Perrigo Company (NASDAQ: PRGO)(TASE: PRGO) today announced results for its fiscal year 2009 first quarter that ended September 27, 2008.
Perrigo Company
(in thousands, except per share amounts)
Fiscal 2009 Fiscal 2008
1st Quarter Ended 1st Quarter Ended
9/27/08 9/29/07
Net Sales $480,236 $382,740
Reported Net Income $37,958 $34,019
Adjusted Net Income $38,597 $34,019
Diluted EPS $0.40 $0.36
Adjusted Diluted EPS $0.41 $0.36
Diluted Shares 94,568 94,884
Net sales for the first quarter of fiscal 2009 were $480.2 million, an increase of 25 percent. Reported net income was $37.9 million, or $0.40 per share, compared with $34.0 million, or $0.36 per share, a year ago, an increase of 12 percent. Excluding a loss on the exchange of property of the Company's UK vitamin business, first quarter fiscal 2009 adjusted net income was $38.6 million, or $0.41 per share.
(Refer to Table II at the end of this press release for additional adjustments in the current year period and additional non-GAAP disclosure information.)
Perrigo Chairman and CEO Joseph C. Papa stated, "Fiscal 2009 is off to the strong start we had anticipated. In the first quarter, we achieved both record sales and record earnings, with our new products contributing $71 million to top line growth. This past quarter, the over-the-counter (OTC) category grew more than 4% versus first quarter last year. In the same period, store brands grew nearly 13%. We believe that store brand offerings will continue to perform well as consumers realize the value of Perrigo's product offering in this challenging economy."
Consumer Healthcare
Consumer Healthcare segment net sales in the first quarter were a record $366.2 million compared with $268.3 million in the first quarter last year, an increase of $97.9 million or 37 percent. The sales increase resulted from $66.8 million in revenue from new product sales led by Omeprazole, several Cetirizine products and the newly launched Famotidine Complete.
Reported operating income was $59.1 million, compared with $30.0 million a year ago as a result of increased sales from new products and international growth.
On August 11, the Company announced it began shipping Famotidine Complete chewable tablets (famotidine 10 mg; calcium carbonate 800mg; magnesium hydroxide 165 mg), the national brand equivalent to Pepcid Complete®, to customers across the U.S. under their store brand labels. It is estimated that Pepcid Complete® has annual sales of approximately $100 million. The new store brand product is indicated for heartburn associated with acid indigestion and sour stomach.
On September 16, the Company announced that it acquired JB Laboratories for approximately $44 million, which includes debt assumed. Based in Holland, Michigan, privately-held JB Laboratories is a contract manufacturer of OTC and nutrition products for leading healthcare suppliers. The acquisition is expected to add more than $70 million of annual sales. Revenues and income related to this transaction will first be reflected in the second quarter 2009 financial statements.
On September 18, the Company announced that the Hatch-Waxman litigation relating to Miconazole Nitrate Vaginal Cream and Suppository between Johnson & Johnson and Perrigo was dismissed. Following FDA approval, Perrigo will begin marketing its product under store brand and value brand labels to its customers. Monistat® -1 has annual retail sales of approximately $80 million. Upon receiving final regulatory approval, Perrigo expects to launch this product with 180 day first-to-file exclusivity.
Rx Pharmaceuticals
The Rx Pharmaceutical segment net sales were $33.2 million compared with $35.0 million a year ago. Operating income was $1.8 million, compared with $7.4 million last year. This year's results included service and royalty revenues of $1.6 million down from $5.8 million last year.
On September 8, the Company announced that it acquired the exclusive rights to sell and distribute Levocetirizine tablets, the generic version of UCB's Xyzal® tablets, from Synthon Pharmaceuticals, Inc. Synthon believes it has a first to file Abbreviated New Drug Application (ANDA) that will entitle it to 180 days of generic exclusivity upon approval. Synthon and UCB are currently engaged in Paragraph IV/Hatch-Waxman litigation over the Synthon ANDA filing. Xyzal® is indicated for the treatment of indoor and outdoor allergies. It is estimated that it has annual sales of approximately $200 million growing at 15% per year, according to data provided by Wolters, Kluwer.
API
The API segment reported net sales of $34.2 million compared with $38.8 million a year ago, reflecting lower sales in several key products. Operating income was $0.4 million, compared with $7.3 million last year, reflecting lower sales volume, an unfavorable sales mix and higher production costs.
