Perrigo Company (NASDAQ: PRGO)(TASE: PRGO) today announced results for its third quarter fiscal year 2008 and nine months ended March 29, 2008.
Perrigo Company
(in thousands, except per share amounts)
Third Quarter Nine Months
2008 2007 2008 2007
Net Sales $503,707 $362,288 $1,321,930 $1,073,132
Net Income $39,967 $17,056 $108,275 $55,026
Adjusted Net Income $44,264 $22,082 $112,572 $60,470
Diluted EPS $0.42 $0.18 $1.14 $0.59
Adjusted Diluted EPS $0.47 $0.24 $1.18 $0.65
Diluted Shares 94,955 93,298 95,115 93,604
These reported results include an acquisition-related write-off of the in- process research and development (IPR&D) of $2.0 million after-tax and a charge for the write-off of the step-up of inventory acquired of $2.1 million after-tax, both related to our January 9, 2008 acquisition of Galpharm Healthcare, Ltd., a leading supplier of over-the-counter store brand pharmaceuticals in the United Kingdom. (Refer to Table II at the end of this press release for additional adjustments in the current year and prior year periods and additional non-GAAP disclosure information.)
Third Quarter results
Net sales for the third quarter of fiscal 2008 were a record $503.7 million, an increase of $141.4 million, or 39 percent, compared with $362.3 million last year. Reported net income was $40.0 million, or $0.42 per share, compared with net income of $17.1 million, or $0.18 per share a year ago. In the third quarter of fiscal 2008 and fiscal 2007, the Company recorded several net of tax charges, summarized as follows:
2008 2007
-- Write-off of IPR&D $2.0 $4.8
-- Inventory step-up 2.1 -
-- Restructuring 0.2 0.2
$4.3 $5.0
Excluding the impact of the charges noted above, adjusted net income for the third quarter of fiscal 2008 was $44.3 million, or $0.47 per share. For the third quarter of fiscal year 2007, adjusted net income was $22.1 million, or $0.24 per share.
(Refer to Table II at the end of this press release for additional non- GAAP disclosure information.)
Perrigo's Chairman and CEO Joseph C. Papa commented, "For the second quarter in a row, we delivered record sales and earnings with successful launches of two of the largest products in our 120 year history, Omeprazole and Cetirizine. We also began shipping products from our Galpharm acquisition in the United Kingdom and launched Clobetasol Foam in Rx. The results this quarter clearly show the benefits of our long term commitment to our new product pipeline."
Nine Months Results
Net sales for the nine months ended March 29, 2008 were $1,321.9 million, compared with $1,073.1 million last year, an increase of $249 million, or 23 percent. Reported net income for the nine months was $108.3 million, or $1.14 per share, compared with $55.0 million, or $0.59 per share last year. In the first nine months of fiscal 2008 and fiscal 2007, the Company recorded several net of tax charges, summarized as follows:
2008 2007
-- Write-off of IRP&D $2.0 $4.8
-- Inventory step-up 2.1 -
-- Restructuring 0.2 0.6
$4.3 $5.4
Excluding the impact of the charges noted above, adjusted net income for the nine months of fiscal 2008 was $112.6 million, or $1.18 per share. For the nine months of fiscal 2007, adjusted net income was $60.5 million, or $0.65 per share.
(Refer to Table II at the end of this press release for additional non- GAAP disclosure information.)
Consumer Healthcare
Consumer Healthcare segment net sales for the quarter were a record $373 million, up $111 million, or 42 percent, compared with $262 million last year. The sales increase included $97 million in new product revenue, led by Omeprazole and Cetirizine, strong sales in the cough/cold, analgesic and smoking cessation product categories. Reported operating income was $51.7 million, compared with $21.9 million last year. Adjusted operating income was $54.9 million, compared with adjusted operating income of $22.2 million a year ago.
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 is being marketed under store brand labels and is comparable to McNeil Consumer Healthcare's Zyrtec® Tablets. Store brand shipments began in January.
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 $87 million. The acquisition is expected to add more than $55 million in net sales annually and be accretive to earnings in the first 12 months.
On March 4, 2008, Perrigo announced that it began shipping 20 mg Omeprazole delayed released tablets to its retail customers. This product delivers the same medicine at the same dose as Prilosec OTC® and is indicated for the treatment of frequent heartburn.
