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Press release from PR Newswire

Perrigo Reports Record Quarterly Revenue and Earnings and Raises Full Year Adjusted EPS Guidance

Tuesday, May 03, 2011

Perrigo Reports Record Quarterly Revenue and Earnings and Raises Full Year Adjusted EPS Guidance08:00 EDT Tuesday, May 03, 2011-- Fiscal third quarter revenue from continuing operations increased $154 million, or 29%, to $692 million -- Fiscal third quarter GAAP income from continuing operations increased 49% to $92 million, or $0.98 per share -- Fiscal third quarter adjusted income from continuing operations increased 33% to $100 million, or $1.07 per share -- Management raises full-year fiscal 2011 adjusted diluted earnings from continuing operations guidance to $3.90-$4.00 per share from previously announced $3.75-$3.90 per shareALLEGAN, Mich., May 3, 2011 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its third quarter ended March 26, 2011.Perrigo's Chairman and CEO Joseph C. Papa commented, "We are very pleased with this quarter's record revenue and earnings performance. The main contributors to this strong performance were $44 million of new product sales, continued operational execution in our Rx and API segments and another solid quarter in Nutritionals. In Consumer Healthcare, revenue grew 13% in the quarter as we continue to see very strong demand for our products. At the same time, we have been experiencing some throughput pressure in manufacturing, but we are in the process of making investments that we believe will enhance output in the near future." Mr. Papa continued, "The April resolution of the 2010 FDA warning letter in less than one year is a major achievement. We are convinced that this process has made us a better company, as it helped us to further enhance the quality of our production. Our retailers and consumers continue to realize the value proposition of Perrigo's high quality, affordable healthcare products and we look forward to increasing our production volumes further to meet their growing demand."  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 Statements of Cash Flows.Perrigo Company(from continuing operations, in thousands, except per share amounts)(see the attached Table I for reconciliation to GAAP numbers)Third QuarterNine Months2011201020112010Net Sales$691,563$537,632$2,050,400$1,648,390Reported Income$91,531$61,541$254,988$175,432Adjusted Income$100,212$75,427$279,944$209,555Reported Diluted EPS$0.98$0.66$2.73$1.89Adjusted Diluted EPS$1.07$0.81$3.00$2.26Diluted Shares93,54992,58993,37192,819Third Quarter ResultsNet sales from continuing operations for the third quarter of fiscal 2011 were approximately $692 million, an increase of 29% over fiscal 2010. The increase was driven primarily by the acquisitions of PBM Holdings, Inc. (PBM) and Orion Laboratories Pty Ltd. (Orion), as well as $44 million in new product sales. Reported income from continuing operations was approximately $92 million, or $0.98 per share, a strong increase over $62 million, or $0.66 per share, a year ago. Excluding charges as outlined in Table I at the end of this release, third quarter fiscal 2011 adjusted income from continuing operations was $100 million, or $1.07 per share.  Nine Months Results Net sales from continuing operations for the first nine months of fiscal 2011 were $2,050 million, an increase of 24% over fiscal 2010. The increase was driven primarily by strong results in the Rx and Nutritionals segments and included consolidated new product sales of approximately $156 million. Reported gross profit was approximately $703 million, up 28% over last year, and the reported gross margin was 34.3%, up from 33.3% last year. Reported operating margin increased 220 basis points to 17.9%, and adjusted operating margin increased 140 basis points to 19.7%. Reported income from continuing operations was $255 million, an increase of 45%. Adjusted income from continuing operations was $280 million, or an increase of 34%.Consumer HealthcareConsumer Healthcare segment net sales for the third quarter were $425 million compared with $377 million for the third quarter last year, an increase of 13%. The increase resulted from approximately $36 million in additional existing product sales, primarily in the analgesics and cough/cold categories, as well as $9 million from new product sales and $7 million of incremental sales from the acquisition of Orion. These increases were partially offset by a decline of $5 million in sales of existing products, primarily in the feminine hygiene and contract manufacturing categories. Reported operating income was $72 million, compared with $75 million a year ago. The decrease was driven largely by increased spending on quality system investments and increased operating expenses. Reported operating margin decreased 300 basis points to 17.0%, and adjusted operating margin decreased 290 basis points to 17.5%.     