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Perrigo Company Reports First Quarter Fiscal 2006 Financial Results
ALLEGAN, Mich., Oct. 27 /PRNewswire-FirstCall/ -- The Perrigo Company today announced results for the first quarter of fiscal year 2006 ended Sept. 24, 2005. The acquisition of Agis Industries was completed on March 17, 2005. Agis was first included in the consolidated balance sheet as of March 26, 2005 and operating results were first included in the consolidated results in the quarter ended June 25, 2005. Perrigo Company
(in thousands, except per share amounts)
Fiscal 2006 Fiscal 2005
1st Quarter Ended 1st Quarter Ended
9/24/05 9/25/04
Sales $319,734 $227,719
Net Income $12,911 $17,578
Diluted EPS $0.14 $0.24
Diluted Shares 94,314 73,043
Net sales for the first quarter of fiscal 2006 were $319.7 million, an increase of 40 percent from $227.7 million last year, reflecting the addition of Agis' product sales. Net income was $12.9 million, or $0.14 per share, compared with $17.6 million, or $0.24 per share, a year ago. Excluding the acquisition-related write-off of the step-up in the value of inventory acquired ($3.7 million after-tax, or $0.04 per share) and including a charge for product recalls ($3.3 million after-tax, or $0.03 per share), net income in the quarter was $16.6 million, or $0.18 per share. A reconciliation of non-GAAP measures is shown in Table II at the end of this press release. David T. Gibbons, Perrigo Chairman, President and Chief Executive Officer, stated, "As anticipated, we began to realize the impact of the market transition of certain pseudoephedrine-based cough/cold products moving to a merchandising position behind the pharmacy counter. We reacted early in the quarter to pull production volumes down to reduce our inventory exposure. The retailers' shift away from pseudoephedrine products on the shelf resulted in lower cough/cold product sales and put downward pressures on gross margin. As we work through the pseudoephedrine-related challenges this cough/cold and flu season, we remain confident in the basic strength of our Consumer Healthcare business and encouraged by the results in our new Rx Pharmaceuticals and API businesses, which turned in strong results in the quarter. Our balance sheet remains strong, with manageable debt and cash flow from operations of $18 million this quarter versus a use of cash of $23 million in the first quarter last year. We repurchased 496,000 shares for $7.0 million during the first quarter as part of a previously announced stock repurchase plan." Consumer Healthcare Consumer Healthcare segment sales in the quarter were $228.6 million compared with $227.7 million in the first quarter last year. These results included topical OTC product sales of $19 million related to the Agis acquisition and new product sales, primarily in the smoking cessation category, offset by a decline of $23 million of pseudoephedrine-based cough and cold products. Reported operating income was $13.1 million, compared with $27.9 million a year ago, reflecting the incremental sales of lower-margin topical OTC products acquired in the Agis acquisition and the sales decline of higher- margin pseudoephedrine-based products. A reconciliation of non-GAAP measures is shown in Table II at the end of this press release. Rx Pharmaceuticals Results for the current quarter largely reflect the operations of the Agis business. The Rx Pharmaceuticals segment reported sales of $29.1 million and operating income of $3.8 million, which included a charge of $2.8 million before-tax for the recall of mesalamine suspension product. Last year Rx Pharmaceuticals reported an operating loss of $1.3 million as the Company invested in the start-up of the generics business. API The API segment reported sales of $26.8 million and operating income of $6.6 million. Excluding the write-off of the step-up in the value of inventory acquired of $1.7 million, the API segment had operating income of $8.3 million. A reconciliation of non-GAAP measures is shown in Table II at the end of this press release. Other The Other category, which consists of Israel Consumer Products and