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Perrigo Reports Record First Quarter Revenue And Adjusted Earnings And Raises Full Year Adjusted EPS Guidance

- Fiscal first quarter adjusted net income increased 16% to a record $119 million, or $1.27 per diluted share, inclusive of an $0.08 tax benefit.

ALLEGAN, Mich., Nov. 7, 2012 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE: PRGO) today announced results for its first quarter ended September 29, 2012.

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

Perrigo's Chairman and CEO Joseph C. Papa commented, "We have started fiscal 2013 well, delivering record first quarter revenue and adjusted earnings. We also delivered all-time record adjusted gross and operating margins. Store brand OTC market share continues to grow. Our Consumer Healthcare segment's revenue grew 9.4% from a record first quarter last year. Our Rx segment continued its excellent performance, which was driven by the acquisition of Paddock Labs, new product sales and strong organic Rx results, combined with our continued focus on quality and R&D. Clearly we are focused on the results from our Nutritionals segment and the team has an action plan in place for the rest of the year. We believe our value proposition continues to resonate well with consumers."

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 Cash Flows.

Perrigo Company
(in thousands, except per share amounts)
(see the attached Table I for reconciliation to GAAP numbers)






Fiscal 2013

Fiscal 2012



First Quarter

Ended

First Quarter

Ended

 

YoY


9/29/2012

9/24/2011

% Change





Net Sales

$769,810

$725,295

6.1%

Reported Net Income

$105,580

$70,458

49.8%

Adjusted Net Income

$119,467

$103,320

15.6%

Reported Diluted EPS

$1.12

$0.75

49.3%

Adjusted Diluted EPS

$1.27

$1.10

15.5%

Diluted Shares

94,335

93,953

0.4%

First Quarter Results

Net sales in the quarter were $770 million, an increase of 6% over the first quarter of fiscal 2012, driven primarily by $28 million attributable to the Paddock Laboratories, Inc. ("Paddock") and CanAm Care, LLC ("CanAm") acquisitions and new product sales of $26 million, partially offset by decreases in sales of certain existing products in the Nutritionals and API segments and $5 million due to unfavorable changes in foreign currency exchange rates. Excluding charges as outlined in Table I at the end of this release, first quarter fiscal 2013 adjusted net income increased 16% to $119 million, or $1.27 per share. Reported net income increased 50% to $106 million, or $1.12 per diluted share, due primarily to $0.21 per diluted share in acquisition-related costs in the first quarter of fiscal 2012.               

Consumer Healthcare

Consumer Healthcare Segment
(in thousands)
(see the attached Table II for reconciliation to GAAP numbers)






Fiscal 2013

Fiscal 2012



First Quarter

Ended

First Quarter

Ended

 

YoY


9/29/2012

9/24/2011

% Change





Net Sales

$450,416

$411,681

9.4%

Reported Gross Profit

$145,835

$129,358

12.7%

Adjusted Gross Profit

$146,850

$130,380

12.6%

Reported Operating Income

$79,288

$69,189

14.6%

Adjusted Operating Income

$81,551

$71,433

14.2%





Reported Gross Margin

32.4%

31.4%

+100 bps

Adjusted Gross Margin

32.6%

31.7%

+90 bps

Reported Operating Margin

17.6%

16.8%

+80 bps

Adjusted Operating Margin

18.1%

17.4%

+70 bps





Consumer Healthcare segment net sales increased 9% to $450 million due to an increase in sales of existing products of $36 million (contract, cough/cold and smoking cessation categories), new product sales of $13 million (gastrointestinal, cough/cold and dermatological categories) and $9 million in incremental sales attributable to the acquisition of CanAm. These combined increases were partially offset by a decline of $17 million in sales of existing products (analgesics and feminine hygiene categories) and a decline of $4 million due to discontinued products.

Adjusted gross and operating margins expanded 90 and 70 basis points, respectively, due to new products, product mix and cost controls in the Company's manufacturing plants.

