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Perrigo Profits, Sales Rise

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ALLEGAN (WWJ) – The generic pharmaceutical and store-brand health products maker Perrigo Co. (NYSE: PRGO) Thursday reported net income of $111.4 million or $1.18 a share in the first fiscal quarter ended Sept. 28, up from $105.6 million or $1.12 a share in the first fiscal quarter a year earlier.

Revenue was $933.4 million, up from $769.8 million a year earlier.

The company also reported “adjusted” net income of $143.9 million or $1.52 a share, up from $119.5 million or $1.27 a share a year earlier. These figures exclude acquisition-related amortization, transaction costs, acquisition costs, a litigation settlement, restructuring charges, and the tax effects of those charges.

Said Perrigo chairman and CEO Joseph C. Papa: “We are off to a great start to fiscal 2014. The strength of our business model was clearly evident this quarter. Every segment experienced double-digit organic sales growth, with 13 percent consolidated organic revenue growth. We are working hard to close the acquisition of Elan Corporation by the end of this calendar year and believe we will continue to be in a great position to deliver shareholder value.”

Perrigo said most of the sales increase was due to $64 million attributable to the Sergeant’s Pet Care Products Inc., Rosemont Pharmaceuticals Ltd., Velcera Inc. and Fera Pharmaceuticals LLC acquisitions, new product sales of $54 million and strong base business growth of $46 million.

Consumer healthcare sales were $538.5 million, up 19.5 percent from $450.4 million a year earlier. Gross profit was $176.9 million, up 21.3 percent from $145.8 million a year earlier. Higher sales were driven by the acquisitions of Sergeant’s and Velcera, an increase in sales of existing products of $40 million (analgesics and cough/cold categories) and new product sales of $17 million (cough/cold and smoking cessation categories). These combined increases were partially offset by a decline of $7 million in sales of existing products (primarily contract category) and $3 million in discontinued products.

Adjusted gross margin expanded 90 basis points due to new products, acquisitions and strong volumes/product mix. Adjusted operating margin declined 30 basis points due primarily to incremental operating expenses from the Sergeant’s and Velcera acquisitions and the absence of an indemnification settlement received in the prior year.

Nutritionals segment sales were $129 million, up 24.8 percent from $103.4 million a year earlier. Gross profit was $30.8 million, up 19.3 percent from $25.8 million a year earlier. All product categories within the segment grew year-over-year, existing product sales increased $21 million and new product sales were $5 million.

First quarter adjusted gross margin decreased due primarily to product mix and higher relative production costs, while the adjusted operating margin was favorably impacted by operating expense efficiencies.

Prescription pharmaceuticals segment sales were $203.6 million, up 25 percent from $162.9 million a year earlier. Gross profit was $112.5 million, up 29.8 percent from $86.7 million a year earlier. The sales increase stemmed from the Rosemont and Fera acquisitions, new product sales of $15 million and product mix.

Adjusted gross margin increased due primarily to product mix and acquisitions. Adjusted operating margin expanded year-over-year on the gross margin expansion, offset by higher distribution, selling, general and administrative costs due to the inclusion of Rosemont.

Active Pharmaceutical Ingredients segment sales were $43.2 million, up 18.5 percnet from a year earlier. Gross profit was $29.8 million, up 39.6 percent from $21.4 million a year earlier. The sales increase stemmed from new product sales of $17 million offset by a decrease in existing product sales of $11 million due to increased competition on select products.

Gross and operating margins were positively impacted by new product sales referred to above and lower employee-related costs.

The Other category reported first quarter net sales of $19 million, a year-over-year increase of 15 percent, due primarily to increased volumes and the impact of favorable changes in foreign currency exchange rates.

Adjusted operating income was approximately $2 million, representing an increase in adjusted operating margin of 360 basis points from last year due to product mix.

As previously reported, excluding the impact of the acquisition of Elan Corp., adjusted earnings per diluted share is expected to be between $6.35 and $6.60 per diluted share as compared to $5.61 in fiscal 2013. This range implies a year-over-year growth rate in adjusted earnings of 13 to 18 percent over fiscal 2013’s adjusted earnings per diluted share. Management said it continues to expect the acquisition of Elan Corporation to be at least 10 cents accretive to the adjusted earnings per share of standalone Perrigo in fiscal 2014 and between 70 and 80 cents a share accretive in fiscal 2015.  The actual earnings per share guidance is $5.38 to $5.63 per diluted share, up from $4.68 in fiscal 2013.

To listen to a conference call discussing these results, call (855) 859-2056 in the Untied States or (404) 537-3406 elsewhere, using access code 75354490.

From its beginnings as a packager of generic home remedies in 1887, Perrigo Company has grown into the world’s largest manufacturer of over-the-counter pharmaceutical products for the store brand markets. It makes OTC and generic prescription pharmaceuticals, nutritional products and active pharmaceutical ingredients.

More at http://www.perrigo.com.

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