ALLEGAN, Mich., Feb. 2 /PRNewswire-FirstCall/ --
Perrigo Company today announced results for its second quarter and six months ended December 26, 2009.
Perrigo’s Chairman and CEO Joseph C. Papa commented, “This was another exciting quarter for us. We delivered all-time record quarterly revenue and earnings, and record second quarter cash flow. Our Consumer Healthcare, Rx, and API segments all contributed to this strong performance. Through core business strength, new product sales, and operating execution, we were able to drive adjusted consolidated gross profit margin and operating margin up 590 and 490 basis points, respectively, from last year. While the H1N1 flu pandemic and the delayed entrance of a competitor to omeprazole provided incremental benefits this quarter, our core business continues to gain market share versus the national brands. Consumers are continuing to benefit from the value proposition of Perrigo’s quality, affordable healthcare products.”
The Company’s reported results are summarized in the attached Condensed Consolidated Statements of Income, Balance Sheets and Cash Flows. As part of management’s continued strategic review of the Company’s portfolio of businesses, management committed to a plan to sell the Company’s Israel Consumer Products business. The results of this business are reflected in the condensed consolidated financial statements as discontinued operations for all periods presented.
Second Quarter Results
Net sales from continuing operations for the second quarter of fiscal 2010 were $583 million, an increase of 9%. Reported income from continuing operations was $53 million, or $0.57 per share, a strong increase over $24 million, or $0.26 per share, a year ago. Excluding the charges as outlined in Table II at the end of this release, second quarter fiscal 2010 adjusted income from continuing operations was $65 million, or $0.70 per share. Reported operating expenses included a $14 million write-off of in-process research and development related to the acquisition of an Abbreviated New Drug Application (ANDA) from KV Pharmaceutical during the quarter.
Six Months Results
Net sales for the first half of fiscal 2010 were $1,111 million, an increase of 12% over fiscal 2009. The increase was driven by strong results in the Consumer Healthcare and Rx segments and included consolidated new product sales of approximately $37 million. Reported gross profit was $361 million, up 28% and the reported gross profit percentage was 32.5%, up from 28.5% last year. Reported operating income margin increased 330 basis points to 15.4% and adjusted operating income margin increased 410 basis points to 16.7%. Reported income from continuing operations was $114 million, an increase of 83%. Adjusted income from continuing operations was $126 million or an increase of 56% from fiscal 2009.
Consumer Healthcare
Consumer Healthcare segment net sales in the second quarter were $478 million compared with $446 million in the second quarter last year, an increase of $32 million or 7%. The increase resulted from approximately $24 million of new product sales and $8 million from higher sales volumes of existing products, primarily in the gastrointestinal, smoking cessation, analgesics, and cough/cold categories, and approximately $7 million of incremental sales from the acquisitions of Unico and Diba. These increases were partially offset by a decline of approximately $4 million in sales from exited products and unfavorable changes in foreign currency exchange rates of $2 million. Reported operating income was $88 million, compared with $56 million a year ago largely driven by favorable product mix and higher gross margins from the sale of new products. Reported operating margin increased 590 basis points to 18.5% due to improved operating expense leverage.
For the first six months of fiscal year 2010, Consumer Healthcare net sales increased $103 million or 13%, compared to fiscal 2009. The increase resulted from approximately $33 million of new product sales and a $48 million increase in sales of existing products, as well as incremental sales of $43 million from the Company’s acquisitions of J.B. Laboratories, Unico and Diba. This growth was partially offset by approximately $8 million in decreased sales from exited products, and a negative impact of approximately $12 million from foreign currency exchange rates.
On October 13, 2009, the Company announced that it had filed an ANDA for over-the-counter (OTC) Minoxidil topical aerosol foam, 5%, a generic form of Men’s Rogaine(R) Foam.
On December 7, 2009, the Company announced that it will implement a labeling program to help consumers more clearly identify more than 200 of the Company’s OTC store brand pharmaceuticals that are gluten-free.
