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Press release from PR Newswire

Perrigo Reports Record Quarterly Revenue and Earnings

Tuesday, February 07, 2012

Perrigo Reports Record Quarterly Revenue and Earnings07:51 EST Tuesday, February 07, 2012- Fiscal second quarter revenue from continuing operations increased $121 million, or 17%, to a record $838 million - Fiscal second quarter adjusted income from continuing operations increased 14% to a record $112 million, or $1.20 per diluted share - Fiscal second quarter GAAP income from continuing operations increased 11% to a record $100 million, or $1.06 per diluted share - Raised the lower end of the Company's full-year adjusted earnings from continuing operations guidance by $0.05 to a range of $4.70-$4.80 per diluted share despite higher full-year effective tax rateALLEGAN, Mich., Feb. 7, 2012 /PRNewswire/ -- Perrigo Company (Nasdaq: PRGO; TASE) today announced results for its second quarter and six months ended December 31, 2011. Perrigo's Chairman and CEO Joseph C. Papa commented, "We are very pleased with our performance this quarter. We delivered all-time record quarterly revenue, earnings and second fiscal quarter operating cash flow. Our recent Paddock Labs acquisition is performing ahead of our expectations, and our Consumer Healthcare, API and legacy Rx operations all contributed to the year over year growth. New products contributed $55 million of sales in the period, and we expect this strong momentum to continue into the second half of fiscal 2012. Adjusted operating margin for the second quarter increased 120 basis points to 21.4%. Our Consumer Healthcare segment performed well and is on track to meet our expectations for the full year." 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.  Note that fiscal second quarter 2012 includes an extra week of activity.  Perrigo Company(from continuing operations, in thousands, except per share amounts)(see the attached Table I for reconciliation to GAAP numbers)Second QuarterSix Months2012201120122011Net Sales$838,170$717,515$1,563,465$1,358,837Reported Income$99,739$89,779$170,197$163,457Adjusted Income$112,431$98,382$215,750$179,732Reported Diluted EPS$1.06$0.96$1.81$1.75Adjusted Diluted EPS$1.20$1.05$2.30$1.93Diluted Shares94,04393,36393,98393,280Second Quarter ResultsNet sales for the second quarter of fiscal 2012 were $838 million, an increase of 17% over fiscal 2011. The increase was driven primarily by $69 million attributable to the Paddock Laboratories acquisition and new product sales of $55 million. Reported income from continuing operations was $100 million, or $1.06 per share, an increase of $10 million, up from $0.96 per share a year ago. Excluding charges as outlined in Table I at the end of this release, second quarter fiscal 2012 adjusted income from continuing operations was $112 million, or $1.20 per share, up 14% over 2011. Six Months Results Net sales for the first half of fiscal 2012 were $1,563 million, an increase of 15% over fiscal 2011. The increase was driven primarily by $107 million of net sales attributable to the Paddock Laboratories acquisition and consolidated new product sales of approximately $96 million. Reported gross profit was $522 million, an increase of 13% over fiscal 2011, while adjusted gross profit grew 21% to $578 million over the same period. Reported operating margin decreased 120 basis points to 16.8%, while the adjusted operating margin increased 160 basis points to 21.3%. Consumer HealthcareConsumer Healthcare segment net sales for the second quarter were $471 million compared with $430 million for the second quarter last year, an increase of 10%. The increase resulted from new product sales of $26 million, primarily Fexofenadine and the diabetes care category, along with an increase in sales of existing products of $20 million, across many product categories. These increases were offset by a decline of $4 million in sales of certain products within the analgesics category driven by fiscal 2011's increased sales due to a key competitor being absent from the market. Net sales were also negatively impacted by approximately $2 million of unfavorable changes in foreign currency exchange rates. Reported operating income was $77 million, compared with $75 million a year ago. The reported gross margin decreased 100 basis points, while the adjusted gross margin decreased 90 basis points due to increased competitive pressures on a key gastrointestinal product.     