Perrigo Company (NASDAQ: PRGO)(TASE: PRGO) today announced results for its fourth quarter and full year ended June 28, 2008.
Perrigo's Chairman and CEO Joseph C. Papa commented, "For the third quarter in a row, we delivered year over year record sales and earnings. We also generated $248 million in cash from operations for the year. Our team is executing well -- growing market share, managing our supply chain and delivering strong returns. And by bringing innovative new products to market, we continue to make quality healthcare more affordable at a time when consumers need to save money more than ever. We continue to invest in research and development, building our pipeline for future innovation as well."
The Company's reported results are summarized in the attached Condensed Consolidated Statements of Income, Balance Sheets and Statements of Cash Flows and include the impact of the 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 adjustments in the current year and prior year periods and additional non-GAAP disclosure information.
Fourth Quarter Results
Net sales for the fourth quarter of fiscal 2008 were a record $500.2 million, an increase of $125.9 million, or 34 percent, compared with $374.3 million last year. Reported net income was $27.5 million, or $0.29 per share, compared with net income of $18.8 million, or $0.20 per share a year ago. In the fourth quarters of fiscal 2008 and fiscal 2007, the Company recorded several net of tax charges, summarized as follows (in millions):
2008 2007
* Impairment of intangible asset $6.5 $-
* Impairment of note receivable - 1.3
* Inventory step-up 2.1 2.7
* Restructuring 1.4 -
$10.0 $4.0
Excluding the impact of the charges noted above, adjusted net income for the fourth quarter of fiscal 2008 was $37.5 million, or $0.39 per share. For the fourth quarter of fiscal year 2007, adjusted net income was $22.7 million, or $0.24 per share.
(Refer to Table II at the end of this press release for additional non-GAAP disclosure information.)
Full Year Results
Net sales for the full year ended June 28, 2008 were $1,822.1 million, compared with $1,447.4 million last year, an increase of $375 million, or 26 percent. Reported net income for the full year was $135.8 million, or $1.43 per share, compared with $73.8 million, or $0.79 per share last year. In the full years of fiscal 2008 and fiscal 2007, the Company recorded several net of tax charges, summarized as follows (in millions):
2008 2007
* Impairment of intangible asset $6.5 $-
* Impairment of note receivable - 1.3
* Inventory step-up 4.1 2.7
* Write-off of IPR&D 2.0 4.8
* Restructuring 1.6 0.5
$14.2 $9.3
Excluding the impact of the charges noted above, adjusted net income for the full year of fiscal 2008 was $150.1 million, or $1.58 per share. For the full year of fiscal 2007, adjusted net income was $83.1 million, or $0.89 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 $375 million, up $117 million, or 46 percent, compared with $257 million last year. The sales increase included $75 million in new product revenue, led by Omeprazole and Cetirizine, as well as strong sales in the cough/cold, analgesic and smoking cessation product categories. Reported operating income was $52.1 million, compared with $13.8 million last year. Adjusted operating income was $56.9 million, compared with adjusted operating income of $15.7 million a year ago.
For the full year of fiscal 2008, Consumer Healthcare net sales were $1,336.1 million, up $298.8 million, or 29 percent, compared with $1,037.3 million last year. The sales gain was driven by new product sales of $191 million, largely Omeprazole, Cetirizine and smoking cessation products. Reported operating income was $172.7 million, compared with $70.5 million a year ago. Adjusted operating income was $180.7 million, compared with adjusted operating income of $73.4 million last year.
Rx Pharmaceuticals
The Rx Pharmaceutical segment reported fourth quarter net sales of $38.4 million, including $1.4 million of service and royalty revenue. This represents a decrease of $5.7 million, or 13 percent, compared with $44.1 million last year, of which $5.0 million was service and royalty revenue. There was a reported operating loss of $5.8 million as a result of a $10.3 million product-related intangible write-off.
For the full year of fiscal 2008, net sales were $161.3 million, including $24.3 million of service and royalty revenue and an $8.5 million payment for termination of a license agreement, an increase of $23.5 million, or 17 percent, compared with $137.8 million last year, of which $23.5 million was service and royalty revenue. Operating income was $21.4 million, slightly below last year's $24.0 million.
API
API segment fourth quarter net sales were $38.3 million, compared with $33.6 million last year, an increase of 14 percent. Operating income was $3.8 million, compared with $4.2 million last year. For the full year of fiscal 2008, net sales were $149.6 million, up $27.5 million, or 22 percent, from $122.1 million last year. Operating income was $20.5 million, compared with $19.1 million a year ago.