Nutritionals

Nutritionals Segment
(in thousands)
(see the attached Table II for reconciliation to GAAP numbers)






Fiscal 2013

Fiscal 2012



First Quarter

Ended

First Quarter

Ended

 

YoY


9/29/2012

9/24/2011

% Change





Net Sales

$103,423

$119,861

-13.7%

Reported Gross Profit

$25,835

$29,569

-12.6%

Adjusted Gross Profit

$28,885

$35,418

-18.4%

Reported Operating Income

$3,883

$7,241

-46.4%

Adjusted Operating Income

$11,183

$16,705

-33.1%





Reported Gross Margin

25.0%

24.7%

+30 bps

Adjusted Gross Margin

27.9%

29.5%

-160 bps

Reported Operating Margin

3.8%

6.0%

-220 bps

Adjusted Operating Margin

10.8%

13.9%

-310 bps

The Nutritionals segment reported first quarter net sales of $103 million, compared with $120 million a year ago as existing product sales declined $20 million, partially offset by new product sales of $3 million (infant formula category). The decrease in sales was due primarily to a decline in existing product sales in the vitamin, minerals and dietary supplements ("VMS") category driven by increased competition and increased retail shipments of infant formula placed in the fourth quarter of fiscal 2012 in advance of the planned July 1st shutdown of the Company's Vermont Plant to perform an SAP conversion and prepare for the installation of a new packaging line. Reported and adjusted gross profit and margin were impacted by relatively lower volumes in infant formula and VMS, along with increased inventory costs.

Operating income and margin were impacted by higher combined research and development and distribution, selling, general and administration expenses as a percent to net sales, though they were lower on a dollar basis, year-over-year.

Rx Pharmaceuticals

Rx Pharmaceuticals Segment
(in thousands)
(see the attached Table II for reconciliation to GAAP numbers)






Fiscal 2013

Fiscal 2012



First Quarter

Ended

First Quarter

Ended

 

YoY


9/29/2012

9/24/2011

% Change





Net Sales

$162,942

$127,627

27.7%

Reported Gross Profit

$86,684

$41,460

109.1%

Adjusted Gross Profit

$95,086

$75,992

25.1%

Reported Operating Income

$68,504

$24,485

179.8%

Adjusted Operating Income

$76,906

$58,673

31.1%





Reported Gross Margin

53.2%

32.5%

+2,070 bps

Adjusted Gross Margin

58.4%

59.5%

-110 bps

Reported Operating Margin

42.0%

19.2%

+2,280 bps

Adjusted Operating Margin

47.2%

46.0%

+120 bps

The Rx Pharmaceuticals segment first quarter net sales increased 28% to $163 million due primarily to incremental net sales of $19 million from the July 26, 2011 Paddock acquisition, new product sales of $8 million and improved pricing on select products.

Year-over-year percent changes in reported gross profit and operating income were impacted by the absence of a one-time charge of $27 million to cost of sales as a result of the step-up of inventory value related to the Paddock acquisition in the first quarter of fiscal 2012.

API

API Segment
(in thousands)
(see the attached Table II for reconciliation to GAAP numbers)






Fiscal 2013

Fiscal 2012



First Quarter

Ended

First Quarter

Ended

 

YoY


9/29/2012

9/24/2011

% Change





Net Sales

$36,419

$47,644

-23.6%

Reported Gross Profit

$21,360

$21,608

-1.1%

Adjusted Gross Profit

$21,823

$22,129

-1.4%

Reported Operating Income

$13,319

$14,215

-6.3%

Adjusted Operating Income

$13,782

$14,736

-6.5%





Reported Gross Margin

58.7%

45.4%

+1,330 bps

Adjusted Gross Margin

59.9%

46.4%

+1,350 bps

Reported Operating Margin

36.6%

29.8%

+680 bps

Adjusted Operating Margin

37.8%

30.9%

+690 bps

The API segment's net sales declined by 24% to $36 million due primarily to a decrease in existing product sales of approximately $17 million as a result of increased competition and pricing pressures on select products, along with a negative impact of $2 million due to changes in foreign currency, partially offset by $7 million related to the launch of a customer's product with 180-day exclusivity status.

Gross and operating margins were positively impacted by the product launch referred to above.

Other

The Other category reported decreased first quarter net sales of approximately $17 million, compared with $18 million a year ago, due primarily to the impact of unfavorable changes in foreign currency exchange rates.

Adjusted operating income was approximately $1 million, representing an increase in adjusted operating margin of 100 basis points from last year due to product mix.

Guidance

Chairman, President and CEO Joseph C. Papa concluded, "The strength of our diversified business model was evident this quarter. Margin expansion remains a top priority for the Company and we continue to make ROIC positive investments in operations and products. As we look forward to the rest of fiscal 2013, we continue to expect strong new product launches and further conversion of consumers to store brand."