For the first six months of fiscal 2012, Consumer Healthcare net sales increased $57 million, or 7%, compared to fiscal 2011. The increase was due to new product sales of $41 million, primarily in the cough/cold and diabetes care categories, along with an increase in sales of existing products of approximately $24 million in the cough/cold and smoking cessation categories. These increases were partially offset by a decline of $10 million in sales of existing products within the gastrointestinal category driven by competitive pressures on a key product.     On November 28, 2011, the Company announced that it received final approval from the U.S. Food and Drug Administration (FDA) for its Abbreviated New Drug Application (ANDA) for Guaifenesin Extended-Release Tablets, 600 mg. On December 27, 2011, the Company announced that it received final approval from the FDA for its ANDA for Desloratadine tablets (5 mg).On January 9, 2012, the Company announced that it signed a definitive agreement to acquire substantially all of the assets of CanAm Care, a privately-held, Alpharetta, Georgia-based distributor of diabetes care products for approximately $36 million in cash. NutritionalsNutritionals segment net sales for the second quarter were $128 million, compared with $133 million in fiscal 2011, a decrease of $5 million. The decrease was due to a decline in existing product sales of $26 million in the infant formula and Vitamins, Minerals and Supplements (VMS) categories. The decrease in the infant formula category was due primarily to the absence of increased demand of $12 million in net sales that the Company experienced last year as a result of a competitor's product recall. The decrease in existing products of infant formula was also due to a decline in U.S. birth rates year-over-year, while the decrease in the VMS category was driven by increased competition. These decreases were partially offset by new product sales of $21 million primarily in the infant formula category. Reported operating margin decreased 1000 basis points to 5.1%, and adjusted operating margin decreased 920 basis points to 10.2% due to under absorption of fixed production costs relative to lower volume output year-over-year, increased costs of raw materials for infant formula and product mix.       For the first six months of fiscal 2012, net sales decreased $8 million or 3% to $248 million, compared to fiscal 2011 due to a decline in existing product sales of $45 million partially offset by new product sales of $37 million, primarily in the infant formula category.On October 19, 2011, the Company announced it entered into a supply agreement with Founder Pharma Co., Ltd. to supply infant formula manufactured in its U.S. facilities for sale and distribution by Founder Pharma in China.On November 8, 2011, the Company announced it entered into Cooperation and License agreements with Brilite Nutritionals (Shanghai) Co., Ltd. to supply its Bright Beginnings? infant formula brand for sale and distribution in China.On November 15, 2011, the Company announced it received FDA clearance to market and distribute the store brand Comfort Care? Infant Formula, a comparable version of Gerber® GOOD START® Gentle Infant Formula.Rx PharmaceuticalsThe Rx Pharmaceuticals segment second quarter net sales increased 82% or $80 million compared to fiscal 2011 due to net sales of $69 million from the Paddock Laboratories acquisition, legacy new product sales of $5 million, market share gains and favorable pricing on select products. Reported operating income was $72 million, an increase of $39 million from last year, while adjusted operating income increased $45 million. The reported operating margin increased 690 basis points while the adjusted operating margin increased 880 basis points. Year-to-date net sales for fiscal 2012 increased 83% or $138 million compared to fiscal 2011 due to net sales of $107 million from the Paddock Laboratories acquisition, legacy new product sales of $10 million, market share gains and favorable pricing on select products. On October 6, 2011, the Company announced it