Perrigo Sets Records For Quarterly, Annual Sales, Profits

ALLEGAN (WWJ) -- The Allegan health and beauty products maker Perrigo Co. (Nasdaq: PRGO) reported record sales and net income for the fourth fiscal quarter and fiscal year ended June 29.

Fourth quarter sales rose 16 percent to $967 million from $832 million a year earlier. For the year, sales rose 12 percent to $3.54 billion from $3.17 billion a year earlier.

Fourth quarter net income was $118 million or $1.25 a share, up 11 percent from $107 million or $1.28 a share a year earlier. For the full year, net income was $442 million or $4.68 a share, up 12 percent from $393 million or $4.18 a share a year earlier.

Perrigo also released an adjusted net income figure for the quarter, of $148 million or $1.57 a share, up 22 percent from $121 million or $1.28 a share a year earlier. So-called adjusted net income for the full fiscal year was $530 million or $5.61 a share, up 13 percent from $469 million or $4.99 a share a year earlier.

Cash flow from operations for the full fiscal year totaled $554 million.

Perrigo says its adjusted earnings per share for the full fiscal year ending next June will be $6.35 to $6.60 a share, an increase of 13 to 18 percent from the year just ended.

Perrigo also said the acquisition of Ireland's Elan Corp. will add 10 cents a share to adjusted earnings of Perrigo in the current fiscal year, and between 70 and 80 cents a share in the 2015 fiscal year.

"I am pleased to report that Perrigo has delivered year-over-year record sales and adjusted earnings for the seventh straight fiscal year," said Perrigo chairman and CEO Joseph C. Papa. "This was a strong quarter where we continued to successfully drive growth across our segments, while managing costs to generate record bottom-line performance. We are continuing to execute on our growth strategy, invest in our future and drive shareholder returns. With this backdrop, on July 29th, we announced a definitive agreement to acquire Elan Corporation, which will combine two great companies to create value for our respective shareholders, patients and customers. The increased revenue stream and cash flow, combined with a more efficient corporate structure, will enable us to be more competitive and to better utilize our platform for future expansion. We are planning for integration and are employing a collaborative process with the Elan team. Additionally, we are actively working with regulators to receive approvals and clearances for the transaction, and expect to close by the end of calendar year 2013."

The company said increased sales in the fourth quarter were driven primarily by $83 million attributable to the Sergeant's Pet Care Products Inc., Rosemont Pharmaceuticals Ltd., Velcera Inc. and Fera Pharmaceuticals LLC acquisitions, new product sales of $30 million and base business growth of $21 million.
For the full year, the company said the sales increase was driven primarily by $185 million attributable to acquisitions and new product sales of $122 million.

Sales in Perrigo's consumer healthcare segment rose 16 percent to $563 million, driven primarily by $67 million attributable to the acquisitions of Sergeant's and Velcera, an increase in sales of existing products of $37 million (contract and smoking cessation categories), and new product sales of approximately $11 million (cough-cold and smoking cessation categories). These combined increases were partially offset by a decline of $34 million in sales of existing products (gastrointestinal and analgesics categories) and $1 million in discontinued products.

Fourth quarter adjusted gross margin expanded 410 basis points due to the inclusion of Sergeant's and Velcera, new products, increased manufacturing efficiencies and a favorable product mix. Fourth quarter operating expenses increased due primarily to incremental operating expenses from the acquisitions of Sergeant's and Velcera.

Sales in Perrigo's nutritionals segment were $150 million, up from $135 million a year ago, an increase of 11 percent. All product categories within the segment grew year-over-year and new product sales were $7 million. The difference between the reported and adjusted operating income and margin was due to the absence of restructuring charges incurred in the fourth quarter of fiscal 2012 related to the company's Florida location, which was closed in the fourth quarter of fiscal 2012.

Fourth quarter adjusted gross margin decreased due primarily to a larger proportion of sales from the lower margin VMS category, while the adjusted operating margin was favorably impacted by lower employee-related expenses and relatively lower marketing expenses.

The prescription pharmaceuticals segment fourth quarter net sales increased 24 percent to $195 million, due primarily to $16 million in sales related to the acquisitions of Rosemont and the product portfolio from Fera, new product sales of $12 million and strong prescription volumes evidenced by an increase in existing product sales of $10 million.

The difference between the fourth quarter reported and adjusted operating income and margin was due primarily to acquisition-related amortization and intangible impairment expense. The adjusted gross margin increased due primarily to product mix and the acquisitions. The adjusted operating margin expanded year-over-year and the flow-through from the gross margin was impacted by higher distribution, selling, general and administrative costs due to the inclusion of Rosemont.

The active pharmaceutical ingredients segment sales increased by 6 percent to $41 million due primarily to product mix, offset by increased competition on specific products. Fourth quarter margins were impacted by lower sales of a generic finished dosage pharmaceutical product that was launched in the fourth quarter of fiscal 2012.

To listen to a replay of a conference call discussing the company's results, call (855) 859-2056 in the United States or (404) 537-3406 elsewhere, using the pass code 13122087. The replay will be available until Aug. 30.

More at www.perrigo.com.

Adjusted net income excludes acquisition-related amortization, severance costs, restructuring charges related to the Velcera acquisition, inventory accounting changes, a write-off of in-process research and development related to the Paddock acqusition, Florida restructuring charges, and other R&D accounting changes.