For the first nine months of fiscal 2011, Consumer Healthcare net sales increased $76 million, or 6%, compared to fiscal 2010.  The increase resulted from $51 million in additional existing product sales, primarily in the analgesics and cough/cold categories, and $36 million of new product sales, as well as incremental sales of approximately $21 million from the Company's acquisition of Orion. This growth was partially offset by approximately $32 million in decreased sales of existing products, primarily in the contract manufacturing and gastrointestinal categories.       On February 10, 2011, the Company announced that it agreed to settle its Hatch-Waxman litigation relating to Minoxidil foam brought by Stiefel Research Australia Pty. Ltd., a GSK Company. The terms of the settlement permit the Company to launch in the U.S., a generic version of Men's Rogaine® Foam on March 1, 2012, or earlier under certain circumstances. On February 17, 2011, the Company announced that it entered into an exclusive agreement with AgaMatrix, Inc. to sell and distribute blood glucose monitors and test strips in the U.S. store brand channel. As part of the agreement, the Company will sell and distribute certain products in the current AgaMatrix portfolio, as well as certain future products.On April 13, 2011, the Company announced that its partner, Teva Pharmaceutical Industries, Ltd. (Nasdaq: TEVA), received final OTC approval to sell and distribute fexofenadine HCl 60 mg and 180 mg tablets; the generic equivalents of Sanofi-Aventis' Allegra 60 mg and 180 mg products.  NutritionalsNutritionals segment net sales for the third quarter were $124 million, compared with $59 million for the third quarter last year, an increase of 111%. The increase was due primarily to additional sales of approximately $81 million attributable to the acquisition of PBM. The increase was partially offset by a decrease in sales of existing products of approximately $14 million. Reported operating income was approximately $18 million, compared with $3 million a year ago. The increase was driven largely by the acquisition of PBM. Reported operating margin increased 880 basis points to 14.5%, and adjusted operating margin increased 1140 basis points to 19.1%.       For the first nine months of fiscal 2011, Nutritionals net sales increased $205 million, or 117%, compared to fiscal 2010.  The increase resulted from $242 million of sales attributable to the acquisition of PBM and $5 million of new product sales in the Vitamins, Minerals and Supplements (VMS) category. This growth was partially offset by $39 million in decreased sales of existing products in the VMS category.   On February 21, 2011, the Company announced that it began selling OTC infant formula to Costco in Canada. The product is sold under Costco's Kirkland Signature brand. The products will be featured in all 80 Costco stores throughout Canada.  Rx PharmaceuticalsThe Rx Pharmaceuticals segment third quarter net sales were $84 million, compared with $51 million a year ago, an increase of 66%. This increase was due primarily to new product sales of $23 million related to the authorized generic of Aldara® and the generic version of Xyzal®, as well as $6 million of increased sales volume in the Company's existing products. Reported operating income was $31 million, an increase of approximately $15 million from last year. The increase was driven largely by new product sales and increased operating expense leverage. Reported operating margin increased 430 basis points from last year to 36.9%.   For the first nine months of fiscal 2011, net sales for the Rx Pharmaceuticals segment increased 62% from fiscal 2010 to $251 million. Net sales increased due primarily to $72 million in new product sales and an increase of $16 million in sales of existing products.   