Israel Pharmaceutical and Diagnostic Products segments, reported sales of $35.2 million and an operating loss of $0.7 million. Excluding the write-off of the step-up in the value of inventory acquired of $2.7 million, the Other category had an operating profit of $2.0 million. A reconciliation of non-GAAP measure is shown in Table II at the end of this press release. Unallocated expense was $2.2 million including on-going corporate costs of $1.6 million and one-time integration costs of $0.6 million. Perrigo will host a conference call to discuss fiscal 2006 first quarter results at 10 a.m. (ET) Thursday, Oct. 27. The call and replay will be available via webcast on the Company's Web site at http://www.perrigo.com/investor/ , or by phone, at 1-866-425-6195, International, 973-935-2981. A taped replay of the call will be available beginning at approximately 2:30 p.m. (ET) Thursday, Oct. 27 until midnight Wednesday, Nov. 2. To listen to the replay, call 1-877-519-4471, International 973-341-3080, access code 6603770. The Perrigo Company is a leading global healthcare supplier and the world's largest manufacturer of over-the-counter (OTC) pharmaceutical and nutritional products for the store brand market. Store brand products are sold by food, drug, mass merchandise, dollar store and club store retailers under their own labels. The Company also develops, manufactures and markets prescription generic drugs, active pharmaceutical ingredients and consumer products, and operates manufacturing facilities in the United States, Israel, United Kingdom, Mexico and Germany. 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. Please see the "Cautionary Note Regarding Forward-Looking Statements" on pages 33 - 41 of the Company's Form 10-K for the year ended June 25, 2005 for a discussion of certain important factors that relate to forward-looking statements contained in this press release. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. 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
2006 2005
Net sales $319,734 $227,719
Cost of sales 232,818 163,006
Gross profit 86,916 64,713
Operating expenses
Distribution 7,150 4,193
Research and development 12,649 6,354
Selling and administration 46,388 27,540
Total 66,187 38,087
Operating income 20,729 26,626
Interest and other, net 2,780 (840)
Income before income taxes 17,949 27,466
Income tax expense 5,038 9,888
Net income $12,911 $17,578
Earnings per share
Basic $0.14 $0.25
Diluted $0.14 $0.24
Weighted average shares outstanding
Basic 93,188 70,948
Diluted 94,314 73,043
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 24, June 25, September 25,
2005 2005 2004
Assets (unaudited) (unaudited)
Current assets
Cash and cash equivalents $25,118 $16,707 $9,734
Investment securities 15,823 17,761 132,080
Accounts receivable 212,433 210,308 112,624
Inventories 269,695 272,980 181,837
Current deferred income taxes 49,870 55,987 29,306
Prepaid expenses and other current
assets 39,270 35,064 11,017
Total current assets 612,209 608,807 476,598
Property and equipment 594,464 586,306 463,241
Less accumulated depreciation 275,758 262,505 240,144
318,706 323,801 223,097
Restricted cash 400,000 400,000 -
Goodwill 144,362 150,293 35,919
Other intangible assets 144,315 147,967 8,039
Non-current deferred income taxes 26,828 26,964 8,761
Other non-current assets 44,617 47,144 9,716
$1,691,037 $1,704,976 $762,130
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $142,361 $142,789 $83,516
Notes payable 19,303 25,345 9,465
Payroll and related taxes 37,788 42,326 20,857
Accrued customer programs 40,129 41,666 16,210
Accrued liabilities 56,821 57,532 28,541
Accrued income taxes 25,903 21,225 7,417
Current deferred income taxes 10,980 9,659 4,044
Total current liabilities 333,285 340,542 170,050
Non-current liabilities
Long-term debt 670,814 656,128 -
Non-current deferred income taxes 56,586 74,379 29,259
Other non-current liabilities 37,715 43,090 6,898
Total non-current
liabilities 765,115 773,597 36,157
Shareholders' equity
Preferred stock, without par
value, 10,000 shares authorized - - -
Common stock, without par value,
200,000 shares authorized 523,093 527,748 108,321