For the first nine months of fiscal 2008, Consumer Healthcare net sales were $961.5 million, up $181.5 million, or 23 percent, compared with $780.0 million last year. The sales gain was driven by new product sales of $117 million, largely Omeprazole, Cetirizine and Smoking Cessation products. Reported operating income was $120.5 million, compared with $56.8 million a year ago. Adjusted operating income was $123.8 million, compared with adjusted operating income of $57.7 million last year.
Rx Pharmaceuticals
The Rx Pharmaceutical segment reported third quarter net sales of $49.2 million, including $3.1 million of service and royalty revenue and an $8.5 million payment for termination of a license agreement. This represents an increase of $15.2 million, or 45 percent, compared with $34.0 million last year, of which $5.8 million was service and royalty revenue. Operating income was $11.3 million, up from $7.6 million a year ago, as a result of increased volume and improved margins.
For the first nine months of fiscal 2008, net sales were $122.8 million, including $11.9 million of service and royalty revenue and an $8.5 million payment for termination of a license agreement, resulting in an increase of $29.1 million, or 31 percent, compared with $93.7 million last year, of which $15.8 million was service and royalty revenue. Operating income was $27.2 million, up $10.2 million, or 60 percent, from $17.0 million in the year-ago period.
API
API segment third quarter net sales were $37.8 million, compared with $30.1 million last year, an increase of 26 percent. Operating income was $6.0 million, compared with $4.2 million last year. API performance in the quarter benefited from a one-time $4.9 million accrual reversal related to a long standing customer contract negotiation. For the first nine months of fiscal 2008, net sales were $111.2 million, up $22.7 million, or 26 percent from $88.5 million last year. Operating income was $16.7 million, compared with $14.9 million a year ago.
Other
The Other category, consisting of Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products segments, reported third quarter net sales of $43.6 million, compared with $35.9 million a year ago, an increase of 22 percent. Operating income was $0.9 million, compared with $1.6 million last year. For the first nine months of fiscal 2008, net sales were $126.3 million, up $15.4 million, or 14 percent, compared with $110.9 million last year. Operating income was $6.9 million, compared with $7.0 million last year.
Unallocated Expenses
In the third quarter of fiscal 2008, unallocated expenses were $10.2 million, compared with $10.6 million a year ago. Both periods included an acquisition-related write-off of IPR&D. These pre-tax expenses were $2.8 million and $8.3 million, respectively. For the nine months in fiscal 2008, unallocated expenses were $15.7 million, compared with $18.7 million last year. Both periods included acquisition-related write-offs of IPR&D, which were $2.8 million and $8.3 million, respectively.
Outlook
The Company has refined its expected range of adjusted EPS for the full fiscal year to $1.55 to $1.60 per share, excluding acquisition and restructuring related charges. It has increased its full-year tax rate expectations to a range of 23 to 27 percent. The Company still expects to generate cash from operations in the range of $180 million to $200 million for the full fiscal year.
(Refer to Table III at the end of this press release for additional non- GAAP earnings guidance disclosure information.)
Perrigo's Chairman and CEO Joseph C. Papa concluded, "In this dynamic environment, our focus continues to be executing our plan, maintaining quality, improving our customer service and lowering working capital. While we are very pleased with our performance to date, there is always work to be done to continue launching quality, affordable new healthcare products into the marketplace."
