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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: DECEMBER 25, 2004
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)
(269) 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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 JANUARY 25, 2005
--------------------- ----------------
WITHOUT PAR 71,562,269
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PERRIGO COMPANY
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated statements of income -- For the quarters
and year-to-date ended December 25, 2004 and December 27, 2003 1
Condensed consolidated balance sheets -- December 25, 2004,
June 26, 2004 and December 27, 2003 2
Condensed consolidated statements of cash flows -- For the year-to-date
ended December 25, 2004 and December 27, 2003 3
Notes to condensed consolidated financial statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risks 18
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits 19
SIGNATURES 21
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Second Quarter Year-To-Date
--------------------- ---------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net sales $ 251,748 $ 247,377 $ 479,467 $ 459,216
Cost of sales 184,692 171,198 347,698 323,017
--------- --------- --------- ---------
Gross profit 67,056 76,179 131,769 136,199
Operating expenses
Distribution 3,905 3,833 8,098 7,355
Research and development 9,286 6,186 15,640 11,899
Selling and administration 29,716 27,390 57,256 52,830
--------- --------- --------- ---------
Total 42,907 37,409 80,994 72,084
Operating income 24,149 38,770 50,775 64,115
Interest and other, net (604) (504) (1,444) (953)
--------- --------- --------- ---------
Income before income taxes 24,753 39,274 52,219 65,068
Income tax expense 8,915 1,039 18,803 10,325
--------- --------- --------- ---------
Net income $ 15,838 $ 38,235 $ 33,416 $ 54,743
========= ========= ========= =========
Earnings per share
Basic $ 0.22 $ 0.55 $ 0.47 $ 0.78
Diluted $ 0.22 $ 0.53 $ 0.46 $ 0.76
Weighted average shares outstanding
Basic 71,206 69,967 71,111 70,006
Diluted 73,285 71,500 73,166 71,568
Dividends declared per share $ 0.040 $ 0.035 $ 0.075 $ 0.060
See accompanying notes to condensed consolidated financial statements
-1-
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 25, June 26, December 27,
2004 2004 2003
------------ --------- ------------
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $ 175,702 $ 161,252 $ 110,809
Investment securities 3,533 10,448 -
Accounts receivable 110,931 86,040 123,832
Inventories 166,615 174,253 142,626
Current deferred income taxes 32,242 29,877 30,455
Prepaid expenses and other current assets 11,271 11,359 9,358
------------ --------- ------------
Total current assets 500,294 473,229 417,080
Property and equipment 468,718 462,185 459,397
Less accumulated depreciation 248,140 234,544 233,706
------------ --------- ------------
220,578 227,641 225,691
Goodwill 35,919 35,919 35,919
Non-current deferred income taxes 7,899 8,137 6,976
Other non-current assets 21,726 14,168 21,579
------------ --------- ------------
$ 786,416 $ 759,094 $ 707,245
============ ========= ============
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 83,299 $ 88,858 $ 81,487
Notes payable 9,758 9,528 8,109
Payroll and related taxes 23,749 41,387 28,337
Accrued customer programs 15,365 13,212 14,160
Accrued liabilities 32,329 30,477 32,781
Accrued income taxes 6,705 - 6,068
Current deferred income taxes 3,079 4,024 2,975
------------ --------- ------------
Total current liabilities 174,284 187,486 173,917
Non-current deferred income taxes 29,631 29,606 26,060
Other non-current liabilities 7,499 5,770 5,128
Shareholders' equity
Preferred stock, without par value, 10,000 shares authorized - - -
Common stock, without par value, 200,000 shares authorized 113,912 104,160 92,404
Unearned compensation (1,209) (514) (608)
Accumulated other comprehensive income 4,523 2,892 1,540
Retained earnings 457,776 429,694 408,804
------------ --------- ------------
Total shareholders' equity 575,002 536,232 502,140
------------ --------- ------------
$ 786,416 $ 759,094 $ 707,245
============ ========= ============
Supplemental Disclosures of Balance Sheet Information
Allowance for doubtful accounts $ 7,934 $ 8,296 $ 7,623
Allowance for inventory $ 23,846 $ 22,888 $ 22,124
Working capital $ 326,010 $ 285,743 $ 243,163
Preferred stock, shares issued - - -
Common stock, shares issued 71,555 70,882 70,076
See accompanying notes to condensed consolidated financial statements
-2-
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Year-To-Date
---------------------
2005 2004
--------- ---------
Cash Flows From Operating Activities
Net income $ 33,416 $ 54,743
Adjustments to derive cash flows
Depreciation and amortization 15,514 14,367
Share-based compensation 2,827 2,609
Deferred income taxes (2,967) (683)
Changes in operating assets and liabilities, net of
a purchase of assets and a business acquisition
Accounts receivable (24,354) (30,761)
Inventories 8,139 25,741
Accounts payable (5,237) 3,246
Payroll and related taxes (17,621) (12,189)
Accrued customer programs 2,153 3,431
Accrued liabilities 1,944 4,079
Accrued income taxes 6,702 500
Other 938 (6,542)
--------- ---------
Net cash from operating activities 21,454 58,541
--------- ---------
Cash Flows For Investing Activities
Additions to property and equipment (7,564) (13,535)
Acquisition of assets or business (5,562) (12,061)
Issuance of note receivable - (10,000)
Investment in equity subsidiaries - (2,000)
Purchase of securities (1,000) -
Proceeds from sales of securities 7,630 -
Other (2,478) -
--------- ---------
Net cash for investing activities (8,974) (37,596)
--------- ---------
Cash Flows From (For) Financing Activities
Borrowings (repayments) of short-term debt, net 395 (765)
Tax benefit of stock transactions 821 355
Issuance of common stock 5,161 2,390
Repurchase of common stock (122) (1,940)
Cash dividends (5,334) (4,202)
--------- ---------
Net cash from (for) financing activities 921 (4,162)
--------- ---------
Net Increase in Cash and Cash Equivalents 13,401 16,783
Cash and cash equivalents, at beginning of period 161,252 93,827
Effect of exchange rate changes on cash 1,049 199
--------- ---------
Cash and cash equivalents, at end of period $ 175,702 $ 110,809
========= =========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Interest $ 220 $ 213
Income taxes $ 11,941 $ 9,539
Income taxes refunded $ 4,066 $ -
See accompanying notes to condensed consolidated financial statements.