Other
The Other category, consisting of Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products segments, reported fourth quarter net sales of $48.8 million, compared with $39.3 million a year ago, an increase of 24 percent. Operating income was $2.1 million, compared with $1.1 million last year. For the full year of fiscal 2008, net sales were $175.2 million, up $25 million, or 17 percent, compared with $150.2 million last year. Operating income was $9.0 million, compared with $8.0 million last year.
Outlook
The Company's expected range of EPS for the full fiscal year 2009 is $1.90 to $1.98 per share. This outlook reflects certain key assumptions, some of which are listed below:
-- Revenue growth in the range of 13 to 18 percent -- Overall operating margins between 12 and 14 percent -- Full-year tax rate approximating 28 percent -- Cash from operations in the range of $210 million to $240 million -- Research & Development investment continuing at 4 percent of sales
-- Capital expenditures of $55 to $70 million for building manufacturing capacity, training and development facilities and other investments to fuel growth
Perrigo's Chairman and CEO Joseph C. Papa concluded, "We are very pleased with the results the Company achieved this year. The team's efforts resulted in the best sales and earnings in our 120 year history. The bar has been raised as we enter 2009, and we look forward to another successful year, growing the business while maintaining our focus on quality."
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 28, 2008, 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
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Fiscal Year
2008 2007 2006
Net sales $1,822,131 $1,447,428 $1,366,821
Cost of sales 1,271,170 1,052,402 972,380
Gross profit 550,961 395,026 394,441
Operating expenses
Distribution 31,023 28,426 27,334
Research and development 72,191 66,480 52,293
Selling and administration 245,169 191,336 191,870
Subtotal 348,383 286,242 271,497
Write-off of in-process
research and development 2,786 8,252 -
Restructuring 2,312 879 8,846
Total 353,481 295,373 280,343
Operating income 197,480 99,653 114,098
Interest, net 17,233 16,020 15,207
Other income, net (197) (5,421) (7,044)
Income before income taxes 180,444 89,054 105,935
Income tax expense 44,671 15,257 34,535
Net income $135,773 $73,797 $71,400
Earnings per share
Basic $1.46 $0.80 $0.77
Diluted $1.43 $0.79 $0.76
Weighted average shares outstanding
Basic 93,124 92,230 92,875
Diluted 95,210 93,807 94,105
Dividends declared per share $0.195 $0.178 $0.168
PERRIGO COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 28, June 30,
Assets 2008 2007
Current assets
Cash and cash equivalents $318,604 $30,305
Investment securities 560 49,110
Accounts receivable 350,272 282,045
Inventories 399,972 295,114
Current deferred income taxes 43,342 41,400
Income taxes refundable 6,883 -
Assets held for sale 2,746 2,746
Prepaid expenses and other current
assets 34,480 18,340
Total current assets 1,156,859 719,060
Property and equipment
Land 31,136 27,681
Buildings 258,224 238,471
Machinery and equipment 456,480 397,944
745,840 664,096
Less accumulated depreciation 388,945 333,024
356,895 331,072
Restricted cash 400,000 422,000
Goodwill 282,417 196,218
Other intangible assets 229,327 159,977
Non-current deferred income taxes 74,737 54,908
Other non-current assets 74,842 41,919
$2,575,077 $1,925,154
Liabilities and shareholders' equity
Current liabilities
Accounts payable $253,307 $164,318
Notes payable - 11,776
Payroll and related taxes 77,140 46,226
Accrued customer programs 53,668 48,218
Accrued liabilities 56,958 47,333
Accrued income taxes - 29,460
Current deferred income taxes 24,493 17,125
Current portion of long-term debt 20,095 15,381
Total current liabilities 485,661 379,837
Non-current liabilities
Long-term debt 895,095 650,762
Non-current deferred income taxes 139,212 103,775
Other non-current liabilities 121,394 36,311
Total non-current
liabilities 1,155,701 790,848
Shareholders' equity