The Company expects fiscal 2013 reported earnings to be between $4.71 and $4.91 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 expects fiscal 2013 adjusted earnings to be between $5.45 and $5.65 per diluted share as compared to $4.99 in fiscal 2012 reflecting the acquisition of Sergeant's Pet Care Products, Inc., the realization of tax benefits and continued execution of the core businesses. This new 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# 46994711. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Wednesday, November 7, 2012 until midnight Friday, November 23, 2012. To listen to the replay, dial 855-859-2056, International 404-537-3406, and use access code 46994711.           

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)










First Quarter


2013


2012





Net sales

$       769,810


$       725,295

Cost of sales

484,541


497,716

Gross profit

285,269


227,579





Operating expenses




Distribution

10,767


10,264

Research and development

27,395


19,638

Selling and administration

90,534


96,125

Total operating expenses

128,696


126,027





Operating income

156,573


101,552





Interest, net

15,853


12,570

Other (income) expense, net

(62)


229

Income before income taxes

140,782


88,753





Income tax expense

35,202


18,295

Net income

$       105,580


$         70,458





Earnings per share




Basic earnings per share

$             1.13


$             0.76

Diluted earnings per share

$             1.12


$             0.75





Weighted average shares outstanding




Basic

93,607


92,900

Diluted

94,335


93,953





Dividends declared per share

$              0.08


$              0.07












See accompanying notes to condensed consolidated financial statements.

PERRIGO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)






First Quarter


2013


2012

Net Income

$                           105,580


$                              70,458

Other comprehensive income (loss):




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

1,462


(7,796)

Foreign currency translation adjustments

5,424


(52,960)

Post-retirement liability adjustments, net of tax

(41)


(17)

Other comprehensive income (loss), net of tax

6,845


(60,773)

Comprehensive income

$                           112,425


$                                9,685









See accompanying notes to condensed consolidated financial statements.

PERRIGO COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)








September 29,


June 30,


September 24,


2012


2012


2011

Assets






Current assets






Cash and cash equivalents

$                 631,993


$                 602,489


$                 116,615

Accounts receivable, net

584,008


572,582


521,263

Inventories

598,825


547,455


563,257

Current deferred income taxes

45,781


45,738


50,276

Income taxes refundable

4,252


1,047


8,891

Prepaid expenses and other current assets

35,872


26,610


38,789

Total current assets

1,900,731


1,795,921


1,299,091







Property and equipment

1,135,502


1,118,837


1,037,270

Less accumulated depreciation

(555,241)


(540,487)


(504,389)


580,261


578,350


532,881







Goodwill and other indefinite-lived intangible assets

822,359


820,122


812,924

Other intangible assets, net

711,104


729,253


771,677

Non-current deferred income taxes

14,627


13,444


13,479

Other non-current assets

88,348


86,957


84,035


$              4,117,430


$              4,024,047


$              3,514,087













Liabilities and Shareholders' Equity






Current liabilities






Accounts payable

$                 306,972


$                 317,341


$                 303,549

Short-term debt

1,609


90


3,750

Payroll and related taxes

57,864


89,934


72,106

Accrued customer programs

122,495


116,055


112,592

Accrued liabilities

79,756


76,406


83,374

Accrued income taxes

21,228


12,905


6,677

Current portion of long-term debt

40,000


40,000


40,000

Total current liabilities

629,924


652,731


622,048







Non-current liabilities






Long-term debt, less current portion

1,329,827


1,329,235


1,155,787

Non-current deferred income taxes

26,297


24,126


9,604

Other non-current liabilities

166,064


165,310


182,207

Total non-current liabilities

1,522,188


1,518,671


1,347,598







Shareholders' Equity






Controlling interest:






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

-


-


-

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

512,658


504,708


478,035

Accumulated other comprehensive income

46,249


39,404


66,277

Retained earnings

1,404,977


1,306,925


998,256


1,963,884


1,851,037


1,542,568

Noncontrolling interest

1,434


1,608


1,873

Total shareholders' equity

1,965,318


1,852,645


1,544,441


$              4,117,430


$              4,024,047


$              3,514,087







Supplemental Disclosures of Balance Sheet Information






Allowance for doubtful accounts

$                      2,224


$                      2,556


$                      9,617

Working capital

$              1,270,807


$              1,143,190


$                 677,043

Preferred stock, shares issued and outstanding

-


-


-

Common stock, shares issued and outstanding

93,840


93,484


93,189







See accompanying notes to condensed consolidated financial statements.

