-----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, ICsqZtRIf90LuG136yErYpvs76FKJdpXuTiSo4bX+VAO2BoTNdu32T8ybiW0E7g7 1iwLDKsJQ14+iYTMWhbKLg== 0000950137-97-001715.txt : 19970506 0000950137-97-001715.hdr.sgml : 19970506 ACCESSION NUMBER: 0000950137-97-001715 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970505 SROS: NASD 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: 97595777 BUSINESS ADDRESS: STREET 1: 117 WATER ST CITY: ALLEGAN STATE: MI ZIP: 49010 BUSINESS PHONE: 6166738451 MAIL ADDRESS: STREET 1: 117 WATER STREET CITY: ALLEGAN STATE: MI ZIP: 49010 10-Q 1 FORM 10-Q DATED MARCH 31, 1997 1 ================================================================================ 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 31, 1997 -------------- 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.) 117 WATER STREET 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 MAY 1, 1997 --------------------- --------------------------------- WITHOUT PAR 76,579,433 SHARES ================================================================================ 2 PERRIGO COMPANY FORM 10-Q INDEX PAGE NUMBER ------ PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets--March 31, 1997 and June 30, 1996 3 Condensed consolidated statements of income--Three months and nine months ended March 31, 1997 and 1996 4 Condensed consolidated statements of cash flows--Nine months ended March 31, 1997 and 1996 5 Notes to condensed consolidated financial statements-- March 31, 1997 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 - ---------- -2- 3 PERRIGO COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, June 30, 1997 1996 --------- ---------- ASSETS (Unaudited) Current assets Cash $ 6,613 $ 176 Accounts receivable, net of allowances of $2,877 and $2,975, respectively 99,039 91,396 Inventories 162,542 156,976 Prepaid expenses and other current assets 13,060 11,025 ----------- ----------- Total current assets 281,254 259,573 Property and equipment 350,015 339,708 Less accumulated depreciation 117,849 100,716 ----------- ----------- 232,166 238,992 Cost in excess of net assets of acquired businesses, net of accumulated amortization of $11,924 and $10,340, respectively 41,377 42,961 Other 8,148 7,869 ----------- ----------- $ 562,945 $ 549,395 LIABILITIES AND SHAREHOLDERS' EQUITY =========== =========== Current liabilities Accounts payable $ 67,577 $ 56,700 Payrolls and related taxes 15,214 13,002 Accrued expenses 28,728 21,417 Income taxes 4,225 1,225 Current installments on long-term debt 300 300 ----------- ----------- Total current liabilities 116,044 92,644 Deferred income taxes 27,992 26,751 Long-term debt, less current installments 1,540 48,840 Shareholders' equity Preferred stock, without par value, 10,000 shares authorized, none issued - - Common stock, without par value, 200,000 shares authorized, 76,579 and 76,327 issued, respectively 146,257 146,056 Retained earnings 271,112 235,104 ----------- ----------- Total shareholders' equity 417,369 381,160 ----------- ----------- $ 562,945 $ 549,395 =========== =========== See accompanying notes to condensed consolidated financial statements.
-3- 4 PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended March 31, March 31, 1997 1996 1997 1996 ---- ---- ---- ---- Net sales $ 214,580 $ 196,326 $ 648,419 $ 602,464 Cost of sales 156,660 144,924 472,557 441,318 ----------- ----------- ----------- ----------- Gross profit 57,920 51,402 175,862 161,146 ----------- ----------- ----------- ----------- Operating expenses Distribution 7,354 6,846 21,485 19,097 Research and development 3,078 3,043 10,017 7,718 Selling and administrative 25,196 21,713 76,841 68,052 Restructuring costs 2,215 263 4,577 1,878 Unusual litigation costs 1,503 1,586 4,799 4,584 ----------- ----------- ----------- ----------- 39,346 33,451 117,719 101,329 ----------- ----------- ----------- ----------- Operating income 18,574 17,951 58,143 59,817 Interest expense 374 1,317 1,445 4,731 ----------- ----------- ----------- ----------- Income before income taxes 18,200 16,634 56,698 55,086 Income taxes 6,600 6,000 20,690 20,100 ----------- ----------- ----------- ----------- Net income $ 11,600 $ 10,634 $ 36,008 $ 34,986 =========== =========== =========== =========== Earnings per common share $ 0.15 $ 0.14 $ 0.47 $ 0.45 =========== =========== =========== =========== Weighted average number of common shares outstanding 77,387 77,215 77,262 77,205 =========== =========== =========== =========== See accompanying notes to condensed consolidated financial statements.
