-- Fiscal first quarter revenue from continuing operations increased $72
million, or 16%, to $528 million
-- Fiscal first quarter GAAP income from continuing operations increased
59% to $61 million, or $0.65 per share
-- Record first quarter cash flow from operations of $38 million
-- Management raises full-year fiscal 2010 adjusted earnings from
continuing operations to $2.35-$2.45 per share from previously
announced $2.00-$2.12 per share
Perrigo Company (NASDAQ: PRGO)(TASE: PRGO) today announced results for its first quarter ended September 26, 2009.
Perrigo's Chairman and CEO Joseph C. Papa commented, "We delivered record earnings for the quarter, with strong performance across all business segments. Cash flow from operations continues to be strong as we generated $38 million during a period when we are preparing for the cough, cold, flu season. Store brands grew nearly 13% during a period when the over-the-counter (OTC) category grew only 3%. Rx sales continued to gain market share as a result of our strong investment in quality and high customer service levels along with the continued growth of over-the-counter Rx (ORx) sales. We continue to make quality healthcare more affordable at a time when consumers need to save money more than ever."
The Company's reported results are summarized in the attached Condensed Consolidated Statements of Income, Balance Sheets and Cash Flows. As part of management's continued strategic review of its portfolio of businesses, in the past fiscal year, it committed to a plan to sell its Israel Consumer Products business. The results of this business are reflected in the condensed consolidated financial statements as discontinued operations for all periods presented.
Perrigo Company
(from continuing operations, in thousands, except per share amounts)
(see the attached Table II for reconciliation to GAAP numbers)
Fiscal 2010 Fiscal 2009
First Quarter Ended First Quarter Ended
9/26/2009 9/27/2008
--------- ---------
Net Sales $528,001 $455,548
Reported Income $61,025 $38,307
Adjusted Income $61,184 $38,946
Reported Diluted EPS $0.65 $0.41
Adjusted Diluted EPS $0.66 $0.41
Diluted Shares 93,396 94,568
First Quarter Results
Net sales from continuing operations for the first quarter of fiscal 2010 were $528 million, an increase of 16%. Reported income from continuing operations was $61 million, or $0.65 per share, a strong increase over $38 million, or $0.41 per share, a year ago. Excluding the charge as outlined in Table II at the end of this release, first quarter fiscal 2010 adjusted income from continuing operations was $61 million, or $0.66 per share.
Consumer Healthcare
Consumer Healthcare segment net sales in the first quarter were $437 million compared with $366 million in the first quarter last year, an increase of $71 million or 19%. The increase resulted from approximately $49 million of new products and higher volume of existing products primarily in the gastrointestinal, smoking cessation, analgesics, and cough/cold categories and approximately $36 million of incremental sales from the acquisitions of JB Laboratories, Unico and Diba. These increases were partially offset by approximately $10 million in unfavorable changes in foreign currency exchange rates and a decline of approximately $4 million in sales from exited products. Reported operating income was $71 million, compared with $59 million a year ago, largely driven by increased sales and favorable product mix. Reported operating margin remained strong, up 20 basis points to 16.3% due to improved operating expense leverage.
On October 6, 2009, the Company announced that it had received final approval from the U.S. Food and Drug Administration (FDA) to market OTC Polyethylene Glycol 3350, the store brand equivalent of MiraLAX®.
Rx Pharmaceuticals
The Rx Pharmaceuticals segment first quarter net sales were $47 million compared with $33 million a year ago, an increase of 42%. The increase in sales was driven by increased volume of existing products and strong performance in our over-the-counter Rx business. Reported operating income was $14 million, an increase of $12 million from last year, due to strong gross margins, which increased from 33.1% last year to 47.5% during the first quarter fiscal 2010. In addition, strong cost management reduced operating expenses by $1 million or 1050 basis points as a percent to sales.
On August 3, 2009, the Company announced that its partner Teva Pharmaceutical Industries Ltd. had received final approval from the FDA to market Triamcinolone Acetonide Nasal Spray containing a paragraph IV certification. Perrigo's partner Teva was the first applicant to file a complete Abbreviated New Drug Application (ANDA) with a Paragraph IV certification for NASACORT® AQ.