Accumulated other comprehensive
income (loss) (4,402) (1,687) 2,817
Retained earnings 73,946 64,776 444,785
Total shareholders'
equity 592,637 590,837 555,923
$1,691,037 $1,704,976 $762,130
Supplemental Disclosures of
Balance Sheet Information
Allowance for doubtful accounts $10,207 $10,370 $7,971
Allowance for inventory $37,164 $34,028 $21,124
Working capital $278,924 $268,265 $306,548
Preferred stock, shares issued - - -
Common stock, shares issued 93,561 93,903 71,208
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
First Quarter
2006 2005
Cash Flows From (For) Operating Activities
Net income $12,911 $17,578
Adjustments to derive cash flows
Depreciation and amortization 14,296 7,092
Share-based compensation 2,403 1,578
Deferred income taxes (1,072) (410)
Changes in operating assets and liabilities
Accounts receivable (1,559) (25,543)
Inventories 3,776 (6,676)
Accounts payable (723) (5,463)
Payroll and related taxes (4,631) (20,535)
Accrued customer programs (1,537) 2,999
Accrued liabilities (2,938) (1,937)
Accrued income taxes 2,757 7,422
Other (5,961) 918
Net cash from (for) operating activities 17,722 (22,977)
Cash Flows (For) From Investing Activities
Purchase of securities (19,438) (29,900)
Proceeds from sales of securities 21,372 60,950
Additions to property and equipment (8,228) (2,394)
Acquisition of assets - (5,000)
Net cash (for) from investing activities (6,294) 23,656
Cash (For) From Financing Activities
Repayments of short-term debt, net (6,104) (92)
Borrowings of long-term debt 15,000 -
Tax (expense) benefit of stock transactions (500) 118
Issuance of common stock 2,000 3,101
Repurchase of common stock (8,558) (122)
Cash dividends (3,741) (2,487)
Net cash (for) from financing activities (1,903) 518
Net increase in cash and cash equivalents 9,525 1,197
Cash and cash equivalents, at beginning of
period 16,707 8,392
Effect of exchange rate changes on cash (1,114) 145
Cash and cash equivalents, at end of period $25,118 $9,734
Supplemental Disclosures of Cash Flow Information
Cash paid/received during the period for:
Interest paid $9,210 $141
Interest received $5,641 $562
Income taxes paid $2,928 $815
Income taxes refunded $4,866 $4,062
Table I
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
(unaudited)
First Quarter
2006 2005
Segment Sales
Consumer Healthcare $228,633 $227,719
Rx Pharmaceuticals 29,094 -
API 26,791 -
Other 35,216 -
Total $319,734 $227,719
Segment Operating Income (Loss)
Consumer Healthcare $13,122 $27,925
Rx Pharmaceuticals 3,836 (1,299)
API 6,586 -
Other (659) -
Unallocated expenses (2,156) -
Total $20,729 $26,626
Table II
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter
2006 2005
Net Sales $319,734 $227,719
Reported gross profit $86,916 $64,713
Inventory step-up 4,762 -
Adjusted gross profit $91,678 $64,713
Adjusted gross profit % 28.7% 28.4%
Reported operating income $20,729 $26,626
Inventory step-up 4,762 -
Adjusted operating income $25,491 $26,626
Reported net income $12,911 $17,578
Inventory step-up (1) 3,714 -
Adjusted net income $16,625 $17,578
Diluted earnings per share
Reported $0.14 $0.24
Adjusted $0.18 $0.24
Diluted weighted average shares
outstanding 94,314 73,043
(1) Net of taxes at 22%
Table II (Continued)
REPORTABLE SEGMENTS
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
First Quarter
2006 2005
Consumer Healthcare
Net Sales $228,633 $227,719
Reported gross profit $52,791 $64,713
Inventory step-up 318 -
Adjusted gross profit $53,109 $64,713
Adjusted gross profit % 23.2% 28.4%
Reported operating income $13,122 $27,925
Inventory step-up 318 -
Adjusted operating income $13,440 $27,925
API
Net Sales $26,791 $-
Reported gross profit $12,004 $-
Inventory step-up 1,747 -
Adjusted gross profit $13,751 $-
Adjusted gross profit % 51.3% -
Reported operating income $6,586 $-
Inventory step-up 1,747 -
Adjusted operating income $8,333 $-
Other
Net Sales $35,216 $-
Reported gross profit $10,496 $-
Inventory step-up 2,697 -
Adjusted gross profit $13,193 $-
Adjusted gross profit % 37.5% -
Reported operating loss $(659) $-
Inventory step-up 2,697 -
Adjusted operating income $2,038 $-
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