-3-
PERRIGO COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 2004
(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
years to conform to the current year presentation.
Operating results for the quarter and year-to-date ended December 25, 2004, are
not necessarily indicative of the results that may be expected for a full year.
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 26, 2004.
Significant Events
In November 2004, the Company and Agis Industries (1983) Ltd., an Israeli public
company, announced that they had signed a definitive merger agreement to create
a diversified healthcare company. The offer represents a total transaction value
of $818,000, of which $409,000 is expected to be in cash. Upon completion of the
transaction, Perrigo's stockholders will own approximately 77% of the combined
company and Agis' stockholders will own approximately 23%. The merger is
expected to be completed in March 2005.
In November 2004, the Company initiated a retail-level recall of all lots of
loratadine syrup, a liquid antihistamine indicated for the relief of symptoms
due to hay fever or other upper respiratory allergies. The Company made the
decision to recall all product from the retailer and wholesaler channels due to
a detected difference in its stability profile. The recall is not safety related
and there have been no reports of injury or illness related to the use of this
product. The value of the Company's on-hand inventories and the cost of return
and disposal is estimated to be $8,300, which reduced earnings $0.07 per share
for the second quarter ended December 25, 2004. In addition, the impact of not
having the product available for sale may reduce earnings up to $0.02 per share
in the second half of fiscal 2005.
In August 2004, the Company entered into a purchase agreement to acquire certain
assets from a manufacturer of foot care products for $5,562.
In January 2004, the Company was notified by the Internal Revenue Service that
it had concluded the routine Federal tax examination of tax years 1998, 1999 and
2000. As a result, the Company recorded a one-time income tax benefit of $13,100
in the second quarter of
-4-
fiscal 2004, reducing its income tax accrual associated with these audits. The
Company believes it has appropriately accrued for probable Federal income tax
exposures subsequent to 2000.
In December 2003, the Company acquired Peter Black Pharmaceuticals, Ltd. (Peter
Black) for $12,061 in cash. Peter Black, located in the United Kingdom, was the
largest manufacturer of store brand vitamin and nutritional supplement products
for grocery stores, pharmacies and contract customers in the United Kingdom. The
assets and liabilities, which were not considered significant to the Company,
were included in the Company's consolidated balance sheet at December 27, 2003.
No goodwill was recorded as a result of the acquisition. Results of operations
were included beginning in the third quarter of fiscal 2004.
New Accounting Pronouncements
In May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position (FSP) 106-2, "Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003" (Act).
The Act entitles employers who provide certain prescription drug benefits for
retirees to receive a federal subsidy beginning in calendar 2006, thereby
creating the potential for significant benefit cost savings. FSP 106-2 requires
companies to record the amount expected to be received under the Act as an
actuarial gain, to the extent the related postretirement medical plan's total
unrecognized actuarial gains or losses exceed certain thresholds, to be
amortized into income over time. FSP 106-2 was effective beginning the first
quarter of fiscal 2005. The Company is a sponsor of a postretirement health care
plan (plan) that provides prescription drug benefits. As the subsidy is expected
to be passed on to the retirees through a reduction in premiums, the Company
does not anticipate a material impact on its financial statements or the plan.
Accordingly, any effects of the Act will be incorporated in the next measurement
of plan assets and obligations.
In October 2004, the FASB issued FSP 109-1, "Application of FASB Statement 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004", effective upon
issuance. The FSP provides guidance on the application of FASB Statement 109,
"Accounting for Income Taxes", to the provision within the American Jobs
Creation Act of 2004 that provides a tax deduction on qualified production
activities. According to FSP 109-1, the deduction should be accounted for as a
special deduction in accordance with Statement 109. The Company believes that
there will be little impact in fiscal 2005 and is reviewing the potential impact
of the deduction for fiscal 2006.
In October 2004, the FASB issued FSP 109-2, "Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004", effective upon issuance. The American Jobs Creation Act
of 2004 provides for a special one-time tax deduction of 85% on certain foreign
earnings that are repatriated. The Company believes that the deduction will have
no impact on fiscal 2005 and 2006.
In November 2004, the FASB issued Statement of Financial Accounting Standards
("SFAS") 151, "Inventory Costs - An amendment of ARB No. 43, Chapter 4". SFAS
151 clarifies that abnormal amounts of idle facility expense, freight, handling
costs and spoilage should be expensed as incurred and not included in overhead.
Further, SFAS 151 requires that
-5-
allocation of fixed production overheads to conversion costs should be based on
normal capacity of the production facilities. The provisions in SFAS 151 are
effective for inventory costs incurred during fiscal years beginning after June
15, 2005 and must be applied prospectively. The Company believes that its
current accounting policies closely align to the new rules and the adoption of
this statement will not have a material impact on the Company's consolidated
financial position or results of operations.
