Perrigo Reports Record Second Quarter Revenue, Adjusted Earnings and Operating Cash Flow

- Fiscal second quarter adjusted net income increased 14% to a record $128 million, or $1.36 per diluted share.

- Fiscal second quarter GAAP net income increased 6% to $106 million, or $1.12 per diluted share.

- Reports record second quarter operating cash flow of $185 million.

- Management confirms previously provided full-year fiscal 2013 adjusted earnings per share to be in a range of $5.45 to $5.65 per diluted share and reported earnings to be between $4.73 and $4.93 per diluted share.

Feb 01, 2013, 07:44 ET from Perrigo Company

ALLEGAN, Mich., Feb. 1, 2013 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE: PRGO) today announced results for its second quarter ended December 29, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120301/DE62255LOGO )

Perrigo's Chairman and CEO Joseph C. Papa commented, "The team delivered on another high-quality quarter with all-time record quarterly revenue, as well as record second quarter adjusted earnings and operating cash flow. The Consumer Healthcare segment had another great quarter with strong store brand OTC market share growth. The team is working hard to integrate and expand the reach of our recent acquisition of Sergeant's Pet Care Products, Inc. ("Sergeant's"). Retailers are excited about the launch of our new plastic container in the infant formula category, as evidenced by their increased marketing and advertising efforts promoting the store brand value proposition. We continue to deliver on our top priority of providing quality, affordable healthcare products for consumers and customers."

Note that fiscal second quarter 2012 included an extra week of operations compared to fiscal second quarter 2013. 

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

Perrigo Company

(in thousands, except per share amounts)

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

Fiscal 2013

Fiscal 2012

Second

Quarter

Ended

Second

Quarter

Ended

YoY

12/29/2012

12/31/2011

% Change

Net Sales

$882,959

$838,170

+5.3%

Reported Net Income

$105,955

$99,739

+6.2%

Adjusted Net Income

$128,083

$112,431

+13.9%

Reported Diluted EPS

$1.12

$1.06

+5.7%

Adjusted Diluted EPS

$1.36

$1.20

+13.3%

Diluted Shares

94,450

94,043

+0.4%

                                                                          

Second Quarter Results

Net sales in the quarter were $883 million, an increase of 5% over the second quarter of fiscal 2012, driven primarily by $34 million attributable to the Sergeant's and CanAm Care, LLC ("CanAm") acquisitions and new product sales of $25 million, partially offset by decreases in sales of certain existing products in the Rx segment in addition to the impact of the extra week of operations experienced in the second quarter of fiscal 2012. Excluding charges as outlined in Table I at the end of this release, second quarter fiscal 2013 adjusted net income increased 14% to $128 million, or $1.36 per diluted share. Reported net income increased 6% to $106 million, or $1.12 per diluted share.

 

Consumer Healthcare

 

Consumer Healthcare Segment

(in thousands)

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

Fiscal 2013

Fiscal 2012

Second

Quarter

Ended

Second

Quarter

Ended

YoY

12/29/2012

12/31/2011

% Change

Net Sales

$539,288

$471,277

+14.4%

Reported Gross Profit

$162,254

$148,813

+9.0%

Adjusted Gross Profit

$173,168

$149,819

+15.6%

Reported Operating Income

$86,078

$82,250

+4.7%

Adjusted Operating Income

$98,641

$84,470

+16.8%

Reported Gross Margin

30.1%

31.6%

-150 bps

Adjusted Gross Margin

32.1%

31.8%

+30 bps

Reported Operating Margin

16.0%

17.5%

-150 bps

Adjusted Operating Margin

18.3%

17.9%

+40 bps

 

Consumer Healthcare segment net sales increased 14% to $539 million, driven by an increase in sales of existing products of $38 million (contract,  analgesics and smoking cessation categories), $34 million attributable to the Sergeant's and CanAm acquisitions, and new product sales of $12 million (cough/cold, dermatologic and gastrointestinal categories). These combined increases were partially offset by a decline of $13 million in sales of existing products (allergy products and gastrointestinal category) and approximately $5 million in discontinued products.

