-- Second quarter revenue increased $65 million, or 17 percent, to
$435 million
-- GAAP net income increased 63 percent to $34 million, or $0.36 per share
-- Second quarter cash provided by operations of $67 million
-- Fiscal 2008 earnings guidance increased to between $1.50 and
$1.60 per share
Perrigo Company (NASDAQ: PRGO)(TASE: PRGO) today announced results for its second quarter fiscal year 2008 and six months ended December 29, 2007.
Perrigo Company
(in thousands, except per share amounts)
Second Quarter Six Months
2008 2007 2008 2007
Sales $435,483 $370,629 $818,223 $710,844
Net Income $34,289 $21,088 $68,308 $37,970
Diluted EPS $0.36 $0.23 $0.72 $0.41
Diluted Shares 95,283 93,506 95,104 93,595
Second Quarter Results
Net sales for the second quarter of fiscal 2008 were a record $435.5 million, an increase of $64.9 million, or 17 percent, compared with $370.6 million last year. Reported net income was $34.3 million, or $0.36 per share, compared with $21.1 million, or $0.23 per share a year ago, which included expense for a product recall of $3.2 million after-tax, or $0.03 per share, and a restructuring charge of $417 thousand after-tax, or less than $0.01 per share.
Perrigo Chairman and CEO, Joseph C. Papa, stated, "I am extremely pleased with our performance this quarter both financially and operationally. Record sales were achieved through double digit sales growth in each of our business segments. Operating income grew 85 percent from last year on a 390 basis point improvement in gross margins. These improvements, along with continued focus on working capital, generated $67 million in cash flow from operations, up $43 million from last year. These results also come before the largest new product launch in our history, Omeprazole, which we expect to start shipping by the end of our third fiscal quarter."
Six Months Results
Net sales for the six months ended December 29, 2007 were $818.2 million, an increase of $107.4 million, or 15 percent, compared with $710.8 million last year. Reported net income was $68.3 million, or $0.72 per share, compared with $38.0 million, or $0.41 per share last year. The year ago period included expense for a product recall of $3.9 million after-tax, or $0.04 per share, and a restructuring charge of $417 thousand after-tax, or less than $0.01 per share.
Consumer Healthcare
Consumer Healthcare segment net sales in the quarter were a record $320.2 million, up $44.3 million, or 16 percent, compared with $275.9 million a year ago. The sales increase resulted from $9.9 million in new product revenue; strong sales in the smoking cessation, analgesics and cough/cold product categories and increases in non-U.S. businesses. Operating income was $38.5 million, compared with $17.4 million a year ago. The income gain was a result of the volume increase as well as benefits from supply chain and operational efficiency improvements. Additionally, last year's second quarter included $3.2 million in after-tax costs related to a product recall.
On December 28, 2007, Perrigo announced it received final approval from the FDA for its Abbreviated New Drug Application (ANDA) for OTC Cetirizine Hydrochloride Tablets, 5 and 10 mg. The product will be marketed under store brand labels and is comparable to McNeil Consumer Healthcare's Zyrtec® Tablets. Store brand shipments began in January.
For the first six months of 2008, Consumer Healthcare sales were $588.5 million, up $70.7 million, or 14 percent, compared with $517.8 million last year. Operating income was $68.1 million, up $33.6 million, or 97 percent, compared with $34.5 million last year, which included after-tax costs of $3.9 million related to a product recall.
On January 9, 2008, the Company announced it acquired Galpharm Healthcare, Ltd., a leading United Kingdom-based supplier of over-the-counter store brand products, for approximately $86 million. The acquisition is expected to add more than $55 million in sales annually and be accretive to earnings in the first 12 months.
Rx Pharmaceuticals
The Rx Pharmaceuticals segment reported sales of $38.7 million, including $5.0 million of service and royalty revenue, an increase of $10.4 million, or 37 percent, compared with $28.3 million a year ago. Fiscal 2008 second quarter results also included $6.9 million in sales of products acquired from Glades Pharmaceuticals. Operating income was $8.4 million, up from $3.7 million last year as a result of increased volume and improved margins.
For the first six months of fiscal 2008, net sales were $73.6 million, including $10.8 million of service and royalty revenue and $13.5 million in sales of acquired products, resulting in an increase of $13.9 million, or 23 percent, compared with $59.7 million last year. Operating income was $15.8 million, up 67 percent from $9.5 million last year.
API
API segment sales were $34.6 million, compared with $28.6 million a year ago, or an increase of 21 percent. Operating income was $3.4 million, compared with $5.9 million last year, reflecting a less favorable product sales mix. For the six months, sales were $73.4 million, up $15.0 million, or 26 percent, compared with $58.4 million a year ago. Operating income for the six months was $10.7 million, compared with $10.6 million in the same period last year.