On February 22, 2011, the Company announced that it had filed an Abbreviated New Drug Application for calcipotriene 0.005% and betamethasone dipropionate 0.064% ointment, a generic form of Taclonex® Ointment.  APIThe API segment reported third quarter net sales of $41 million compared with $33 million a year ago, an increase of 26%. The increase was due primarily to additional sales of existing products of $8 million and new product sales of $5 million led by European sales of temozolomide. The increase was partially offset by an approximately $4 million decrease in revenues related to the sale of dossier agreements. Reported operating income increased $12 million due to higher margin new product sales, decreased operating expenses and improved financial operating leverage. Reported operating margin increased 2920 basis points to 27.5%, and adjusted operating margin increased 820 basis points to 28.7%.   For the first nine months of fiscal 2011, net sales increased 18% to approximately $119 million, compared to $101 million in fiscal 2010. Reported operating margin increased 1830 basis points to 26.6% from last year's 8.3%.   OtherContinuing 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 $18 million a year ago. The decrease was due primarily to a decrease in sales of existing products of $2 million, partially offset by new product sales. Gross profit decreased 23% or $1.7 million. Year-to-date net sales for fiscal 2011 increased 16% compared to fiscal 2010. The increase was due primarily to $7 million in new product sales, partially offset by a decrease of $1 million due to unfavorable changes in foreign currency exchange rates.  GuidanceChairman and CEO Joseph C. Papa concluded, "The strength of our business model was evident this quarter, and as we look forward to the end of fiscal 2011, we expect this to continue. Additionally, the realization of a $0.09 one-time tax benefit in the third quarter related to the change in the Israel statutory rates gives us comfort to be able to raise our guidance for the rest of this year. Reported fiscal 2011 earnings from continuing operations are now expected to be between $3.43 and $3.53 per share. Excluding the charges outlined in Table III at the end of this release, we now expect fiscal 2011 adjusted diluted earnings from continuing operations to be between $3.90 and $4.00 per share, up from our previously announced $3.75-$3.90 per share. This new range implies a year-over-year growth rate of adjusted earnings from continuing operations of 29% to 32% over fiscal 2010 adjusted EPS."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# 61044320.  A taped replay of the call will be available beginning at approximately 2:00 (ET) Tuesday, May 3, 2011, until midnight Friday, May 20, 2011. To listen to the replay, call 800-642-1687, International 706-645-9291, access code 61044320.Perrigo Company is a leading global healthcare supplier that develops, manufactures and distributes OTC and generic prescription (Rx) pharmaceuticals, infant formulas, nutritional products and active pharmaceutical ingredients (API).  The Company is the world's largest store brand manufacturer of OTC pharmaceutical products and infant formulas. The Company's primary markets and locations of manufacturing and logistics operations are the United States, Israel, Mexico, the United Kingdom and Australia. 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 26, 2010, 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 COMPANYCONDENSED CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts)(unaudited)Third QuarterYear-to-Date20112010As Adjusted (Note 1)20112010As Adjusted (Note 1)Net sales$691,563$537,632$2,050,400$1,648,390Cost of sales452,481350,2371,347,8641,100,158Gross profit239,082187,395702,536548,232Operating expenses   Distribution8,5257,91925,72221,474   Research and development23,51117,71565,84257,153   Selling and administration84,13365,135244,053188,817     Subtotal116,16990,769335,617267,444   Write-off of in-process     research and development---14,000   Restructuring-7,474-7,474      Total116,16998,243335,617288,918Operating income122,91389,152366,919259,314Interest, net10,9155,92731,71817,869Other income, net(753)(1,367)(1,945)(1,686)Income from continuing operations before      income taxes112,75184,592337,146243,131Income tax expense21,22023,05182,15867,699Income