In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment", to expand
and clarify SFAS 123, "Accounting for Stock-Based Compensation," in several
areas. SFAS 123(R) requires companies to measure the cost of employee services
received in exchange for an award of an equity instrument based on the
grant-date fair value of the award. The cost is recognized over the requisite
service period (usually the vesting period) for the estimated number of
instruments where service is expected to be rendered. SFAS 123(R) is effective
beginning in the first quarter of fiscal 2006. Since the Company began expensing
stock-based compensation using the fair value based method of accounting as
permitted under SFAS 123 in December 2002, the Company does not expect the
consolidated financial statements or results of operations to be materially
impacted by SFAS 123(R).
In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets, an
amendment of APB Opinion 29". SFAS 153 addresses the measurement of exchanges of
nonmonetary assets. It eliminates the exception from fair value accounting for
nonmonetary exchanges of similar productive assets and replaces it with an
exception for exchanges that do not have commercial substance. SFAS 153
specifies that a nonmonetary exchange has commercial substance if the future
cash flows of an entity are expected to change significantly as a result of the
exchange. This statement is effective beginning in the first quarter of fiscal
2006 and is not expected to have a significant impact on the Company's
consolidated financial statements.
NOTE B - EARNINGS PER SHARE
A reconciliation of the numerators and denominators used in the basic and
diluted earnings per share (EPS) calculation follows:
Second Quarter Year-to-Date
-------------------- -------------------
2005 2004 2005 2004
------- ------- ------- -------
Numerator
Net income used for both basic and diluted EPS $15,838 $38,235 $33,416 $54,743
======= ======= ======= =======
Denominator
Weighted average shares outstanding for basic EPS 71,206 69,967 71,111 70,006
Dilutive effect of shared-based awards 2,079 1,533 2,055 1,562
------- ------- ------- -------
Weighted average shares outstanding for diluted EPS 73,285 71,500 73,166 71,568
======= ======= ======= =======
Share-based awards outstanding that are anti-dilutive were 958 and 2,182 for
year-to-date fiscal 2005 and 2004, respectively. These share-based awards are
excluded from the diluted EPS calculation.
-6-
NOTE C - INVENTORIES
Inventories are summarized as follows:
December 25, June 26, December 27,
2004 2004 2003
------------ -------- ------------
Finished goods $ 60,581 $ 71,875 $ 55,297
Work in process 58,572 58,784 48,538
Raw materials 47,462 43,594 38,791
-------- -------- --------
$166,615 $174,253 $142,626
======== ======== ========
The Company maintains an allowance for estimated obsolete or unmarketable
inventory based on the difference between the cost of inventory and its
estimated market value. The inventory balances stated above are net of an
inventory allowance of $23,846 at December 25, 2004, $22,888 at June 26, 2004
and $22,124 at December 27, 2003.
NOTE D - POSTRETIREMENT MEDICAL BENEFITS
The Company has an unfunded postretirement plan (plan) that provides health
benefits to eligible retired employees and their dependents. The cost of
postretirement health benefits is accrued by the Company over the service lives
of the employees based on actuarial calculations for the plan. Effective January
1, 2004, the plan was modified to limit the amount of benefits the Company
provides to retirees each year, adjusted annually for inflation.
Second Quarter Year-to-Date
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Components of expense as provided by the Company's actuary:
Service cost $ 103 $ 170 $ 206 $ 339
Interest cost 56 76 112 153
Amortization of prior year service cost (111) (65) (223) (130)
Amortization of unrecognized transition
obligation - 6 - 13
Amortization of unrecognized net actuarial
loss 34 57 69 113
----- ----- ----- -----
Net expense $ 82 $ 244 $ 164 $ 488
===== ===== ===== =====
Retirement benefit claims paid for the first half of fiscal 2005 are $202 and
are expected to be approximately $400 for fiscal 2005.
NOTE E - SHAREHOLDERS' EQUITY
The Company has a common stock repurchase program. Purchases are made on the
open market, subject to market conditions, and are funded by cash from
operations. All common stock repurchased is retired upon purchase. The remaining
expenditure approved by the Board of Directors for the repurchase of additional
shares is $20,000. This repurchase program was announced on October 29, 2003 and
will expire on April 28, 2005. The Company repurchased 7 shares of common stock
from a private party for $122 on August 12,
-7-
2004. The Company did not repurchase any shares in the second quarter of fiscal
2005. In the second quarter of 2004, the Company repurchased 121 shares of
common stock for $1,597. For year-to-date 2004, the Company repurchased 146
shares of common stock for $1,940.
NOTE F - 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:
Second Quarter Year-to-Date
------------------- -------------------
2005 2004 2005 2004
------- ------- ------- -------
Net income $15,838 $38,235 $33,416 $54,743
Other comprehensive income
Foreign currency translation adjustments 1,706 1,353 1,631 258
------- ------- ------- -------
Comprehensive income $17,544 $39,588 $35,047 $55,001
======= ======= ======= =======
NOTE G - COMMITMENTS AND CONTINGENCIES
The Company is not a party to any litigation, other than routine litigation
incidental to its business except for the litigation described below. The
Company believes that none of the routine litigation, individually or in the
aggregate, will be material to the business of the Company.