Adjusted gross and operating margins expanded 30 and 40 basis points, respectively, due to new products and increased manufacturing efficiencies. The disparity between the reported and adjusted margins was due primarily to a charge of approximately $8 million to cost of sales as a result of the step-up of inventory acquired and sold related to the Sergeant's acquisition.

 

Nutritionals

 

Nutritionals Segment

(in thousands)

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

Fiscal 2013

Fiscal 2012

Second

Quarter

Ended

Second

Quarter

Ended

 

 

YoY

12/29/2012

12/31/2011

% Change

Net Sales

$121,938

$128,147

-4.8%

Reported Gross Profit

$30,145

$28,230

+6.8%

Adjusted Gross Profit

$33,194

$31,252

+6.2%

Reported Operating Income

$7,160

$4,552

+57.3%

Adjusted Operating Income

$14,470

$11,189

+29.3%

Reported Gross Margin

24.7%

22.0%

+270 bps

Adjusted Gross Margin

27.2%

24.4%

+280 bps

Reported Operating Margin

5.9%

3.6%

+230 bps

Adjusted Operating Margin

11.9%

8.7%

+320 bps

 

The Nutritionals segment reported second quarter net sales of $122 million, compared with $128 million a year ago, as existing product sales declined $9 million due primarily to the extra week of sales in fiscal 2012, partially offset by new product sales of $3 million (Vitamins, Minerals and Supplements and infant foods categories).

Second quarter gross profit and margin increased due primarily to price increases and favorable product mix. Operating profit and margin were positively impacted by lower employee-related expenses, along with the absence of operating expenses related to the Company's Florida location, which was closed in the fourth quarter of fiscal 2012.

 

Rx Pharmaceuticals

 

Rx Pharmaceuticals Segment

(in thousands)

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

Fiscal 2013

Fiscal 2012

Second

Quarter

Ended

Second

Quarter

Ended

 

 

YoY

12/29/2012

12/31/2011

% Change

Net Sales

$162,541

$177,196

-8.3%

Reported Gross Profit

$86,036

$91,378

-5.8%

Adjusted Gross Profit

$94,493

$99,347

-4.9%

Reported Operating Income

$64,059

$69,974

-8.5%

Adjusted Operating Income

$74,042

$78,542

-5.7%

Reported Gross Margin

52.9%

51.6%

+130 bps

Adjusted Gross Margin

58.1%

56.1%

+200 bps

Reported Operating Margin

39.4%

39.5%

-10 bps

Adjusted Operating Margin

45.6%

44.3%

+130 bps

 

The Rx Pharmaceuticals segment second quarter net sales decreased 8% as existing product sales were lower year-over-year by $11 million due to increased competition on certain existing products. This decrease was partially offset by new product sales of $9 million. The extra week of operations in second quarter fiscal 2012 accounted for most of the difference in net sales in the segment compared to fiscal 2012.

The adjusted gross margin increased due primarily to favorable product mix as well as higher margin on new product sales. The adjusted operating margin was impacted by higher distribution, selling, general and administrative costs.

 

API

 

API Segment

(in thousands)

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

Fiscal 2013

Fiscal 2012

Second

Quarter

Ended

Second

Quarter

Ended

 

 

YoY

12/29/2012

12/31/2011

% Change

Net Sales

$40,854

$42,752

-4.4%

Reported Gross Profit

$22,883

$20,151

+13.6%

Adjusted Gross Profit

$23,364

$20,647

+13.2%

Reported Operating Income

$13,820

$11,693

+18.2%

Adjusted Operating Income

$14,301

$12,189

+17.3%

Reported Gross Margin

56.0%

47.1%

+890 bps

Adjusted Gross Margin

57.2%

48.3%

+890 bps

Reported Operating Margin

33.8%

27.4%

+640 bps

Adjusted Operating Margin

35.0%

28.5%

+650 bps

The API segment's net sales declined by 4% to $41 million due primarily to a decrease in existing product sales of approximately $5 million as a result of increased competition, partially offset by $4 million related to the continued successful launch of a customer's product.