from continuing operations91,53161,541254,988175,432Income (loss) from discontinued operations,      net of tax(2,446)640(1,361)(577)Net income$89,085$62,181$253,627$174,855Earnings (loss) per share (1)   Basic      Continuing operations$0.99$0.67$2.77$1.92      Discontinued operations(0.03)0.01(0.01)(0.01)      Basic earnings per share$0.96$0.68$2.75$1.91   Diluted      Continuing operations$0.98$0.66$2.73$1.89      Discontinued operations(0.03)0.01(0.01)(0.01)      Diluted earnings per share $0.95$0.67$2.72$1.88Weighted average shares outstanding   Basic92,45991,17992,17591,428   Diluted93,54992,58993,37192,819Dividends declared per share$0.0700$0.0625$0.2025$0.1800(1) The sum of individual per share amounts may not equal due to rounding.See accompanying notes to condensed consolidated financial statements.PERRIGO COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)March 26, 2011June 26, 2010As Adjusted(Note 1)March 27, 2010As Adjusted(Note 1)AssetsCurrent assets   Cash and cash equivalents$223,237$109,765$318,522   Restricted cash-400,000-   Investment securities-559562   Accounts receivable, net464,190359,809331,530   Inventories494,278452,980419,779   Current deferred income taxes22,93027,22525,675   Income taxes refundable2,10314,4394,980   Prepaid expenses and other current assets50,11230,54935,029   Current assets of discontinued operations 2,7977,3758,440          Total current assets1,259,6471,402,7011,144,517Property and equipment950,478885,169826,164   Less accumulated depreciation(484,575)(436,586)(442,997)465,903448,583383,167Restricted cash--400,000Goodwill and other indefinite-lived intangible assets640,107618,042289,968Other intangible assets, net576,436587,000218,739Non-current deferred income taxes13,786--Other non-current assets81,61252,67752,290$3,037,491$3,109,003$2,488,681Liabilities and Shareholders' EquityCurrent liabilities   Accounts payable$286,795$267,311$243,702   Short-term debt1,1809,000-   Payroll and related taxes71,52179,21973,456   Accrued customer programs91,70459,89853,778   Accrued liabilities79,48590,04653,883   Accrued income taxes17,35111,66517,702   Current portion of long-term debt15,000400,000-   Current liabilities of discontinued operations 3,5705,37010,228          Total current liabilities566,606922,509452,749Non-current liabilities   Long-term debt, less current portion875,442935,000825,000   Non-current deferred income taxes11,90049,34648,694   Other non-current liabilities158,444108,208104,881          Total non-current liabilities1,045,7861,092,554978,575Shareholders' equity   Controlling interest shareholders' equity:      Preferred stock, without par value, 10,000 shares authorized ---      Common stock, without par value, 200,000 shares authorized  458,811428,457413,683      Accumulated other comprehensive income109,08043,20064,547      Retained earnings855,287620,439577,2581,423,1781,092,0961,055,488   Noncontrolling interest1,9211,8441,869          Total shareholders' equity1,425,0991,093,9401,057,357$3,037,491$3,109,003$2,488,681Supplemental Disclosures of Balance Sheet Information   Related to Continuing Operations          Allowance for doubtful accounts$7,618$8,015$10,760          Working capital $693,814$478,187$693,556          Preferred stock, shares issued and outstanding---          Common stock, shares issued and outstanding92,68291,69491,356See accompanying notes to condensed consolidated financial statements.PERRIGO COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Year-To-Date20112010As Adjusted(Note 1)Cash Flows (For) From Operating Activities   Net income$253,627$174,855   Adjustments to derive cash flows      Write-off of in-process research and development-14,000      Depreciation and amortization76,25751,811      Restructuring-7,474      Share-based compensation11,52611,184      Loss (gain) on sale of business2,151(750)      Income tax benefit from exercise of stock options1,621(905)      Excess tax benefit of stock transactions(16,256)(5,730)      Deferred income taxes(60,845)(16,361)   Sub-total268,081235,578   Changes in operating assets and liabilities, net of asset and business          acquisitions      Accounts receivable(104,197)(13,039)      Inventories(31,304)(33,706)      Income taxes refundable12,4693,694      Accounts payable15,521(13,303)      Payroll and related taxes(9,072)24,521      Accrued