In August 2004, the Company agreed to settle with the United States Federal
Trade Commission (FTC) which had been investigating a 1998 agreement between
Alpharma, Inc. and the Company related to a children's ibuprofen suspension
product. The agreement between Alpharma, Inc. and the Company is no longer in
effect. The consent order included payment of $4,750 to resolve all claims by
the FTC and state governments as well as certain restrictions on future
contractual agreements of this nature. The Company is involved in related
proceedings with private litigants. These restrictions and proceedings are not
expected to have a material impact on the Company's future results of
operations. The $4,750 charge was recorded in the fourth quarter of fiscal 2004
and paid in the first quarter of fiscal 2005.
The Company is currently defending numerous individual lawsuits pending in
various state and federal courts involving phenylpropanolamine (PPA), an
ingredient used in the manufacture of certain OTC cough/cold and diet products.
The Company discontinued using PPA in the United States in November 2000 at the
request of the United States Food and Drug Administration (FDA). These cases
allege that the plaintiff suffered injury, generally some type of stroke, from
ingesting PPA-containing products. Many 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 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.
-8-
Guarantees of debt obligations are primarily issued to support borrowing
arrangements entered into by two of the Company's foreign subsidiaries. The
Company has guarantees of approximately $10,563 as of December 25, 2004.
Although this amount represents the maximum exposure to loss, the Company
believes the actual risk of loss is insignificant. Of this amount, $9,758 was
recorded in the financial statements as notes payable as of December 25, 2004.
NOTE H - INCOME TAX
In January 2004, the Company was notified by the Internal Revenue Service that
it had concluded the routine Federal tax examination of tax years 1998, 1999 and
2000. As a result, the Company recorded a one-time income tax benefit of $13,100
in the second quarter of fiscal 2004, reducing its income tax accrual associated
with these audits. The Company believes it has appropriately accrued for
probable Federal income tax exposures subsequent to 2000.
NOTE I - SEGMENT INFORMATION
The Company has four reportable segments: Consumer Healthcare, Pharmaceuticals,
UK Operations and Mexico Operations. Consumer Healthcare includes the U.S.
operations supporting the sale of OTC (over-the-counter) pharmaceutical and
nutritional products. Pharmaceuticals includes the development and sale of
prescription generic drug products. UK Operations support the sale of OTC
pharmaceutical and nutritional products in the United Kingdom. Mexico Operations
support the sale of OTC and prescription drug products for retail, wholesale,
and governmental customers in Mexico.
Consumer Pharma- UK Mexico
Healthcare ceuticals Operations Operations Total
---------- --------- ---------- ---------- --------
Second Quarter 2005
Net sales $218,846 $ 164 $ 24,499 $ 8,239 $251,748
Operating income (loss) $ 23,159 (2,350) $ 1,653 $ 1,687 $ 24,149
Operating income % 10.6% - 6.7% 20.5% 9.6%
Second Quarter 2004
Net sales $225,071 - $ 14,965 $ 7,341 $247,377
Operating income (loss) $ 37,867 $ (1,078) $ 900 $ 1,081 $ 38,770
Operating income % 16.8% - 6.0% 14.7% 15.7%
Year-to-Date 2005
Net sales $418,381 $ 164 $ 47,717 $ 13,205 $479,467
Operating income (loss) $ 50,991 $ (3,649) $ 1,862 $ 1,571 $ 50,775
Operating income % 12.2% - 3.9% 11.9% 10.6%
Year-to-Date 2004
Net sales $417,830 - $ 27,628 $ 13,758 $459,216
Operating income (loss) $ 62,767 $ (1,357) $ 1,334 $ 1,371 $ 64,115
Operating income % 15.0% - 4.8% 10.0% 14.0%
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER FISCAL YEARS 2005 AND 2004
(in thousands, except per share amounts)
RESULTS OF OPERATIONS
Segments
The Company has four reportable segments: Consumer Healthcare, Pharmaceuticals,
UK Operations and Mexico Operations. Consumer Healthcare includes the U.S.
operations supporting the sale of OTC (over-the-counter) pharmaceutical and
nutritional products. Pharmaceuticals includes the development and sale of
prescription generic drug products. UK Operations support the sale of OTC
pharmaceutical and nutritional products in the United Kingdom. Mexico Operations
support the sale of OTC and prescription drug products for retail, wholesale and
governmental customers in Mexico.
Significant Events
In November 2004, the Company and Agis Industries (1983) Ltd., an Israeli public
company, announced that they had signed a definitive merger agreement to create
a diversified healthcare company. The offer represents a total transaction value
of $818,000, of which $409,000 is expected to be in cash. Upon completion of the
transaction, Perrigo's stockholders will own approximately 77% of the combined
company and Agis' stockholders will own approximately 23%. The merger is
expected to be completed in March 2005.
In November 2004, the Company initiated a retail-level recall of all lots of
loratadine syrup, a liquid antihistamine indicated for the relief of symptoms
due to hay fever or other upper respiratory allergies. The Company made the
decision to recall all product from the retailer and wholesaler channels due to
a detected difference in its stability profile. The recall is not safety related
and there have been no reports of injury or illness related to the use of this
product. The value of the Company's on-hand inventories and the cost of return
and disposal is estimated to be $8,300, which reduced earnings $0.07 per share
for the second quarter ended December 25, 2004. In addition, the impact of not
having the product available for sale may reduce earnings up to $0.02 per share
in the second half of fiscal 2005.
In August 2004, the Company entered into a purchase agreement to acquire certain
assets from a manufacturer of foot care products for $5,562.