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)
Third Quarter Year-to-Date
2008 2007 2008 2007
Net sales $503,707 $362,288 $1,321,930 $1,073,132
Cost of sales 345,761 262,751 915,903 784,273
Gross profit 157,946 99,537 406,027 288,859
Operating expenses
Distribution 7,987 7,020 22,805 21,559
Research and development 19,160 16,390 51,623 44,339
Selling and
administration 67,978 42,863 172,822 136,857
Subtotal 95,125 66,273 247,250 202,755
Write-off of in-process
research and development 2,786 8,252 2,786 8,252
Restructuring 348 306 348 948
Total 98,259 74,831 250,384 211,955
Operating income 59,687 24,706 155,643 76,904
Interest, net 3,688 3,650 12,017 11,536
Other (income) expense, net 448 (699) (637) (2,919)
Income before income taxes 55,551 21,755 144,263 68,287
Income tax expense 15,584 4,699 35,988 13,261
Net income $39,967 $17,056 $108,275 $55,026
Earnings per share
Basic $0.43 $0.19 $1.16 $0.60
Diluted $0.42 $0.18 $1.14 $0.59
Weighted average
shares outstanding
Basic 92,854 91,643 93,127 92,161
Diluted 94,955 93,298 95,115 93,604
Dividends declared per share $0.050 $0.045 $0.145 $0.133
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 29, June 30, March 31,
2008 2007 2007
Assets (unaudited) (unaudited)
Current assets
Cash and cash equivalents $64,402 $30,305 $34,873
Investment securities 725 49,110 58,220
Accounts receivable 372,526 282,045 246,582
Inventories 356,906 295,114 310,272
Current deferred income taxes 37,716 41,400 39,122
Income taxes refundable 4,684 - -
Assets held for sale 2,746 2,746 -
Prepaid expenses and other current
assets 16,146 18,340 23,833
Total current assets 855,851 719,060 712,902
Property and equipment 708,297 664,096 641,343
Less accumulated depreciation 372,618 333,024 320,672
335,679 331,072 320,671
Restricted cash 400,000 422,000 422,000
Goodwill 264,913 196,218 189,450
Other intangible assets 231,033 159,977 159,427
Non-current deferred income taxes 51,033 54,908 42,624
Other non-current assets 58,876 41,919 43,487
$2,197,385 $1,925,154 $1,890,561
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $229,744 $164,318 $158,499
Notes payable 10,169 11,776 3,763
Payroll and related taxes 54,849 46,226 43,590
Accrued customer programs 45,773 48,218 40,494
Accrued liabilities 39,039 47,333 48,135
Accrued income taxes - 29,460 16,210
Current deferred income taxes 18,864 17,125 13,886
Current portion of long-term debt 17,598 15,381 14,910
Total current liabilities 416,036 379,837 339,487
Non-current liabilities
Long-term debt 697,598 650,762 709,342
Non-current deferred income taxes 112,675 103,775 102,129
Other non-current liabilities 110,512 36,311 34,346
Total non-current liabilities 920,785 790,848 845,817
Shareholders' equity
Preferred stock, without par value,
10,000 shares authorized - - -
Common stock, without par value,
200,000 shares authorized 498,002 519,419 507,025
Accumulated other comprehensive
income 95,398 56,676 34,434
Retained earnings 267,164 178,374 163,798
Total shareholders' equity 860,564 754,469 705,257
$2,197,385 $1,925,154 $1,890,561
Supplemental Disclosures of Balance
Sheet Information
Allowance for doubtful accounts $9,511 $9,421 $9,933
Allowance for inventory $36,962 $36,210 $37,390
Working capital $439,815 $339,223 $373,415
Preferred stock, shares issued - - -
Common stock, shares issued 93,380 93,395 92,510
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Year-to-Date
2008 2007
Cash Flows (For) From Operating Activities
Net income $108,275 $55,026
Adjustments to derive cash flows
Write-off of in-process
research and development 2,786 8,252
Depreciation and amortization 50,822 41,997
Share-based compensation 6,457 6,530
Deferred income taxes 8,336 12,749
Sub-total 176,676 124,554
Changes in operating assets and
liabilities, net of business and asset
acquisitions and restructuring
Accounts receivable (71,497) (8,616)
Inventories (37,314) (4,224)
Income taxes refundable (4,684) -
Accounts payable 52,513 (19,254)
Payroll and related taxes 6,958 (10,151)
Accrued customer programs (2,445) (9,040)
Accrued liabilities (14,771) 2,968
Accrued income taxes 12,089 3,008
Other 17,969 (5,084)
Sub-total (41,182) (50,393)
Net cash from operating
activities 135,494 74,161
Cash Flows (For) From Investing Activities
Purchases of securities (170,552) (228,341)
Proceeds from sales of securities 201,436 198,530