customer programs31,770(1,005)      Accrued liabilities(10,739)(7,731)      Accrued income taxes47,07724,972      Other9,428439   Sub-total(39,047)(15,158)         Net cash from operating activities229,034220,420Cash Flows (For) From Investing Activities   Proceeds from sales of securities560-   (Return of) Proceeds from sale of business(3,558)35,980   Acquisitions of businesses, net of cash acquired2,624(58,885)   Acquired research and development-(14,000)   Acquisitions of assets(10,000)(10,262)   Additions to property and equipment(46,542)(34,545)         Net cash for investing activities(56,916)(81,712)Cash Flows (For) From Financing Activities   Repayments of short-term debt, net(7,820)-   Borrowings of long-term debt150,442-   Repayments of long-term debt(195,000)(67,771)   Deferred financing fees(5,158)(3,500)   Excess tax benefit of stock transactions16,2565,730   Issuance of common stock12,47614,593   Repurchase of common stock(8,285)(70,972)   Cash dividends(18,779)(16,566)         Net cash for financing activities(55,868)(138,486)Effect of exchange rate changes on cash(2,778)658        Net increase in cash and cash equivalents113,472880Cash and cash equivalents of continuing operations, beginning of period109,765317,638Cash balance of discontinued operations, beginning of period-4Cash and cash equivalents, end of period223,237318,522       Less cash balance of discontinued operations, end of period--Cash and cash equivalents of continuing operations, end of period$223,237$318,522Supplemental Disclosures of Cash Flow Information   Cash paid/received during the period for:      Interest paid$27,759$30,765      Interest received$2,594$15,891      Income taxes paid $83,494$50,231      Income taxes refunded$1,303$1,159See accompanying notes to condensed consolidated financial statements.Table IPERRIGO COMPANYRECONCILIATION OF NON-GAAP MEASURES(in thousands, except per share amounts)(unaudited)Three Months EndedConsolidatedMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$    691,563$             -$    691,563$    537,632$             -$    537,63229 %29 %Cost of sales452,4817,703(a)444,778350,2374,322(a,d)345,91529 %29 %Gross profit239,0827,703246,785187,3954,322191,71728 %29 %Operating expenses    Distribution8,525-8,5257,919-7,9198 %8 %    Research and development23,511-23,51117,715-17,71533 %33 %    Selling and administration84,1335,095(a,b)79,03865,1354,198(a,e)60,93729 %30 %    Restructuring---7,4747,474(f)-(100)%-       Total116,1695,095111,07498,24311,67286,571Operating income122,91312,798135,71189,15215,994105,14638 %29 %Interest, net10,915-10,9155,927700(g)5,22784 %109 %Other income, net(753)-(753)(1,367)-(1,367)(45)%(45)%Income from continuing operations before income taxes112,75112,798125,54984,59216,694101,28633 %24 %Income tax expense21,2204,117(c)25,33723,0512,808(c)25,859(8)%(2)%Income from continuing operations$      91,531$       8,681$    100,212$      61,541$     13,886$      75,42749 %33 %Diluted earnings per share from continuing operations$          0.98$          1.07$          0.66$          0.8148 %32 %Diluted weighted average shares outstanding93,54993,54992,58992,589Selected ratios as a percentage of net sales    Gross profit34.6 %35.7 %34.9 %35.7 %    Operating expenses16.8 %16.1 %18.3 %16.1 %    Operating income17.8 %19.6 %16.6 %19.6 %Nine Months EndedConsolidatedMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$ 2,050,400$             -$ 2,050,400$ 1,648,390$             -$ 1,648,39024 %24 %Cost of sales1,347,86422,271(a)1,325,5931,100,15813,921(a,i)1,086,23723 %22 %Gross profit702,53622,271724,807548,23213,921562,15328 %29 %Operating expenses    Distribution25,722-25,72221,474-21,47420 %20 %    Research and development65,842-65,84257,153-57,15315 %15 %    Selling and administration244,05314,504(a,h)229,549188,8176,595(a,e)182,22229 %26 %    Write-off of in-process research and development---14,00014,000(j)-(100)%-    Restructuring---7,4747,474(f)-(100)%-       Total335,61714,504321,113288,91828,069260,849Operating income366,91936,775403,694259,31441,990301,30441 %34 %Interest, net31,718-31,71817,869700(g)17,16978 %85 %Other income, net(1,945)-(1,945)(1,686)-(1,686)15 %15 %Income from continuing operations before income taxes337,14636,775373,921243,13142,690285,82139 %31 %Income tax expense82,15811,819(c)93,97767,6998,567(c)76,26621 %23 %Income from continuing