,549 $12,911
Inventory step-up (1) - 3,714
Adjusted net income $17,549 $16,625
Diluted earnings per share
Reported $0.19 $0.14
Adjusted $0.19 $0.18
Diluted weighted average shares outstanding 93,521 94,314
(1) Net of taxes at 22%
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter
2007 2006
Consumer Healthcare
Net sales $242,462 $227,100
Reported gross profit $57,227 $52,644
Inventory step-up - 318
Adjusted gross profit $57,227 $52,962
Adjusted gross profit % 23.6% 23.3%
Reported operating income $18,126 $13,327
Inventory step-up - 318
Adjusted operating income $18,126 $13,645
API
Net sales $29,779 $26,791
Reported gross profit $11,879 $12,004
Inventory step-up - 1,747
Adjusted gross profit $11,879 $13,751
Adjusted gross profit % 39.9% 51.3%
Reported operating income $4,658 $6,586
Inventory step-up - 1,747
Adjusted operating income $4,658 $8,333
Other
Net sales $37,202 $36,749
Reported gross profit $12,750 $10,643
Inventory step-up - 2,697
Adjusted gross profit $12,750 $13,340
Adjusted gross profit % 34.3% 36.3%
Reported operating income (loss) $2,664 $(864)
Inventory step-up - 2,697
Adjusted operating income $2,664 $1,833
First Call Analyst:
FCMN Contact: pblain@perrigo.com
SOURCE: Perrigo Company
CONTACT: Arthur J. Shannon, Vice President, Investor Relations and
Communication, +1-269-686-1709, ajshannon@perrigo.com or Ernest J. Schenk,
Manager, Investor Relations and Communication, +1-269-673-9212,
eschenk@perrigo.com , both of Perrigo Company
Web site: http://www.perrigo.com/