-4- 5 PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
NINE MONTHS ENDED MARCH 31, 1997 1996 ---- ---- Cash Flows From (For) Operating Activities: Net income $ 36,008 $ 34,986 Depreciation and amortization 21,698 20,361 ---------- ---------- 57,706 55,347 Accounts receivable (7,643) (5,312) Inventories (5,566) (9,277) Accounts payable 10,877 1,085 Other 11,734 3,595 ---------- ---------- Net cash from operating activities 67,108 45,438 ---------- ---------- Cash Flows From (For) Investing Activities: Additions to property and equipment (13,066) (14,460) Other (506) 35 ---------- ---------- Net cash for investing activities (13,572) (14,425) ---------- ---------- Cash Flows From (For) Financing Activities: Repayments of long-term debt (47,300) (31,300) Issuance of common stock 201 221 ---------- ---------- Net cash for financing activities (47,099) (31,079) ---------- ---------- Net Increase (Decrease) in Cash 6,437 (66) Cash, at beginning of period 176 259 ---------- ---------- Cash, at end of period $ 6,613 $ 193 ========== ========== Supplemental disclosures of cash flow information: Interest paid $ 1,367 $ 4,552 Income taxes paid $ 17,624 $ 13,731 See accompanying notes to condensed consolidated financial statements.
-5- 6 PERRIGO COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 NOTE A -- 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) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending June 30, 1997. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1996. NOTE B -- INVENTORIES The components of inventories consist of the following:
March 31, June 30, 1997 1996 ---- ---- (in thousands) Finished goods $84,617 $74,657 Work in process 48,791 57,529 Raw materials 29,134 24,790 -------- -------- $162,542 $156,976 ======== ========
Inventories are stated at the lower of cost (first-in, first-out) or market. NOTE C -- RESTRUCTURING COSTS In March 1997, the Company announced the closing of its Cumberland Freight Line (CFL) truck fleet operations effective immediately. The operations of CFL were not significant relative to the operations of the Company. Anticipated restructuring costs of $1,211 were recorded during the third quarter of fiscal 1997. For the nine months ended March 31, 1997, the condensed consolidated statement of income includes $4,577 of restructuring costs expensed as incurred related primarily to business process redesign and to the closing of CFL as noted above. In addition, $1,040 was paid for expenses accrued in a previous period, primarily related to the elimination of certain low volume products and severance costs. As of March 31, 1997, $1,767 remains in accrued liabilities. -6- 7 NOTE D -- COMMITMENTS AND CONTINGENCIES For the nine months ended March 31, 1997 the condensed consolidated statement of income includes $4,799 of unusual litigation costs related to a purported class action and other legal matters as described in the Company's annual report on Form 10-K for the year ended June 30, 1996. The Company believes the actions and claims are without merit or are covered by insurance and intends to vigorously defend against these actions. NOTE E -- NEW ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The new Statement requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected future cash flows, then the loss should be recognized in the income statement and certain disclosures regarding the impairment should be made in the financial statements. The Company's adoption of SFAS No. 121 has had no impact on the Company's financial position or results of operations. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 allows companies to continue to account for their stock option plans in accordance with APB Opinion No. 25 but encourages the adoption of a new accounting method to record compensation expense based on the estimated fair value of employee stock options. The Company will continue to account for its stock option plans in accordance with APB Opinion No. 25 and provide supplemental disclosures in its year-end financial statements as required by SFAS No. 123. No additional disclosures are required on an interim basis. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128 "Earnings Per Share." This Statement simplifies the standards for computing earnings per share (EPS) and makes them comparable to international EPS standards. The Statement requires the presentation of both "basic" and "diluted" EPS on the face of the income statement with a supplementary reconciliation of the numerators and denominators used in the calculations. The Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. Had the Statement been required to be implemented for the periods presented, the effect on EPS would have been insignificant. -7- 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996 (DOLLARS IN THOUSANDS) RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 The Company's net sales increased $18,254 or 9.3% to $214,580 for the third quarter of fiscal 1997 compared to the same period in fiscal 1996. The increase was primarily due to new product sales and to greater unit sales to existing customers of cough and cold and analgesic products. New products included Naproxen Sodium (a non-aspirin analgesic which is the active ingredient in Aleve(R)), Minoxidil (a hair growth stimulant) and pregnancy test kits. Gross profit increased $6,518 or 12.7% for the third quarter of fiscal 1997 compared to the same period in fiscal 1996. The gross profit percentage for the third quarter was 27.0% versus 26.2% for the same period in fiscal 1996. The increase in margin rate was due to increased sales of higher margin products of cough and cold, analgesics, Minoxidil and pregnancy test kits. Operating expenses increased $5,895 or 17.6% for the third quarter of fiscal 1997 compared to the same period in fiscal 1996. Operating expenses as a percentage of net sales were 18.3% for the third quarter of fiscal 1997 versus 17.0% for the third quarter of fiscal 1996. Selling and administrative expenses increased by $3,483 for