Additions to property and equipment (26,022) (30,133)
Proceeds from sale of property
and equipment - 2,613
Acquisition of business (87,130) -
Acquisition of assets (12,401) (59,538)
Net cash for investing
activities (94,669) (116,869)
Cash (For) From Financing
Activities
Repayments of short-term debt, net (1,607) (16,293)
Borrowings of long-term debt 140,000 130,000
Repayments of long-term debt (95,801) (30,000)
Tax effect of stock transactions 5,008 (30)
Issuance of common stock 26,097 5,347
Repurchases of common stock (58,979) (20,919)
Cash dividends (13,551) (12,281)
Net cash from financing
activities 1,167 55,824
Net increase in cash and
cash equivalents 41,992 13,116
Cash and cash equivalents,
beginning of period 30,305 19,018
Effect of exchange rate changes on cash (7,895) 2,739
Cash and cash equivalents, end of period $64,402 $34,873
Supplemental Disclosures of Cash
Flow Information
Cash paid/received during the
period for:
Interest paid $29,102 $27,973
Interest received $15,590 $15,119
Income taxes paid $25,715 $8,500
Income taxes refunded $6,560 $8,443
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
Third Quarter Fiscal Year
2008 2007 2008 2007
Segment Sales
Consumer Healthcare $373,031 $262,277 $961,495 $780,033
Rx Pharmaceuticals 49,231 34,025 122,846 93,710
API 37,818 30,095 111,240 88,507
Other 43,627 35,891 126,349 110,882
Total $503,707 $362,288 $1,321,930 $1,073,132
Segment Operating Income
(Loss)
Consumer Healthcare $51,693 $21,905 $120,549 $56,770
Rx Pharmaceuticals 11,349 7,615 27,160 17,047
API 6,024 4,238 16,723 14,851
Other 868 1,550 6,922 6,959
Unallocated expenses (7,461) (2,350) (12,925) (10,471)
Write-off of in-process R&D (2,786) (8,252) (2,786) (8,252)
Total $59,687 $24,706 $155,643 $76,904
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
Third Quarter Fiscal Year
2008 2007 2008 2007
Net sales $503,707 $362,288 $1,321,930 $1,073,132
Reported gross profit $157,946 $99,537 $406,027 $288,859
Inventory step-up 2,878 - 2,878 -
Adjusted gross profit $160,824 $99,537 $408,905 $288,859
Adjusted gross profit % 31.9% 27.5% 30.9% 26.9%
Reported operating income $59,687 $24,706 $155,643 $76,904
Inventory step-up 2,878 - 2,878 -
Restructuring 348 306 348 948
Write-off of in-process R&D 2,786 8,252 2,786 8,252
Adjusted operating income $65,699 $33,264 $161,655 $86,104
Adjusted operating income % 13.0% 9.2% 12.2% 8.0%
Reported net income $39,967 $17,056 $108,275 $55,026
Inventory step-up (1) 2,072 - 2,072 -
Restructuring - Michigan
Plants (2) - 199 - 617
Restructuring - West Coast (3) 219 - 219 -
Write-off of in-process R&D -
Glades acquisition (4) - 4,827 - 4,827
Write-off of in-process R&D -
Galpharm acquisition (1) 2,006 - 2,006 -
Adjusted net income $44,264 $22,082 $112,572 $60,470
Diluted earnings per share
Reported $0.42 $0.18 $1.14 $0.59
Adjusted $0.47 $0.24 $1.18 $0.65
Diluted weighted average
shares outstanding 94,955 93,298 95,115 93,604
(1) Net of taxes at 28%
(2) Net of taxes at 35%
(3) Net of taxes at 37%
(4) Net of taxes at 41.5%
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
Third Quarter Year-To-Date
2008 2007 2008 2007
Consumer Healthcare
Net sales $373,031 $262,277 $961,495 $780,033
Reported gross profit $107,819 $59,560 $266,728 $175,452
Inventory step-up 2,878 - 2,878 -
Adjusted gross profit $110,697 $59,560 $269,606 $175,452
Adjusted gross profit % 29.7% 22.7% 28.0% 22.5%
Reported operating expenses $56,126 $37,655 $146,179 $118,682
Restructuring (348) (306) (348) (948)
Adjusted operating expenses $55,778 $37,349 $145,831 $117,734
Reported operating income $51,693 $21,905 $120,549 $56,770
Inventory step-up 2,878 - 2,878 -
Restructuring 348 306 348 948
Adjusted operating income $54,919 $22,211 $123,775 $57,718
Adjusted operating income % 14.7% 8.5% 12.9% 7.4%
Unallocated
Reported operating loss $(10,247) $(10,602) $(15,711) $(18,723)
Write-off of in-process R&D 2,786 8,252 2,786 8,252
Adjusted operating income
(loss) $(7,461) $(2,350) $(12,925) $(10,471)
Table III
2008 GUIDANCE
RECONCILIATION OF NON-GAAP MEASURES
(unaudited)
Full Year
Fiscal 2008 Guidance
Reported earnings per share range $1.48 - $1.53
Write-off of in-process R&D $0.021
Inventory step-up $0.044
Restructuring $0.004
Adjusted earnings per share range $1.55 - $1.60
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
Web site: http://www.perrigo.com/