Perrigo Company today announced results for its second quarter fiscal year 2008 and six months ended December 29, 2007.
Second Quarter Results
Net sales for the second quarter of fiscal 2008 were a record $435.5 million, an increase of $64.9 million, or 17 percent, compared with $370.6 million last year. Reported net income was $34.3 million, or $0.36 per share, compared with $21.1 million, or $0.23 per share a year ago, which included expense for a product recall of $3.2 million after-tax, or $0.03 per share, and a restructuring charge of $417 thousand after-tax, or less than $0.01 per share.
Perrigo Chairman and CEO, Joseph C. Papa, stated, "I am extremely pleased with our performance this quarter both financially and operationally. Record sales were achieved through double digit sales growth in each of our business segments. Operating income grew 85 percent from last year on a 390 basis point improvement in gross margins. These improvements, along with continued focus on working capital, generated $67 million in cash flow from operations, up $43 million from last year. These results also come before the largest new product launch in our history, Omeprazole, which we expect to start shipping by the end of our third fiscal quarter."
Six Months Results
Net sales for the six months ended December 29, 2007 were $818.2 million, an increase of $107.4 million, or 15 percent, compared with $710.8 million last year. Reported net income was $68.3 million, or $0.72 per share, compared with $38.0 million, or $0.41 per share last year. The year ago period included expense for a product recall of $3.9 million after-tax, or $0.04 per share, and a restructuring charge of $417 thousand after-tax, or less than $0.01 per share.
Consumer Healthcare
Consumer Healthcare segment net sales in the quarter were a record $320.2 million, up $44.3 million, or 16 percent, compared with $275.9 million a year ago. The sales increase resulted from $9.9 million in new product revenue; strong sales in the smoking cessation, analgesics and cough/cold product categories and increases in non-U.S. businesses. Operating income was $38.5 million, compared with $17.4 million a year ago. The income gain was a result of the volume increase as well as benefits from supply chain and operational efficiency improvements. Additionally, last year's second quarter included $3.2 million in after-tax costs related to a product recall.
On December 28, 2007, Perrigo announced it received final approval from the FDA for its Abbreviated New Drug Application (ANDA) for OTC Cetirizine Hydrochloride Tablets, 5 and 10 mg. The product will be marketed under store brand labels and is comparable to McNeil Consumer Healthcare's Zyrtec(R) Tablets. Store brand shipments began in January.
For the first six months of 2008, Consumer Healthcare sales were $588.5 million, up $70.7 million, or 14 percent, compared with $517.8 million last year. Operating income was $68.1 million, up $33.6 million, or 97 percent, compared with $34.5 million last year, which included after-tax costs of $3.9 million related to a product recall.
On January 9, 2008, the Company announced it acquired Galpharm Healthcare, Ltd., a leading United Kingdom-based supplier of over-the-counter store brand products, for approximately $86 million. The acquisition is expected to add more than $55 million in sales annually and be accretive to earnings in the first 12 months.
Rx Pharmaceuticals
The Rx Pharmaceuticals segment reported sales of $38.7 million, including $5.0 million of service and royalty revenue, an increase of $10.4 million, or 37 percent, compared with $28.3 million a year ago. Fiscal 2008 second quarter results also included $6.9 million in sales of products acquired from Glades Pharmaceuticals. Operating income was $8.4 million, up from $3.7 million last year as a result of increased volume and improved margins.
For the first six months of fiscal 2008, net sales were $73.6 million, including $10.8 million of service and royalty revenue and $13.5 million in sales of acquired products, resulting in an increase of $13.9 million, or 23 percent, compared with $59.7 million last year. Operating income was $15.8 million, up 67 percent from $9.5 million last year.
API
API segment sales were $34.6 million, compared with $28.6 million a year ago, or an increase of 21 percent. Operating income was $3.4 million, compared with $5.9 million last year, reflecting a less favorable product sales mix. For the six months, sales were $73.4 million, up $15.0 million, or 26 percent, compared with $58.4 million a year ago. Operating income for the six months was $10.7 million, compared with $10.6 million in the same period last year.
Other
The Other category, consisting of the Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products segments, reported second quarter sales of $42.0 million, compared with $37.8 million a year ago, an increase of 11 percent. Operating income was $3.3 million, compared with $3.0 million last year. Sales for the six months were $82.7 million, up 10 percent, compared with $75.0 million in the same period a year ago. Operating income was $5.8 million, compared with $5.6 million last year.
In the fiscal 2008 second quarter, unallocated expenses were $4.8 million, compared with $3.6 million a year ago, due to higher employee wage and benefit costs. For the six months in fiscal 2008, unallocated expenses were $5.5 million, compared with $8.1 million last year. The decrease was due primarily to a favorable legal settlement that offset expenses in the first quarter of fiscal 2008.
Outlook
The Company is increasing full year guidance and now anticipates adjusted EPS for the full fiscal year in the range of $1.50 to $1.60 per share, up 69 to 80 percent from last year. This increase from previous guidance reflects the continued strong performance of Perrigo's existing portfolio and additional volume gains as a result of ongoing quality issues at a competitor. The Company also expects its full-year tax rate to be in the range of 21 to 24 percent, down from prior guidance as a result of forecasted changes to the worldwide income mix and additional tax planning measures. The Company expects to generate cash from operations in the range of $180 million to $200 million.
Mr. Papa stated, "Perrigo is executing in a challenging economic environment by delivering quality, affordable healthcare to our customers. We continue our focus on improving quality, our supply chain, and working capital management, while investing in our new product pipeline. The Galpharm acquisition is another example of improving our customer offering, while also improving our return on invested capital. We are generating strong cash flow and delivering value to our customers and shareholders."
Perrigo will host a conference call to discuss fiscal 2008 second quarter results at 10:00am (ET) on Tuesday, February 5. The conference call will be available via webcast to interested parties on the Perrigo website http://www.perrigo.com or by phone 888-694-4676, International 973-582-2737, and reference ID# 31908064. A taped replay of the call will be available beginning at approximately 2:30 p.m. (ET) Tuesday, February 5, until midnight Tuesday, February 12, 2008. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 31908064.
Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes over-the-counter (OTC) and prescription pharmaceuticals, nutritional products, active pharmaceutical ingredients (API) and consumer 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 facilities 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 30, 2007, 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, or Ernest J. Schenk,
Manager, Investor Relations and Communication, +1-269-673-9212,
eschenk@perrigo.com, both of Perrigo Company
Web site: http://www.perrigo.com/