Other
The Other category, consisting of the Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products segments, reported second quarter sales of $42.0 million, compared with $37.8 million a year ago, an increase of 11 percent. Operating income was $3.3 million, compared with $3.0 million last year. Sales for the six months were $82.7 million, up 10 percent, compared with $75.0 million in the same period a year ago. Operating income was $5.8 million, compared with $5.6 million last year.
In the fiscal 2008 second quarter, unallocated expenses were $4.8 million, compared with $3.6 million a year ago, due to higher employee wage and benefit costs. For the six months in fiscal 2008, unallocated expenses were $5.5 million, compared with $8.1 million last year. The decrease was due primarily to a favorable legal settlement that offset expenses in the first quarter of fiscal 2008.
Outlook
The Company is increasing full year guidance and now anticipates adjusted EPS for the full fiscal year in the range of $1.50 to $1.60 per share, up 69 to 80 percent from last year. This increase from previous guidance reflects the continued strong performance of Perrigo's existing portfolio and additional volume gains as a result of ongoing quality issues at a competitor. The Company also expects its full-year tax rate to be in the range of 21 to 24 percent, down from prior guidance as a result of forecasted changes to the worldwide income mix and additional tax planning measures. The Company expects to generate cash from operations in the range of $180 million to $200 million.
Mr. Papa stated, "Perrigo is executing in a challenging economic environment by delivering quality, affordable healthcare to our customers. We continue our focus on improving quality, our supply chain, and working capital management, while investing in our new product pipeline. The Galpharm acquisition is another example of improving our customer offering, while also improving our return on invested capital. We are generating strong cash flow and delivering value to our customers and shareholders."
Perrigo will host a conference call to discuss fiscal 2008 second quarter results at 10:00am (ET) on Tuesday, February 5. The conference call will be available via webcast to interested parties on the Perrigo website http://www.perrigo.com/ or by phone 888-694-4676, International 973-582-2737, and reference ID# 31908064. A taped replay of the call will be available beginning at approximately 2:30 p.m. (ET) Tuesday, February 5, until midnight Tuesday, February 12, 2008. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 31908064.
Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes over-the-counter (OTC) and prescription pharmaceuticals, nutritional products, active pharmaceutical ingredients (API) and consumer products. The Company is the world's largest manufacturer of OTC pharmaceutical products for the store brand market. The Company's primary markets and locations of manufacturing facilities are the United States, Israel, Mexico and the United Kingdom. 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, 2007, 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 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Second Quarter Year-to-Date
2008 2007 2008 2007
Net sales $435,483 $370,629 $818,223 $710,844
Cost of sales 305,071 274,147 571,093 521,547
Gross profit 130,412 96,482 247,130 189,297
Operating expenses
Distribution 7,744 7,155 14,818 14,539
Research and development 16,143 14,902 32,463 27,949
Selling and administration 57,685 47,396 104,960 94,068
Restructuring - 642 - 642
Total 81,572 70,095 152,241 137,198
Operating income 48,840 26,387 94,889 52,099
Interest, net 3,674 3,300 8,329 7,886
Other income, net (969) (2,258) (2,152) (2,319)
Income before income taxes 46,135 25,345 88,712 46,532
Income tax expense 11,846 4,257 20,404 8,562
Net income $34,289 $21,088 $68,308 $37,970
Earnings per share
Basic $0.37 $0.23 $0.73 $0.41
Diluted $0.36 $0.23 $0.72 $0.41
Weighted average shares
outstanding
Basic 93,147 91,836 93,186 92,104
Diluted 95,283 93,506 95,104 93,595
Dividends declared per share $0.0500 $0.0450 $0.0950 $0.0875
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 29, June 30, December 30,
2007 2007 2006
Assets (unaudited) (unaudited)
Current assets
Cash and cash equivalents $72,163 $30,305 $39,635
Investment securities 29,642 49,110 34,030
Accounts receivable 311,013 282,045 246,603
Inventories 326,002 295,114 322,624
Current deferred income taxes 38,683 41,400 50,358
Income taxes refundable 4,568 - -
Assets held for sale 2,746 2,746 -
Prepaid expenses and other
current assets 18,669 18,340 24,515
Total current assets 803,486 719,060 717,765
Property and equipment 687,068 664,096 629,325
Less accumulated depreciation 358,068 333,024 308,999
329,000 331,072 320,326
Restricted cash 400,000 422,000 400,000
Goodwill 212,934 196,218 188,272
