The Perrigo Company (NASDAQ: PRGO) today announced results for the full year and fourth quarter ended June 26, 2004.
Perrigo Company
(in thousands, except per share amounts)
Fourth Quarter Year-To-Date
2004 2003 2004 2003
Sales $206,125 $184,403 $898,204 $834,100
Net Income $8,085 $4,324 $80,567 $54,048
Diluted EPS $0.11 $0.06 $1.11 $0.76
Diluted Shares 73,277 71,439 72,289 71,158
Fiscal Year 2004
Sales for the twelve months ended June 26, 2004 were $898.2 million, compared with $834.1 million last year, an increase of eight percent. Net income increased 49 percent to a record $80.6 million, or $1.11 per share, from $54.0 million, or $0.76 per share a year ago.
On an operating basis, excluding a tax benefit of $13.1 million, or $0.18 per share, and an after-tax charge of $3.4 million, or $0.05 per share, related to an FTC investigation, net income was $70.9 million, or $0.98 per share. This is an increase in net income of 36 percent, compared with net income of $52.0 million, or $0.73 per share, for the prior year. The results for the prior year on an operating basis exclude the benefit of a favorable vitamin litigation settlement of $2 million after-tax, or $0.03 per share.
Commenting on the results, Perrigo Chairman, President and Chief Executive Officer, David T. Gibbons, said, "We are very pleased to report record earnings in fiscal 2004, which were the result of good revenue growth and continued operational excellence. In 2004, we received seven FDA new product approvals and launched a broad range of products including national brand equivalents, Rx-to-OTC switches and innovative brand name nutritional offerings. The loratadine family of OTC allergy/sinus medications, in particular, were a key contributor to the overall revenue increase. Growth also resulted from our December 2003 acquisition of Peter Black Pharmaceuticals, a United Kingdom-based nutritional business.
"Sales and earnings growth were significant factors in the strong cash flow from operations of $119 million, up 49 percent from $80 million last year. This strong cash flow allowed us to increase our quarterly dividend, invest in our new generic drug business, acquire the Peter Black operation, fund $28 million in capital projects and end the year with $171 million in cash and investment securities on the balance sheet," said Mr. Gibbons.
Fiscal Fourth Quarter
For the fourth quarter, sales were $206.1 million, an increase of 12 percent, compared with $184.4 million last year. Net income was $8.1 million, or $0.11 per share, compared with $4.3 million, or $0.06 per share a year ago. Subsequent to the fiscal year-end, the Company announced it is negotiating a settlement with the U.S. Federal Trade Commission (FTC) in order to close the FTC's investigation into a 1998 agreement with Perrigo and New Jersey-based Alpharma Inc. The Company recorded a $4.75 million charge, $3.4 million after-tax, or $0.05 per share, which is expected to resolve all claims by the FTC and state governments. On an operating basis, excluding the FTC charge, net income was $11.5 million, or $0.16 per share, in the fourth quarter.
"In addition to incremental revenues from Peter Black and new products, fourth quarter results benefited from increased production levels. The higher production reflects the decision to build inventories earlier in order to improve service levels through the peak demand of the next cough, cold season," noted Gibbons.
Other Developments
On June 10, the Company announced that it had no present intention to exercise its option to acquire a controlling interest in Lannett Company, a manufacturer of generic pharmaceuticals. The option was allowed to expire on August 6.
On July 15, the Company entered into a purchase agreement to acquire certain assets of APG, Inc., an Elkhart, Indiana-based contract manufacturer of aerosol products. The purchased assets include inventories, receivables and formulations for anti-fungal foot products. The transaction is expected to close on or before September 1, and is expected to add approximately $4 million in sales in fiscal 2005.