Gross and operating margins were positively impacted by the product launch referred to above, along with favorable mix of existing product sales, partially offset by higher research and development and selling, general and administrative expenses.

Other

The Other category reported second quarter net sales of $18 million, compared with approximately $19 million a year ago, due primarily to the impact of unfavorable changes in foreign currency exchange rates.

Adjusted operating income was $1 million, representing a decrease in adjusted operating margin of 140 basis points from last year due to product mix.

Closing

Chairman, President and CEO Joseph C. Papa concluded, "Once again, the strength of our diversified business model was evident this quarter. Our Consumer Healthcare manufacturing operations are producing higher volumes and are operating more efficiently than at any time in our history. The Company continues to use our disciplined ROIC-centric process to make positive investments in operations and products. We expect further growth in store brand market penetration and strong new product launches, resulting in significant savings to consumers with quality, affordable healthcare products."

The Company expects fiscal 2013 reported earnings to be between $4.73 and $4.93 per diluted share as compared to $4.18 in fiscal 2012. Excluding the charges outlined in Table III at the end of this release, the Company continues to expect fiscal 2013 adjusted earnings to be between $5.45 and $5.65 per diluted share as compared to $4.99 in fiscal 2012. This range implies a year-over-year growth rate in adjusted earnings of 9% to 13% over fiscal 2012's adjusted earnings from continuing operations per diluted share.

The conference call will be available live via webcast to interested parties on the Perrigo website http://perrigo.investorroom.com/events-webcasts or by phone at 877-248-9413, International 973-582-2737, and reference ID# 87314407. A taped replay of the call will be available beginning at approximately 1:00 p.m. (ET) Friday, February 1, 2013 until midnight Friday, February 15, 2013. To listen to the replay, dial 855-859-2056, International 404-537-3406, and use access code 87314407.

From its beginnings as a packager of generic home remedies in 1887, Perrigo Company, based in Allegan, Michigan, has grown to become a leading global provider of quality, affordable healthcare products. The Company develops, manufactures and distributes over-the-counter ("OTC") and generic prescription ("Rx") pharmaceuticals, nutritional products and active pharmaceutical ingredients ("API") and is the world's largest manufacturer of OTC pharmaceutical products for the store brand market. Perrigo's mission is to offer uncompromised "quality, affordable healthcare products", and it does so across a wide variety of product categories primarily in the United States, United Kingdom, Mexico, Israel and Australia, as well as certain other markets throughout the world, including Canada, China and Latin America. 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, 2012, 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.

 

 

PERRIGO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

Six Months Ended

December 29, 2012

December 31, 2011

December 29, 2012

December 31, 2011

Net sales

$         882,959

$         838,170

$      1,652,769

$      1,563,465

Cost of sales

575,794

543,295

1,060,335

1,041,011

Gross profit

307,165

294,875

592,434

522,454

Operating expenses

  Distribution

11,699

9,095

22,466

19,359

  Research and development

28,323

31,148

55,718

50,786

  Selling and administration

103,286

93,964

193,820

190,089

  Total operating expenses

143,308

134,207

272,004

260,234

Operating income

163,857

160,668

320,430

262,220

Interest, net

15,314

15,641

31,167

28,211

Other expense, net

76

752

14

981

Loss on sale of investment

3,049

3,049

Income before income taxes

145,418

144,275

286,200

233,028

Income tax expense

39,463

44,536

74,665

62,831

Net income

$         105,955

$           99,739

$         211,535

$         170,197

Earnings per share

Basic earnings per share

$              1.13

$              1.07

$              2.26

$              1.83

Diluted earnings per share

$              1.12

$              1.06

$              2.24

$              1.81

Weighted average shares outstanding

Basic

93,903

93,221

93,755

93,066

Diluted

94,450

94,043

94,408

93,983

Dividends declared per share

$              0.09

$              0.08

$              0.17

$              0.15

See accompanying notes to condensed consolidated financial statements.