On September 21, 2009, the Company announced that its Israeli subsidiary acquired the ANDA for the generic form of Duac® gel from KV Pharmaceutical for $14 million in cash and a $2 million milestone payment to be made upon the successful completion of a contingency. KV Pharmaceutical was the first to file its ANDA. Excluding the milestone payment, the Company anticipates the full amount of the purchase price, which relates to acquired research and development, will be charged to expense in the second quarter of fiscal 2010 in accordance with U.S. accounting principles.
On October 16, 2009, the Hatch-Waxman litigation relating to Duac® gel filed by the Stiefel Laboratories division of GlaxoSmithKline was dismissed with prejudice.
API
The API segment reported first quarter net sales of $30 million compared with $34 million a year ago. The decrease was due primarily to a decline of existing product sales and unfavorable changes in foreign currency exchange rates. The decreases were partially offset by new product sales. Reported operating income increased $3 million or 762% due to improved sales mix and operational efficiencies.
Other
Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported first quarter net sales of approximately $14 million compared with $22 million a year ago. The decrease was due primarily to the loss of a customer contract, as well as a $1 million impact from unfavorable foreign currency exchange rates. Reported operating income was $1 million, down from $2 million last year. The decrease in reported operating income was due primarily to the previously discussed loss of a customer contract. Reported operating margin increased 50 basis points to 8.8% from 8.3% last year.
Guidance
Chairman and CEO Joseph C. Papa concluded, "Fiscal 2010 is off to a very strong start. We achieved all-time record earnings in a macroeconomic environment that is favorable to Perrigo's business model. All of our segments are executing well with no one single product or division driving these strong results. Reported fiscal 2010 earnings from continuing operations are expected to be between $2.22 and $2.32 per share. Excluding the charges outlined in Table III at the end of this release, we now expect fiscal 2010 adjusted earnings from continuing operations to be between $2.35 and $2.45 per share, up from our previously announced $2.00-$2.12 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 26% to 31% over fiscal 2009 adjusted EPS."
Perrigo will host a conference call to discuss fiscal 2010 first quarter results at 10:00 a.m. (ET) on Monday, November 2. The conference call will be available live via webcast to interested parties on the Perrigo website http://www.perrigo.com/ or by phone 877-248-9413, International 973-582-2737 and reference ID# 35823113. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Monday, November 2, until midnight Tuesday, November 10, 2009. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 35823113.
Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, nutritional products, active pharmaceutical ingredients (API) and pharmaceutical and medical diagnostic 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 and logistics operations 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 27, 2009, 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
-------------
2010 2009
---- ----
Net sales $528,001 $455,548
Cost of sales 364,007 319,561
------- -------
Gross profit 163,994 135,987
------- -------
Operating expenses
Distribution 6,521 6,268
Research and development 18,497 18,224
Selling and administration 52,407 52,408
------ ------
Total 77,425 76,900
------ ------
Operating income 86,569 59,087
Interest, net 6,663 5,986
Other expense, net 1,017 307
----- ---
Income from continuing operations before
income taxes 78,889 52,794
Income tax expense 17,864 14,487
------ ------
Income from continuing operations 61,025 38,307
Income (loss) from discontinued operations,
net of tax 273 (349)
--- ----
Net income $61,298 $37,958
======= =======
Earnings (loss) per share (1)
Basic
Continuing operations $0.66 $0.41
Discontinued operations 0.00 (0.00)
---- -----
Basic earnings per share $0.67 $0.41
Diluted
Continuing operations $0.65 $0.41
Discontinued operations 0.00 (0.00)
---- -----
Diluted earnings per share $0.66 $0.40
Weighted average shares outstanding
Basic 92,044 92,787
Diluted 93,396 94,568
Dividends declared per share $0.055 $0.050
(1) The sum of individual per share amounts may not equal due
to rounding.
