Perrigo Reports Record First Quarter Revenue, Earnings

ALLEGAN -- The Allegan-based generic drug and health products manufacturer Perrigo Co. (Nasdaq: PRGO) Wednesday reported net income of $106 million or $1.12 a share in the first fiscal quarter ended Sept. 29, up from $70.5 million or 75 cents a share in the same quarter a year earlier.

The company said much of the increase was a charge in the prior year's first quarter of 21 cents a share for acquisition costs.

Revenue was $769.8 million, up 6.1 percent from $725.3 million a year earlier.

Perrigo management also boosted its full-year fiscal 2013 adjusted earnings per share to be in a range of $5.45 to $5.65 per diluted share, an increase of 9 to 13 percent compared to fiscal 2012's $4.99 per diluted share, to reflect the acquisition of Sergeant's Pet Care Products Inc., tax benefits and continued execution of the company's core businesses.

"We have started fiscal 2013 well, delivering record first quarter revenue and adjusted earnings," said Perrigo chairman and CEO Joseph C. Papa. "We also delivered all-time record adjusted gross and operating margins. Store brand OTC market share continues to grow. Our consumer healthcare segment's revenue grew 9.4 percent from a record first quarter last year. Our prescription segment continued its excellent performance, which was driven by the acquisition of Paddock Labs, new product sales and strong organic prescription results, combined with our continued focus on quality and R&D. Clearly we are focused on the results from our Nutritionals segment and the team has an action plan in place for the rest of the year. We believe our value proposition continues to resonate well with consumers."

Adjusted net income, excluding one-time items, was $119.5 million or $1.27 a share in the quarter, up 15.6 percent from $103.3 million or $1.10 a share a year earlier.

The company said the sales increase was split about evenly by a $28 million increase attributable to the purchases of Paddock Laboratories Inc. and CanAm Care LLC and $26 million in new product sales, partially offset by decreases in sales of certain existing products in the nutritionals and API segments and $5 million due to unfavorable changes in foreign currency exchange rates.

Consumer healthcare segment sales were $450.4 million, up from $411.7 million a year ago. Operating income was $79.3 mllion, up from $69.2 million. There was an  increase in sales of existing products of $36 million (contract, cough-cold and smoking cessation categories), new product sales of $13 million (gastrointestinal, cough/cold and dermatological categories) and $9 million in incremental sales attributable to the acquisition of CanAm. These combined increases were partially offset by a decline of $17 million in sales of existing products (analgesics and feminine hygiene categories) and a decline of $4 million due to discontinued products.

Nutritionals segment sales were $103.4 million, down from $119.9 million a year earlier. Operating income was $3.9 million, down from $7.2 million a year earlier. There was a decrease in existing product sales of $20 million, partially offset by new product sales of $3 million (infant formula category). The decrease in sales was due primarily to a decline in existing product sales in the vitamin, minerals and dietary supplements ("VMS") category driven by increased competition and increased retail shipments of infant formula placed in the fourth quarter of fiscal 2012 in advance of the planned July 1 st shutdown of the Company's Vermont Plant to perform an SAP conversion and prepare for the installation of a new packaging line. Reported and adjusted gross profit and margin were impacted by relatively lower volumes in infant formula and VMS, along with increased inventory costs. Operating income and margin were impacted by higher combined research and development and distribution, selling, general and administration expenses as a percent to net sales, though they were lower on a dollar basis, year-over-year.

Prescription pharmaceuticals segment sales were $162.9 million, up from $127.6 million a year earlier. Operating income was $68.5 million, up from $24.5 million a year earlier. The increase was due to incremental net sales of $19 million from the July 26, 2011 Paddock acquisition, new product sales of $8 million and improved pricing on select products. Year-over-year percent changes in reported gross profit and operating income were impacted by the absence of a one-time charge of $27 million to cost of sales as a result of the step-up of inventory value related to the Paddock acquisition in the first quarter of fiscal 2012.

The Active Pharmaceutical Ingredient segment had sales of $36.4 million, down from $47.6 million a year earlier. Operating income was $13.3 million, down from $14.2 million. The decline was due primarily to a decrease in existing product sales of approximately $17 million as a result of increased competition and pricing pressures on select products, along with a negative impact of $2 million due to changes in foreign currency, partially offset by $7 million related to the launch of a customer's product with 180-day exclusivity status. Gross and operating margins were positively impacted by the product launch.

The Other category reported decreased first quarter net sales of approximately $17 million, compared with $18 million a year ago, due primarily to the impact of unfavorable changes in foreign currency exchange rates. Adjusted operating income was approximately $1 million, representing an increase in adjusted operating margin of 100 basis points from last year due to product mix.

Perrigo develops, manufactures and distributes 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.