 

PERRIGO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

December 29,

2012

December 31,

2011

December 29,

2012

December 31,

2011

Net income

$         105,955

$           99,739

$         211,535

$         170,197

  Other comprehensive income (loss):

Change in fair value of derivative financial instruments, net of tax

5,244

(1,496)

6,706

(9,292)

Foreign currency translation adjustments

28,026

(12,851)

33,450

(65,812)

Change in fair value of investment securities, net of tax

1,037

(933)

1,037

(933)

Post-retirement liability adjustments, net of tax

(24)

(41)

(41)

  Other comprehensive income (loss), net of tax

34,307

(15,304)

41,152

(76,078)

Comprehensive income

$         140,262

$           84,435

$         252,687

$           94,119

See accompanying notes to condensed consolidated financial statements.

 

PERRIGO COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

December 29, 2012

June 30, 2012

December 31, 2011

Assets

Current assets

  Cash and cash equivalents

$               459,514

$               602,489

$               531,410

  Accounts receivable, net

583,903

572,582

530,178

  Inventories

638,797

547,455

580,668

  Current deferred income taxes

44,813

45,738

47,216

  Income taxes refundable

4,323

1,047

4,111

  Prepaid expenses and other current assets

42,771

26,610

40,509

Total current assets

1,774,121

1,795,921

1,734,092

Property and equipment

1,192,787

1,118,837

1,066,307

  Less accumulated depreciation

(574,362)

(540,487)

(515,600)

618,425

578,350

550,707

Goodwill and other indefinite-lived intangible assets

962,804

820,122

808,531

Other intangible assets, net

845,666

729,253

752,595

Non-current deferred income taxes

14,938

13,444

12,330

Other non-current assets

78,382

86,957

84,299

$            4,294,336

$            4,024,047

$            3,942,554

Liabilities and Shareholders' Equity

Current liabilities

  Accounts payable

$               321,205

$               317,341

$               324,349

  Short-term debt

2,648

90

  Payroll and related taxes

71,081

89,934

71,059

  Accrued customer programs

122,651

116,055

116,888

  Accrued liabilities

65,981

76,406

85,661

  Accrued income taxes

11,299

12,905

28,684

  Current portion of long-term debt

40,000

40,000

40,000

Total current liabilities

634,865

652,731

666,641

Non-current liabilities

  Long-term debt, less current portion

1,329,886

1,329,235

1,452,546

  Non-current deferred income taxes

47,481

24,126

9,163

  Other non-current liabilities

173,644

165,310

183,393

Total non-current liabilities

1,551,011

1,518,671

1,645,102

Shareholders' Equity

Controlling interest:

Preferred stock, without par value, 10,000 shares authorized

Common stock, without par value, 200,000 shares authorized

524,124

504,708

486,665

Accumulated other comprehensive income

80,556

39,404

50,972

Retained earnings

1,502,455

1,306,925

1,090,509

2,107,135

1,851,037

1,628,146

Noncontrolling interest

1,325

1,608

2,665

Total shareholders' equity

2,108,460

1,852,645

1,630,811

$            4,294,336

$            4,024,047

$            3,942,554

Supplemental Disclosures of Balance Sheet Information

Allowance for doubtful accounts

$                   2,473

$                   2,556

$                   8,993

Working capital

$            1,139,256

$            1,143,190

$            1,067,451

Preferred stock, shares issued and outstanding

Common stock, shares issued and outstanding

93,980

93,484

93,287

See accompanying notes to condensed consolidated financial statements.

