-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VhT0C/q9M8+ZCMdeamuESB8pRAFEGbvDsOjCfoOZKayyeunXI8q9LIzPFqjmBKE3 Pon10BIm7p0K/jXkW1D0Yw== 0000950137-02-002447.txt : 20020425 0000950137-02-002447.hdr.sgml : 20020425 ACCESSION NUMBER: 0000950137-02-002447 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020330 FILED AS OF DATE: 20020425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERRIGO CO CENTRAL INDEX KEY: 0000820096 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 382799573 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19725 FILM NUMBER: 02620587 BUSINESS ADDRESS: STREET 1: 515 EASTERN AVENUE CITY: ALLEGAN STATE: MI ZIP: 49010 BUSINESS PHONE: 6166738451 MAIL ADDRESS: STREET 1: 515 EASTERN AVENUE CITY: ALLEGAN STATE: MI ZIP: 49010 10-Q 1 c69132e10-q.txt QUARTERLY REPORT ================================================================================ UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q -------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 30, 2002 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- --------- Commission file number 0-19725 PERRIGO COMPANY ----------------------------------------------------- (Exact name of registrant as specified in its charter) Michigan 38-2799573 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 515 Eastern Avenue Allegan, Michigan 49010 --------------------- ----- (Address of principal (Zip Code) executive offices) (616) 673-8451 -------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class of Common Stock April 17, 2002 --------------------- -------------- without par 72,470,892 shares ================================================================================ PERRIGO COMPANY AND SUBSIDIARIES FORM 10-Q INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed consolidated statements of income-- For the quarter and the year-to-date ended March 30, 2002 and March 31, 2001 1 Condensed consolidated balance sheets-- March 30, 2002 and June 30, 2001 2 Condensed consolidated statements of cash flows-- For the year-to-date ended March 30, 2002 and March 31, 2001 3 Notes to condensed consolidated financial statements-- March 30, 2002 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risks 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13
PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited)
Third Quarter Year-To-Date --------------------------- --------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $ 198,491 $ 190,898 $ 644,301 $ 572,590 Cost of sales 143,333 144,472 476,999 429,653 PPA product discontinuation -- -- -- 20,200 --------- --------- --------- --------- Gross profit 55,158 46,426 167,302 122,737 --------- --------- --------- --------- Operating expenses Distribution 4,048 4,080 12,330 11,498 Research and development 4,312 5,202 13,116 12,630 Selling and administration 24,748 24,152 71,540 68,379 Restructuring -- -- 2,046 -- Unusual litigation (7,813) (538) (7,813) (995) --------- --------- --------- --------- 25,295 32,896 91,219 91,512 --------- --------- --------- --------- Operating income 29,863 13,530 76,083 31,225 Interest and other, net (220) (1,687) (496) (2,822) --------- --------- --------- --------- Income before income taxes 30,083 15,217 76,579 34,047 Income tax expense 10,822 5,116 27,663 12,592 --------- --------- --------- --------- Net income $ 19,261 $ 10,101 $ 48,916 $ 21,455 ========= ========= ========= ========= Basic earnings per share $ 0.26 $ 0.14 $ 0.67 $ 0.29 ========= ========= ========= ========= Diluted earnings per share $ 0.26 $ 0.14 $ 0.65 $ 0.29 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. -1- PERRIGO COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 30, June 30, 2002 2001 --------- --------- ASSETS (unaudited) Current assets Cash and cash equivalents $ 36,674 $ 11,016 Accounts receivable, net of allowances of $8,809 and $5,902, respectively 98,755 96,828 Inventories 145,379 161,112 Prepaid expenses and other current assets 8,936 8,771 Current deferred income taxes 19,364 19,203 Assets held for sale -- 16,207 --------- --------- Total current assets 309,108 313,137 Property and equipment 396,398 377,269 Less accumulated depreciation 184,943 165,182 --------- --------- 211,455 212,087 Goodwill 47,471 47,195 Other 5,156 3,493 --------- --------- $ 573,190 $ 575,912 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 61,111 $ 84,385 Notes payable 7,321 12,759 Payrolls and related taxes 27,733 26,121 Accrued expenses 31,808 27,917 Income taxes 10,134 20,577 --------- --------- Total current liabilities 138,107 171,759 Deferred income taxes 18,046 17,419 Other long-term liabilities 2,685 859 Shareholders' equity Preferred stock, without par value, 10,000 shares authorized, none issued -- -- Common stock, without par value, 200,000 shares authorized, 72,471 and 74,072 issued, respectively 88,613 108,952 Unearned compensation (756) (465) Accumulated other comprehensive income 619 428 Retained earnings 325,876 276,960 --------- --------- Total shareholders' equity 414,352 385,875 --------- --------- $ 573,190 $ 575,912 ========= =========