received tentative approval from the FDA for its ANDA for Clobetasol Propionate Emulsion Foam, 0.05%. On October 18, 2011, the Company announced it filed with the FDA an ANDA for olopatadine hydrochloride nasal spray and that it has notified Alcon Laboratories, the owner of the New Drug Application (NDA). The filing involved contributions from the Company's partner, Impax Laboratories, Inc. On November 1, 2011, the Company announced that its partner, PharmaForce/Luitpold Pharmaceuticals, received final approval for Epinastine HCl ophthalmic solution, 0.05%, a generic version of Elestat®. On November 2, 2011, the Company announced it filed with the FDA a NDA for testosterone gel 1.0% and that it notified Abbott Products Inc., the owner of the Reference Listed Drug of its filing. On November 7, 2011, the Company and its partner Synthon Pharmaceuticals, Inc. announced that the Company began shipping Levocetirizine Solution, 2.5 mg/5ml, a generic version of UCB's Xyzal® Oral Solution. APIThe API segment reported second quarter net sales of $43 million compared with $40 million a year ago, an increase of 6%. The increase was due to $1 million in higher sales of existing products and $1 million in new product sales. Reported gross profit increased 16% or $3 million compared to fiscal 2011, while the reported gross margin increased 430 basis points to 47.8%. Reported operating margin increased 340 basis points to 28.3% and adjusted operating margin increased 330 basis points to 29.5%.For the first six months of fiscal 2012, net sales increased 16% or $13 million to $90 million, compared to fiscal 2011 due to an increase in sales of existing products of approximately $7 million, new product sales of $4 million and favorable changes in foreign currency exchange rates of $2 million. Reported operating margin increased 330 basis points to 29.5% and adjusted operating margin increased 310 basis points to 30.6%.   OtherSecond quarter net sales from continuing operations for the Other category, consisting of the Israel Pharmaceutical and Diagnostic Products operating segment, increased 16% or $3 million compared to fiscal 2011 due to higher sales of existing products of $2 million, along with a $1 million increase in new product sales. Year-to-date net sales for fiscal 2012 increased 16% or $5 million compared to fiscal 2011 driven by new product sales of approximately $3 million, an increase in existing product sales of approximately $2 million and an increase of $1 million due to favorable changes in foreign currency exchange rates.OutlookChairman and CEO Joseph C. Papa concluded, "The strength across our businesses continued this quarter, driving record results. As we look forward to the second half of fiscal 2012, we expect this strength to continue. Our teams are executing on their plans, which are the foundation for sustaining our growth. New product launches including the generic versions of Mucinex®, Prevacid®, Delsym®, and Allegra® D12 are expected in the second half of our fiscal year. Our Rx Pharmaceuticals segment continues to outperform our expectations. Furthermore, we are raising the lower end of the Company's full-year adjusted earnings from continuing operations guidance by $0.05 to a range of $4.70-$4.80 per diluted share and full-year reported earnings from continuing operations to be in a range of $3.90-$4.00 per diluted share, despite expecting our full-year effective tax rate to be at the top end of the previously disclosed range. We are excited about our future."     Perrigo will host a conference call to discuss fiscal 2012 second quarter at 10:00 a.m. (ET) on Tuesday, February 7, 2012. 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# 44258931. A taped replay of the call will be available beginning at approximately 2:00 p.m. (ET) Tuesday, February 7, 2012, until midnight Friday, February 24, 2012. To listen to the replay, call 855-859-2056, International 404-537-3406, access code 44258931.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 manufacturer of OTC pharmaceutical products and infant formulas, both for the store brand market. 