The Perrigo Company (NASDAQ: PRGO) today announced results for the full year and fourth quarter ended June 28, 2003.
Perrigo Company (NASDAQ: PRGO)
(in thousands, except per share amounts)
Fourth Quarter Year-To-Date
2003 2002 2003 2002
Sales $182,635 $182,021 $825,987 $826,322
Net Income $4,324 $(71) $54,048 $44,790
Diluted EPS $0.06 - $0.76 $0.60
Diluted Shares 71,439 72,307 71,158 74,606
Fiscal Year 2003
Sales for the twelve months ended June 28, 2003 were $826.0 million compared with $826.3 million in fiscal 2002. Net income increased 21 percent to $54.0 million, or $0.76 per share, from $44.8 million or $0.60 per share last year. On an operating basis, excluding certain items in both years, net income was $52.0 million, or $0.73 per share in fiscal 2003, an increase in net income of 20 percent, compared with net income of $43.6 million, or $0.58 per share, for the prior year.
Reported net income in fiscal 2003 included after-tax income of $2.0 million, or $0.03 per share, from a vitamin litigation settlement. Reported net income in fiscal 2002 included after-tax income of $17.9 million, or $0.24 per share, from vitamin litigation and an after-tax charge of $16.6 million, or $0.22 per share, related to a restructuring of operations in Mexico.
Chief Executive Officer, David T. Gibbons, commented, "We are very pleased to report strong fiscal 2003 results which reflect Perrigo's progress in strengthening its fundamentals. Earnings were up more than 20 percent as we continue to realize the payback from the investments made in our quality processes and manufacturing operations over the past two years. Our increased operational efficiencies along with business simplification and expense control initiatives were key factors in the significant gain in gross profits and net earnings."
Mr. Gibbons continued, "We generated $80 million in cash from operations and stayed virtually debt-free, keeping us in a very strong financial position. This strong and predictable cash generation enabled us to repurchase 3.3 million shares during the year and allowed us to begin paying a cash dividend for the first time. In June, we began shipping the store brand version of Claritin-D® 24 Hour and look forward to providing additional store brand equivalents of this leading allergy relief product during fiscal 2004."
Fiscal 2003 Fourth Quarter
For the fourth quarter, sales were $182.6 million, a slight increase over sales of $182.0 million a year ago. Net income was $4.3 million, or $0.06 per share, compared with breakeven last year. On an operating basis, excluding certain items last year, net income was $3.7 million, or $0.05 per share. Reported net income included after-tax income of $12.9 million, or $0.17 per share, from vitamin litigation settlements and a charge of $16.6 million after-tax, or $0.22 per share, related to the restructuring of operations in Mexico.
Fiscal Year 2004 Outlook
Mr. Gibbons stated, "While we deliberately gave up some volume in fiscal 2003 to improve profits, as we look out to 2004 we see the opportunity for top-line growth. Our core over-the-counter (OTC) pharmaceutical and nutritional businesses remain strong, and with our new initiatives for growth we anticipate an increase in revenues of approximately three to five percent.
"In 2004, we will continue to build on our consumer pharmaceutical foundation as a focus for future growth. We are committed to continuing to enhance our mission of providing affordable consumer healthcare options. We now have the quality, R&D and manufacturing resources to expand our pharmaceutical business. Our strong financial position allows us to invest $5 to $7 million toward this initiative in 2004, primarily in increased R&D for the development of generic prescription drug products. Because of the anticipated eight to ten percent earnings growth and strong cash flow in our core business, we expect 2004 earnings to be at or slightly above current levels, despite this investment for our long-term growth. We see generic prescription drugs as a natural progression that will enhance our already strong position in the OTC pharmaceutical market and will provide substantial new growth.
"Implementing this new strategic direction requires a realignment of internal resources and our senior management structure. Effective immediately, John Hendrickson, Executive Vice President, Operations, will become Executive Vice President and General Manager, Perrigo Consumer Healthcare. In his new role, John will have responsibility for all functional operations within our OTC pharmaceutical and nutritional businesses. He has led our pursuit of operational excellence and has played a major role in Perrigo's strong results over the past few years.
