Perrigo fourth-quarter fiscal 2010 net sales up 22%

Perrigo CompanyAug 12 2010

• Full-year revenue from continuing operations increased $262 million, or 13 percent, to a record $2.27 billion.

• Adjusted income from continuing operations for the full year increased 50 percent to $263 million, or $2.83 per share.

• GAAP income from continuing operations for the full year increased 59 percent to $224 million, or $2.41 per share.

• Record full year cash flow from operations of $314 million. Strong fourth quarter cash flow of $98 million.

• Management expects full-year fiscal 2011 GAAP earnings per share from continuing operations to be in a range of $3.08 to $3.28 per share. This is an increase of 28% to 36% from fiscal 2010's $2.41 per share.

• Management expects full-year fiscal 2011 adjusted earnings from continuing operations, which now excludes deal-related amortization, to be in a range of $3.40 to $3.60 per share. This is an increase of 12% to 18% from fiscal 2010 presented on a consistent basis.

Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its fourth quarter and full year ended June 26, 2010.

Perrigo's Chairman and CEO Joseph C. Papa commented, "For the fourth straight year, we delivered year-over-year record sales, earnings and cash flow from operations. Despite significant challenges, from competition in our largest product to stronger regulatory oversight, we remained focused on execution and delivered results ahead of our own expectations. During the year, we made two business acquisitions that expanded our portfolio into adjacent categories and new geographical areas. We extended our product pipeline into ophthalmics. We also entered strategic partnerships for new products leveraging Perrigo's powerful sales, marketing and distribution capabilities. We are continuing along our strategic path in these challenging times to make quality healthcare more affordable to consumers around the globe."

The Company's reported results are summarized in the attached 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, and subsequently sold on February 26, 2010, the Company's Israel Consumer Products business. The results of this business are reflected in the consolidated financial statements as discontinued operations for all periods presented.

Fourth Quarter Results

Net sales from continuing operations for the fourth quarter of fiscal 2010 were $619 million, an increase of 22% compared to last year. Reported income from continuing operations was $50 million, or $0.53 per share, a strong increase over $32 million, or $0.35 per share, a year ago. Excluding the charges as outlined in Table II at the end of this release, fourth quarter fiscal 2010 adjusted income from continuing operations was $66 million, or $0.71 per share. Reported operating income included approximately $10 million in inventory step-up charges related to the acquisitions of PBM Holdings, Inc. (PBM) and Orion Laboratories (Orion).    

Fiscal Year Results

Net sales for fiscal 2010 were $2.27 billion, an increase of 13% over fiscal 2009. The increase was driven largely by strong performance in the Consumer Healthcare and Rx segments. The growth included consolidated new product sales of approximately $125 million. Reported gross profit was $746 million, up 25%, and the reported gross margin was 32.9%, up from 29.7% last year. The gross margin improvement was driven primarily by new products. Reported operating margin increased 250 basis points to 14.8% and adjusted operating margin increased 360 basis points to 16.9%. Reported income from continuing operations was $224 million, an increase of 59%. Adjusted income from continuing operations was $263 million, or an increase of 50% from fiscal 2009.

Consumer Healthcare

Consumer Healthcare segment net sales in the fourth quarter were $481 million, compared with $407 million in the fourth quarter last year, an increase of $74 million or 18%. The increase resulted from $46 million of sales attributable to the acquisitions of PBM and Orion, $19 million of new product sales and $17 million from higher sales volumes of existing products, primarily in the analgesic category, as well as from favorable changes in foreign currency exchange rates, which increased sales by $2 million. These increases were partially offset by a decline of approximately $10 million in sales from existing products, primarily in gastrointestinal, nutrition and oral electrolytes categories. Reported gross profit was $144 million, compared to $120 million a year ago. Adjusted gross profit was $154 million compared to $120 million a year ago. Adjusted gross margin increased 270 basis points to 32.1%, largely driven by acquisitions, increased sales in analgesics and favorable product mix. Reported operating income was $67 million, compared with $56 million a year ago, and adjusted operating income was $77 million compared to $56 million a year ago. Adjusted operating margin increased 210 basis points to 15.9% due to the strong gross margin improvement.      

For fiscal year 2010, Consumer Healthcare net sales increased $194 million or 12%, compared to fiscal 2009.  The increase resulted from approximately $89 million in incremental sales from the Company's acquisitions of PBM, Orion, J.B. Laboratories, Unico Holdings and Laboratorios Diba, new product sales of $70 million and an increase in sales of existing products of $61 million, primarily in the gastrointestinal, cough/cold and analgesics categories. This growth was partially offset by $19 million in decreased sales from existing products, primarily in the nutrition, feminine hygiene and smoking cessation categories. Net sales were also reduced by approximately $7 million as a result of foreign currency exchange rates. Reported gross profit was $561 million, compared to $460 million a year ago. Adjusted gross profit was $571 million, compared to $465 million a year ago. Adjusted gross margin increased 280 basis points to 31.2%, largely driven by acquisitions, new product sales and lower inventory costs. Reported operating income was $305 million, compared with $234 million a year ago, and adjusted operating income was $315 million, compared to $239 million a year ago. Adjusted operating margin increased 260 basis points to 17.2%.  