In January 2004, the Company was notified by the Internal Revenue Service that
it had concluded the routine Federal tax examination of tax years 1998, 1999 and
2000. As a result, the Company recorded a one-time income tax benefit of $13,100
in the second quarter of fiscal 2004, reducing its income tax accrual associated
with these audits. The Company believes it has appropriately accrued for
probable Federal income tax exposures subsequent to 2000.
In December 2003, the Company acquired Peter Black Pharmaceuticals, Ltd. (Peter
Black) for $12,061 in cash. Peter Black, located in the United Kingdom, was the
largest manufacturer of store brand vitamin and nutritional supplement products
for grocery stores, pharmacies and
-10-
contract customers in the United Kingdom. The assets and liabilities, which were
not considered significant to the Company, were included in the Company's
consolidated balance sheet at December 27, 2003. No goodwill was recorded as a
result of the acquisition. Results of operations were included beginning in the
third quarter of fiscal 2004.
Seasonality
The Company's sales of OTC pharmaceutical and nutritional products are subject
to the seasonal demands for cough, cold, analgesic and allergy products. Second
quarter and year-to-date results for fiscal 2005 reflect the lower than
anticipated sales of cough, cold and analgesic products. The weak demand for
these products was the result of the lowest incidences of colds and flu for a
December quarter on record, 30% below last year when a severe season peaked in
the second quarter. Accordingly, operating results for the quarter and
year-to-date ended December 25, 2004 are not necessarily indicative of the
results that may be expected for a full year.
CONSUMER HEALTHCARE
Second Quarter Year-to-Date
---------------------- ----------------------
2005 2004 2005 2004
-------- -------- -------- --------
Net sales $218,846 $225,071 $418,381 $417,830
Gross profit $ 59,599 $ 71,265 $120,050 $127,738
Gross profit % 27.2% 31.7% 28.7% 30.6%
Operating expenses $ 36,439 $ 33,398 $ 69,058 $ 64,971
Operating expenses % 16.7% 14.8% 16.5% 15.5%
Operating income $ 23,159 $ 37,867 $ 50,991 $ 62,767
Operating income % 10.6% 16.8% 12.2% 15.0%
Sales
Second quarter net sales for fiscal 2005 decreased 3% or $6,225 compared to
fiscal 2004, primarily due to the weak cough, cold and flu season as compared to
fiscal 2004 and the estimated sales returns of $6,300 related to the recall of
loratadine syrup. The decrease was partially offset by strong sales of existing
vitamin products.
Year-to-date net sales for fiscal 2005 increased $551 compared to fiscal 2004,
primarily due to strong sales of existing vitamin products and new feminine
hygiene products. The increase was offset by the estimated sales returns of
$6,300 related to the recall of loratadine syrup; a decline in sales of starch
blocker product introduced in the first quarter of fiscal 2004; the weak cough,
cold, and flu season and a decrease in sales of antacid products.
Gross Profit
Second quarter gross profit for fiscal 2005 decreased 16% or $11,666 compared to
fiscal 2004. The decrease in gross profit was primarily due to estimated sales
returns and costs of disposal for the loratadine syrup recall of $8,300 and
fixed costs related to low production levels. The decrease in the gross profit
percentage was approximately split evenly between
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costs associated with the product recall and lower production volumes.
Year-to-date gross profit for fiscal 2005 decreased 6% or $7,688 compared to
fiscal 2004. The decrease in gross profit was primarily due to estimated sales
returns and costs of disposal for the loratadine syrup recall of $8,300 and
fixed costs related to low production levels. The decrease in the gross profit
percentage was approximately split evenly between costs associated with the
product recall and lower production volumes.
Operating Expenses
Second quarter operating expenses for fiscal 2005 increased 9% or $3,041
compared to fiscal 2004 primarily due to an increase in research and development
costs of $2,244 and an increase in marketing costs. The increase was partially
offset by a reduction in the allowance for product liability claims.
Year-to-date operating expenses for fiscal 2005 increased 6% or $4,087 compared
to fiscal 2004 primarily due to an increase in research and development costs of
$2,241 and an increase in marketing costs. The increase was partially offset by
a reduction in the allowance for product liability claims.
Operating Income
Second quarter operating income for fiscal 2005 decreased 39% or $14,708
compared to fiscal 2004. The decrease in operating income was primarily a result
of the reduction in sales due to the weak cough, cold and flu season, estimated
sales returns and expenses related to the loratadine syrup recall of $8,300 and
an increase in operating expenses.
Year-to-date operating income for fiscal 2005 decreased by 19% or $11,776
compared to fiscal 2004. The decrease in operating income was primarily a result
of the reduction in sales due to the weak cough, cold and flu season, estimated
sales returns and expenses related to the loratadine syrup recall of $8,300 and
an increase in operating expenses.
PHARMACEUTICALS
Second Quarter Year-to-Date
-------------------- --------------------
2005 2004 2005 2004
------- ------- ------- -------
Net sales $ 164 - $ 164 -
Gross profit $ (82) - $ (82) -
Operating expenses $ 2,269 $ 1,078 $ 3,568 $ 1,357
Operating income (loss) $(2,350) $(1,078) $(3,649) $(1,357)
Operating expenses consist primarily of research and development costs for
generic prescription drug products.