See accompanying notes to condensed consolidated financial statements. -2- PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Year-To-Date ------------------------- 2002 2001 -------- -------- Cash Flows From (For) Operating Activities: Net income $ 48,916 $ 21,455 Depreciation and amortization 17,968 18,055 -------- -------- 66,884 39,510 Accounts receivable (5,179) (533) Inventories 15,734 (4,583) Current and deferred income taxes (9,976) 21,867 Accounts payable (23,274) 9,378 Payrolls and related taxes 1,610 7,433 Accrued expenses 5,939 5,205 Restructuring, net of cash 2,046 -- Other (782) 1,774 -------- -------- Net cash from operating activities 53,002 80,051 -------- -------- Cash Flows (For) From Investing Activities: Additions to property and equipment (17,321) (17,373) Proceeds from sale of assets held for sale 14,161 -- Other (426) -- -------- -------- Net cash (for) from investing activities (3,586) (17,373) -------- -------- Cash Flows (For) From Financing Activities: (Repayments) Borrowings of short-term debt (5,401) 1,215 Issuance of common stock 10,232 162 Repurchase of common stock (31,923) (1,060) Other 3,373 176 -------- -------- Net cash (for) from financing activities (23,719) 493 -------- -------- Net Increase in Cash and Cash Equivalents 25,697 63,171 Cash and Cash Equivalents, at Beginning of Period 11,016 7,055 Effect of exchange rate changes on cash (39) -- -------- -------- Cash and Cash Equivalents, at End of Period $ 36,674 $ 70,226 ======== ======== Supplemental Disclosures of Cash Flow Information: Interest paid $ 1,266 $ 1,342 Income taxes paid $ 36,939 $ 9,102
See accompanying notes to condensed consolidated financial statements. -3- PERRIGO COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 30, 2002 (in thousands, except per share amounts) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The Company has reclassified certain amounts in the prior year to conform with the current year presentation. Operating results for the quarter and year-to-date ended March 30, 2002 are not necessarily indicative of the results that may be expected for the year ending June 29, 2002. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended June 30, 2001. In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations". SFAS 141 requires all business combinations to be accounted for by the purchase method and eliminates use of the pooling-of-interests method. It also requires upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. Additionally, the statement requires recognition of intangible assets apart from goodwill and provides for additional disclosure of information related to a business combination. This SFAS is effective for all business combinations initiated after June 30, 2001. The adoption of this standard did not have a significant impact on the Company's financial statements. The Company's previous business combinations were accounted for using the purchase method. In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets". SFAS 142 eliminates goodwill amortization, provides guidance and requirements for impairment testing of goodwill and discusses the treatment of other intangible assets. Adoption of the standard is required for fiscal years beginning after December 15, 2001. However, because earlier adoption is permissible, the Company adopted the standard effective July 1, 2001. The impairment tests of goodwill and other intangible assets as required by this standard have been performed and resulted in no impairment of these assets. Goodwill amortization, which is non-deductible for tax purposes, was $284 for the third quarter of fiscal 2001 and $852 for year-to-date fiscal 2001. The effect on earnings per share of eliminating goodwill amortization was less than $.01 for both the third quarter and year-to-date fiscal 2001. -4- NOTE B - INVENTORIES The components of inventories consist of the following: March 30, June 30, 2002 2001 ---- ---- Finished goods $ 57,043 $ 73,996 Work in process 53,864 52,573 Raw materials 34,472 34,543 -------- -------- $145,379 $161,112 ======== ======== NOTE C - COMPREHENSIVE INCOME Comprehensive income is comprised of all changes in shareholders' equity during the period other than from transactions with shareholders. Comprehensive income consists of the following:
Third Quarter Year-to-Date ------------------- --------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net income $19,261 $10,101 $48,916 $21,455 Other comprehensive income: Foreign currency translation adjustments 199 (221) 191 (147) ------- ------- ------- ------- Comprehensive income $19,460 $ 9,880 $49,107 $21,308 ======= ======= ======= =======
NOTE D - EARNINGS PER SHARE A reconciliation of the numerators and denominators used in the "basic" and "diluted" Earnings per Share ("EPS") calculations follows:
Third Quarter Year-To-Date -------------------- ------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Numerator: Net income used for both basic and diluted EPS $19,261 $10,101 $48,916 $21,455 Denominator: Weighted average shares outstanding for basic EPS 72,690 73,468 73,451 73,485 Dilutive effect of stock options 1,619 1,084 2,023 597 ------- ------- ------- ------- Weighted average shares outstanding for diluted EPS 74,309 74,552 75,474 74,082 ======= ======= ======= =======