Preferred stock, without par
value, 10,000 shares authorized - -
Common stock, without par value,
200,000 shares authorized 488,537 519,419
Accumulated other comprehensive
income 155,184 56,676
Retained earnings 289,994 178,374
Total shareholders' equity 933,715 754,469
$2,575,077 $1,925,154
Supplemental Disclosures of Balance
Sheet Information
Allowance for doubtful accounts $9,931 $9,421
Working capital $671,198 $339,223
Preferred stock, shares issued - -
Common stock, shares issued 93,311 93,395
PERRIGO COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year
2008 2007 2006
Cash Flows (For) From Operating
Activities
Net income $135,773 $73,797 $71,400
Adjustments to derive cash flows
Write-off of in-process
research and development 2,786 8,252 -
Depreciation and amortization 69,231 58,032 56,604
Asset impairment 10,346 2,034 7,783
Share-based compensation 8,469 8,953 9,485
Deferred income taxes 6,442 (1,371) (5,804)
Sub-total 233,047 149,697 139,468
Changes in operating assets and
liabilities, net of asset and
business acquisitions and
restructuring
Accounts receivable (38,742) (36,812) (31,085)
Inventories (72,480) 18,786 (31,681)
Income taxes refundable (6,883) - -
Accounts payable 67,638 (19,186) 38,312
Payroll and related taxes 27,046 (4,956) 12,173
Accrued customer programs 5,450 (1,316) 7,868
Accrued liabilities 4,085 2,063 (14,476)
Accrued income taxes 20,679 15,272 (10,277)
Other 8,467 5,375 16,229
Sub-total 15,260 (20,774) (12,937)
Net cash from operating
activities 248,307 128,923 126,531
Cash Flows (For) From Investing
Activities
Purchase of securities (176,298) (335,016) (60,773)
Proceeds from sales of securities 208,097 312,521 51,492
Issuance of note receivable - (1,000) (3,000)
Additions to property and
equipment (44,824) (45,014) (36,427)
Proceeds from sales of property
and equipment - 2,613 -
Acquisition of assets (12,401) (59,538) -
Acquisition of business, net of
cash (83,312) - -
Equity investment (12,500) - -
Net cash for investing
activities (121,238) (125,434) (48,708)
Cash Flows (For) From Financing
Activities
Repayments of short-term debt, net (11,776) (8,295) (5,287)
Borrowings of long-term debt 465,000 130,000 60,000
Repayments of long-term debt (225,801) (90,000) (95,000)
Tax effect of stock transactions 6,603 1,470 (861)
Issuance of common stock 32,210 15,362 8,056
Repurchase of common stock (78,164) (22,464) (28,330)
Cash dividends (18,219) (16,476) (15,613)
Net cash from (for)
financing activities 169,853 9,597 (77,035)
Net increase in cash and
cash equivalents 296,922 13,086 788
Cash and cash equivalents, at
beginning of period 30,305 19,018 16,707
Effect of exchange rate changes on
cash (8,623) (1,799) 1,523
Cash and cash equivalents, at end of
period $318,604 $30,305 $19,018
Supplemental Disclosures of Cash Flow
Information
Cash paid/received during the year
for:
Interest paid $37,111 $36,020 $34,741
Interest received $21,664 $20,079 $21,464
Income taxes paid $32,718 $12,896 $47,133
Income taxes refunded $7,693 $11,316 $7,939
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
Fourth Quarter Fiscal Year
2008 2007 2008 2007
Segment Sales
Consumer Healthcare $374,645 $257,272 $1,336,140 $1,037,305
Rx Pharmaceuticals 38,425 44,087 161,271 137,797
API 38,313 33,636 149,553 122,143
Other 48,818 39,301 175,167 150,183
Total $500,201 $374,296 $1,822,131 $1,447,428
Segment Operating Income
(Loss)
Consumer Healthcare $52,105 $13,752 $172,654 $70,522
-2034 -2034
Rx Pharmaceuticals (5,774) 6,949 21,386 23,996
API 3,752 4,221 20,475 19,072
Other 2,066 1,078 8,988 8,037
Unallocated expenses (10,312) (3,251) (23,237) (13,722)
-2.8% -1.3% -1.7% -1.3%
Write-off of in-process R&D - - (2,786) (8,252)
Total $41,837 $20,715 $197,480 $97,619
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
Fourth Quarter Fiscal Year
2008 2007 2008 2007
Net sales $500,201 $374,296 $1,822,131 $1,447,428
Reported gross profit $144,934 $106,167 $550,961 $395,026
Inventory step-up -
Glades - 4,573 - 4,573
Inventory step-up -
Galpharm 2,878 - 5,756 -
Impairment of intangible