PERRIGO COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)








First Quarter



2013


2012

Cash Flows (For) From Operating Activities





Net income


$        105,580


$         70,458

Adjustments to derive cash flows





Gain on sale of pipeline development projects


-


(3,500)

Depreciation and amortization


33,424


34,720

Share-based compensation


4,772


3,935

Income tax benefit from exercise of stock options


2,068


2,125

Excess tax benefit of stock transactions


(13,342)


(10,578)

Deferred income taxes 


(3,483)


(3,084)

Subtotal


129,019


94,076






Changes in operating assets and liabilities, net of business acquisition





Accounts receivable


(6,682)


8,581

Inventories


(48,110)


(7,156)

Accounts payable


(12,574)


(47,249)

Payroll and related taxes


(32,298)


(10,681)

Accrued customer programs


6,440


(5,708)

Accrued liabilities


2,713


17,678

Accrued income taxes


15,674


(878)

Other


(9,327)


5,484

Subtotal


(84,164)


(39,929)

Net cash from operating activities


44,855


54,147






Cash Flows (For) From Investing Activities





Acquisition of business, net of cash acquired


-


(547,052)

Proceeds from sale of intangible assets and pipeline development projects


-


10,500

Additions to property and equipment


(14,804)


(18,953)

Other


-


(250)

Net cash for investing activities


(14,804)


(555,755)






Cash Flows (For) From Financing Activities





Borrowings of short-term debt, net


1,519


980

Net borrowings under accounts receivable securitization program


-


55,000

Borrowings of long-term debt


592


250,787

Deferred financing fees


-


(2,468)

Excess tax benefit of stock transactions


13,342


10,578

Issuance of common stock


4,063


5,884

Repurchase of common stock


(12,159)


(7,899)

Cash dividends


(7,528)


(6,535)

Net cash (for) from financing activities


(171)


306,327






Effect of exchange rate changes on cash


(376)


1,792

Net increase (decrease) in cash and cash equivalents


29,504


(193,489)






Cash and cash equivalents, beginning of period


602,489


310,104

Cash and cash equivalents, end of period


$        631,993


$       116,615






Supplemental Disclosures of Cash Flow Information





Cash paid/received during the period for:





Interest paid


$            2,096


$           3,240

Interest received


$            1,276


$           1,127

Income taxes paid


$          20,514


$           9,151

Income taxes refunded


$                526


$               768






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

September 29, 2012


September 24, 2011


% Change


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


As Adjusted

Net sales

$          769,810


$                    -


$          769,810


$         725,295


$                   -


$          725,295


6 %


6 %

Cost of sales

484,541


13,323

(a)

471,218


497,716


42,362

(a,d)

455,354


-3 %


3 %

Gross profit

285,269


13,323


298,592


227,579


42,362


269,941


25 %


11 %

















Operating expenses
















Distribution

10,767


-


10,767


10,264


-


10,264


5 %


5 %

Research and development

27,395


-


27,395


19,638


(3,500)

(e)

23,138


39 %


18 %

Selling and administration

90,534


7,375

(a,b)

83,159


96,125


13,620

(a,f)

82,505


-6 %


1 %

Total operating expenses

128,696


7,375


121,321


126,027


10,120


115,907


2 %


5 %

















Operating income

156,573


20,698


177,271


101,552


52,482


154,034


54 %


15 %

Interest, net

15,853


-


15,853


12,570


-


12,570


26 %


26 %

Other (income) expense, net

(62)


-


(62)


229


-


229


-


-

Income before income taxes

140,782


20,698


161,480


88,753


52,482


141,235


59 %


14 %

Income tax expense

35,202


6,811

(c)

42,013


18,295


19,620

(c)

37,915


92 %


11 %

Net income

$          105,580


$            13,887


$          119,467


$           70,458


$           32,862


$          103,320


50 %


16 %

















Diluted earnings per share

$               1.12




$               1.27


$               0.75




$               1.10


49 %


15 %

















Diluted weighted average shares outstanding

94,335




94,335


93,953




93,953





















Selected ratios as a percentage of net sales
















Gross profit

37.1 %




38.8 %


31.4 %




37.2 %





Operating expenses

16.7 %




15.8 %


17.4 %




16.0 %





Operating income

20.3 %




23.0 %


14.0 %




21.2 %





































(a) Deal-related amortization











(b) Acquisition costs of $1,877











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











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











(e) Proceeds from sale of pipeline development projects











(f) Acquisition-related and severance costs of $8,782











Table II

PERRIGO COMPANY

REPORTABLE SEGMENTS

RECONCILIATION OF NON-GAAP MEASURES

(in thousands)