Rx Pharmaceuticals
The Rx Pharmaceuticals segment second quarter net sales were approximately $56 million compared with $40 million a year ago, an increase of 38%. This increase was due primarily to increased sales volumes in the Company’s existing products, increased sales in over-the-counter Rx, and new product sales. Reported operating income was $2 million, a decrease of $5 million from last year due to a $14 million charge related to the ANDA acquired from KV Pharmaceutical for clindamycin phosphate (1%) and benzoyl peroxide (5%) gel. Excluding this charge, adjusted operating income for the second quarter was $16 million, a $9 million increase from last year. The increase was due primarily to greater operating expense leverage, less pricing pressure, and improved product mix. Adjusted operating margin increased 1170 basis points from last year to 29.5%.
For the first six months of fiscal year 2010, net sales for the Rx Pharmaceuticals segment increased 40% from fiscal 2009. Sales increased due to higher sales of existing products, less pricing pressure, new product sales, and an increase in non-product revenue.
API
The API segment reported second quarter net sales of $37 million compared with $32 million a year ago. The increase was due primarily to increased sales volumes of the Company’s existing products, new product sales, and favorable changes in the foreign currency exchange rates. Reported operating income increased nearly $5 million due to increased sales volume, improved sales mix, and improved operational efficiencies. Reported operating margin increased 1240 basis points to 15.7%.
For the first six months of fiscal year 2010, net sales increased 1% or $900 thousand, compared to fiscal 2009. Reported operating income margin increased 1200 basis points to 14.3% from last year’s 2.3%.
Other
Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported second quarter net sales of $12 million compared with approximately $19 million a year ago. The segment reported an operating loss of $1 million, compared to operating income of $1 million for fiscal 2009. Year-to-date net sales for fiscal 2010 decreased 36% compared to fiscal 2009. The decrease was due primarily to approximately $15 million related to the loss of a customer contract.
On November 2, 2009, the Company announced that it had signed a definitive agreement to sell its Israel Consumer Products business along with the related production assets in Israel to Emilia Group, a subsidiary of O. Feller Holdings Ltd., for 205 million New Israeli Shekels (approximately $55 million), subject to post-closing working capital adjustments as defined in the agreement. The transaction is expected to close in the first calendar quarter of 2010.
Guidance
Chairman and CEO Joseph C. Papa concluded, “The strength across our businesses continued this quarter, driving record results. As we look forward to the last half of fiscal 2010 we expect this strength to continue. Our teams are executing on their plans, which are the foundation for sustaining our growth. Reported fiscal 2010 earnings from continuing operations are now expected to be between $2.42 and $2.52 per share. Excluding the charges outlined in Table II at the end of this release, we now expect fiscal 2010 adjusted earnings from continuing operations to be between $2.55 and $2.65 per share, up from our previously announced $2.35-$2.45 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 36% to 42% over fiscal 2009 adjusted EPS. This revised guidance does not include any incremental contribution from the profit split associated with the anticipated U.S. launch of Temozolomide, the generic version of Temodar(R).”
Perrigo will host a conference call to discuss fiscal 2010 second quarter results at 10:00 a.m. (ET) on Tuesday, February 2. The conference call will be available live via webcast to interested parties on the Perrigo website http://www.perrigo.com or by phone 877-248-9413, International 973-582-2737 and reference ID# 50570220. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Tuesday, February 2, until midnight Tuesday, February 9, 2010. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 50570220.
Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, nutritional products, active pharmaceutical ingredients (API) and pharmaceutical and medical diagnostic products. The Company is the world’s largest manufacturer of OTC pharmaceutical products for the store brand market. The Company’s primary markets and locations of manufacturing and logistics operations are the United States, Israel, Mexico and the United Kingdom. Visit Perrigo on the Internet (http://www.perrigo.com).
Note: Certain statements in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or the Company’s future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company or its industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or other comparable terminology. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company’s control. These and other important factors, including those discussed under “Risk Factors” in the Company’s Form 10-K for the year ended June 27, 2009, as well as the Company’s subsequent filings with the Securities and Exchange Commission, may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this press release are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CONTACT: Arthur J. Shannon, Vice President, Investor Relations and
Communication, +1-269-686-1709, ajshannon@perrigo.com; Daniel B. Willard,
Manager, Investor Relations and Communication, +1-269-686-1597,
dbwillard@perrigo.com
Web site: http://www.perrigo.com/