On May 3, 2010, the Company announced that it had closed the previously announced acquisition of PBM.

On May 5, 2010, the Company announced that it had acquired the exclusive U.S. store brand rights to sell and distribute Dextromethorphan Polistirex Extended Release Suspension Cough Suppressant, the generic version of Reckitt Benckiser's Delsym®, from Tris Pharma.  

On June 3, 2010, the Company announced that it had received final approval from the U.S. Food and Drug Administration (FDA) for its abbreviated new drug application (ANDA) for over-the-counter (OTC) Miconazole Nitrate Vaginal Cream and Suppository, a generic to Monistat® -1 Combination Pack.

On June 29, 2010, the Company announced that it had acquired the exclusive U.S. store brand rights to sell and distribute OTC versions of Fexofenadine HCl 180 mg and 60 mg tabs, plus Fexofenadine HCl 60 mg and Pseudoephedrine 120 mg tabs, the generic versions of Sanofi-Aventis' Allegra® and Allegra® D-12 products.  

On July 26, 2010, the Company announced that it had received final approval from the FDA to manufacture and market OTC Cetirizine Cherry Syrup, 1mg/ml.

Rx Pharmaceuticals

The Rx Pharmaceuticals segment fourth quarter net sales were $84 million, compared with approximately $49 million a year ago, an increase of 72%. This increase was due primarily to an increase in new product sales and increased sales in over-the-counter Rx (ORx). Reported gross profit was $33 million, compared to $21 million a year ago. The increase was due primarily to new product sales, increased sales in ORx and less downward pricing pressure. Gross margin decreased 360 basis points to 39.4%. The decrease was due primarily to the successful new product launch of imiquimod cream, of which the Company is the authorized generic distributor and recognizes a lower gross margin in line with such contracts. Reported operating income was approximately $17 million, an increase of $5 million from last year, and adjusted operating income was $22 million, compared to $12 million a year ago. Adjusted operating margin increased 90 basis points from last year to 25.7% due to increased operating expense leverage.  

For fiscal year 2010, net sales for the Rx Pharmaceuticals segment increased 45% over fiscal 2009. Net sales increased due to higher sales of existing products, new product sales, less downward pricing pressure and an increase in service and royalty revenue.

On May 26, 2010, the Company announced that it had acquired rights to Novel Laboratories' (Novel) pending ANDA for HalfLytely® and Bisacodyl Tablets Bowel Prep Kit (PEG-3350, sodium chloride, sodium bicarbonate and potassium chloride for oral solution and bisacodyl delayed-release tablets).

On June 2, 2010, the Company announced that, on May 27, 2010, Novel received tentative approval from the FDA on its ANDA for the generic version of HalfLytely®.  

On July 14, 2010, the Company announced its filing with the FDA for its ANDA for Clobetasol Propionate Emulsion Foam, 0.05%. The Company believes it is first-to-file on this product.

On July 30, 2010, the Company announced its filing with the FDA for its ANDA for the generic version of Gynazol-1®. On July 29, 2010, KV Pharmaceutical Company filed suit in the United States District Court for the District of Delaware, alleging patent infringement to prevent the Company from proceeding with the commercialization of this product.

API

The API segment reported fourth quarter net sales of $38 million, compared with $39 million a year ago. The decrease was due primarily to lower sales of existing products, which was partially offset by new product sales and dossier sales. Reported operating income increased approximately $12 million due primarily to charges related to the restructuring in Germany that were included in fiscal 2009. Adjusted operating income decreased $1 million. Adjusted operating margin decreased 170 basis points to 22%.  

For fiscal year 2010, net sales increased 2% or $3 million, compared to fiscal 2009. Reported operating income increased $14 million over last year, and adjusted operating income increased $8 million over last year to $23 million. Adjusted operating margin increased 570 basis points to 16.8%.  

Other

Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported fourth quarter net sales of $16 million compared with $13 million a year ago. The operating segment reported operating income of approximately $1 million, compared to operating income of $2 million for fiscal 2009. Net sales for fiscal 2010 decreased 13% compared to fiscal 2009. The decrease was due primarily to approximately $22 million related to the loss of a customer contract.  

Guidance

Chairman and CEO Joseph C. Papa concluded, "We had strong performance and execution across our businesses during fiscal 2010, and in fiscal 2011, we look to build on that success. We expect fiscal 2011 reported diluted earnings from continuing operations to be between $3.08 and $3.28 per share as compared to $2.41 in fiscal 2010. Excluding the charges outlined in Table III at the end of this release, we expect fiscal 2011 adjusted diluted earnings from continuing operations to be between $3.40 and $3.60 per share as compared to $3.04 in fiscal 2010. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 12% to 18% over fiscal 2010 adjusted diluted EPS."