Other
The Other category, consisting of Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products segments, reported net sales of $46.6 million, compared with $40.7 million a year ago. Operating income was $1.2 million, compared with $2.6 million last year.
Unallocated Expenses
In the fiscal 2009 first quarter, unallocated expenses were $3.9 million compared with $0.7 million a year ago. The increase was due primarily to the absence this year of a favorable legal settlement in the first quarter last year.
Perrigo's Chairman and CEO Joseph C. Papa concluded, "We are truly in the right place at the right time. I am very pleased with the momentum we have built and our strong balance sheet. We are confident in our ability to generate strong operating cash flow in the remainder of the year as seasonal inventory builds are sold through. Given our strong start to the year and our recent acquisitions, we are increasing our full year earnings guidance. We are now estimating adjusted earnings between $1.92 and $2.00 per share, excluding the $0.6 million loss on the exchange of property in the UK. Reported earnings per share are expected to be between $1.91 and $1.99 per share. Looking ahead, Perrigo will continue to make quality healthcare more affordable for our customers and drive value for our shareholders."
Perrigo will host a conference call to discuss fiscal 2009 first quarter results at 10:00 a.m. (ET) on Thursday, November 6. The conference call will be available live via web cast to interested parties on the Perrigo website http://www.perrigo.com/ or by phone 888-694-4676, International 404-665-9919, and reference ID# 70124252. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Thursday, November 6, until midnight Friday, November 14, 2008. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 70124252.
Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
First Quarter
2009 2008
Net sales $480,236 $382,740
Cost of sales 336,021 265,469
Gross profit 144,215 117,271
Operating expenses
Distribution 7,969 7,074
Research and development 18,224 16,320
Selling and administration 59,341 47,218
Total 85,534 70,612
Operating income 58,681 46,659
Interest, net 5,846 4,655
Other (income) expense, net 115 (573)
Income before income taxes 52,720 42,577
Income tax expense 14,762 8,558
Net income $37,958 $34,019
Earnings per share
Basic $0.41 $0.37
Diluted $0.40 $0.36
Weighted average shares outstanding
Basic 92,787 93,142
Diluted 94,568 94,884
Dividends declared per share $0.050 $0.045
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 27, June 28, September 29,
2008 2008 2007
Assets (unaudited) (unaudited)
Current assets
Cash and cash equivalents $249,328 $318,604 $46,837
Investment securities 14 560 32,487
Accounts receivable, net 340,138 350,272 283,443
Inventories 448,386 399,972 314,597
Current deferred income taxes 44,477 43,342 41,372
Income taxes refundable 468 6,883 5,596
Prepaid expenses and other
current assets 25,863 37,226 23,010
Total current assets 1,108,674 1,156,859 747,342
Property and equipment 747,235 745,840 665,239
Less accumulated depreciation (381,468) (388,945) (343,033)
365,767 356,895 322,206
Restricted cash 400,000 400,000 400,000
Goodwill 262,195 282,417 199,730
Other intangible assets 223,460 229,327 187,467
Non-current deferred income taxes 63,130 74,737 49,184
Other non-current assets 70,145 74,842 40,723
$2,493,371 $2,575,077 $1,946,652
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $270,614 $253,307 $170,639
Notes payable - - 11,677
Payroll and related taxes 51,506 77,140 38,425
Accrued customer programs 50,025 53,668 48,638
Accrued liabilities 52,703 56,958 44,142
Current deferred income taxes 18,839 24,493 15,214
Current portion of long-term debt 21,163 20,095 15,314
Total current liabilities 464,850 485,661 344,049
Non-current liabilities
Long-term debt 893,433 895,095 642,629
Non-current deferred income taxes 130,234 139,212 101,424
Other non-current liabilities 116,596 121,394 87,324
Total non-current liabilities 1,140,263 1,155,701 831,377
Shareholders' equity
Preferred stock, without par value,
10,000 shares authorized - - -
Common stock, without par value,
200,000 shares authorized 468,798 488,537 521,117
Accumulated other comprehensive
