Perrigo Company Reports Record Quarterly Revenue and Earnings and Raises Full Year Adjusted EPS Guidance

ALLEGAN, Mich., May 3, 2011 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its third quarter ended March 26, 2011.

Perrigo’s Chairman and CEO Joseph C. Papa commented, “We are very pleased with this quarter’s record revenue and earnings performance. The main contributors to this strong performance were $44 million of new product sales, continued operational execution in our Rx and API segments and another solid quarter in Nutritionals. In Consumer Healthcare, revenue grew 13% in the quarter as we continue to see very strong demand for our products. At the same time, we have been experiencing some throughput pressure in manufacturing, but we are in the process of making investments that we believe will enhance output in the near future.”

Mr. Papa continued, “The April resolution of the 2010 FDA warning letter in less than one year is a major achievement. We are convinced that this process has made us a better company, as it helped us to further enhance the quality of our production. Our retailers and consumers continue to realize the value proposition of Perrigo’s high quality, affordable healthcare products and we look forward to increasing our production volumes further to meet their growing demand.”

Refer to Table I at the end of this press release for adjustments in the current year and prior year periods and additional non-GAAP disclosure information.

The Company’s reported results are summarized in the attached Condensed Consolidated Statements of Income, Balance Sheets and Statements of Cash Flows.

Perrigo Company

(from continuing operations, in thousands, except per share amounts)

(see the attached Table I for reconciliation to GAAP numbers)

Third Quarter Results

Net sales from continuing operations for the third quarter of fiscal 2011 were approximately $692 million, an increase of 29% over fiscal 2010. The increase was driven primarily by the acquisitions of PBM Holdings, Inc. (PBM) and Orion Laboratories Pty Ltd. (Orion), as well as $44 million in new product sales. Reported income from continuing operations was approximately $92 million, or $0.98 per share, a strong increase over $62 million, or $0.66 per share, a year ago. Excluding charges as outlined in Table I at the end of this release, third quarter fiscal 2011 adjusted income from continuing operations was $100 million, or $1.07 per share.

Nine Months Results

Net sales from continuing operations for the first nine months of fiscal 2011 were $2,050 million, an increase of 24% over fiscal 2010. The increase was driven primarily by strong results in the Rx and Nutritionals segments and included consolidated new product sales of approximately $156 million. Reported gross profit was approximately $703 million, up 28% over last year, and the reported gross margin was 34.3%, up from 33.3% last year. Reported operating margin increased 220 basis points to 17.9%, and adjusted operating margin increased 140 basis points to 19.7%. Reported income from continuing operations was $255 million, an increase of 45%. Adjusted income from continuing operations was $280 million, or an increase of 34%.

Consumer Healthcare

Consumer Healthcare segment net sales for the third quarter were $425 million compared with $377 million for the third quarter last year, an increase of 13%. The increase resulted from approximately $36 million in additional existing product sales, primarily in the analgesics and cough/cold categories, as well as $9 million from new product sales and $7 million of incremental sales from the acquisition of Orion. These increases were partially offset by a decline of $5 million in sales of existing products, primarily in the feminine hygiene and contract manufacturing categories. Reported operating income was $72 million, compared with $75 million a year ago. The decrease was driven largely by increased spending on quality system investments and increased operating expenses. Reported operating margin decreased 300 basis points to 17.0%, and adjusted operating margin decreased 290 basis points to 17.5%.

For the first nine months of fiscal 2011, Consumer Healthcare net sales increased $76 million, or 6%, compared to fiscal 2010. The increase resulted from $51 million in additional existing product sales, primarily in the analgesics and cough/cold categories, and $36 million of new product sales, as well as incremental sales of approximately $21 million from the Company’s acquisition of Orion. This growth was partially offset by approximately $32 million in decreased sales of existing products, primarily in the contract manufacturing and gastrointestinal categories.

On February 10, 2011, the Company announced that it agreed to settle its Hatch-Waxman litigation relating to Minoxidil foam brought by Stiefel Research Australia Pty. Ltd., a GSK Company. The terms of the settlement permit the Company to launch in the U.S., a generic version of Men’s Rogaine® Foam on March 1, 2012, or earlier under certain circumstances.

On February 17, 2011, the Company announced that it entered into an exclusive agreement with AgaMatrix, Inc. to sell and distribute blood glucose monitors and test strips in the U.S. store brand channel. As part of the agreement, the Company will sell and distribute certain products in the current AgaMatrix portfolio, as well as certain future products.

