Perrigo Reports Record Third Quarter Revenue, All-Time Record Earnings, and Raises Full Year Adjusted EPS Guidance

ALLEGAN, Mich., April 29 /PRNewswire-FirstCall/ --

• Fiscal third quarter revenue from continuing operations increased $32 million, or 6%, to $538 million
• Fiscal third quarter adjusted income from continuing operations increased 49% to $70 million, or $0.76 per diluted share
• Fiscal third quarter GAAP income from continuing operations increased 29% to $60 million, or $0.65 per diluted share
• Strong third quarter cash flow from operations of $57 million
• Management raises full-year fiscal 2010 adjusted diluted earnings from continuing operations to $2.75-$2.80 per share from previously announced $2.55-$2.65 per share

Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its third quarter and nine months ended March 27, 2010.

Perrigo's Chairman and CEO Joseph C. Papa commented, "We are excited to announce another outstanding quarter. Consumers continue to realize the value of store brands; however, that is just one of numerous drivers that contributed to our strong performance. All of our segments executed above expectations. This quarter, both our adjusted consolidated gross and operating margins reached all-time highs of 34.6% and 18.2%, respectively. In addition to this strong day-to-day performance, our teams have been hard at work focusing on the future. During the quarter we announced two acquisitions, won a summary judgment in a patent litigation and launched two new products. Those achievements are just a few examples of the exciting opportunities we are working on in adjacent categories, product pipeline extensions and geographical expansions here at Perrigo."

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, and subsequently sold on February 26, 2010, 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.

Third Quarter Results

Net sales from continuing operations for the third quarter of fiscal 2010 were $538 million, an increase of 6%. Reported income from continuing operations was $60 million, or $0.65 per share, a strong increase over $46 million, or $0.50 per share, a year ago. Excluding the charges as outlined in Table II at the end of this release, third quarter fiscal 2010 adjusted income from continuing operations was $70 million, or $0.76 per share. Reported operating expenses included $7 million in restructuring charges, primarily related to the sale of the Company's German API facility, and $3 million in acquisition costs related to the pending acquisition of PBM Holdings, Inc. (PBM).    

Nine Months Results

Net sales for the first nine months of fiscal 2010 were $1,649 million, an increase of 10% over fiscal 2009. The increase spanned all of the Company's segments and included consolidated new product sales of approximately $65 million. Reported gross profit was $547 million, up 27%, and the reported gross margin was 33.2%, up from 28.8% last year. Reported operating margin increased 290 basis points to 15.7% and adjusted operating margin increased 400 basis points to 17.2%. Reported income from continuing operations was $174 million, an increase of 60%. Adjusted income from continuing operations was $196 million or an increase of 54% from fiscal 2009.

Consumer Healthcare

Consumer Healthcare segment net sales in the third quarter were $436 million compared with $419 million in the third quarter last year, an increase of $17 million or 4%. The increase resulted from $18 million of new product sales and $11 million from higher sales volumes of existing products, primarily in the laxatives, analgesics, nutritional, and gastrointestinal categories, as well as from favorable changes in foreign currency exchange rates which increased sales by $3 million. These increases were partially offset by a decline of approximately $15 million in sales from existing products, primarily in smoking cessation and contract manufacturing categories. Reported operating income was $78 million, compared with $62 million a year ago, largely driven by favorable product mix and higher gross margins from the sale of new products. Reported operating margin increased 300 basis points to 17.9% due to improved operating expense leverage.  

For the first nine months of fiscal year 2010, Consumer Healthcare net sales increased $120 million or 10%, compared to fiscal 2009.  The increase resulted from approximately $51 million of new product sales and a $63 million increase in sales of existing products, primarily in the gastrointestinal, cough/cold and analgesics categories, 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 $27 million in decreased sales from existing products, primarily in the feminine hygiene, smoking cessation and contract manufacturing categories, as well as from exited products. Net sales were also reduced by approximately $9 million as a result of foreign currency exchange rates.

On February 12, 2010, the Company announced that a federal court had granted summary judgment in its favor in patent litigation involving Guaifenesin Extended-Release Tablets, 600mg, a generic version of Mucinex®.

On March 1, 2010, the Company announced that it had acquired Australia's leading OTC store brand supplier, Orion Laboratories, for $49 million in cash.

On March 15, 2010, the Company announced that it launched Ketotifen Fumarate ophthalmic solution, 0.025%, a generic version of Zaditor™.