income 96,167 155,184 47,864
Retained earnings 323,293 289,994 202,245
Total shareholders' equity 888,258 933,715 771,226
$2,493,371 $2,575,077 $1,946,652
Supplemental Disclosures of Balance
Sheet Information
Allowance for doubtful accounts $9,531 $9,931 $8,622
Working capital $643,824 $671,198 $403,293
Preferred stock, shares issued - - -
Common stock, shares issued 92,891 93,311 93,566
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
First Quarter
2009 2008
Cash Flows (For) From Operating Activities
Net income $37,958 $34,019
Adjustments to derive cash flows
Depreciation and amortization 16,767 15,570
Share-based compensation 2,754 1,958
Income tax benefit from
exercise of stock options 345 705
Excess tax benefit of stock
transactions (1,685) (570)
Deferred income taxes (13,677) 710
Sub-total 42,462 52,392
Changes in operating assets and
liabilities, net of asset and business
acquisitions and restructuring
Accounts receivable 15,669 (3,389)
Inventories (40,317) (21,356)
Income taxes refundable (468) (6,883)
Accounts payable 7,259 7,665
Payroll and related taxes (29,037) (7,437)
Accrued customer programs (3,643) 420
Accrued liabilities (4,471) (3,584)
Accrued income taxes 6,228 9,729
Other 7,285 (563)
Sub-total (41,495) (25,398)
Net cash from operating activities 967 26,994
Cash Flows (For) From Investing
Activities
Purchase of securities - (73,418)
Proceeds from sales of securities - 89,182
Cash acquired in asset exchange 2,115 -
Acquisition of business, net of
cash acquired (14,839) -
Acquisition of intangible assets (1,000) (12,401)
Additions to property and equipment (5,913) (4,364)
Net cash for investing activities (19,637) (1,001)
Cash Flows (For) From Financing Activities
Repayments of short-term debt, net (11,006) (99)
Borrowings of long-term debt - 30,000
Repayments of long-term debt (14,287) (38,000)
Excess tax benefit of stock transactions 1,685 570
Issuance of common stock 5,481 4,155
Repurchase of common stock (29,314) (4,280)
Cash dividends (4,659) (4,214)
Net cash for financing activities (52,100) (11,868)
Net increase (decrease) in
cash and cash equivalents (70,770) 14,125
Cash and cash equivalents, at
beginning of period 318,604 30,305
Effect of exchange rate changes on cash 1,494 2,407
Cash and cash equivalents, at end
of period $249,328 $46,837
Supplemental Disclosures of Cash
Flow Information
Cash paid/received during the period for:
Interest paid $9,860 $11,254
Interest received $7,209 $5,189
Income taxes paid $12,050 $3,612
Income taxes refunded $1,016 $1,003
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
First Quarter
2009 2008
Segment Sales
Consumer Healthcare $366,202 $268,259
Rx Pharmaceuticals 33,175 34,960
API 34,243 38,814
Other 46,616 40,707
Total $480,236 $382,740
Segment Operating Income (Loss)
Consumer Healthcare $59,115 $30,018
Rx Pharmaceuticals 1,784 7,445
API 435 7,276
Other 1,249 2,630
Unallocated expenses (3,902) (710)
Total $58,681 $46,659
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter
2009 2008
Net sales $480,236 $382,740
Reported operating income $58,681 $46,659
Loss on asset exchange 639 -
Adjusted operating income $59,320 $46,659
Adjusted operating income % 12.4% 12.2%
Reported net income $37,958 $34,019
Loss on asset exchange (1) 639 -
Adjusted net income $38,597 $34,019
Diluted earnings per share
Reported $0.40 $0.36
Adjusted $0.41 $0.36
Diluted weighted average shares outstanding 94,568 94,884
(1) No tax impact
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter
2009 2008
Consumer Healthcare
Net sales $366,202 $268,259
Reported operating expenses $50,192 $42,338
Loss on asset exchange (639) -
Adjusted operating expenses $49,553 $42,338
Adjusted operating expenses % 13.5% 15.8%
Reported operating income $59,115 $30,018
Loss on asset exchange 639 -
Adjusted operating income $59,754 $30,018
Adjusted operating income % 16.3% 11.2%
Table III
2009 GUIDANCE
RECONCILIATION OF NON-GAAP MEASURES
(unaudited)
Full Year
Fiscal 2009 Guidance
Reported earnings per share range $1.91 - $1.99
Loss on asset exchange $0.007
Charge associated with
inventory step-up $0.002
Adjusted earnings per share range $1.92 - $2.00
First Call Analyst:
FCMN Contact: penny.bursma@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/