(unaudited)








Three Months Ended





Consumer Healthcare

September 29, 2012


September 24, 2011


% Change


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


As Adjusted

Net sales

$       450,416


$                 -


$      450,416


$       411,681


$                   -


$       411,681


9 %


9 %

Cost of sales

304,581


1,015

(a)

303,566


282,323


1,022

(a)

281,301


8 %


8 %

Gross profit

145,835


1,015


146,850


129,358


1,022


130,380


13 %


13 %

Operating expenses

66,547


1,248

(a)

65,299


60,169


1,222

(a)

58,947


11 %


11 %

Operating income

$         79,288


$           2,263


$        81,551


$         69,189


$             2,244


$         71,433


15 %


14 %

















Selected ratios as a percentage of net sales
















Gross profit

32.4 %




32.6 %


31.4 %




31.7 %





Operating expenses

14.8 %




14.5 %


14.6 %




14.3 %





Operating income

17.6 %




18.1 %


16.8 %




17.4 %






































Three Months Ended





Nutritionals

September 29, 2012


September 24, 2011


% Change


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


As Adjusted

Net sales

$       103,423


$                 -


$      103,423


$       119,861


$                   -


$       119,861


-14 %


-14 %

Cost of sales

77,588


3,050

(a)

74,538


90,292


5,849

(a)

84,443


-14 %


-12 %

Gross profit

25,835


3,050


28,885


29,569


5,849


35,418


-13 %


-18 %

Operating expenses

21,952


4,250

(a)

17,702


22,328


3,615

(a)

18,713


-2 %


-5 %

Operating income

$           3,883


$           7,300


$        11,183


$           7,241


$             9,464


$         16,705


-46 %


-33 %

















Selected ratios as a percentage of net sales
















Gross profit

25.0 %




27.9 %


24.7 %




29.5 %





Operating expenses

21.2 %




17.1 %


18.6 %




15.6 %





Operating income

3.8 %




10.8 %


6.0 %




13.9 %






































Three Months Ended





Rx Pharmaceuticals

September 29, 2012


September 24, 2011


% Change


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


As Adjusted

Net sales

$       162,942


$                 -


$      162,942


$       127,627


$                   -


$       127,627


28 %


28 %

Cost of sales

76,258


8,402

(a)

67,856


86,167


34,532

(a,b)

51,635


-11 %


31 %

Gross profit

86,684


8,402


95,086


41,460


34,532


75,992


109 %


25 %

Operating expenses

18,180


-


18,180


16,975


(344)

(c,d)

17,319


7 %


5 %

Operating income

$         68,504


$           8,402


$        76,906


$         24,485


$            34,188


$         58,673


180 %


31 %

















Selected ratios as a percentage of net sales
















Gross profit

53.2 %




58.4 %


32.5 %




59.5 %





Operating expenses

11.2 %




11.2 %


13.3 %




13.6 %





Operating income

42.0 %




47.2 %


19.2 %




46.0 %





































(a) Deal-related amortization










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










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










(d) Severance costs of $3,156










Table II (Continued)

PERRIGO COMPANY

REPORTABLE SEGMENTS

RECONCILIATION OF NON-GAAP MEASURES

(in thousands)

(unaudited)


















Three Months Ended





API

September 29, 2012


September 24, 2011


% Change


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


As Adjusted

Net sales

$        36,419


$                -


$          36,419


$         47,644


$                -


$          47,644


-24 %


-24 %

Cost of sales

15,059


463

(a)

14,596


26,036


521

(a)

25,515


-42 %


-43 %

Gross profit

21,360


463


21,823


21,608


521


22,129


-1 %


-1 %

Operating expenses

8,041


-


8,041


7,393


-


7,393


9 %


9 %

Operating income

$        13,319


$             463


$          13,782


$         14,215


$             521


$          14,736


-6 %


-6 %

















Selected ratios as a percentage of net sales
















Gross profit

58.7 %




59.9 %


45.4 %




46.4 %





Operating expenses

22.1 %




22.1 %


15.5 %




15.5 %





Operating income

36.6 %




37.8 %


29.8 %




30.9 %






































Three Months Ended





Other

September 29, 2012


September 24, 2011


% Change


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


Non-GAAP Adjustments


As Adjusted


GAAP


As Adjusted

Net sales

$        16,610


$                -


$          16,610


$         18,482


$                -


$          18,482


-10 %


-10 %

Cost of sales

11,055


393

(a)

