Perrigo Company today announced results for its first quarter ended September 26, 2009.
Perrigo's Chairman and CEO Joseph C. Papa commented, "We delivered record earnings for the quarter, with strong performance across all business segments. Cash flow from operations continues to be strong as we generated $38 million during a period when we are preparing for the cough, cold, flu season. Store brands grew nearly 13% during a period when the over-the-counter (OTC) category grew only 3%. Rx sales continued to gain market share as a result of our strong investment in quality and high customer service levels along with the continued growth of over-the-counter Rx (ORx) sales. We continue to make quality healthcare more affordable at a time when consumers need to save money more than ever."
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 its portfolio of businesses, in the past fiscal year, it committed to a plan to sell its Israel Consumer Products business. The results of this business are reflected in the condensed consolidated financial statements as discontinued operations for all periods presented.
First Quarter Results
Net sales from continuing operations for the first quarter of fiscal 2010 were $528 million, an increase of 16%. Reported income from continuing operations was $61 million, or $0.65 per share, a strong increase over $38 million, or $0.41 per share, a year ago. Excluding the charge as outlined in Table II at the end of this release, first quarter fiscal 2010 adjusted income from continuing operations was $61 million, or $0.66 per share.
Consumer Healthcare segment net sales in the first quarter were $437 million compared with $366 million in the first quarter last year, an increase of $71 million or 19%. The increase resulted from approximately $49 million of new products and higher volume of existing products primarily in the gastrointestinal, smoking cessation, analgesics, and cough/cold categories and approximately $36 million of incremental sales from the acquisitions of JB Laboratories, Unico and Diba. These increases were partially offset by approximately $10 million in unfavorable changes in foreign currency exchange rates and a decline of approximately $4 million in sales from exited products. Reported operating income was $71 million, compared with $59 million a year ago, largely driven by increased sales and favorable product mix. Reported operating margin remained strong, up 20 basis points to 16.3% due to improved operating expense leverage.
On October 6, 2009, the Company announced that it had received final approval from the U.S. Food and Drug Administration (FDA) to market OTC Polyethylene Glycol 3350, the store brand equivalent of MiraLAX(R).
The Rx Pharmaceuticals segment first quarter net sales were $47 million compared with $33 million a year ago, an increase of 42%. The increase in sales was driven by increased volume of existing products and strong performance in our over-the-counter Rx business. Reported operating income was $14 million, an increase of $12 million from last year, due to strong gross margins, which increased from 33.1% last year to 47.5% during the first quarter fiscal 2010. In addition, strong cost management reduced operating expenses by $1 million or 1050 basis points as a percent to sales.
On August 3, 2009, the Company announced that its partner Teva Pharmaceutical Industries Ltd. had received final approval from the FDA to market Triamcinolone Acetonide Nasal Spray containing a paragraph IV certification. Perrigo's partner Teva was the first applicant to file a complete Abbreviated New Drug Application (ANDA) with a Paragraph IV certification for NASACORT(R) AQ.
On September 21, 2009, the Company announced that its Israeli subsidiary acquired the ANDA for the generic form of Duac(R) gel from KV Pharmaceutical for $14 million in cash and a $2 million milestone payment to be made upon the successful completion of a contingency. KV Pharmaceutical was the first to file its ANDA. Excluding the milestone payment, the Company anticipates the full amount of the purchase price, which relates to acquired research and development, will be charged to expense in the second quarter of fiscal 2010 in accordance with U.S. accounting principles.
On October 16, 2009, the Hatch-Waxman litigation relating to Duac(R) gel filed by the Stiefel Laboratories division of GlaxoSmithKline was dismissed with prejudice.
The API segment reported first quarter net sales of $30 million compared with $34 million a year ago. The decrease was due primarily to a decline of existing product sales and unfavorable changes in foreign currency exchange rates. The decreases were partially offset by new product sales. Reported operating income increased $3 million or 762% due to improved sales mix and operational efficiencies.
Continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, reported first quarter net sales of approximately $14 million compared with $22 million a year ago. The decrease was due primarily to the loss of a customer contract, as well as a $1 million impact from unfavorable foreign currency exchange rates. Reported operating income was $1 million, down from $2 million last year. The decrease in reported operating income was due primarily to the previously discussed loss of a customer contract. Reported operating margin increased 50 basis points to 8.8% from 8.3% last year.
Chairman and CEO Joseph C. Papa concluded, "Fiscal 2010 is off to a very strong start. We achieved all-time record earnings in a macroeconomic environment that is favorable to Perrigo's business model. All of our segments are executing well with no one single product or division driving these strong results. Reported fiscal 2010 earnings from continuing operations are expected to be between $2.22 and $2.32 per share. Excluding the charges outlined in Table III at the end of this release, we now expect fiscal 2010 adjusted earnings from continuing operations to be between $2.35 and $2.45 per share, up from our previously announced $2.00-$2.12 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 26% to 31% over fiscal 2009 adjusted EPS."
Perrigo will host a conference call to discuss fiscal 2010 first quarter results at 10:00 a.m. (ET) on Monday, November 2. 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# 35823113. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Monday, November 2, until midnight Tuesday, November 10, 2009. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 35823113.
Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, nutritional products, 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, 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.