On April 13, 2011, the Company announced that its partner, Teva Pharmaceutical Industries, Ltd. (Nasdaq: TEVA), received final OTC approval to sell and distribute fexofenadine HCl 60 mg and 180 mg tablets; the generic equivalents of Sanofi-Aventis’ Allegra 60 mg and 180 mg products.

Nutritionals

Nutritionals segment net sales for the third quarter were $124 million, compared with $59 million for the third quarter last year, an increase of 111%. The increase was due primarily to additional sales of approximately $81 million attributable to the acquisition of PBM. The increase was partially offset by a decrease in sales of existing products of approximately $14 million. Reported operating income was approximately $18 million, compared with $3 million a year ago. The increase was driven largely by the acquisition of PBM. Reported operating margin increased 880 basis points to 14.5%, and adjusted operating margin increased 1140 basis points to 19.1%.

For the first nine months of fiscal 2011, Nutritionals net sales increased $205 million, or 117%, compared to fiscal 2010. The increase resulted from $242 million of sales attributable to the acquisition of PBM and $5 million of new product sales in the Vitamins, Minerals and Supplements (VMS) category. This growth was partially offset by $39 million in decreased sales of existing products in the VMS category.

On February 21, 2011, the Company announced that it began selling OTC infant formula to Costco in Canada. The product is sold under Costco’s Kirkland Signature brand. The products will be featured in all 80 Costco stores throughout Canada.

Rx Pharmaceuticals

The Rx Pharmaceuticals segment third quarter net sales were $84 million, compared with $51 million a year ago, an increase of 66%. This increase was due primarily to new product sales of $23 million related to the authorized generic of Aldara® and the generic version of Xyzal®, as well as $6 million of increased sales volume in the Company’s existing products. Reported operating income was $31 million, an increase of approximately $15 million from last year. The increase was driven largely by new product sales and increased operating expense leverage. Reported operating margin increased 430 basis points from last year to 36.9%.

For the first nine months of fiscal 2011, net sales for the Rx Pharmaceuticals segment increased 62% from fiscal 2010 to $251 million. Net sales increased due primarily to $72 million in new product sales and an increase of $16 million in sales of existing products.

On February 22, 2011, the Company announced that it had filed an Abbreviated New Drug Application for calcipotriene 0.005% and betamethasone dipropionate 0.064% ointment, a generic form of Taclonex® Ointment.

API

The API segment reported third quarter net sales of $41 million compared with $33 million a year ago, an increase of 26%. The increase was due primarily to additional sales of existing products of $8 million and new product sales of $5 million led by European sales of temozolomide. The increase was partially offset by an approximately $4 million decrease in revenues related to the sale of dossier agreements. Reported operating income increased $12 million due to higher margin new product sales, decreased operating expenses and improved financial operating leverage. Reported operating margin increased 2920 basis points to 27.5%, and adjusted operating margin increased 820 basis points to 28.7%.

For the first nine months of fiscal 2011, net sales increased 18% to approximately $119 million, compared to $101 million in fiscal 2010. Reported operating margin increased 1830 basis points to 26.6% from last year’s 8.3%.

Other

Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported third quarter net sales of $17 million, compared with $18 million a year ago. The decrease was due primarily to a decrease in sales of existing products of $2 million, partially offset by new product sales. Gross profit decreased 23% or $1.7 million. Year-to-date net sales for fiscal 2011 increased 16% compared to fiscal 2010. The increase was due primarily to $7 million in new product sales, partially offset by a decrease of $1 million due to unfavorable changes in foreign currency exchange rates.

Guidance

Chairman and CEO Joseph C. Papa concluded, “The strength of our business model was evident this quarter, and as we look forward to the end of fiscal 2011, we expect this to continue. Additionally, the realization of a $0.09 one-time tax benefit in the third quarter related to the change in the Israel statutory rates gives us comfort to be able to raise our guidance for the rest of this year. Reported fiscal 2011 earnings from continuing operations are now expected to be between $3.43 and $3.53 per share. Excluding the charges outlined in Table III at the end of this release, we now expect fiscal 2011 adjusted diluted earnings from continuing operations to be between $3.90 and $4.00 per share, up from our previously announced $3.75-$3.90 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 29% to 32% over fiscal 2010 adjusted EPS.”

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# 61044320. A taped replay of the call will be available beginning at approximately 2:00 (ET) Tuesday, May 3, 2011, until midnight Friday, May 20, 2011. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 61044320.

Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products and active pharmaceutical ingredients (API). The Company is the world’s largest store brand manufacturer of OTC pharmaceutical products and infant formulas. The Company’s primary markets and locations of manufacturing and logistics operations are the United States, Israel, Mexico, the United Kingdom and Australia. 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 26, 2010, 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.