10,662


12,898


437

(a)

12,461


-14 %


-14 %

Gross profit

5,555


393


5,948


5,584


437


6,021


-1 %


-1 %

Operating expenses

5,130


-


5,130


5,299


-


5,299


-3 %


-3 %

Operating income

$             425


$             393


$               818


$              285


$             437


$               722


49 %


13 %

















Selected ratios as a percentage of net sales
















Gross profit

33.4 %




35.8 %


30.2 %




32.6 %





Operating expenses

30.9 %




30.9 %


28.7 %




28.7 %





Operating income

2.6 %




4.9 %


1.5 %




3.9 %





































(a) Deal-related amortization










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










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










(d) Severance costs of $3,156




















Table III

PERRIGO COMPANY

FY 2013 GUIDANCE AND FY 2012 EPS

RECONCILIATION OF NON-GAAP MEASURES

(unaudited)








Full Year




Fiscal 2013 Guidance


FY13 reported diluted EPS range


$4.71 - $4.91


    Deal-related amortization (1)


0.62


    Charge associated with inventory step-up


0.11


    Charges associated with acquisition costs


0.01


FY13 adjusted diluted EPS range


$5.45 - $5.65












Fiscal 2012*


FY12 reported diluted EPS from continuing operations


$4.18


    Deal-related amortization (1)


0.523


    Charge associated with inventory step-up


0.181


    Charges associated with acquisition-related and severance costs


0.062


    Charges associated with restructuring


0.061


    Net charge associated with acquired R&D and proceeds from sale of IPR&D projects


0.012


    Earnings associated with sale of pipeline development projects


(0.026)


FY12 adjusted diluted EPS from continuing operations


$4.99






(1)  Amortization of acquired intangible assets related to business combinations and asset acquisitions






*All information based on continuing operations.



Table IV

PERRIGO COMPANY

REPORTABLE SEGMENTS

RECONCILIATION OF NON-GAAP MEASURES

(in thousands)

(unaudited)






















Q1 FY12*


Q2 FY12*


Q3 FY12*


Q4 FY12*


FY 2012*

Consumer Healthcare










Net sales

$      411,681


$       471,277


$      448,848


$       483,982


$     1,815,788











Reported gross profit

$      129,358


$       148,813


$      140,417


$       153,169


$        571,757

Deal-related amortization(1)

1,022


1,006


1,010


1,008


4,046

Adjusted gross profit

$      130,380


$       149,819


$      141,427


$       154,177


$        575,803

Adjusted gross profit %

31.7%


31.8%


31.5%


31.9%


31.7%











Reported operating expenses

$        60,169


$        66,563


$        61,034


$         68,689


$        256,455

Deal-related amortization(1)

(1,222)


(1,214)


(1,411)


(1,419)


(5,266)

Adjusted operating expenses 

$        58,947


$        65,349


$        59,623


$         67,270


$        251,189

Adjusted operating expenses %

14.3%


13.9%


13.3%


13.9%


13.8%











Reported operating income 

$        69,189


$        82,250


$        79,383


$         84,480


$        315,302

Deal-related amortization(1)

2,244


2,220


2,421


2,427


9,312

Adjusted operating income 

$        71,433


$        84,470


$        81,804


$         86,907


$        324,614

Adjusted operating income %

17.4%


17.9%


18.2%


18.0%


17.9%











Nutritionals










Net sales

$      119,861


$       128,147


$      117,683


$       135,335


$        501,026











Reported gross profit

$        29,569


$        28,230


$        30,350


$         37,196


$        125,345

Deal-related amortization(1)

5,849


3,022


3,021


3,021


14,913

Adjusted gross profit

$        35,418


$        31,252


$        33,371


$         40,217


$        140,258

Adjusted gross profit %

29.5%


24.4%


28.4%


29.7%


28.0%











Reported operating expenses

$        22,328


$        23,677


$        28,505


$         25,387


$          99,897

Deal-related amortization(1)

(3,615)


(3,615)


(3,616)


(3,615)


(14,461)

Restructuring charges

-


-


(7,081)


(1,674)


(8,755)

