Perrigo Reports Record Quarterly Revenue, Profit

ALLEGAN — The generic drug and health and beauty product manufacturer Perrigo Co. (Nasdaq: PRGO) Tuesday reported record revenue and profit for the second fiscal quarter ended Dec. 31.

Fiscal second quarter revenue from continuing operations increased 17 percent, to a record $838 million.

Fiscal second quarter net income from continuing operations rose 11 percent to a record $100 million or $1.06 a share, up from $90 million or 96 cents a share a year earlier. “Adjusted” income from continuing operations, which excludes some acquisition and severance costs, rose 14 percent to a record $112 million or $1.20 a share.

The company also raised the lower end of its full-year adjusted earnings from continuing operations guidance by a nickel a share. The guidance is now $4.70 to $4.80 a share. The guidance for full-year reported earnings from continuing operations is $3.90 to $4 a share.

Said Perrigo’s chairman and CEO Joseph C. Papa: “We delivered all-time record quarterly revenue, earnings and second fiscal quarter operating cash flow. Our recent Paddock Labs acquisition is performing ahead of our expectations, and our Consumer Healthcare, API and legacy prescription operations all contributed to the year over year growth. New products contributed $55 million of sales in the period, and we expect this strong momentum to continue into the second half of fiscal 2012.”

For the six months, net sales were $1.56 billion, up from $1.36 billion a year earlier.

Net income was $170.2 million or $1.81 a share, up from $163.5 million or $1.75 a share a year earlier. Adjusted income was $215.8 million or $2.30 a share, up from $179.7 million or $1.93 a share a year earlier.

The increase in sales was driven primarily by $107 million of net sales attributable to the Paddock Laboratories acquisition and consolidated new product sales of approximately $96 million.

Consumer Healthcare segment net sales for the second quarter were $471 million compared with $430 million for the second quarter last year, an increase of 10 percent. The increase resulted from new product sales of $26 million, primarily Fexofenadine and the diabetes care category, along with an increase in sales of existing products of $20 million, across many product categories. These increases were offset by a decline of $4 million in sales of certain products within the analgesics category driven by fiscal 2011’s increased sales due to a key competitor being absent from the market. Net sales were also negatively impacted by approximately $2 million of unfavorable changes in foreign currency exchange rates. Reported operating income was $77 million, compared with $75 million a year ago. The reported gross margin decreased 100 basis points, while the adjusted gross margin decreased 90 basis points due to increased competitive pressures on a key gastrointestinal product.

Nutritionals segment net sales for the second quarter were $128 million, compared with $133 million in fiscal 2011, a decrease of $5 million. The decrease was due to a decline in existing product sales of $26 million in the infant formula and Vitamins, Minerals and Supplements (VMS) categories. The decrease in the infant formula category was due primarily to the absence of increased demand of $12 million in net sales that the company experienced last year as a result of a competitor’s product recall. The decrease in existing products of infant formula was also due to a decline in U.S. birth rates year-over-year, while the decrease in the VMS category was driven by increased competition. These decreases were partially offset by new product sales of $21 million primarily in the infant formula category. Reported operating margin decreased to 5.1 percent, and adjusted operating margin decreased 920 to 10.2 percent due to under absorption of fixed production costs relative to lower volume output year-over-year, increased costs of raw materials for infant formula and product mix.

The Prescription Pharmaceuticals segment second quarter net sales increased 82 percent or $80 million compared to fiscal 2011 due to net sales of $69 million from the Paddock Laboratories acquisition, legacy new product sales of $5 million, market share gains and favorable pricing on select products. Reported operating income was $72 million, an increase of $39 million from last year, while adjusted operating income increased $45 million. The reported operating margin increased 690 basis points while the adjusted operating margin increased 880 basis points.

The API segment reported second quarter net sales of $43 million compared with $40 million a year ago, an increase of 6 percent. The increase was due to $1 million in higher sales of existing products and $1 million in new product sales. Reported gross profit increased 16 percent or $3 million compared to fiscal 2011.

Second quarter net sales from continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, increased 16 percent or $3 million compared to fiscal 2011 due to higher sales of existing products of $2 million, along with a $1 million increase in new product sales.

To listen to a replay of a conference call discussing these results, call (855) 859-2056 in the United States or (404) 537-3406 elsewhere, using access code 44258931.

Perrigo Company develops, manufactures and distributes OTC 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.

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