Other intangible assets 191,430 159,977 137,921
Non-current deferred income taxes 59,925 54,908 46,039
Other non-current assets 42,535 41,919 43,740
$2,039,310 $1,925,154 $1,854,063
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable $194,214 $164,318 $173,008
Notes payable 3,937 11,776 18,333
Payroll and related taxes 44,673 46,226 41,049
Accrued customer programs 48,882 48,218 45,436
Accrued liabilities 40,137 47,333 44,328
Accrued income taxes - 29,460 23,311
Current deferred income taxes 20,320 17,125 6,193
Current portion of long-term
debt 16,539 15,381 -
Total current
liabilities 368,702 379,837 351,658
Non-current liabilities
Long-term debt 648,077 650,762 668,784
Non-current deferred income
taxes 106,569 103,775 106,702
Other non-current liabilities 99,566 36,311 34,646
Total non-current
liabilities 854,212 790,848 810,132
Shareholders' equity
Preferred stock, without par
value, 10,000 shares
authorized - - -
Common stock, without par
value, 200,000 shares
authorized 505,076 519,419 509,910
Accumulated other
comprehensive income 79,470 56,676 31,456
Retained earnings 231,850 178,374 150,907
Total shareholders'
equity 816,396 754,469 692,273
$2,039,310 $1,925,154 $1,854,063
Supplemental Disclosures of
Balance Sheet Information
Allowance for doubtful
accounts $8,944 $9,421 $12,198
Allowance for inventory $36,184 $36,210 $39,098
Working capital $434,784 $339,223 $366,107
Preferred stock, shares
issued - - -
Common stock, shares
issued 93,353 93,395 92,666
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Year-To-Date
2008 2007
Cash Flows (For) From Operating
Activities
Net income $68,308 $37,970
Adjustments to derive cash flows
Depreciation and amortization 30,983 27,681
Share-based compensation 3,930 5,718
Deferred income taxes 6,096 (4,248)
Sub-total 109,317 67,121
Changes in operating assets
and liabilities
Accounts receivable (22,125) (9,295)
Inventories (24,238) (22,919)
Income taxes refundable (4,568) -
Accounts payable 24,951 (4,034)
Payroll and related taxes (2,605) (12,658)
Accrued customer programs 664 (4,098)
Accrued liabilities (6,663) (937)
Accrued income taxes 10,266 9,480
Other 10,131 (5,025)
Sub-total (14,187) (49,486)
Net cash from operating
activities 95,130 17,635
Cash Flows (For) From Investing
Activities
Purchase of securities (133,791) (117,746)
Proceeds from sales of securities 153,502 111,665
Asset acquisition (12,401) -
Additions to property and equipment (13,714) (19,784)
Proceeds from sales of
property and equipment - 2,613
Net cash for investing
activities (6,404) (23,252)
Cash Flows (For) From Financing
Activities
Repayments of short-term debt, net (7,839) (1,699)
Borrowings of long-term debt 50,000 60,000
Repayments of long-term debt (55,000) (15,000)
Tax effect of stock transactions 1,115 (59)
Issuance of common stock 16,029 3,700
Repurchases of common stock (35,417) (15,547)
Cash dividends (8,898) (8,116)
Net cash (for) from
financing activities (40,010) 23,279
Net increase in cash and
cash equivalents 48,716 17,662
Cash and cash equivalents, at
beginning of period 30,305 19,018
Effect of exchange rate changes on cash (6,858) 2,955
Cash and cash equivalents, at end
of period $72,163 $39,635
Supplemental Disclosures of Cash
Flow Information
Cash paid/received during the
period for:
Interest paid $19,561 $18,254
Interest received $10,392 $9,831
Income taxes paid $11,723 $6,727
Income taxes refunded $1,288 $1,369
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
Second Quarter Fiscal Year
2008 2007 2008 2007
Segment Sales
Consumer Healthcare $320,205 $275,947 $588,464 $517,756
Rx Pharmaceuticals 38,655 28,260 73,615 59,685
API 34,608 28,633 73,422 58,412
Other 42,015 37,789 82,722 74,991
Total $435,483 $370,629 $818,223 $710,844
Segment Operating Income (Loss)
Consumer Healthcare $38,521 $17,420 $68,070 $34,520
Rx Pharmaceuticals 8,356 3,686 15,801 9,473
API 3,425 5,929 10,701 10,587
Other 3,292 2,976 5,781 5,640
Unallocated expenses (4,754) (3,624) (5,464) (8,121)
Total $48,840 $26,387 $94,889 $52,099
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
Second Quarter Fiscal Year
2008 2007 2008 2007
Reported operating income $48,840 $26,387 $94,889 $52,099
Restructuring - 642 - 642
Adjusted operating income $48,840 $27,029 $94,889 $52,741
Reported net income $34,289 $21,088 $68,308 $37,970
Restructuring (1) - 417 - 417
Adjusted net income $34,289 $21,505 $68,308 $38,387
Diluted earnings per share
Reported $0.36 $0.23 $0.72 $0.41
Adjusted $0.36 $0.23 $0.72 $0.41
Diluted weighted average shares
outstanding 95,283 93,506 95,104 93,595
(1) Net of taxes at 35%
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
Second Quarter Fiscal Year
2008 2007 2008 2007
Consumer Healthcare
Reported operating income $38,521 $17,420 $68,070 $34,520
Restructuring - 642 - 642
Adjusted operating income $38,521 $18,062 $68,070 $35,162
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/