"Mark Olesnavage, Executive Vice President, Sales, Marketing and Scientific Affairs, will become Executive Vice President and General Manager, Perrigo Pharmaceuticals. In this role, Mark will be responsible for the planning, development and execution of the launch and growth of our generic Rx drug efforts. He has an extensive background in marketing, operations and business development in 22 years with Perrigo and has worked extensively with our customers to bring them a wide range of product and service solutions to consumer healthcare. He also has been an active member of the Generic Pharmaceutical Industry Association Board over the last ten years. Both John and Mark will report directly to me."
With the fiscal second quarter ended December 28, 2002, Perrigo began expensing stock option compensation. All prior periods have been adjusted to reflect the compensation cost that would have been recognized had the stock option expense been applied to all awards granted after July 1, 1995. Please refer to the adjusted results in the summary table contained in this announcement.
Perrigo will host a conference call to discuss fourth quarter fiscal 2003 results at 11:00 a.m. (EDT) today. The call and replay will be available via webcast on the Company's website at www.perrigo.com/investor or by phone, toll free, 888-489-0147. A taped replay of the call will be available beginning at approximately 2:30 p.m. (EDT) Monday, August 11. To listen to the replay, call 800-642-1687, access code 2120625.
The Company is furnishing this earnings release to the Securities and Exchange Commission via Form 8-K and it is hereby incorporated by reference. The information provided on Form 8-K includes a summary of each non-GAAP financial measure included in this earnings release and the reasons management believes these non-GAAP financial measures are useful to investors.
Perrigo Company is the nation's largest manufacturer of over-the-counter (non-prescription) pharmaceutical and nutritional products sold by supermarket, drug, and mass merchandise chains under their own labels. The Company's products include over-the-counter pharmaceuticals such as analgesics, cough and cold remedies, gastrointestinal, and feminine hygiene products, and nutritional products, such as vitamins, nutritional supplements and nutritional drinks. Visit Perrigo on the Internet (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 23-27 of the Company's Form 10-K for the year ended June 29, 2002 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)
Fourth Quarter Year-To-Date
2003 2002* 2003 2002*
(unaudited) (unaudited)
Net sales $182,635 $182,021 $825,987 $826,322
Cost of sales 137,405 135,972 596,076 608,622
Gross profit 45,230 46,049 229,911 217,700
Operating expenses
Distribution 3,639 3,997 15,563 16,327
Research and development 7,078 8,224 23,315 25,689
Selling and administration 27,934 27,893 108,983 103,982
Subtotal 38,651 40,114 147,861 145,998
Restructuring - 5,090 - 7,136
Goodwill impairment - 11,524 - 11,524
Unusual litigation - (20,078) (3,128) (27,891)
Total 38,651 36,650 144,733 136,767
Operating income 6,579 9,399 85,178 80,933
Interest and other, net 15 (859) (1,080) (1,355)
Income before income taxes 6,564 10,258 86,258 82,288
Income tax expense 2,240 10,329 32,210 37,498
Net income $4,324 $(71) $54,048 $44,790
Earnings per share
Basic $0.06 $ - $0.77 $0.61
Diluted $0.06 $ - $0.76 $0.60
Weighted average shares outstanding:
Basic 69,614 72,307 69,746 73,164
Diluted 71,439 72,307 71,158 74,606
Dividends declared per share $0.03 $ - $0.05 $ -
*As adjusted for expensing of stock options.
PERRIGO COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 28, June 29,
Assets 2003 2002*
Current assets
Cash and cash equivalents $93,827 $76,824
Accounts receivable 87,018 82,560
Inventories 160,326 155,611
Prepaid expenses and other
current assets 5,383 6,896
Current deferred income taxes 32,643 23,484
Total current assets 379,197 345,375
Property and equipment
Land 13,962 13,700
Building 188,509 182,960
Machinery and equipment 226,644 202,801
429,115 399,461
Less accumulated depreciation 210,337 188,417
218,778 211,044
Goodwill 35,919 35,919
Non-current deferred income taxes 3,968 3,964
Other 6,108 5,073
$643,970 $601,375
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $72,186 $74,449
Notes payable 8,980 8,338
Payrolls and related taxes 40,535 31,338
Accrued expenses 36,590 32,721
Accrued income taxes 5,568 8,088
Current deferred income taxes 2,683 3,624
Total current liabilities 166,542 158,558
Deferred income taxes 25,484 22,259
Other long-term liabilities 3,520 2,396
Shareholders' equity
Preferred stock, without par
value, 10,000 shares authorized - -
Common stock, without par
value, 200,000 shares authorized 88,990 110,698
Unearned compensation (111) (608)
Accumulated other
comprehensive income 1,282 373
Retained earnings 358,263 307,699
Total shareholders' equity 448,424 418,162
$643,970 $601,375
Supplemental Disclosures of
Balance Sheet Information
Allowance for doubtful accounts $10,242 $8,465
Allowance for inventory $21,717 $21,360
Working capital $212,655 $186,817
Preferred stock, shares issued - -
Common stock, shares issued 70,034 72,550
*As adjusted for expensing of stock options.