Options outstanding where the exercise price was higher than the market price were 458 and 2,978 for the year-to-date fiscal 2002 and 2001, respectively. These options were excluded from the diluted EPS calculation. NOTE E - COMMITMENTS AND CONTINGENCIES The Company is currently defending numerous individual lawsuits pending in various state and federal courts involving PPA, an ingredient formerly used in the manufacture of certain OTC cough/cold and diet products. The Company discontinued using PPA in November 2000 at the request of the FDA. These cases allege that the plaintiff suffered injury, generally some type of stroke, from ingesting PPA-containing products. Most of these suits -5- also name other manufacturers or retailers of PPA-containing products. These personal injury suits seek an unspecified amount of compensatory, exemplary and statutory damages. The Company maintains product liability insurance coverage for the claims asserted in these lawsuits. The Company believes that it has meritorious defenses to these lawsuits and intends to vigorously defend them. At this time, the Company cannot determine whether it will be named in additional PPA-related suits, the outcome of existing suits or the effect that PPA-related suits may have on its financial condition or operating results. In August 1999, the Company filed a civil antitrust lawsuit in the U.S. District Court for the Western District of Michigan against a group of vitamin raw material suppliers alleging the defendants conspired to fix the prices of vitamin raw materials sold to the Company. The relief sought includes money damages and a permanent injunction enjoining defendants from future violations of antitrust laws. The case is proceeding to trial and discovery is ongoing. The Company has entered into settlement agreements with certain defendants. The Company received settlement payments of $7,813 in fiscal 2002 and $995 in fiscal 2001, net of attorney fees and expenses that were withheld prior to the disbursement of the funds to the Company. The Company can make no prediction as to the outcome of the litigation with the remaining defendants. NOTE F - SHAREHOLDERS' EQUITY In fiscal 2002, the Company extended its common share repurchase program. The program allows for additional common share purchases of $20,000, for a total of $40,000. Purchases are made on the open market, subject to market conditions. During fiscal 2002, the Company purchased 2,533 shares for $31,923. Additionally, common stock increased $10,232 primarily due to the exercise of 890 stock options. NOTE G - PRODUCT DISCONTINUATION In the second quarter of fiscal 2001, in response to recommendations by the Food and Drug Administration (FDA), the Company voluntarily halted shipments of all products containing the ingredient Phenylpropanolamine (PPA), effective immediately. In the second quarter of fiscal 2001, the Company recorded sales returns of $14,000 with a negative impact on gross profit of $3,800. Additionally, the Company recorded a charge of $20,200 in cost of sales related to the cost of returned product, product on hand, and product disposal costs. These PPA charges reduced earnings $0.21 per share in the second quarter of fiscal 2001. NOTE H - RESTRUCTURING COSTS In the second quarter of fiscal 2002, the Company sold its logistics facility in LaVergne, Tennessee. The proceeds from the sale were $14,161. The Company recorded a restructuring charge of $2,046 in connection with the sale of this facility. The facility had previously been reflected as an asset held for sale in the consolidated financial statements of the Company. -6- NOTE I - CUSTOMER BANKRUPTCY Subsequent to the second quarter of fiscal 2002, a large customer of the Company filed for protection under Chapter 11 of the U.S. Bankruptcy Code. As a result, the Company recorded a charge of $1,900 in the second quarter of fiscal 2002. The effect on net income was approximately $1,200 or $.02 on earnings per share. The Company cannot predict the future sales to this customer or the resulting effect on net income and earnings per share. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIRD QUARTER AND YEAR-TO-DATE FISCAL YEARS 2002 AND 2001 (in thousands, except per share amounts) RESULTS OF OPERATIONS COMPARABILITY ISSUES Described below are certain events that affect the comparability of the Company's financial results in the third quarter and first nine months of the fiscal year. In the second quarter of fiscal 2001, the Company voluntarily halted shipments of all products containing the ingredient PPA in response to recommendations by the FDA. The Company recorded sales returns of $14,000 with a negative impact on gross profit of $3,800. Additionally, the Company recorded a charge of $20,200 in cost of sales related to the cost of returned product, product on hand and product disposal costs. These PPA charges reduced earnings $.21 per share in the second quarter of fiscal 2001. On June 29, 2001, the Company purchased Wrafton Laboratories Ltd. (Wrafton). Wrafton's financial results were included in the Company's consolidated financial statements beginning in the current fiscal year. On December 20, 2001, the Company sold its logistics facility located in LaVergne, Tennessee. The Company recorded a restructuring charge of $2,046. See Note H to the consolidated financial statements. In the second quarter of fiscal 2002, the Company recorded $1,900 in bad debt expense related to the bankruptcy of a large customer. See Note I to the consolidated financial statements. On January 28, 2002, the Company received $7,813, net of attorney fees and expenses, related to settlement agreements with certain defendants of a civil antitrust lawsuit. See Note E to the consolidated financial statements. THIRD QUARTER OF FISCAL YEARS 2002 AND 2001 RESULTS OF OPERATIONS The Company's net sales increased $7,593 or 4% to $198,491 during fiscal 2002, from $190,898 during fiscal 2001. The increase was primarily due to the inclusion of Wrafton in current year results, an increase in sales of existing vitamin products to existing customers and sales of new products. Gross profit increased $8,732 or 19% during fiscal 2002 compared to fiscal 2001. The increase was primarily due to increased sales, the inclusion of Wrafton in fiscal 2002, and lower obsolescence costs. -8- The gross profit percent to net sales was 27.8% in fiscal 2002 compared to 24.3% in fiscal 2001. The increase was primarily due to lower obsolescence expenses and the ability to manage pricing to offset the impact of higher quality costs. Operating expenses decreased $7,601 or 23% during fiscal 2002 compared to fiscal 2001 primarily due to unusual litigation income of $7,813. Interest and other, net increased $1,467 primarily due to interest expense of $78 in fiscal 2002 compared to interest income of $904 in fiscal 2001. The difference in interest is the result of borrowings early in fiscal 2002 versus investment of excess cash in fiscal 2001. The effective tax rate was 36.0% in fiscal 2002 compared to 33.6% in fiscal 2001. YEAR-TO-DATE FISCAL YEARS 2002 AND 2001 The Company's net sales increased $71,711 or 13% to $644,301 in fiscal 2002 from $572,590 in fiscal 2001. The increase was primarily due to recording the PPA product charge in fiscal 2001; the sale of PPA replacement products in fiscal 2002; the inclusion of Wrafton in current year results; increases in sales of new products and existing cough/cold and analgesic products. Excluding the PPA charge recorded in fiscal 2001, sales increased 10% during fiscal 2002. Gross profit increased $44,565 in fiscal 2002 compared to fiscal 2001. The increase was primarily due to the recording of the PPA product charge in fiscal 2001, which reduced gross margin $24,000 in total; increased sales in the current year and the inclusion of Wrafton in current year results. The gross profit percent to net sales was 26.0% in fiscal 2002 compared to 21.4% in fiscal 2001. Excluding the PPA product charge, the gross profit percent would have been 25.0% for fiscal 2001. Operating expenses decreased $293 in fiscal 2002 compared to fiscal 2001. Operating expenses as a percent to net sales were 14.2% in fiscal 2002 compared to 16.0% in fiscal 2001. The decrease in percent in fiscal 2002 was primarily due to unusual litigation income of $7,813. Selling and administration increased $3,161 primarily due to bad debt expense related to the bankruptcy of a large customer. The restructuring charge of $2,046 is related to the sale of the LaVergne, Tennessee logistics facility. The inclusion of Wrafton in the current year increased operating expenses. Interest and other, net increased $2,326 primarily due to interest expense of $897 in fiscal 2002 compared to interest income of $1,254 in fiscal 2001. The difference in interest is the result of borrowings early in fiscal 2002 versus investment of cash balances in fiscal 2001. The effective tax rate was 36.1% in fiscal 2002 compared to 37.0% in fiscal 2001. LIQUIDITY AND CAPITAL RESOURCES For fiscal 2002, working capital, excluding cash, increased $3,965. Cash and cash -9- equivalents increased from $11,016 to $36,674. Cash flow from operating activities was $53,002 for fiscal 2002. Cash flow was positively impacted primarily by net income of $48,916, depreciation of $17,968 and a decrease in inventory of $15,734. Cash flow was negatively impacted primarily by a decrease in accounts payable of $23,274 due to lower third quarter production levels, a decrease in income taxes of $9,976 due to the timing of tax payments partially offset by higher reported income and an increase in accounts receivable of $5,179. Capital expenditures for facilities and equipment of $17,321 during fiscal 2002 were primarily for normal equipment replacement, productivity enhancements and capacity additions. In the second quarter of fiscal 2002, the Company sold its logistics facility in LaVergne, Tennessee. The proceeds from the sale were $14,161. During fiscal 2002, the Company continued its common share repurchase program. The Company purchased 2,533 shares for $31,923 during fiscal 2002. Common stock increased $10,232 primarily due to the exercise of 890 stock options. The Company had no long-term debt at March 30, 2002 and had $175,000 available on its unsecured credit facility. Cash flows from operations and borrowings from its credit facility are expected to be sufficient to finance the known or foreseeable liquidity and capital needs of the Company. CRITICAL ACCOUNTING POLICIES Determination of certain amounts in the Company's financial statements requires the use of estimates. These estimates are based upon the Company's historical experiences combined with management's understanding of current facts and circumstances. Although the estimates are considered reasonable, actual results could differ from the estimates. Discussed below are the accounting policies considered