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UK OPERATIONS
Second Quarter Year-to-Date
-------------------- --------------------
2005 2004 2005 2004
------- ------- ------- -------
Net sales $24,499 $14,965 $47,717 $27,628
Gross profit $ 4,175 $ 2,252 $ 6,969 $ 3,839
Gross profit % 17.0% 15.0% 14.6% 13.9%
Operating expenses $ 2,522 $ 1,352 $ 5,107 $ 2,505
Operating expenses % 10.3% 9.0% 10.7% 9.1%
Operating income $ 1,653 $ 900 $ 1,862 $ 1,334
Operating income % 6.7% 6.0% 3.9% 4.8%
Net Sales
Second quarter net sales for fiscal 2005 increased 64% or $9,534 compared to
fiscal 2004. The majority of the increase was due to sales of nutritional
products of approximately $7,600 related to the acquisition of Peter Black in
December 2003. The remaining increase was primarily due to exchange rate
fluctuations.
Year-to-date net sales for fiscal 2005 increased 73% or $20,089 compared to
fiscal 2004. The majority of the increase was due to sales of nutritional
products of approximately $16,200 related to the acquisition of Peter Black in
December 2003. The remaining increase was primarily due to exchange rate
fluctuations.
Gross Profit
Second quarter gross profit for fiscal 2005 increased 85% or $1,923 compared to
fiscal 2004 primarily due to the acquisition of Peter Black and exchange rate
fluctuations. The gross profit percent increased primarily due to increased
store brand sales at Wrafton resulting in favorable margins.
Year-to-date gross profit increased 82% during fiscal 2005 or $3,130 compared to
fiscal 2004 primarily due to the acquisition of Peter Black and exchange rate
fluctuations.
Operating Expenses
Second quarter operating expenses for fiscal 2005 increased 87% or $1,170
compared to fiscal 2004 primarily due to the acquisition of Peter Black and
exchange rate fluctuations.
Year-to-date operating expenses for fiscal 2005 increased 104% or $2,602
compared to 2004 primarily due to the acquisition of Peter Black and exchange
rate fluctuations.
Operating Income
Second quarter operating income for fiscal 2005 increased 84% or $753.
Year-to-date operating income for fiscal 2005 increased 40% or $528. The merger
integration plan for the Wrafton and Peter Black businesses, which is targeted
to reduce on-going operating costs and
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overall breakeven levels, is expected to result in continued improvement in
operating income.
MEXICO OPERATIONS
Second Quarter Year-to-Date
-------------------- --------------------
2005 2004 2005 2004
------- ------- ------- -------
Net sales $ 8,239 $ 7,341 $13,205 $13,758
Gross profit $ 3,364 $ 2,662 $ 4,832 $ 4,622
Gross profit % 40.8% 36.3% 36.6% 33.6%
Operating expenses $ 1,677 $ 1,581 $ 3,261 $ 3,251
Operating expenses % 20.4% 21.5% 24.7% 23.6%
Operating income $ 1,687 $ 1,081 $ 1,571 $ 1,371
Operating income % 20.5% 14.7% 11.9% 10.0%
Net Sales
Second quarter net sales for fiscal 2005 increased 12% or $898 compared to
fiscal 2004, primarily due to increased sales in the store brand market
partially offset by decreased government sales and exchange rate fluctuations.
Year-to-date net sales for fiscal 2005 decreased 4% or $553 compared to fiscal
2004, primarily due to decreased government sales and exchange rate fluctuations
partially offset by increased sales in the store brand market.
Gross Profit
Second quarter gross profit for fiscal 2005 increased 26% or $702 compared to
fiscal 2004, primarily due to higher margins on products in the mix of products
sold. The increase was partially offset by exchange rate fluctuations.
Year-to-date gross profit increased 5% or $210 during fiscal 2005 compared to
fiscal 2004, primarily due to higher margins on products in the mix of products
sold. The increase was partially offset by exchange rate fluctuations.
Operating Expenses
Second quarter operating expenses during fiscal 2005 increased 6% or $96
compared to fiscal 2004, primarily due to increased research and development
costs and selling expenses related to new projects offset by decreased
administrative expenses.
Year-to-date operating expenses increased $10 during fiscal 2005 compared to
fiscal 2004, primarily due to increased research and development costs and
selling expenses related to new projects offset by decreased administrative
expenses.
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Operating Income
Second quarter operating income increased 56% or $606. Year-to-date operating
income increased 15% or $200. The Mexican business is refocusing its business
model and has become more dependent on retail store brand sales which grew 49%
for the year and now represents approximately 44% of total sales for the
business.
INTEREST AND OTHER (CONSOLIDATED)
Second quarter interest income was $594 for fiscal 2005 compared to interest
income of $237 for fiscal 2004. Other income was $10 for fiscal 2005 compared to
$267 for fiscal 2004.
Year-to-date interest income was $951 for fiscal 2005 compared to interest
income of $332 for fiscal 2004. Other income was $493 for fiscal 2005 compared
to $621 for fiscal 2004.
The increase in interest income was due to the higher level of invested cash
balances in fiscal 2005 compared to fiscal 2004.
INCOME TAXES (CONSOLIDATED)
For the second quarter of fiscal 2005, the effective tax rate was 36.0% compared
to 2.6% for fiscal 2004.
For year-to-date 2005, the effective tax rate was 36.0% compared to 15.9% for
fiscal 2004.