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 26, June 27, September 27,
2009 2009 2008
---- ---- ----
Assets
Current assets
Cash and cash equivalents $256,528 $316,133 $249,302
Investment securities 561 3 14
Accounts receivable, net 332,785 325,810 312,061
Inventories 383,988 384,794 421,741
Current deferred income taxes 47,353 41,941 43,591
Income taxes refundable 6,719 8,926 10,625
Prepaid expenses and other
current assets 24,257 23,658 25,749
Current assets of
discontinued operations 74,558 51,699 56,745
------ ------ ------
Total current assets 1,126,749 1,152,964 1,119,828
Property and equipment 783,208 763,951 724,401
Less accumulated depreciation (420,952) (409,634) (374,393)
-------- -------- --------
362,256 354,317 350,008
Restricted cash 400,000 400,000 400,000
Goodwill and other indefinite-lived
intangible assets 275,175 268,819 267,091
Other intangible assets, net 212,233 214,207 214,740
Non-current deferred income taxes 69,133 74,438 63,912
Other non-current assets 53,505 49,756 61,567
Non-current assets of
discontinued operations - 21,854 28,161
--- ------ ------
$2,499,051 $2,536,355 $2,505,307
========== ========== ==========
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable $225,850 $271,537 $253,654
Payroll and related taxes 54,562 54,196 46,405
Accrued customer programs 60,160 54,461 49,742
Accrued liabilities 55,534 61,704 51,434
Accrued income taxes 18,487 3,334 11,154
Current deferred income taxes 19,470 18,528 18,838
Current portion of long-term
debt 17,975 17,181 21,163
Current liabilities of
discontinued operations 22,678 19,620 23,614
------ ------ ------
Total current
liabilities 474,716 500,561 476,004
Non-current liabilities
Long-term debt, less current
portion 825,000 875,000 893,433
Non-current deferred income
taxes 128,406 139,916 129,195
Other non-current
liabilities 98,933 86,476 111,731
Non-current liabilities of
discontinued operations - 11,933 6,686
--- ------ -----
Total non-current
liabilities 1,052,339 1,113,325 1,141,045
Shareholders' equity
Controlling interest
shareholders' equity:
Preferred stock, without par
value, 10,000 shares
authorized - - -
Common stock, without par
value, 200,000 shares
authorized 435,278 452,243 468,798
Accumulated other
comprehensive income 59,650 50,592 96,167
Retained earnings 475,278 419,086 323,293
------- ------- -------
970,206 921,921 888,258
Noncontrolling interest 1,790 548 -
----- --- ---
Total shareholders'
equity 971,996 922,469 888,258
------- ------- -------
$2,499,051 $2,536,355 $2,505,307
========== ========== ==========
Supplemental Disclosures of
Balance Sheet Information
Related to Continuing Operations
Allowance for doubtful
accounts $13,295 $11,394 $7,390
Working capital $600,153 $620,324 $610,693
Preferred stock, shares
issued and
outstanding - - -
Common stock, shares
issued and
outstanding 91,779 92,209 92,891
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
First Quarter
-------------
2010 2009
---- ----
Cash Flows From (For) Operating Activities
Net income $61,298 $37,958
Adjustments to derive cash flows
Depreciation and amortization 17,737 16,767
Share-based compensation 2,917 2,754
Income tax benefit from exercise of
stock options 647 345
Excess tax benefit of stock
transactions (2,430) (1,685)
Deferred income taxes (13,752) (13,677)
------- -------
Sub-total 66,417 42,462
------ ------
Changes in operating assets and
liabilities, net of asset and
business acquisitions
Accounts receivable (5,455) 15,669
Inventories 2,260 (40,317)
Income taxes refundable (2,345) (468)
Accounts payable (47,827) 7,259
Payroll and related taxes (966) (29,037)
Accrued customer programs 5,769 (3,643)
Accrued liabilities (4,954) (4,471)
Accrued income taxes 30,483 6,228
Other (5,838) 7,285
------ -----
Sub-total (28,873) (41,495)
------- -------
Net cash from operating activities 37,544 967
------ ---
Cash Flows (For) From Investing Activities
Cash acquired in asset exchange - 2,115
Acquisition of business, net of cash
acquired (10,059) (14,839)
Acquisition of assets (4,610) -
Acquisition of intangible assets (500) (1,000)
Additions to property and equipment (7,156) (5,913)
------ ------
Net cash for investing activities (22,325) (19,637)
------- -------
Cash Flows (For) From Financing Activities
Repayments of short-term debt, net - (11,006)
Repayments of long-term debt (50,000) (14,287)