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 25, 2011, 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)Second QuarterYear-to-Date2012201120122011Net sales$838,170$717,515$1,563,465$1,358,837Cost of sales543,295468,0151,041,011895,383Gross profit294,875249,500522,454463,454Operating expenses   Distribution9,0958,86419,35917,197   Research and development31,14824,60450,78642,331   Selling and administration93,96483,793190,089159,920      Total134,207117,261260,234219,448Operating income160,668132,239262,220244,006Interest, net15,64110,71628,21120,803Other expense (income), net752(633)981(1,192)Income from continuing operations before      income taxes144,275122,156233,028224,395Income tax expense44,53632,37762,83160,938Income from continuing operations99,73989,779170,197163,457Income from discontinued operations,      net of tax-388-1,085Net income$99,739$90,167$170,197$164,542Earnings per share (1)   Basic      Continuing operations$1.07$0.97$1.83$1.78      Discontinued operations-0.00-0.01      Basic earnings per share$1.07$0.98$1.83$1.79   Diluted      Continuing operations$1.06$0.96$1.81$1.75      Discontinued operations-0.00-0.01      Diluted earnings per share $1.06$0.97$1.81$1.76Weighted average shares outstanding   Basic93,22192,23293,06692,031   Diluted94,04393,36393,98393,280Dividends declared per share$0.0800$0.0700$0.1500$0.1325(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)December 31, 2011June 25, 2011December 25, 2010AssetsCurrent assets   Cash and cash equivalents$531,410$310,104$134,779Accounts receivable, net530,178477,851465,257Inventories580,668505,576483,787Current deferred income taxes47,21630,47428,979Income taxes refundable4,111370943Prepaid expenses and other current assets40,50950,35043,253Current assets of discontinued operations-2,5686,542          Total current assets1,734,0921,377,2931,163,540Property and equipment1,066,3071,005,798929,232   Less accumulated depreciation(515,600)(498,490)(469,068)550,707507,308460,164Goodwill and other indefinite-lived intangible assets808,531644,902639,581Other intangible assets, net752,595567,573578,766Non-current deferred income taxes12,33010,53113,314Other non-current assets84,29981,61479,655$3,942,554$3,189,221$2,935,020Liabilities and Shareholders' EquityCurrent liabilities   Accounts payable$324,349$343,278$289,844   Short-term debt-2,770971   Payroll and related taxes71,05981,45574,348   Accrued customer programs116,88891,37490,366   Accrued liabilities85,66157,51470,424   Accrued income taxes28,68410,55132,992   Current portion of long-term debt40,00015,00015,000   Current liabilities of discontinued operations -4,09314,244          Total current liabilities666,641606,035588,189Non-current liabilities   Long-term debt, less current portion1,452,546875,000875,000   Non-current deferred income taxes9,16310,60116,652   Other non-current liabilities183,393166,598147,139          Total non-current liabilities1,645,1021,052,1991,038,791Shareholders' equity   Controlling interest shareholders' equity:      Preferred stock, without par value, 10,000 shares authorized ---      Common stock, without par value, 200,000 shares authorized  486,665467,661440,208      Accumulated other comprehensive income50,972127,05093,219      Retained earnings1,090,509934,333772,7131,628,1461,529,0441,306,140   Noncontrolling interest2,6651,9431,900          Total shareholders' equity1,630,8111,530,9871,308,040$3,942,554$3,189,221$2,935,020Supplemental Disclosures of Balance Sheet Information   Related to Continuing Operations          Allowance for doubtful accounts$8,993$7,837$8,896          Working capital $1,067,451$772,783$583,053          Preferred stock, shares issued and outstanding---          Common stock, shares issued and outstanding93,28792,77892,297See accompanying notes to condensed consolidated financial statements.PERRIGO COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Year-To-Date20122011Cash Flows (For) From Operating Activities   Net income$170,197$164,542   Adjustments to derive cash flows      Gain on sale of pipeline development projects(3,500)-      Depreciation and amortization67,10550,370      Share-based compensation8,9777,212      Income tax benefit from exercise of stock options9342,123      Excess tax benefit of stock transactions(11,215)(9,607)      Deferred income taxes (credit)3,669(59,379)   Subtotal236,167155,261   Changes in operating assets and liabilities, net of business          acquisition      Accounts