the third quarter of fiscal 1997 to 11.7% of net sales from 11.1% of net sales for the same period in fiscal 1996. The increase was primarily due to higher wages and costs to support higher sales. Restructuring costs increased by $1,952 for the third quarter of fiscal 1997 to 1.0% of net sales from .1% of net sales for the same period in fiscal 1996, primarily due to the closing of CFL, and unusual litigation costs were $1,503 for the third quarter of fiscal 1997 versus $1,586 for the same period of fiscal 1996. See Notes C and D to the Condensed Consolidated Financial Statements. Operating expenses without restructuring and unusual litigation costs increased $4,026 or 12.7% for the third quarter of fiscal 1997 compared to the same period in fiscal 1996. Interest expense decreased $943 for the third quarter of fiscal 1997 compared to the same period in fiscal 1996 due to lower borrowing levels and slightly lower interest rates. The effective income tax rate was 36.3% for the third quarter of fiscal 1997 versus 36.1% for the same period in fiscal 1996. NINE MONTHS ENDED MARCH 31, 1997 AND 1996 The Company's net sales increased $45,955 or 7.6% to $648,419 for the first nine months of fiscal 1997 compared to the same period in fiscal 1996. The increase was primarily due to greater unit sales to existing customers of cough and cold, vitamin and analgesic products and to sales of new products as discussed for the quarter, partially offset by sales of personal care products which decreased in total due to price increases initiated in fiscal 1996. -8- 9 Gross profit increased $14,716 or 9.1% for the first nine months of fiscal 1997 compared to the same period of fiscal 1996. The gross profit percentage for the first nine months was 27.1% versus 26.7% for the same period in fiscal 1996. The increase in margin rate was due to increased sales of higher margin products of cough and cold, analgesics, Minoxidil and pregnancy test kits. Operating expenses increased $16,390 or 16.2% for the first nine months of fiscal 1997 compared to the same period in fiscal 1996. Operating expenses as a percentage of net sales were 18.2% for the first nine months of fiscal 1997 versus 16.8% for the same period in fiscal 1996. Research and development costs increased $2,299 to 1.5% of net sales for the first nine months of fiscal 1997 compared to 1.3% of net sales for the same period in fiscal 1996, primarily due to expenses related to new product development for which an approval from the FDA through its ANDA process is required. Selling and administrative expenses increased $8,789 to 11.9% of net sales for the first nine months of fiscal 1997 from 11.3% of net sales for the same period in fiscal 1996. The increase was primarily due to higher wages and costs to support higher sales. Restructuring costs increased $2,699 to 0.7% of net sales for the first nine months of fiscal 1997 from 0.3% of net sales for the same period in fiscal 1996, in part due to the closing of CFL, and unusual litigation costs were $4,799 for the first nine months of fiscal 1997 versus $4,584 for the same period in fiscal 1996. See Notes C and D to the Condensed Consolidated Financial Statements. Interest expense decreased $3,286 to $1,445 for the first nine months of fiscal 1997 compared to the same period in fiscal 1996 due to lower borrowing levels and slightly lower interest rates. The effective income tax rate was 36.5% for the first nine months of both fiscal 1997 and fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of fiscal 1997 working capital decreased $1,719 and cash flow generated by operations exceeded cash flow used by operations by $67,108. Accounts receivable increased $7,643 due primarily to increased sales, inventories increased $5,566 in order to support the increased sales volume and accounts payable increased $10,877 due to the timing of materials and component purchases related to production increases. Long-term debt decreased by $47,300 during the first nine months of fiscal 1997 and as a result the Company's line of credit was fully paid down. The decrease in debt was primarily due to close monitoring and management of working capital and capital expenditures. The Company's capital expenditures for facilities and equipment were $13,066 for the nine months ended March 31, 1997. In order to support ongoing growth in sales, the Company is investing in a number of projects to increase its manufacturing and distribution capabilities. The Company anticipates capital expenditures of approximately $20,000 during fiscal year 1997, principally for additional manufacturing and packaging equipment, and for an integrated computer software package. The Company plans to finance these capital expenditures with cash flow from operations and, if required, additional borrowings on its existing lines of credit. -9- 10 SAFE HARBOR PROVISIONS In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, please see pages 25-28 of Perrigo Company's Form 10-K for the year ended June 30, 1996, for cautionary statements and discussion of certain important factors as they relate to forward looking statements. -10- 11 PART II. OTHER INFORMATION Item. 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Number Description -------------- ----------- 27 Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the three months ended March 31, 1997. -11- 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: May 5, 1997 /s/ Michael J. Jandernoa -------------- ---------------------------------- Michael J. Jandernoa Chairman of the Board and Chief Executive Officer Date: May 5, 1997 /s/ Steven M. Neil -------------- ---------------------------------- Steven M. Neil Vice President--Finance, Treasurer and Chief Financial Officer -12- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 6,613 0 99,039 2,877 162,542 281,254 350,015 117,849 562,945 116,044 0 0 146,257 0 271,112 562,945 648,419 648,419 472,557 472,557 0 304 1,445 56,698 20,690 36,008 0 0 0 36,008 .47 .47
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