In January 2004, the Company was notified by the Internal Revenue Service that
it had concluded the routine Federal tax examination of tax years 1998, 1999 and
2000. As a result, the Company recorded a one-time income tax benefit of $13,100
in the second quarter of fiscal 2004, reducing its income tax accrual associated
with these audits. The Company believes it has appropriately accrued for
probable Federal income tax exposures subsequent to 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and investment securities increased $68,426 to $179,235
at December 25, 2004 from $110,809 at December 27, 2003. Working capital,
including cash, increased $82,847 to $326,010 at December 25, 2004 from $243,163
at December 27, 2003. The Company's priorities for use of the cash and
investment securities include support of seasonal working capital demands, the
acquisition of Agis, investment in capital assets, opportunistic repurchase of
common stock and other acquisitions of complementary businesses that could
leverage retailer relationships, offer a product niche opportunity or to support
geographic expansion.
Year-to-date net cash provided by operating activities decreased by $37,087 to
$21,454 for fiscal 2005 compared to $58,541 for fiscal 2004. The increased use
of cash is primarily due to higher levels of inventory due to the weak cough,
cold and flu season in the second quarter of fiscal 2005 as compared to the
second quarter of fiscal 2004, the related decrease in net income, lower
accounts payable due to reduced production levels and payment of employee
bonuses related to fiscal 2004.
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Year-to-date net cash used for investing activities decreased $28,622 to $8,974
for fiscal 2005 compared to $37,596 for fiscal 2004. During the first half of
2005, the Company sold $7,630 of securities and used the proceeds primarily to
meet seasonal working capital demands, to acquire certain assets from a
manufacturer of foot care products for $5,562 and for acquisition costs of
$2,478 related to the impending purchase of Agis. In December 2003, the Company
acquired Peter Black for $12,061 in cash. In August 2003, the Company issued a
$10,000 note receivable which was repaid in April 2004.
Year-to-date capital expenditures for facilities and equipment were for normal
replacement and productivity enhancements. Capital expenditures are anticipated
to be $20,000 to $25,000 for fiscal 2005.
Year-to-date net cash from financing activities increased $5,083 to $921 for
fiscal 2005 compared to cash used of $4,162 for financing activities in fiscal
2004. The increase was primarily due to an increase in employee stock option
exercises of $2,771, an increase in short-term debt of $1,160 and a decrease in
stock repurchases of $1,818 partially offset by a higher dividend payment of
$1,132.
The Company has a common stock repurchase program. Purchases are made on the
open market, subject to market conditions, and are funded by cash from
operations. All common stock repurchased is retired upon purchase. The total
remaining expenditure approved by the Board of Directors for the repurchase of
additional shares is $20,000. This repurchase program was announced on October
29, 2003 and will expire on April 28, 2005. The Company repurchased 7 shares of
common stock from a private party for $122 on August 12, 2004. The Company did
not repurchase any shares in the second quarter of fiscal 2005. In the second
quarter of 2004, the Company repurchased 121 shares of common stock for $1,597.
For year-to-date 2004, the Company repurchased 146 shares of common stock for
$1,940.
In January 2003, the Board of Directors adopted a policy of paying regular
quarterly dividends. The Company paid quarterly dividends of $5,334 and $4,202,
or $0.075 and $0.06 per share for the first half of 2005 and 2004, respectively.
The declaration and payment of dividends and the amount paid, if any, is subject
to the discretion of the Board of Directors and will depend on the earnings,
financial condition and capital and surplus requirements of the Company and
other factors the Board of Directors may consider relevant.
The Company had no long-term debt at December 25, 2004. Cash, cash equivalents,
investment securities and cash flows from operations will be sufficient to
finance the known and/or foreseeable liquidity and capital needs of the Company.
However, with the purchase of Agis, the Company will be required to secure
additional funding capital. The Company is currently reviewing its options and
expects to secure appropriate financing for the acquisition, working capital
demands and other liquidity needs through bank financing.
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
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are considered reasonable, actual results could differ from the estimates. The
accounting policies, discussed below, are considered by management to require
the most judgment and are critical in the preparation of the financial
statements. These policies are reviewed by the Audit Committee. Other accounting
policies are included in Note A of the consolidated financial statements
included in the Company's annual report on Form 10-K for the year-ended June 26,
2004.
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. The allowance for doubtful accounts was $7,934,
$8,296 and $7,623 at December 25, 2004, June 26, 2004 and December 27, 2003,
respectively.
Inventory - The Company maintains an allowance for estimated obsolete or
unmarketable inventory based on the difference between the cost of the inventory
and its estimated market value. In estimating the allowance, management
considers factors such as excess or slow moving inventories, product expiration
dating, products on quality hold, current and future customer demand, and market
conditions. Changes in these conditions may result in additional allowances. The
allowance for inventory was $23,846, $22,888 and $22,124 at December 25, 2004,
June 26, 2004 and December 27, 2003, respectively.
Goodwill - Goodwill is tested for impairment annually or more frequently if
changes in circumstances or the occurrence of events suggest impairment exists.
The test for impairment requires the Company to make several estimates about
fair value, most of which are based on projected future cash flows. The
estimates associated with the goodwill impairment tests are considered critical
due to the judgments required in determining fair value amounts, including
projected future cash flows. Changes in these estimates may result in the
recognition of an impairment loss. The required annual testing of goodwill was
performed in the second quarter of fiscal 2005 and resulted in no impairment.
Product Liability and Workers' Compensation - The Company maintains accruals
to provide for claims incurred that are related to product liability and
workers' compensation. In estimating these accruals, management considers
actuarial valuations of exposure based on loss experience. These actuarial
valuations include significant estimates and assumptions, which include, but are
not limited to, loss development, interest rates, product sales, litigation
costs, accident severity and payroll expenses. Changes in these estimates and
assumptions may result in additional accruals. The accrual for product liability
claims was $2,500, $3,876, and $3,718 at December 25, 2004, June 26, 2004 and
December 27, 2003, respectively. The accrual for workers' compensation claims
was $2,736, $2,458 and $3,670 at December 25, 2004, June 26, 2004 and December
27, 2003, respectively.