receivable(10,657)(103,947)      Inventories(34,150)(24,151)      Accounts payable(14,319)19,006      Payroll and related taxes(12,012)(6,100)      Accrued customer programs(1,412)30,495      Accrued liabilities16,300(14,010)      Accrued income taxes46,40951,225      Other(6,204)14,960   Subtotal(16,045)(32,522)         Net cash from operating activities220,122122,739Cash Flows (For) From Investing Activities   Proceeds from sales of securities-560   Acquisitions of businesses, net of cash acquired(547,052)1,998Proceeds from sale of intangible assets and pipeline development projects10,500-   Acquisitions of assets(750)(4,000)   Additions to property and equipment(55,659)(30,555)         Net cash for investing activities(592,961)(31,997)Cash Flows (For) From Financing Activities   Repayments of short-term debt, net(2,770)(8,029)   Borrowings of long-term debt1,087,546150,000   Repayments of long-term debt(485,000)(195,000)   Deferred financing fees(5,097)(3,703)   Excess tax benefit of stock transactions11,2159,607   Issuance of common stock7,6995,267   Repurchase of common stock(7,954)(8,214)   Cash dividends(14,021)(12,268)         Net cash from (for) financing activities591,618(62,340)Effect of exchange rate changes on cash2,527(3,388)        Net increase in cash and cash equivalents221,30625,014Cash and cash equivalents, beginning of period310,104109,765Cash and cash equivalents, end of period$        531,410$        134,779Supplemental Disclosures of Cash Flow Information   Cash paid/received during the period for:      Interest paid$22,861$25,298      Interest received$1,301$2,266      Income taxes paid $15,973$55,264      Income taxes refunded$802$1,303See accompanying notes to condensed consolidated financial statements.Table IPERRIGO COMPANYRECONCILIATION OF NON-GAAP MEASURES(in thousands, except per share amounts)(unaudited)Three Months EndedConsolidatedDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$       838,170$             -$       838,170$       717,515$             -$       717,51517 %17 %Cost of sales543,29512,931(a)530,364468,0157,394(a)460,62116 %15 %Gross profit294,87512,931307,806249,5007,394256,89418 %20 %Operating expensesDistribution9,095-9,0958,864-8,8643 %3 %Research and development31,148-31,14824,604-24,60427 %27 %Selling and administration93,9645,428(a,b)88,53683,7935,296(a,d)78,49712 %13 %Total134,2075,428128,779117,2615,296111,965Operating income160,66818,359179,027132,23912,690144,92921 %24 %Interest, net15,641-15,64110,716-10,71646 %46 %Other expense (income), net752-752(633)-(633)--Income from continuing operations before income taxes144,27518,359162,634122,15612,690134,84618 %21 %Income tax expense44,5365,667(c)50,20332,3774,087(c)36,46438 %38 %Income from continuing operations$         99,739$    12,692$       112,431$         89,779$      8,603$         98,38211 %14 %Diluted earnings per share from continuing operations$             1.06$             1.20$             0.96$             1.0510 %14 %Diluted weighted average shares outstanding94,04394,04393,36393,363Selected ratios as a percentage of net salesGross profit35.2 %36.7 %34.8 %35.8 %Operating expenses16.0 %15.4 %16.3 %15.6 %Operating income19.2 %21.4 %18.4 %20.2 %Six Months EndedConsolidatedDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$    1,563,465$             -$    1,563,465$    1,358,837$             -$    1,358,83715 %15 %Cost of sales1,041,01155,292(a,e)985,719895,38314,568(a)880,81516 %12 %Gross profit522,45455,292577,746463,45414,568478,02213 %21 %Operating expensesDistribution19,359-19,35917,197-17,19713 %13 %Research and development50,786(3,500)(f)54,28642,331-42,33120 %28 %Selling and administration190,08919,049(a,g)171,040159,9209,409(a,d)150,51119 %14 %Total260,23415,549244,685219,4489,409210,039Operating income262,22070,841333,061244,00623,977267,9837 %24 %Interest, net28,211-28,21120,803-20,80336 %36 %Other expense (income), net981-981(1,192)-(1,192)--Income from continuing operations before income taxes233,02870,841303,869224,39523,977248,3724 %22 %Income tax expense62,83125,288(c)88,11960,9387,702(c)68,6403 %28 %Income from continuing operations$       170,197$    45,553$       215,750$       163,457$    16,275$       179,7324 %20 %Diluted earnings per share from continuing operations$             1.81$             