operations$    254,988$     24,956$    279,944$    175,432$     34,123$    209,55545 %34 %Diluted earnings per share from continuing operations$          2.73$          3.00$          1.89$          2.2644 %33 %Diluted weighted average shares outstanding93,37193,37192,81992,819Selected ratios as a percentage of net sales    Gross profit34.3 %35.3 %33.3 %34.1 %    Operating expenses16.4 %15.7 %17.5 %15.8 %    Operating income17.9 %19.7 %15.7 %18.3 %(a) Deal-related amortization(b) Acquisition costs of $1,095(c) Total tax effect for non-GAAP pre-tax adjustments(d) Inventory step-up of $94(e) Acquisition costs of $3,052(f) Restructuring charges related to Germany and Florida(g) Acquisition costs(h) Acquisition costs of $2,410(i) Inventory step-ups of $1,031(j) Write-off of in-process R&D related to acquired ANDATable IIPERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedConsumer HealthcareMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$    425,025$             -$    425,025$    377,064$             -$    377,06413 %13 %Cost of sales289,825918(a)288,907250,210661(a)249,54916 %16 %Gross profit135,200918136,118126,854661127,5157 %7 %Operating expenses62,9961,210(a)61,78651,395696(a)50,69923 %22 %Operating income$      72,204$       2,128$      74,332$      75,459$       1,357$      76,816(4)%(3)%Selected ratios as a percentage of net sales    Gross profit31.8 %32.0 %33.6 %33.8 %    Operating expenses14.8 %14.5 %13.6 %13.4 %    Operating income17.0 %17.5 %20.0 %20.4 %Nine Months EndedConsumer HealthcareMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$ 1,251,125$             -$ 1,251,125$ 1,174,886$             -$ 1,174,8866 %6 %Cost of sales853,1192,414(a)850,705782,9592,028(a)780,9319 %9 %Gross profit398,0062,414400,420391,9272,028393,9552 %2 %Operating expenses179,0893,710(a)175,379157,5952,208(a)155,38714 %13 %Operating income$    218,917$       6,124$    225,041$    234,332$       4,236$    238,568(7)%(6)%Selected ratios as a percentage of net sales    Gross profit31.8 %32.0 %33.4 %33.5 %    Operating expenses14.3 %14.0 %13.4 %13.2 %    Operating income17.5 %18.0 %19.9 %20.3 %Three Months EndedNutritionalsMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$    124,077$             -$    124,077$      58,722$             -$      58,722111 %111 %Cost of sales86,0993,000(a)83,09947,442-47,44281 %75 %Gross profit37,9783,00040,97811,280-11,280237 %263 %Operating expenses20,0462,790(a)17,2567,9281,149(a,b)6,779153 %155 %Operating income$      17,932$       5,790$      23,722$        3,352$       1,149$        4,501435 %427 %Selected ratios as a percentage of net sales    Gross profit30.6 %33.0 %19.2 %19.2 %    Operating expenses16.2 %13.9 %13.5 %11.5 %    Operating income14.5 %19.1 %5.7 %7.7 %Nine Months EndedNutritionalsMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$    380,219$             -$    380,219$    175,524$             -$    175,524117 %117 %Cost of sales258,3298,999(a)249,330151,569-151,56970 %64 %Gross profit121,8908,999130,88923,955-23,955409 %446 %Operating expenses65,7168,384(a)57,33220,5962,048(a,b)18,548219 %209 %Operating income$      56,174$     17,383$      73,557$        3,359$       2,048$        5,4071,572 %1,260 %Selected ratios as a percentage of net sales    Gross profit32.1 %34.4 %13.6 %13.6 %    Operating expenses17.3 %15.1 %11.7 %10.6 %    Operating income14.8 %19.3 %1.9 %3.1 %Three Months EndedRx PharmaceuticalsMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$      84,383$             -$      84,383$      50,802$             -$      50,80266 %66 %Cost of sales43,3512,827(a)40,52423,6272,645(a)20,98283 %93 %Gross profit41,0322,82743,85927,1752,64529,82051 %47 %Operating expenses9,891-9,89110,607-10,607(7)%(7)%Operating income$      31,141$       2,827$      33,968$      16,568$       2,645$      19,21388 %77 %Selected ratios as a percentage of net sales    Gross profit48.6 %52.0 %53.5 %58.7 %    Operating expenses11.7 %11.7 %20.9 %20.9 %    Operating income36.9 %40.3 %32.6 %37.8 %(a) Deal-related amortization(b) Restructuring charges of $699 related to Florida(c) Write-off of in-process R&D related to acquired ANDA(d) Restructuring charges related to Germany(e) Inventory step-up of $94(f) Inventory step-ups of $1,031Table II (Continued)PERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Nine Months EndedRx PharmaceuticalsMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$ 