asset 10,346 - 10,346 -
Adjusted gross profit $158,158 $110,740 $567,063 $399,599
Adjusted gross profit % 31.6% 29.6% 31.1% 27.6%
Restructuring (benefits)
costs - Michigan Plants - (2,034) - (2,034)
Reported operating income $41,837 $22,749 $197,480 $99,653
Inventory step-up -
Glades - 4,573 - 4,573
Inventory step-up -
Galpharm 2,878 - 5,756 -
0.6% 0.0% 0.3% 0.0%
Impairment of note
receivable - 2,034 - 2,034
Impairment of intangible
asset 10,346 - 10,346 -
Restructuring (benefits)
costs - Michigan Plants - (69) - 879
Restructuring costs -
West Coast 143 - 491 -
Restructuring costs -
United Kingdom 1,821 - 1,821 -
Write-off of in-process
R&D - Glades acquisition - - - 8,252
Write-off of in-process
R&D - Galpharm acquisition - - 2,786 -
Adjusted operating income $57,025 $29,287 $218,680 $115,391
Adjusted operating income % 11.4% 7.8% 12.0% 8.0%
Reported net income $27,498 $18,771 $135,773 $73,797
Inventory step-up -
Glades (5) - 2,675 - 2,675
Inventory step-up -
Galpharm (1) 2,072 - 4,144 -
Impairment of note
receivable (4) - 1,261 - 1,261
Impairment of intangible
asset (3) 6,518 - 6,518 -
Restructuring (benefits)
costs- Michigan Plants (2) - (44) - 563
Restructuring costs -
West Coast (3) 90 - 309 -
Restructuring costs -
United Kingdom (1) 1,311 - 1,311 -
Write-off of in-process
R&D - Glades acquisition (5) - - - 4,827
Write-off of in-process
R&D - Galpharm acquisition
(1) - - 2,006 -
Adjusted net income $37,489 $22,663 $150,061 $83,123
Diluted earnings per share
Reported $0.29 $0.20 $1.43 $0.79
Adjusted $0.39 $0.24 $1.58 $0.89
Diluted weighted average
shares outstanding 95,076 94,063 95,210 93,807
(1) Net of taxes at 28%
(2) Net of taxes at 36%
(3) Net of taxes at 37%
(4) Net of taxes at 38%
(5) Net of taxes at 41.5%
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
Fourth Quarter Fiscal Year
2008 2007 2008 2007
Consumer Healthcare
Net sales $374,645 $257,272 $1,336,140 $1,037,305
Reported gross profit $111,037 $62,490 $377,765 $237,942
Inventory step-up -
Galpharm 2,878 - 5,756 -
Adjusted gross profit $113,915 $62,490 $383,521 $237,942
Adjusted gross profit % 30.4% 24.3% 28.7% 22.9%
Reported operating
expenses $58,932 $48,738 $205,111 $167,420
Impairment of note
receivable - (2,034) - (2,034)
Restructuring benefits
(costs) - Michigan
Plants - 69 - (879)
Restructuring costs -
West Coast (143) - (491) -
Restructuring costs -
United Kingdom (1,821) - (1,821) -
Adjusted operating expenses $56,968 $46,773 $202,799 $164,507
Adjusted operating expenses % 15.2% 18.2% 15.2% 15.9%
Reported operating income $52,105 $13,752 $172,654 $70,522
Impairment of note
receivable - 2,034 - 2,034
Inventory step-up -
Galpharm 2,878 - 5,756 -
Restructuring (benefits)
costs - Michigan Plants - (69) - 879
Restructuring costs -
West Coast 143 - 491 -
Restructuring costs -
United Kingdom 1,821 - 1,821 -
Adjusted operating income $56,947 $15,717 $180,722 $73,435
Adjusted operating income % 15.2% 6.1% 13.5% 7.1%
Rx Pharmaceuticals
Net sales $38,425 $44,087 $161,271 $137,797
Reported gross profit $3,969 $16,331 $58,622 $57,762
Inventory step-up -
Glades - 4,573 - 4,573
Impairment of intangible
asset 10,346 - 10,346 -
Adjusted gross profit $14,315 $20,904 $68,968 $62,335
Adjusted gross profit % 37.3% 47.4% 42.8% 45.2%
Reported operating income
(loss) $(5,774) $6,949 $21,386 $23,996
Inventory step-up -
Glades - 4,573 - 4,573
Impairment of intangible
asset 10,346 - 10,346 -
Adjusted operating income $4,572 $11,522 $31,732 $28,569
Adjusted operating income % 11.9% 26.1% 19.7% 20.7%
Unallocated
Reported operating loss $(10,312) $(3,251) $(26,023) $(21,974)
Write-off of in-process
R&D - Glades acquisition - - - 8,252
Write-off of in-process
R&D - Galpharm
acquisition - - 2,786 -
Adjusted operating loss $(10,312) $(3,251) $(23,237) $(13,722)
First Call Analyst:
FCMN Contact: penny.bursma@perrigo.com
SOURCE: Perrigo Company
CONTACT: Arthur J. Shannon, Vice President, Investor Relations and
Communication, Perrigo Company, +1-269-686-1709, ajshannon@perrigo.com
Web site: http://www.perrigo.com/