On March 23, 2010, the Company announced that it had signed a definitive merger agreement to acquire the world's largest store brand infant formula manufacturer, PBM Holdings, for $808 million in cash.  

Rx Pharmaceuticals

The Rx Pharmaceuticals segment third quarter net sales were approximately $51 million compared with $42 million a year ago, an increase of 22%. This increase was due primarily to an increase in non-product revenue, reduced downward pricing pressure and new product sales. Reported operating income was $17 million, an increase of $9 million from last year. The increase was due primarily to an increase in non-product revenue, greater operating expense leverage and improved operating efficiency. Operating margin increased 1400 basis points from last year to 33.1%.  

For the first nine months of fiscal year 2010, net sales for the Rx Pharmaceuticals segment increased 33% over fiscal 2009. Net sales increased due to higher sales of existing products and over-the-counter Rx (ORx), less downward pricing pressure, new product sales and an increase in non-product revenue.

On February 18, 2010, the Company announced that it had received final approval from the U.S. Food and Drug Administration (FDA) to manufacture and market Ciclopirox Shampoo, 1%, a generic version of LOPROX® Shampoo.

On April 5, 2010, the Company announced, that together with its partner Cobrek Pharmaceuticals, Inc. (Cobrek), final approval had been received from the FDA to manufacture and market Clindamycin Phosphate Foam 1%, a generic version of Evoclin® Foam 1% produced by Stiefel Laboratories, a GSK Company. As the abbreviated new drug application (ANDA) was first to file with a Paragraph IV certification against Evoclin®, 180 days of generic exclusivity was granted by the FDA.

Also on April 5, 2010, the Company announced that, together with its partner Cobrek, it had agreed to settle all Hatch-Waxman litigation relating to Betamethasone Valerate Foam, a generic equivalent of Luxiq® Foam, brought by Stiefel, against Cobrek by taking a royalty bearing license under all relevant patents. Under the terms of the settlement, the Company can launch a generic version of Luxiq® Foam on January 15, 2013, or earlier under certain circumstances.

On April 13, 2010, the Company announced that it had settled all patent litigation with Graceway Pharmaceuticals related to the Company's ANDA filing for a generic version of Aldara®. The Company has been named Graceway's authorized generic distributor for Aldara® through February 24, 2011.

On April 15, 2010, the Company announced that it had been named as an authorized generic partner by Ferndale Laboratories and had launched an authorized generic of Analpram HC® Cream.

API

The API segment reported third quarter net sales of $34 million compared with $31 million a year ago. The increase was due primarily to new product sales, dossier sales and favorable changes in the foreign currency exchange rates. Reported operating income decreased approximately $6 million due primarily to charges related to the restructuring in Germany. Adjusted operating income increased $1 million. Adjusted operating margin increased 180 basis points to 15.8%.

For the first nine months of fiscal year 2010, net sales increased 4% or $4 million, compared to fiscal 2009. Adjusted operating margin increased 880 basis points to 14.8% from last year's 6%.  

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 $14 million a year ago. The operating segment reported operating income of approximately $2 million, compared to operating income of approximately $3 million for fiscal 2009. Year-to-date net sales for fiscal 2010 decreased 22% compared to fiscal 2009. The decrease was due primarily to approximately $18 million related to the loss of a customer contract.  

On March 1, 2010, the Company announced that on February 26, 2010 it had closed its previously announced sale of the Israel Consumer Products business to Emilia Group.

Guidance

Chairman and CEO Joseph C. Papa concluded, "Strong performance and execution across our businesses continued during the third quarter. As a result of these positive factors, we now expect reported fiscal 2010 diluted earnings from continuing operations to be between $2.42 and $2.47 per share. Excluding the charges outlined in Table II at the end of this release, we now expect fiscal 2010 adjusted diluted earnings from continuing operations to be between $2.75 and $2.80 per share, up from our previously announced $2.55 to $2.65 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 47% to 50% over fiscal 2009 adjusted diluted EPS."

Perrigo will host a conference call to discuss fiscal 2010 third quarter results at 10:00 a.m. (ET) on Thursday, April 29. 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# 69498517. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Thursday, April 29, until midnight Thursday, May 13, 2010. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 69498517.  

Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, nutritional products, and 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, Australia, 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.

SOURCE Perrigo Company