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Perrigo Reports Record Revenue, Profit For Fiscal Year

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Allegan-based Perrigo Co. (Nasdaq: PRGO) reported record revenue of $2.76 billion for its fiscal year ended June 25, up 21 percent or $487 million from $2.27 billion a year earlier.

Sales for the fourth quarter were $704.6 million, up from $619.8 million a year earlier.

Net income for the fiscal year was $340.6 million or $4.01 a share, up from $224.4 million or $3.03 a share a year earlier. For the fourth quarter, net income was $85.6 million or $1.02 a share, up from $49 million or 77 cents a share a year earlier.

“For the fifth straight year, we delivered year-over-year record sales, earnings and cash flow from operations, while at the same time making meaningful investments in the facilities, production and people necessary to further enhance our own already high standards of excellent product quality,” said Perrigo chairman and CEO Joseph C. Papa. “In addition, we announced the acquisition of Paddock Laboratories and the entry into blood glucose monitoring category that broaden our product offering. We are continuing along our strategic path in these challenging economic times to make quality healthcare more affordable to consumers around the globe.”

The company reported record full year cash flow from operations of $374 million.

Looking ahead, the company said it expects fiscal 2012 earnings per share of $3.79 to $3.94, up 4 to 8 percent from this year.

Consumer Healthcare segment net sales in the fourth quarter were $434 million, compared with $399 million in the fourth quarter last year, an increase of $35 million or 9 percent. The increase resulted from $18 million of new product sales, $12 million of higher sales volumes of existing products and approximately $5 million due to the impact of favorable changes in foreign currency exchange rates. Reported gross profit was $133 million, compared to $131 million a year ago. Adjusted gross profit was $134 million compared to $133 million a year ago. Adjusted gross margin decreased 220 basis points to 31 percent, largely driven increased investments in quality systems and lower manufacturing efficiencies year over year due to production process redesigns. Reported operating income was $74 million, compared with $69 million a year ago, and adjusted operating income was approximately $77 million compared to approximately $71 million a year ago. Adjusted operating margin remained constant at 17.9 percent compared to last year.

For fiscal year 2011, Consumer Healthcare net sales increased $111 million or 7 percent compared to fiscal 2010. The increase resulted from $51 million of higher sales volumes of existing products, primarily in the analgesics and cough-and-cold categories, $54 million of new product sales, and $22 million of sales attributable to the acquisition of Orion, as well as an approximate $7 million favorable impact from changes in foreign currency exchange rates. These increases were partially offset by a decline of $22 million in sales of existing products, primarily in the contract manufacturing and gastrointestinal categories. Reported gross profit was $531 million, compared to $523 million a year ago. Adjusted gross profit was $535 million, compared to $526 million a year ago. Adjusted gross margin decreased 180 basis points to 31.7 percent, driven by increased manufacturing and inventory costs related to quality improvement initiatives at our Michigan facilities. Reported operating income was $293 million, compared with $304 million a year ago, and adjusted operating income was approximately $303 million, compared to $310 million a year ago. Adjusted operating margin decreased 170 basis points to 18 percent.

Nutritionals segment fourth quarter net sales were $123 million, compared to $84 million last year, an increase of 47 percent. This increase was due to the inclusion of a full quarter of sales from the PBM acquisition. Reported gross profit was $37 million, compared to $15 million a year ago, while adjusted gross margin increased 190 basis points to 32.9 percent. This increase was also due to the PBM acquisition. Reported operating income was $12 million, up from a loss of $1 million a year ago. Adjusted operating income increased to approximately $18 million, up from $12 million a year ago, as the adjusted operating margin percentage remained flat at 14.3 percent.

For fiscal year 2011, Nutritionals net sales increased 94 percent to $503 million compared to $259 million in fiscal 2010 due to the PBM acquisition, which added incremental revenues of $283 million, including approximately $9 million in new product sales. New product sales within VMS (Vitamins, Minerals and Supplements) were approximately $8 million. The increase was offset by a decline of $46 million due primarily to SKU rationalization within VMS. Reported gross profit was $159 million, compared to approximately $39 million a year ago, while adjusted gross profit was $171 million, compared to $50 million a year ago. Adjusted gross margin increased 1,480 basis points to 34 percent, due largely to the acquisition of PBM, along with operational improvements within VMS. Reported operating income was $68 million, compared with $2 million a year ago, and adjusted operating income was $91 million, compared to $17 million a year ago. Adjusted operating margin increased 1,140 basis points to 18.1 percent.

The Prescription Pharmaceuticals segment fourth quarter net sales were $92 million, compared with $83 million a year ago, an increase of 12 percent. This increase was due primarily to new product sales of $10 million. Reported gross profit was $50 million, compared to approximately $31 million a year ago. Gross margin increased 1,760 basis points to 54.4 percent as a result of the company switching from selling the authorized generic of imiquimod cream to its own product. Reported operating income was $38 million, an increase of $25 million from last year, and adjusted operating income was $41 million, compared to $21 million a year ago. Adjusted operating margin increased 1,910 basis points from last year to 44.6 percent.

For fiscal year 2011, net sales for the Prescription Pharmaceuticals segment increased 45 percent over fiscal 2010 to $344 million from $238 million. The increase was due primarily to new product sales of $81 million, due largely to sales of the generic version of Aldara, along with favorable pricing on select products. Reported gross profit was $163 million, compared to $108 million a year ago. Adjusted gross profit was $174 million, compared to $119 million a year ago. Adjusted gross margin increased 60 basis points to 50.7 percent due to new product sales, favorable pricing on select products, and gross profit from higher sales volumes of existing products. Reported operating income was $120 million, compared with approximately $49 million a year ago, and adjusted operating income was $131 million, compared to $78 million a year ago. Adjusted operating margin increased 520 basis points to 38.2 percent.

The API segment reported fourth quarter net sales of $37 million, compared with $39 million a year ago. Reported operating income decreased approximately $1 million to $6 million, while adjusted operating income decreased $2 million compared to last year. Adjusted operating margin decreased 500 basis points to 19.3 percent.

For fiscal year 2011, net sales increased 11 percent or $16 million over fiscal 2010, to $156 million. Reported operating income increased approximately $23 million over last year, and adjusted operating income increased $14 million over last year to $40 million. The increases were due largely to new product sales of $32 million, driven primarily by temozolomide sales in Europe. Sales were offset by decreased sales volumes of existing products, a decrease in revenues related to the sale of dossier agreements and unfavorable changes in foreign currency exchange rates. Adjusted operating margin increased 730 basis points to 25.9 percent.

Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported fourth quarter net sales of $18 million compared with $15 million a year ago. The segment reported adjusted operating income of $600,000, compared to $1 million a year ago. Net sales for fiscal 2011 increased 17 percent to $67 million, up from approximately $58 million a year ago. Adjusted operating income for the segment was $3 million compared to approximately $5 million for fiscal 2010.

To listen to a replay of the conference call discussing the results, call (800) 642-1687 in the United States or (706) 645-9291 elsewhere, using access code 84462142.

Perrigo develops, manufactures and distributes over-the-counter and generic prescription  pharmaceuticals, infant formulas, nutritional products, and active pharmaceutical ingredients. The company is the world’s largest manufacturer of over-the-counter pharmaceutical products and infant formulas, both for the store brand market. The company’s primary markets and locations of manufacturing and logistics operations are the United States, Israel, Mexico, the United Kingdom and Australia.

More at www.perrigo.com.

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