Excess tax benefit of stock transactions 2,430 1,685
Issuance of common stock 3,620 5,481
Repurchase of common stock (25,286) (29,314)
Cash dividends (5,106) (4,659)
------ ------
Net cash for financing activities (74,342) (52,100)
------- -------
Effect of exchange rate changes on cash (481) 1,494
---- -----
Net decrease in cash and cash
equivalents (59,604) (69,276)
Cash and cash equivalents of continuing
operations, beginning of period 316,133 318,599
Cash balance of discontinued operations,
beginning of period 4 5
--- ---
Cash and cash equivalents, end of period 256,533 249,328
Less cash balance of discontinued
operations, end of period (5) (26)
-- ---
Cash and cash equivalents of continuing
operations, end of period $256,528 $249,302
======== ========
Supplemental Disclosures of Cash Flow
Information Cash paid/received during
the period for:
Interest paid $8,470 $9,860
Interest received $5,363 $7,209
Income taxes paid $3,515 $12,050
Income taxes refunded $938 $1,016
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
First Quarter*
--------------
2010 2009
---- ----
Segment Net Sales
Consumer Healthcare $437,321 $366,202
Rx Pharmaceuticals 47,077 33,175
API 30,056 34,243
Other 13,547 21,928
------ ------
Total $528,001 $455,548
======== ========
Segment Operating Income
(Loss)
Consumer Healthcare $71,360 $59,115
Rx Pharmaceuticals 14,260 1,784
API 3,750 435
Other 1,194 1,816
Unallocated expenses (3,995) (4,063)
------ ------
Total $86,569 $59,087
======= =======
*All information based on continuing operations.
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter*
--------------
2010 2009 % Change
---- ---- ---------
Net sales $528,001 $455,548 16%
Reported gross profit $163,994 $135,987 21%
Inventory step-up 212 -
--- ---
Adjusted gross profit $164,206 $135,987 21%
======== ========
Adjusted gross profit % 31.1% 29.9%
Reported operating expenses $77,425 $76,900 1%
Loss on asset exchange - (639)
--- ----
Adjusted operating expenses $77,425 $76,261 2%
======= =======
Adjusted operating expenses % 14.7% 16.7%
Reported operating income $86,569 $59,087 47%
Inventory step-up 212 -
Loss on asset exchange - 639
--- ---
Adjusted operating income $86,781 $59,726 45%
======= =======
Adjusted operating income % 16.4% 13.1%
Reported income from continuing
operations $61,025 $38,307 59%
Inventory step-up (1) 159 -
Loss on asset exchange (2) - 639
--- ---
Adjusted income from continuing
operations $61,184 $38,946 57%
======= =======
Diluted earnings per share from
continuing operations
Reported $0.65 $0.41 59%
Adjusted $0.66 $0.41 61%
Diluted weighted average shares
outstanding 93,396 94,568
(1) Net of taxes at 25%
(2) No tax impact
*All information based on continuing operations.
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands)
(unaudited)
First Quarter*
--------------
2010 2009 % Change
---- ---- ---------
Consumer Healthcare
Net sales $437,321 $366,202 19%
Reported operating expenses $55,029 $50,192 10%
Loss on asset exchange - (639)
--- ----
Adjusted operating expenses $55,029 $49,553 11%
======= =======
Adjusted operating expenses % 12.6% 13.5%
Reported operating income $71,360 $59,115 21%
Loss on asset exchange - 639
--- ---
Adjusted operating income $71,360 $59,754 19%
======= =======
Adjusted operating income % 16.3% 16.3%
Other
Net sales $13,547 $21,928 -38%
Reported gross profit $4,653 $6,555
Inventory step-up 212 -
--- ---
Adjusted gross profit $4,865 $6,555 -26%
====== ======
Adjusted gross profit % 35.9% 29.9%
Reported operating income $1,194 $1,816 -34%
Inventory step-up 212 -
--- ---
Adjusted operating income $1,406 $1,816 -23%
====== ======
Adjusted operating income % 10.4% 8.3%
*All information based on continuing operations.
Table III
FY 2010 GUIDANCE
RECONCILIATION OF NON-GAAP MEASURES
(unaudited)
Full Year
Fiscal 2010 Guidance
--------------------
Reported earnings per share from
continuing operations range $2.22 - $2.32
Charge associated with inventory
step-up $0.005
Charge associated with acquired
research and development $0.123
------
Adjusted earnings per share from
continuing operations range $2.35 - $2.45
===============
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 Daniel B. Willard,
Manager, Investor Relations and Communication, +1-269-686-1597,
dbwillard@perrigo.com
Web Site: http://www.perrigo.com/