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Perrigo Reports Record Second Quarter Revenue, Higher Profit

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ALLEGAN — Perrigo Co. (Nasdaq: PRGO) Friday record revenue of $883 million for its second fiscal quarter ended Dec. 29, up from $838.2 million in the same quarter a year earlier.

Net income for the quarter was $106 million or $1.12 a share, up from $99.7 million or $1.06 aa share in the same quarter a year earlier.

“The team delivered on another high-quality quarter with all-time record quarterly revenue, as well as record second quarter adjusted earnings and operating cash flow,” said Perrigo chairman and CEO Joseph C. Papa. “The consumer health care segment had another great quarter with strong store brand OTC market share growth.”

He added that Perrigo employees are “working hard to integrate and expand the reach of our recent acquisition of Sergeant’s Pet Care Products” and that retailers are enthusiastic “about the launch of our new plastic container in the infant formula category, as evidenced by their increased marketing and advertising efforts promoting the store brand value proposition.”

Overall, he said, “We continue to deliver on our top priority of providing quality, affordable healthcare products for consumers and customers.”

The increases are even more impressive considering that through a quirk in the calendar, last year’s results included an extra week of operations compared to this year’s fiscal second quarter. 

So-called “adjusted” net income, which is net income without severance, acquisition and deal related costs as well as one-time gains from sale of assets, was $128.1 million or $1.36 a share, up from $112.4 million or $1.20 a share a year earlier.

Consumer Healthcare segment net sales increased 14 percent to $539 million, driven by an increase in sales of existing products of $38 million (contract, analgesics and smoking cessation categories), $34 million attributable to the Sergeant’s and CanAm acquisitions, and new product sales of $12 million (cough/cold, dermatologic and gastrointestinal categories). These combined increases were partially offset by a decline of $13 million in sales of existing products (allergy products and gastrointestinal category) and approximately $5 million in discontinued products.

Adjusted gross and operating margins expanded 30 and 40 basis points, respectively, due to new products and increased manufacturing efficiencies. The disparity between the reported and adjusted margins was due primarily to a charge of approximately $8 million to cost of sales as a result of the step-up of inventory acquired and sold related to the Sergeant’s acquisition.

The Nutritionals segment reported second quarter net sales of $122 million, compared with $128 million a year ago, as existing product sales declined $9 million due primarily to the extra week of sales in fiscal 2012, partially offset by new product sales of $3 million (vitamins, minerals and supplements and infant foods categories).

Second quarter gross profit and margin increased due primarily to price increases and favorable product mix. Operating profit and margin were positively impacted by lower employee-related expenses, along with the absence of operating expenses related to the Company’s Florida location, which was closed in the fourth quarter of fiscal 2012.

The Rx Pharmaceuticals segment second quarter net sales decreased 8 percent as existing product sales were lower year-over-year by $11 million due to increased competition on certain existing products. This decrease was partially offset by new product sales of $9 million. The extra week of operations in second quarter fiscal 2012 accounted for most of the difference in net sales in the segment compared to fiscal 2012.

The adjusted gross margin increased due primarily to favorable product mix as well as higher margin on new product sales. The adjusted operating margin was impacted by higher distribution, selling, general and administrative costs.

The active pharmaceutical ingredients segment’s net sales declined by 4 percent to $41 million due primarily to a decrease in existing product sales of approximately $5 million as a result of increased competition, partially offset by $4 million related to the continued successful launch of a customer’s product.

Gross and operating margins were positively impacted by the product launch referred to above, along with favorable mix of existing product sales, partially offset by higher research and development and selling, general and administrative expenses.

The Other category reported second quarter net sales of $18 million, compared with approximately $19 million a year ago, due primarily to the impact of unfavorable changes in foreign currency exchange rates.

Adjusted operating income was $1 million, representing a decrease in adjusted operating margin of 140 basis points from last year due to product mix.

The company said it expects fiscal 2013 reported earnings to be between $4.73 and $4.93 per diluted share as compared to $4.18 in fiscal 2012. Excluding the charges outlined in Table III at the end of this release, the company continues to expect fiscal 2013 adjusted earnings to be between $5.45 and $5.65 per diluted share as compared to $4.99 in fiscal 2012. This range implies a year-over-year growth rate in adjusted earnings of 9 to 13 percent over fiscal 2012’s adjusted earnings from continuing operations per diluted share.

A taped replay of the conference call discussing these results will be available through midnight Feb. 15 at (855) 859-2056 in the United States or (404) 537-3406 elsewhere, using access code 87314407.

From its beginnings as a packager of generic home remedies in 1887, Perrigo has grown to become a leading global provider of over-the-counter and generic prescription  pharmaceuticals, nutritional products and active pharmaceutical ingredients and is the world’s largest manufacturer of OTC pharmaceutical products for the store brand market.
More at www.perrigo.com.

For the six months, revenue was $1.65 billion, up from $1.56 billion a year earlier. Net income was $211.5 million or $2.24 a share, up from $170.2 million or $1.81 a share a year earlier.

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