2.30$             1.75$             1.933 %19 %Diluted weighted average shares outstanding93,98393,98393,28093,280Selected ratios as a percentage of net salesGross profit33.4 %37.0 %34.1 %35.2 %Operating expenses16.6 %15.7 %16.1 %15.5 %Operating income16.8 %21.3 %18.0 %19.7 %(a) Deal-related amortization(b) Severance costs of $599(c) Total tax effect for non-GAAP pre-tax adjustments(d) Acquisition-related costs of $1,315(e) Inventory step-up of $27,179(f) Proceeds from sale of pipeline development projects(g) Acquisition-related and severance costs of $9,381Table IIPERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedConsumer HealthcareDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   471,277$             -$   471,277$   429,996$             -$   429,99610 %10 %Cost of sales325,4421,006(a)324,436292,782694(a)292,08811 %11 %Gross profit145,8351,006146,841137,214694137,9086 %6 %Operating expenses68,5981,214(a)67,38461,8201,188(a)60,63211 %11 %Operating income$     77,237$      2,220$     79,457$     75,394$      1,882$     77,2762 %3 %Selected ratios as a percentage of net salesGross profit30.9 %31.2 %31.9 %32.1 %Operating expenses14.6 %14.3 %14.4 %14.1 %Operating income16.4 %16.9 %17.5 %18.0 %Six Months EndedConsumer HealthcareDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   882,958$             -$   882,958$   826,100$             -$   826,1007 %7 %Cost of sales610,5492,028(a)608,521563,2941,496(a)561,7988 %8 %Gross profit272,4092,028274,437262,8061,496264,3024 %4 %Operating expenses130,6892,437(a)128,252116,0932,500(a)113,59313 %13 %Operating income141,7204,465146,185146,7133,996150,709-3 %-3 %Selected ratios as a percentage of net salesGross profit30.9 %31.1 %31.8 %32.0 %Operating expenses14.8 %14.5 %14.1 %13.8 %Operating income16.1 %16.6 %17.8 %18.2 %Three Months EndedNutritionalsDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   128,147$             -$   128,147$   133,458$             -$   133,458-4 %-4 %Cost of sales98,7793,022(a)95,75787,9362,999(a)84,93712 %13 %Gross profit29,3683,02232,39045,5222,99948,521-35 %-33 %Operating expenses22,8733,615(a)19,25825,3592,793(a)22,566-10 %-15 %Operating income$       6,495$      6,637$     13,132$     20,163$      5,792$     25,955-68 %-49 %Selected ratios as a percentage of net salesGross profit22.9 %25.3 %34.1 %36.4 %Operating expenses17.8 %15.0 %19.0 %16.9 %Operating income5.1 %10.2 %15.1 %19.4 %Six Months EndedNutritionalsDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   248,008$             -$   248,008$   256,142$             -$   256,142-3 %-3 %Cost of sales188,0178,871(a)179,146172,2305,999(a)166,2319 %8 %Gross profit59,9918,87168,86283,9125,99989,911-29 %-23 %Operating expenses44,4317,231(a)37,20045,6705,594(a)40,076-3 %-7 %Operating income$     15,560$    16,102$     31,662$     38,242$    11,593$     49,835-59 %-36 %Selected ratios as a percentage of net salesGross profit24.2 %27.8 %32.8 %35.1 %Operating expenses17.9 %15.0 %17.8 %15.6 %Operating income6.3 %12.8 %14.9 %19.5 %Three Months EndedRx PharmaceuticalsDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   177,196$             -$   177,196$     97,534$             -$     97,53482 %82 %Cost of sales84,3597,969(a)76,39053,2782,749(a)50,52958 %51 %Gross profit92,8377,969100,80644,2562,74947,005110 %114 %Operating expenses20,382599(b)19,78311,061-11,06184 %79 %Operating income$     72,455$      8,568$     81,023$     33,195$      2,749$     35,944118 %125 %Selected ratios as a percentage of net salesGross profit52.4 %56.9 %45.4 %48.2 %Operating expenses11.5 %11.2 %11.3 %11.3 %Operating income40.9 %45.7 %34.0 %36.9 %Six Months EndedRx PharmaceuticalsDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   304,823$             -$   304,823$   166,867$             -$   166,86783 %83 %Cost of sales169,15042,501(a,c)126,64994,8395,208(a)89,63178 %41 %Gross profit135,67342,501178,17472,0285,20877,23688 %131 %Operating expenses36,375255(d,e)36,12021,078-21,07873 %71 %Operating income$     99,298$    42,756$   142,054$     50,950$      5,208$     56,15895 %153 %Selected ratios as a percentage of net salesGross profit44.5 %58.5 %43.2 %46.3 %Operating expenses11.9 %11.8 %12.6 %12.6 %Operating income32.6 %46.6 %30.5 %33.7 %(a) Deal-related amortization(b) Severance costs of $599(c) Inventory