Adjusted operating expenses

$        18,713


$        20,062


$        17,808


$         20,098


$          76,681

Adjusted operating expenses %

15.6%


15.7%


15.1%


14.9%


15.3%











Reported operating income 

$          7,241


$          4,553


$          1,845


$         11,809


$          25,448

Deal-related amortization(1)

9,464


6,637


6,637


6,636


29,374

Restructuring charges

-


-


7,081


1,674


8,755

Adjusted operating income 

$        16,705


$        11,190


$        15,563


$         20,119


$          63,577

Adjusted operating income %

13.9%


8.7%


13.2%


14.9%


12.7%











Rx Pharmaceuticals










Net sales

$      127,627


$       177,196


$      155,591


$       156,975


$        617,389











Reported gross profit

$        41,460


$        91,380


$        83,331


$         72,450


$        288,621

Deal-related amortization(1)

7,353


7,969


8,574


8,532


32,428

Inventory step-up

27,179


-


-


-


27,179

Adjusted gross profit

$        75,992


$        99,349


$        91,905


$         80,982


$        348,228

Adjusted gross profit %

59.5%


56.1%


59.1%


51.6%


56.4%











Reported operating expenses

$        16,975


$        21,404


$        16,076


$         20,671


$          75,126

Acquisition-related costs

(3,156)


(599)


-


-


(3,755)

Earnings associated with sale of IPR&D projects

3,500


-


-


-


3,500

Write-off of in-process R&D 

-


-


-


(750)


(750)

Adjusted operating expenses 

$        17,319


$        20,805


$        16,076


$         19,921


$          74,121

Adjusted operating expenses %

13.6%


11.7%


10.3%


12.7%


12.0%











Reported operating income 

$        24,485


$        69,976


$        67,255


$         51,779


$        213,495

Deal-related amortization(1)

7,353


7,969


8,574


8,532


32,428

Inventory step-up

27,179


-


-


-


27,179

Acquisition-related costs

3,156


599


-


-


3,755

Earnings associated with sale of IPR&D projects

(3,500)


-


-


-


(3,500)

Write-off of in-process R&D 

-


-


-


750


750

Adjusted operating income 

$        58,673


$        78,544


$        75,829


$         61,061


$        274,107

Adjusted operating income %

46.0%


44.3%


48.7%


38.9%


44.4%





















(1)  Amortization of acquired intangible assets related to business combinations and asset acquisitions


*All information based on continuing operations.

Table IV (Continued)

PERRIGO COMPANY

REPORTABLE SEGMENTS

RECONCILIATION OF NON-GAAP MEASURES

(in thousands)

(unaudited)






















Q1 FY12*


Q2 FY12*


Q3 FY12*


Q4 FY12*


FY 2012*

API










Net sales

$      47,644


$    42,751


$      36,952


$     38,434


$     165,781











Reported gross profit

$      21,608


$    20,150


$      18,676


$     25,674


$       86,108

   Deal-related amortization (1)

521


496


490


482


1,989

Adjusted gross profit

$      22,129


$    20,646


$      19,166


$     26,156


$       88,097

Adjusted gross profit %

46.4%


48.3%


51.9%


68.1%


53.1%











Reported operating income

$      14,215


$    11,692


$      10,462


$     17,512


$       53,881

   Deal-related amortization (1)

521


496


490


482


1,989

Adjusted operating income 

$      14,736


$    12,188


$      10,952


$     17,994


$       55,870

Adjusted operating income %

30.9%


28.5%


29.6%


46.8%


33.7%











Other










Net sales

$      18,482


$    18,798


$      18,943


$     17,041


$       73,264











Reported gross profit

$        5,584


$      6,303


$        6,498


$       5,382


$       23,767

   Deal-related amortization (1)

437


438


410


403


1,688

Adjusted gross profit

$        6,021


$      6,741


$        6,908


$       5,785


$       25,455

Adjusted gross profit %

32.6%


35.9%


36.5%


33.9%


34.7%











Reported operating income (loss)

$           285


$         924


$           846


$          (37)


$         2,018

   Deal-related amortization (1)

437


438


410


403


1,688

Adjusted operating income 

$           722


$      1,362


$        1,256


$         366


$         3,706

Adjusted operating income %

3.9%


7.2%


6.6%


2.1%


5.1%











(1)  Amortization of acquired intangible assets related to business combinations and asset acquisitions


*All information based on continuing operations.

SOURCE Perrigo Company

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