 

PERRIGO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Six Months Ended

December 29, 2012

December 31, 2011

Cash Flows From (For) Operating Activities

Net income

$             211,535

$               170,197

Adjustments to derive cash flows

Gain on sale of pipeline development projects

(3,500)

Loss on sale of investment

3,049

Depreciation and amortization

69,939

67,105

Share-based compensation

9,363

8,977

Income tax benefit from exercise of stock options

1,074

934

Excess tax benefit of stock transactions

(15,668)

(11,215)

Deferred income taxes

972

3,669

Subtotal

280,264

236,167

Changes in operating assets and liabilities, net of business acquisitions

Accounts receivable

16,228

(10,657)

Inventories

(44,980)

(34,150)

Accounts payable

(18,072)

(14,319)

Payroll and related taxes

(19,966)

(12,012)

Accrued customer programs

6,596

(1,412)

Accrued liabilities

(7,156)

16,300

Accrued income taxes

12,835

46,409

Other

3,854

(6,204)

Subtotal

(50,661)

(16,045)

Net cash from operating activities

229,603

220,122

Cash Flows (For) From Investing Activities

Acquisitions of businesses, net of cash acquired

(326,944)

(547,052)

Proceeds from sale of intangible assets and pipeline development projects

10,500

Additions to property and equipment

(39,279)

(55,659)

Acquisitions of assets

(750)

Net cash for investing activities

(366,223)

(592,961)

Cash Flows (For) From Financing Activities

Borrowings (repayments) of short-term debt, net

2,558

(2,770)

Borrowings of long-term debt

40,651

1,087,546

Repayments of long-term debt

(40,000)

(485,000)

Deferred financing fees

(643)

(5,097)

Excess tax benefit of stock transactions

15,668

11,215

Issuance of common stock

7,617

7,699

Repurchase of common stock

(12,159)

(7,954)

Cash dividends

(16,005)

(14,021)

Net cash (for) from financing activities

(2,313)

591,618

Effect of exchange rate changes on cash

(4,042)

2,527

Net (decrease) increase in cash and cash equivalents

(142,975)

221,306

Cash and cash equivalents, beginning of period

602,489

310,104

Cash and cash equivalents, end of period

$             459,514

$               531,410

Supplemental Disclosures of Cash Flow Information

Cash paid/received during the period for:

Interest paid

$               29,244

$                 22,861

Interest received

$                 2,741

$                   1,301

Income taxes paid

$               67,863

$                 15,973

Income taxes refunded

$                 1,155

$                      802

See accompanying notes to condensed consolidated financial statements.

 

Table I

PERRIGO COMPANY

RECONCILIATION OF NON-GAAP MEASURES

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

Consolidated

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$      882,959

$               -

$      882,959

$     838,170

$               -

$      838,170

5 %

5 %

Cost of sales

575,794

23,308

(a,b)

552,486

543,295

12,931

(a)

530,364

6 %

4 %

Gross profit

307,165

23,308

330,473

294,875

12,931

307,806

4 %

7 %

Operating expenses

Distribution

11,699

-

11,699

9,095

-

9,095

29 %

29 %

Research and development

28,323

-

28,323

31,148

-

31,148

-9 %

-9 %

Selling and administration

103,286

7,476

(a,c,d)

95,810

93,964

5,428

(a,e)

88,536

10 %

8 %

Total operating expenses

143,308

7,476

135,832

134,207

5,428

128,779

7 %

5 %

Operating income

163,857

30,784

194,641

160,668

18,359

179,027

2 %

9 %

Interest, net

15,314

-

15,314

15,641

-

15,641

-2 %

-2 %

Other expense, net

76

-

76

752

-

752

-90 %

-90 %

Loss on sale of investment

3,049

3,049

-

-

-

-

-

-

Income before income taxes

145,418

33,833

179,251

144,275

18,359

162,634

1 %

10 %

Income tax expense

39,463

11,705

(j)

51,168

44,536

5,667

(j)