251,250$             -$   251,250$ 154,694$             -$   154,69462 %62 %Cost of sales138,1908,035(a)130,15577,0678,337(a)68,73079 %89 %Gross profit113,0608,035121,09577,6278,33785,96446 %41 %Operating expenses30,969-30,96942,78214,000(c)28,782(28)%8 %Operating income$   82,091$       8,035$     90,126$   34,845$     22,337$     57,182136 %58 %Selected ratios as a percentage of net sales    Gross profit45.0 %48.2 %50.2 %55.6 %    Operating expenses12.3 %12.3 %27.7 %18.6 %    Operating income32.7 %35.9 %22.5 %37.0 %Three Months EndedAPIMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   41,206$             -$     41,206$   32,802$             -$     32,80226 %26 %Cost of sales22,070519(a)21,55118,172500(a)17,67221 %22 %Gross profit19,13651919,65514,63050015,13031 %30 %Operating expenses7,818-7,81815,1776,775(d)8,402(48)%(7)%Operating income (loss)$   11,318$          519$     11,837$      (547)$       7,275$       6,728-76 %Selected ratios as a percentage of net sales    Gross profit46.4 %47.7 %44.6 %46.1 %    Operating expenses19.0 %19.0 %46.3 %25.6 %    Operating income27.5 %28.7 %(1.7)%20.5 %Nine Months EndedAPIMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$ 118,900$             -$   118,900$ 100,994$             -$   100,99418 %18 %Cost of sales65,4301,527(a)63,90361,3841,486(a)59,8987 %7 %Gross profit53,4701,52754,99739,6101,48641,09635 %34 %Operating expenses21,797-21,79731,2296,762(a,d)24,467(30)%(11)%Operating income$   31,673$       1,527$     33,200$     8,381$       8,248$     16,629278 %100 %Selected ratios as a percentage of net sales    Gross profit45.0 %46.3 %39.2 %40.7 %    Operating expenses18.3 %18.3 %30.9 %24.2 %    Operating income26.6 %27.9 %8.3 %16.5 %Three Months EndedOtherMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   16,872$             -$     16,872$   18,242$             -$     18,242(8)%(8)%Cost of sales11,136439(a)10,69710,786516(a,e)10,2703 %4 %Gross profit5,7364396,1757,4565167,972(23)%(23)%Operating expenses5,435-5,4355,341-5,3412 %2 %Operating income$        301$          439$          740$     2,115$          516$       2,631(86)%(72)%Selected ratios as a percentage of net sales    Gross profit34.0 %36.6 %40.9 %43.7 %    Operating expenses32.2 %32.2 %29.3 %29.3 %    Operating income1.8 %4.4 %11.6 %14.4 %Nine Months EndedOtherMarch 26, 2011March 27, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   48,906$             -$     48,906$   42,292$             -$     42,29216 %16 %Cost of sales32,7961,296(a)31,50027,1792,070(a,f)25,10921 %25 %Gross profit16,1101,29617,40615,1132,07017,1837 %1 %Operating expenses15,012-15,01213,514-13,51411 %11 %Operating income$     1,098$       1,296$       2,394$     1,599$       2,070$       3,669(31)%(35)%Selected ratios as a percentage of net sales    Gross profit32.9 %35.6 %35.7 %40.6 %    Operating expenses30.7 %30.7 %32.0 %32.0 %    Operating income2.2 %4.9 %3.8 %8.7 %(a) Deal-related amortization(b) Restructuring charges of $699 related to Florida(c) Write-off of in-process R&D related to acquired ANDA(d) Restructuring charges related to Germany(e) Inventory step-up of $94(f) Inventory step-ups of $1,031Table IIIPERRIGO COMPANYFY 2011 GUIDANCE AND FY 2010 EPSRECONCILIATION OF NON-GAAP MEASURES(unaudited)Full YearFiscal 2011 Guidance*FY11 reported diluted EPS from continuing operations range$3.43 - $3.53    Deal-related amortization (1,2)0.352    Charges associated with acquisition costs (2)0.064    Charge associated with inventory step-up (2)0.054 FY11 adjusted diluted EPS from continuing operations range$3.90 - $4.00Fiscal 2010*FY10 reported diluted EPS from continuing operations$2.42    Deal-related amortization (1)0.195    Charges associated with acquisition costs0.083    Charges associated with inventory step-ups0.075    Charges associated with restructuring0.100    Charges associated with acquired research and development0.157 FY10 adjusted diluted EPS from continuing operations$3.03(1)  Amortization of acquired intangible assets related to business combinations and asset acquisitions(2)  Assumes a mid-fourth fiscal quarter close of the Paddock Laboratories acquisition*All information based on continuing operations.SOURCE Perrigo CompanyFor further information: Arthur J. Shannon, Vice President, Investor Relations and Communication, +1-269-686-1709, ajshannon@perrigo.com