Fiscal Year 2005
Commenting on the outlook for the year ahead, Mr. Gibbons said, "We look forward to continued growth in our core businesses and further development of our start-up generic prescription drug business in fiscal 2005. Perrigo Consumer Healthcare continues to successfully focus on the fundamentals of quality, service and operational excellence, while supporting the launch and marketing of important new products. With this strong domestic business and improved prospects for our U.K. and Mexico operations, we anticipate an increase in revenues of four to five percent.
"We remain committed to growing the Perrigo Pharmaceutical business through internal development or an appropriate acquisition. To develop a pipeline of prescription generic drug products, we will utilize our strong financial position to invest between $10 and $12 million in 2005, up from $5 million in 2004, primarily in R&D. Concurrent with internal development, we will continue to seek potential acquisition candidates which could accelerate our market entry. On a consolidated basis, we expect earnings growth of three to five percent, despite the increased investment in the pharmaceutical business."
Perrigo will host a conference call to discuss fourth quarter and fiscal 2004 year-end results at 11:00 a.m. (ET) today. The call and replay will be available via webcast on the Company's Web site at http://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. (ET) Tuesday, August 10 until midnight Friday, August 13. To listen to the replay, call 800-642-1687, access code 9192818.
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 (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 25 - 30 of the Company's Form 10-K for the year ended June 28, 2003 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
2004 2003 2004 2003
(unaudited) (unaudited)
Net sales $206,125 $184,403 $898,204 $834,100
Cost of sales 143,115 137,405 630,240 596,076
Gross profit 63,010 46,998 267,964 238,024
Operating expenses
Distribution 3,682 3,639 15,154 15,563
Research and development 9,137 7,078 27,721 23,315
Selling and administration 37,922 29,702 122,193 117,096
Subtotal 50,741 40,419 165,068 155,974
Unusual litigation - - - (3,128)
Total 50,741 40,419 165,068 152,846
Operating income 12,269 6,579 102,896 85,178
Interest and other, net (928) 15 (3,087) (1,080)
Income before income taxes 13,197 6,564 105,983 86,258
Income tax expense 5,112 2,240 25,416 32,210
Net income $8,085 $4,324 $80,567 $54,048
Earnings per share
Basic $0.11 $0.06 $1.15 $0.77
Diluted $0.11 $0.06 $1.11 $0.76
Weighted average shares
outstanding
Basic 70,671 69,614 70,206 69,746
Diluted 73,277 71,439 72,289 71,158
Dividends declared per share $0.035 $0.025 $0.13 $0.05
PERRIGO COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 26, June 28,
2004 2003
Assets
Current assets
Cash and cash equivalents $161,252 $93,827
Investment securities 10,448 -
Accounts receivable 86,040 87,018
Inventories 174,253 160,326
Current deferred income taxes 29,877 32,643
Prepaid expenses and other current assets 11,359 5,383
Total current assets 473,229 379,197
Property and equipment 462,185 429,115
Less accumulated depreciation 234,544 210,337
227,641 218,778
Goodwill 35,919 35,919
Non-current deferred income taxes 8,137 3,968
Other non-current assets 14,168 6,108
$759,094 $643,970
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $88,858 $72,186
Notes payable 9,528 8,980
Payroll and related taxes 41,387 40,535
Accrued expenses 43,689 36,590
Accrued income taxes - 5,568
Current deferred income taxes 4,024 2,683
Total current liabilities 187,486 166,542
Non-current deferred income taxes 29,606 25,484
Other non-current liabilities 5,770 3,520
Shareholders' equity
Preferred stock, without par