50,203

-11 %

2 %

Net income

$      105,955

$        22,128

$      128,083

$       99,739

$       12,692

$      112,431

6 %

14 %

Diluted earnings per share

$           1.12

$           1.36

$           1.06

$           1.20

6 %

13 %

Diluted weighted average shares outstanding

94,450

94,450

94,043

94,043

Selected ratios as a percentage of net sales

Gross profit

34.8 %

37.4 %

35.2 %

36.7 %

Operating expenses

16.2 %

15.4 %

16.0 %

15.4 %

Operating income

18.6 %

22.0 %

19.2 %

21.4 %

Six Months Ended

Consolidated

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$   1,652,769

$               -

$   1,652,769

$   1,563,465

$               -

$   1,563,465

6 %

6 %

Cost of sales

1,060,335

36,632

(a,b)

1,023,703

1,041,011

55,292

(a,g)

985,719

2 %

4 %

Gross profit

592,434

36,632

629,066

522,454

55,292

577,746

13 %

9 %

Operating expenses

Distribution

22,466

-

22,466

19,359

-

19,359

16 %

16 %

Research and development

55,718

-

55,718

50,786

(3,500)

(h)

54,286

10 %

3 %

Selling and administration

193,820

14,851

(a,c,f)

178,969

190,089

19,049

(a,i)

171,040

2 %

5 %

Total operating expenses

272,004

14,851

257,153

260,234

15,549

244,685

5 %

5 %

Operating income

320,430

51,483

371,913

262,220

70,841

333,061

22 %

12 %

Interest, net

31,167

-

31,167

28,211

-

28,211

10 %

10 %

Other expense, net

14

-

14

981

-

981

-99 %

-99 %

Loss on sale of investment

3,049

3,049

-

-

-

-

-

-

Income before income taxes

286,200

54,532

340,732

233,028

70,841

303,869

23 %

12 %

Income tax expense

74,665

18,515

(j)

93,180

62,831

25,288

(j)

88,119

19 %

6 %

Net income

$      211,535

$        36,017

$      247,552

$     170,197

$       45,553

$      215,750

24 %

15 %

Diluted earnings per share

$           2.24

$           2.62

$           1.81

$           2.30

24 %

14 %

Diluted weighted average shares outstanding

94,408

94,408

93,983

93,983

Selected ratios as a percentage of net sales

Gross profit

35.8 %

38.1 %

33.4 %

37.0 %

Operating expenses

16.5 %

15.6 %

16.6 %

15.7 %

Operating income

19.4 %

22.5 %

16.8 %

21.3 %

(a) Deal-related amortization

(b) Inventory step-up of $7,693

(c) Severance costs of $1,526

(d) Acquisition costs of $40

(e) Severance costs of $599

(f) Acquisition costs of $1,917

(g) Inventory step-up of $27,179

(h) Proceeds from sale of pipeline development projects

(i) Acquisition-related and severance costs of $9,381

(j) Total tax effect for non-GAAP pre-tax adjustments

 

Table II

PERRIGO COMPANY

REPORTABLE SEGMENTS

RECONCILIATION OF NON-GAAP MEASURES

(in thousands)

(unaudited)

Three Months Ended

Consumer Healthcare

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$    539,288

$             -

$    539,288

$    471,277

$               -

$    471,277

14 %

14 %

Cost of sales

377,034

10,914

(a,b)

366,120

322,464

1,006

(a)

321,458

17 %

14 %

Gross profit

162,254

10,914

173,168

148,813

1,006

149,819

9 %

16 %

Operating expenses

76,176

1,649

(a)

74,527

66,563

1,214

(a)

65,349

14 %

14 %

Operating income

$     86,078

$     12,563

$      98,641

$     82,250

$         2,220

$      84,470

5 %

17 %

Selected ratios as a percentage of net sales

Gross profit

30.1 %

32.1 %

31.6 %

31.8 %

Operating expenses

14.1 %

13.8 %

14.1 %

13.9 %

Operating income

16.0 %

18.3 %

17.5 %

17.9 %

Six Months Ended

Consumer Healthcare

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$    989,704

$             -

$    989,704

$    882,958

$               -

$    882,958

12 %

12 %

Cost of sales

681,615

11,929

(a,b)