PERRIGO COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year
2003 2002*
Cash Flows From (For) Operating Activities
Net income $54,048 $44,790
Adjustments to derive cash flows
Depreciation and amortization 26,126 25,613
Compensation - stock options 5,224 6,066
Deferred income taxes (6,847) 1,711
Goodwill impairment - 11,524
Restructuring - 7,136
Changes in operating assets
and liabilities net of restructuring
Accounts receivable, net (4,427) 14,301
Inventories (4,656) 5,512
Accounts payable (2,329) (9,955)
Payrolls and related taxes 9,185 5,218
Accrued expenses 3,869 4,878
Current income taxes (2,516) (12,492)
Other 2,557 123
Net cash from (for)
operating activities 80,234 104,425
Cash Flows (For) From Investing Activities
Additions to property and equipment (32,296) (27,528)
Proceeds from sale of assets
held for sale - 14,161
Business acquisitions, net of cash - -
Other (980) (398)
Net cash (for) from
investing activities (33,276) (13,765)
Cash Flows From (For) Financing Activities
Net borrowings of short-term debt 640 -
Net repayments of short-term debt - (4,506)
Tax benefit of stock transactions 63 1,260
Issuance of common stock 7,231 10,192
Repurchase of common stock (33,682) (31,923)
Cash dividends (3,484) -
Other (596) 131
Net cash from (for)
financing activities (29,828) (24,846)
Net increase in cash and
cash equivalents 17,130 65,814
Cash and cash equivalents, at
beginning of period 76,824 11,016
Effect of exchange rate changes on cash (127) (6)
Cash and cash equivalents,
at end of period $93,827 $76,824
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $1,257 $1,542
Income taxes $43,417 $47,103
*As adjusted for expensing of stock options.
PERRIGO COMPANY
STOCK OPTION COMPENSATION EXPENSE
IMPACT ON NET INCOME AND EPS
(in thousands, except per share amounts)
Fourth Quarter Year-To-Date
2003 2002 2003 2002
(unaudited)(unaudited)
Net income before adoption $5,300 $1,281 $58,865 $50,197
Compensation expenses
(net of tax benefit) 976 1,352 4,817 5,407
Net income after adoption $4,324 $(71) $54,048 $44,790
Weighted average shares outstanding:
Basic 69,614 72,307 69,746 73,164
Diluted
Before adoption 71,755 74,051 71,498 75,113
After adoption 71,439 72,307 71,158 74,606
Basic EPS
Before adoption $0.08 $0.02 $0.84 $0.69
After adoption $0.06 $ - $0.77 $0.61
Diluted EPS
Before adoption $0.07 $0.02 $0.82 $0.67
After adoption $0.06 $ - $0.76 $0.60
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
Fourth Quarter Year-To-Date
2003 2002* 2003 2002*
(unaudited)(unaudited)
Net income (GAAP) $4,324 $(71) $54,048 $44,790
Less: unusual litigation, net of tax - 12,850 2,000 17,850
Plus: Quifa restructuring - 16,614 - 16,614
Net income (operating basis) $4,324 $3,693 $52,048 $43,554
Earnings per share:
Basic $0.06 $0.05 $0.75 $0.60
Diluted $0.06 $0.05 $0.73 $0.58
Weighted average shares outstanding:
Basic 69,614 72,307 69,746 73,164
Diluted 71,439 75,049 71,158 74,606
* As adjusted for expensing of stock options.
SOURCE: Perrigo Company
CONTACT: Ernest J. Schenk, Manager, Investor Relations and Communication
of Perrigo Company, +1-269-673-9212, E-mail: eschenk@perrigo.com
Web site: http://www.perrigo.com/
http://www.perrigo.com/investor