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
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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 "Risk Factors" in the Company's
Registration Statement on Form S-4 (No. 333 - 121574) filed on December 23,
2004, including any amendments thereto, for a discussion of certain important
factors that relate to forward-looking statements contained in this report.
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
interest income earned on its investment of cash on hand and, if the Company
borrows funds to finance its operations, interest expense. As of December 25,
2004, the Company had invested cash, cash equivalents and investment securities
of $179,235. 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 operations in the United Kingdom and Mexico. 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. However, the Company may obtain a contractual
currency exchange rate in contemplation of a significant transaction, such as a
foreign acquisition. Significant currency fluctuations could adversely impact
foreign revenues; however, the Company cannot predict future changes in foreign
currency exposure.
Item 4. Controls and Procedures
As of December 25, 2004, the Company's management, including its Chief Executive
Officer and its Chief Financial Officer, have reviewed and evaluated the
effectiveness of the Company's disclosure controls and procedures pursuant to
Rule 13a-15(b) of the Securities Exchange Act of 1934. Based on that review and
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are adequate and
effective in ensuring that all material information relating to the Company and
its consolidated subsidiaries required to be included in the Company's periodic
SEC filings would be made known to them by others within those entities in a
timely manner and that no changes are required at this time.
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In connection with the evaluation by the Company's management, including its
Chief Executive Officer and Chief Financial Officer, of the Company's internal
control over financial reporting pursuant to Rule 13a-15(d) of the Securities
Exchange Act of 1934, no changes during the quarter ended December 25, 2004 were
identified that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company has a repurchase program approved by the Board of Directors for the
repurchase of $20,000 of additional common shares. This repurchase program was
announced on October 29, 2003 and will expire on April 28, 2005. The Company
repurchased 7 shares of common stock from a private party for $122 on August 12,
2004. The common stock repurchased was retired upon purchase. The Company did
not repurchase any shares in the second quarter of 2005.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Shareholders' Meeting held on October 29, 2004, the
Company's shareholders voted on the following matter:
1. Election of three directors of the Company:
The tabulation of votes provided by the Inspector of Election was as follows:
Nominee For Withhold/Against
- -------------------- ---------- ----------------
Laurie Brlas 63,115,703 2,285,402
Larry D. Fredricks 61,371,131 4,029,974
Michael J. Jandernoa 63,978,993 1,422,112
2. Amend the Company's Articles of Incorporation to increase the maximum
number of directors to eleven.
For Against Abstain Broker Non-Votes
- ---------- --------- ------- ----------------
58,538,923 1,530,460 40,196 5,291,726
Item 6. Exhibits
Exhibit Number Description
- -------------- -----------
2(a) Agreement and Plan of Merger dated as of November 14, 2004
among Perrigo Company, Agis Industries (1983) Ltd. and Perrigo
Israel Opportunities Ltd., included as and incorporated by
reference from Appendix A to the proxy statement/prospectus
included in the Registrant's Registration Statement on Form
S-4 (No. 333-121574).
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3(a) Amended and Restated Articles of Incorporation of Registrant,
as amended.
3(b) Restated Bylaws of Registrant, as amended through October 29,
2004.
4(a) Shareholders' Rights Plan, incorporated by reference from the
Registrant's Form 8-K filed on April 10, 1996. (SEC File No.
00-19725).
4(b) Registration Rights Agreement, dated as of November 14, 2004,
between Perrigo Company and Moshe Arkin, included as and
incorporated by reference from Appendix H to the proxy
statement/prospectus included in the Registrant's Registration
Statement on Form S-4 (No. 333-121574).
10(a)* Form of Non-qualified Stock Option Agreement.
10(b)* Form of Restricted Stock Agreement.
10(c) Undertaking Agreement, dated as of November 14, 2004, among
Perrigo Company, Agis Industries (1983) Ltd. and Moshe Arkin,
included as and incorporated by reference from Appendix D to
the proxy statement/prospectus included in the Registrant's
Registration Statement on Form S-4 (No. 333-121574).
10(d) Nominating Agreement, dated as of November 14, 2004, between
Perrigo Company and Moshe Arkin, included as and incorporated
by reference from Appendix F to the proxy statement/prospectus
included in the Registrant's Registration Statement on Form
S-4 (No. 333-121574).
10(e) Lock-Up Agreement, dated as of November 14, 2004, among Moshe
Arkin, Perrigo Company and Perrigo Israel Opportunities Ltd.,
included as and incorporated by reference from Appendix G to
the proxy statement/prospectus included in the Registrant's
Registration Statement on Form S-4 (No. 333-121574).
10(f) Employment Agreement, dated as of November 14, 2004, among
Perrigo Company, Agis Industries (1983) Ltd. and Moshe Arkin,
included as and incorporated by reference from Appendix I to
the proxy statement/prospectus included in the Registrant's
Registration Statement on Form S-4 (No. 333-121574).
31 Rule 13a-14(a) Certifications.
32 Section 1350 Certifications.
*Denotes management contract or compensatory plan or arrangement.
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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: February 2, 2005 By: /s/David T. Gibbons
-----------------------------------------------
David T. Gibbons
Chairman, President and Chief Executive Officer
Date: February 2, 2005 By: /s/Douglas R. Schrank
-----------------------------------------------
Douglas R. Schrank
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
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