669,686

604,787

2,028

(a)

602,759

13 %

11 %

Gross profit

308,089

11,929

320,018

278,171

2,028

280,199

11 %

14 %

Operating expenses

142,723

2,897

(a)

139,826

126,732

2,437

(a)

124,295

13 %

12 %

Operating income

$    165,366

$     14,826

$    180,192

$    151,439

$         4,465

$    155,904

9 %

16 %

Selected ratios as a percentage of net sales

Gross profit

31.1 %

32.3 %

31.5 %

31.7 %

Operating expenses

14.4 %

14.1 %

14.4 %

14.1 %

Operating income

16.7 %

18.2 %

17.2 %

17.7 %

Three Months Ended

Nutritionals

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$    121,938

$             -

$    121,938

$    128,147

$               -

$    128,147

-5 %

-5 %

Cost of sales

91,793

3,049

(a)

88,744

99,917

3,022

(a)

96,895

-8 %

-8 %

Gross profit

30,145

3,049

33,194

28,230

3,022

31,252

7 %

6 %

Operating expenses

22,985

4,261

(a)

18,724

23,678

3,615

(a)

20,063

-3 %

-7 %

Operating income

$       7,160

$       7,310

$      14,470

$       4,552

$         6,637

$      11,189

57 %

29 %

Selected ratios as a percentage of net sales

Gross profit

24.7 %

27.2 %

22.0 %

24.4 %

Operating expenses

18.8 %

15.4 %

18.5 %

15.7 %

Operating income

5.9 %

11.9 %

3.6 %

8.7 %

Six Months Ended

Nutritionals

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$    225,361

$             -

$    225,361

$    248,008

$               -

$    248,008

-9 %

-9 %

Cost of sales

169,381

6,099

(a)

163,282

190,209

8,871

(a)

181,338

-11 %

-10 %

Gross profit

55,980

6,099

62,079

57,799

8,871

66,670

-3 %

-7 %

Operating expenses

44,937

8,511

(a)

36,426

46,006

7,231

(a)

38,775

-2 %

-6 %

Operating income

$     11,043

$     14,610

$      25,653

$     11,793

$       16,102

$      27,895

-6 %

-8 %

Selected ratios as a percentage of net sales

Gross profit

24.8 %

27.5 %

23.3 %

26.9 %

Operating expenses

19.9 %

16.2 %

18.6 %

15.6 %

Operating income

4.9 %

11.4 %

4.8 %

11.2 %

Three Months Ended

Rx Pharmaceuticals

December 29, 2012

December 31, 2011

% Change

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

Non-GAAP Adjustments

As Adjusted

GAAP

As Adjusted

Net sales

$    162,541

$             -

$    162,541

$    177,196

$               -

$    177,196

-8 %

-8 %

Cost of sales

76,505

8,457

(a)

68,048

85,818

7,969

(a)

77,849

-11 %

-13 %

Gross profit

86,036

8,457

94,493

91,378

7,969

99,347

-6 %

-5 %

Operating expenses

21,977

1,526

(c)

20,451

21,404

599

(c)

20,805

3 %

-2 %

Operating income

$     64,059

$       9,983

$      74,042

$     69,974

$         8,568

$      78,542

-8 %

-6 %

Selected ratios as a percentage of net sales

Gross profit

52.9 %

58.1 %

51.6 %

56.1 %

Operating expenses

13.5 %

12.6 %

12.1 %

11.7 %

Operating income

39.4 %

45.6 %

39.5 %

44.3 %

(a) Deal-related amortization

(b) Inventory step-up of $7,693

(c) Severance costs

(d) Inventory step-up of $27,179

(e) Proceeds of $3,500 from sale of pipeline development projects

(f) Severance costs of $3,755

 

Table II (Continued)

PERRIGO COMPANY

REPORTABLE SEGMENTS

RECONCILIATION OF NON-GAAP MEASURES

(in thousands)

(unaudited)