by management to require the most judgement and to be critical in the preparation of the financial statements. Other accounting policies are included in the footnotes of the Company's annual report on Form 10-K for the year ended June 30, 2001. Allowance for Doubtful Accounts - The Company maintains an allowance for customer accounts that reduces receivables to amounts that are expected to be collected. In estimating the allowance, management considers factors such as current overall economic conditions, industry-specific economic conditions, historical and anticipated customer performance, historical experience with write-offs and the level of past-due amounts. Changes in these conditions may result in additional allowances. Inventory - The Company maintains a reserve for estimated obsolete or unmarketable inventory based on the difference between the cost of the inventory and its estimated market value. In estimating the reserve, management considers factors such as excess or slow moving inventories, product expiration dating, current and future customer demand, and market conditions. Changes in these conditions may result in additional reserves. -10- CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS Certain statements in Management's Discussion and Analysis of Results of Operations and Financial Condition and other portions of this report 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. Please see the "Cautionary Note Regarding Forward-Looking Statements" on pages 24-29 of the Company's Form 10-K for the year ended June 30, 2001 for a discussion of certain important factors that relate to forward-looking statements contained in this report. In addition, the Company's future results may be affected by the impact of events flowing from the September 11, 2001 terrorist attacks, current economic conditions in the United States, retailers' financial difficulties or cough/cold/flu trends. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risks The Company is exposed to market risks, which include changes in interest rates and changes in the foreign currency exchange rate as measured against the U.S. dollar. The Company is exposed to interest rate changes primarily as a result of its variable rate line of credit used to finance working capital when necessary and for general corporate purposes. Management believes that a fluctuation in interest rates in the near future will not have a material impact on the Company's consolidated financial statements. The Company has international operations in Mexico and the United Kingdom. These operations transact business in the local currency, thereby creating exposures to changes in exchange rates. The Company does not currently have hedging or similar foreign currency contracts. Significant currency fluctuations could adversely impact foreign revenues; however, the Company does not expect any significant changes in foreign currency exposure in the near future. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is currently defending numerous individual lawsuits pending in various state and federal courts involving PPA, an ingredient formerly used in the manufacture of certain OTC cough/cold and diet products. The Company discontinued using PPA in November 2000 at the request of the FDA. These cases allege that the plaintiff suffered injury, generally some type of stroke, from ingesting PPA-containing products. Most of these suits also name other manufacturers or retailers of PPA-containing products. These personal injury suits seek an unspecified amount of compensatory, exemplary and statutory damages. The Company maintains product liability insurance coverage for the claims asserted in these lawsuits. The Company believes that it has meritorious defenses to these lawsuits and intends to -11- vigorously defend them. At this time, the Company cannot determine whether it will be named in additional PPA-related suits, the outcome of existing suits or the effect that PPA-related suits may have on its financial condition or operating results. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Number Description -------------- ----------- 3(a) Amended and Restated Articles of Incorporation of Registrant, incorporated by reference from Amendment No. 2 to Registration Statement No. 33-43834 filed by the Registrant on September 23, 1993. 3(b) Restated Bylaws of Registrant, dated April 10, 1996, as amended, incorporated by reference from the Registrants Form 10-K filed on September 6, 2000. 4(a) Shareholders' Rights Plan, incorporated by reference from the Registrant's Form 8-K filed on April 10, 1996 (Commission File No. 0-19725). (b) Reports on Form 8-K The Company filed a report on February 1, 2002 that announced it entered into settlement agreements with certain defendants related to a civil antitrust lawsuit. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PERRIGO COMPANY ------------------------------ (Registrant) Date: April 25, 2002 By: /s/ David T. Gibbons ---------------------- ---------------------------------------- David T. Gibbons President and Chief Executive Officer Date: April 25, 2002 By: /s/ Douglas R. Schrank ---------------------- ---------------------------------------- Douglas R. Schrank Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) -13- -----END PRIVACY-ENHANCED MESSAGE-----