value, 10,000 shares authorized - -
Common stock, without par value,
200,000 shares authorized 104,160 88,990
Unearned compensation (514) (111)
Accumulated other comprehensive income 2,892 1,282
Retained earnings 429,694 358,263
Total shareholders' equity 536,232 448,424
$759,094 $643,970
Supplemental Disclosures of Balance
Sheet Information
Allowance for doubtful accounts $8,296 $10,242
Allowance for inventory $22,888 $21,717
Working capital $285,743 $212,655
Preferred stock, shares issued - -
Common stock, shares issued 70,882 70,034
PERRIGO COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year-To-Date
2004 2003
Cash Flows From Operating Activities
Net income $80,567 $54,048
Adjustments to derive cash flows
Depreciation and amortization 28,452 26,126
Compensation - stock options 5,128 5,224
Deferred income taxes 3,366 (6,847)
Changes in operating assets and
liabilities, net of a business
acquisition and a restructuring
Accounts receivable 4,075 (4,427)
Inventories (6,168) (4,656)
Accounts payable 10,891 (2,329)
Payroll and related taxes 1,072 9,185
Accrued expenses 6,050 3,869
Accrued income taxes (5,552) (2,516)
Other (9,354) 2,557
Net cash from operating
activities 118,527 80,234
Cash Flows For Investing Activities
Additions to property and equipment (28,294) (32,296)
Proceeds from sale of assets held for
sale - -
Acquisition of a business, net of cash (12,061) -
Investment in equity subsidiaries (2,000) -
Purchase of securities (17,099) -
Proceeds from sales of securities 6,300 -
Other - (980)
Net cash for investing
activities (53,154) (33,276)
Cash Flows For (From) Financing Activities
Borrowings (repayments) of short-term
debt, net 702 640
Tax benefit (expense) of stock
transactions 1,725 (481)
Issuance of common stock 11,083 7,231
Repurchase of common stock (2,766) (33,682)
Cash dividends (9,136) (3,484)
Other (128) (52)
Net cash for (from) financing
activities 1,480 (29,828)
Net increase in cash and cash
equivalents 66,853 17,130
Cash and cash equivalents at beginning of
period 93,827 76,824
Effect of exchange rate changes on cash 572 (127)
Cash and cash equivalents at end of period $161,252 $93,827
Supplemental Disclosures of Cash Flow
Information
Cash paid during the year for:
Interest $591 $1,257
Income taxes $31,079 $43,417
PERRIGO COMPANY
SEGMENT INFORMATION
(in thousands)
Fourth Quarter Year-To-Date
2004 2003 2004 2003
(unaudited) (unaudited)
Segment Sales
Consumer Healthcare $176,702 $166,777 $800,619 $757,035
UK Operations 23,323 10,314 72,740 46,537
Mexico Operations 6,100 7,312 24,845 30,528
Pharmaceuticals - - - -
Total $206,125 $184,403 $898,204 $834,100
Segment Operating Income
(Loss)
Consumer Healthcare $16,029 $6,545 $107,567 $80,905
UK Operations (1,438) (156) 55 2,246
Mexico Operations (365) 190 235 2,027
Pharmaceuticals (1,957) - (4,961) -
Total $12,269 $6,579 $102,896 $85,178
PERRIGO COMPANY
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
Fourth Quarter Year-To-Date
2004 2003 2004 2003
(unaudited) (unaudited)
Net income (GAAP) $8,085 $4,324 $80,567 $54,048
Less: income tax benefit - - (13,100) -
Less: unusual litigation,
net of tax - - - (2,000)
Plus: FTC settlement charge,
net of tax 3,400 - 3,400 -
Net income before income
tax benefit, unusual
litigation, and FTC
settlement $11,485 $4,324 $70,867 $52,048
Earnings per share
Basic $0.16 $0.06 $1.01 $0.75
Diluted $0.16 $0.06 $0.98 $0.73
Weighted average shares
outstanding
Basic 70,671 69,614 70,206 69,746
Diluted 73,277 71,439 72,289 71,158
Dividends declared per share $0.035 $0.025 $0.13 $0.05
SOURCE: Perrigo Company
CONTACT: Ernest J. Schenk, Manager, Investor Relations and Communication
of Perrigo Company, +1-269-673-9212, or E-mail: Investor@perrigo.com
Web site: http://www.perrigo.com/
http://www.perrigo.com/investor