step-up of $27,179(d) Proceeds of $3,500 from sale of pipeline development projects(e) Severance costs of $3,755Table II (Continued)PERRIGO COMPANYREPORTABLE SEGMENTSRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedAPIDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   42,752$             -$    42,752$   40,333$             -$    40,3336 %6 %Cost of sales22,336496(a)21,84022,780516(a)22,264-2 %-2 %Gross profit20,41649620,91217,55351618,06916 %16 %Operating expenses8,314-8,3147,521-7,52111 %11 %Operating income$   12,102$         496$    12,598$   10,032$         516$    10,54821 %19 %Selected ratios as a percentage of net salesGross profit47.8 %48.9 %43.5 %44.8 %Operating expenses19.4 %19.4 %18.6 %18.6 %Operating income28.3 %29.5 %24.9 %26.2 %Six Months EndedAPIDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   90,396$             -$    90,396$   77,694$             -$    77,69416 %16 %Cost of sales48,1271,017(a)47,11043,3601,008(a)42,35211 %11 %Gross profit42,2691,01743,28634,3341,00835,34223 %22 %Operating expenses15,589-15,58913,979-13,97912 %12 %Operating income$   26,680$      1,017$    27,697$   20,355$      1,008$    21,36331 %30 %Selected ratios as a percentage of net salesGross profit46.8 %47.9 %44.2 %45.5 %Operating expenses17.2 %17.2 %18.0 %18.0 %Operating income29.5 %30.6 %26.2 %27.5 %Three Months EndedOtherDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   18,798$             -$    18,798$   16,194$             -$    16,19416 %16 %Cost of sales12,379438(a)11,94111,239436(a)10,80310 %11 %Gross profit6,4194386,8574,9554365,39130 %27 %Operating expenses5,315-5,3154,963-4,9637 %7 %Operating income (loss)$     1,104$         438$      1,542$           (8)$         436$         428-   %260 %Selected ratios as a percentage of net salesGross profit34.1 %36.5 %30.6 %33.3 %Operating expenses28.3 %28.3 %30.6 %30.6 %Operating income (loss)5.9 %8.2 %(0.0)%2.6 %Six Months EndedOtherDecember 31, 2011December 25, 2010% ChangeGAAPNon-GAAP AdjustmentsAs AdjustedGAAPNon-GAAP AdjustmentsAs AdjustedGAAPAs AdjustedNet sales$   37,280$             -$    37,280$   32,034$             -$    32,03416 %16 %Cost of sales25,168875(a)24,29321,660857(a)20,80316 %17 %Gross profit12,11287512,98710,37485711,23117 %16 %Operating expenses10,562-10,5629,577-9,57710 %10 %Operating income$     1,550$         875$      2,425$        797$         857$      1,65494 %47 %Selected ratios as a percentage of net salesGross profit32.5 %34.8 %32.4 %35.1 %Operating expenses28.3 %28.3 %29.9 %29.9 %Operating income4.2 %6.5 %2.5 %5.2 %(a) Deal-related amortization(b) Severance costs of $599(c) Inventory step-up of $27,179(d) Proceeds of $3,500 from sale of pipeline development projects(e) Severance costs of $3,755Full YearFiscal 2012 Guidance*FY12 reported diluted EPS from continuing operations range$3.90 - $4.00    Deal-related amortization (1,2)0.53    Charge associated with inventory step-up (2)0.18    Charges associated with acquisition-related and severance costs0.06    Charges associated with restructuring0.06    Earnings associated with sale of pipeline development projects(0.03)FY12 adjusted diluted EPS from continuing operations range$4.70 - $4.80Fiscal 2011*FY11 reported diluted EPS from continuing operations$3.64    Deal-related amortization (1)0.34    Charges associated with acquisition-related costs0.02    Charges associated with restructuring0.01FY11 adjusted diluted EPS from continuing operations$4.01(1)  Amortization of acquired intangible assets related to business combinations and asset acquisitions(2)  Does not include any estimate related to the CanAm Care acquisition*All information based on continuing operations.Table IVPERRIGO COMPANYRECONCILIATION OF NON-GAAP MEASURES(in thousands)(unaudited)Three Months EndedChangeConsolidatedDecember 31, 2011December 31, 2010$%Net sales, as reported$              838,170$              717,515$   120,65517 %Less: Paddock acquisition(68,552)-(68,552)-Net sales, organic$              769,618$              717,515$     52,1037 %SOURCE Perrigo CompanyFor further information: Arthur J. Shannon, Vice President, Investor Relations and Communication, +1-269-686-1709, ajshannon@perrigo.com, Bradley Joseph, Senior Manager, Investor Relations and Communication, +1-269-686-3373, bradley.joseph@perrigo.com