Perrigo Achieves Record Earnings

August 16, 2004
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ALLEGAN — Perrigo Co. posted sales of $898.2 million for the fiscal year ended June 26, compared with $834.1 million for fiscal 2003. Net income increased 49 percent to a record $80.6 million, or $1.11 per share, up from $54 million, or 76 cents per share, a year ago.

The company further reported sales of $206.1 million for the fourth quarter ended June 26, an increase of 12 percent over 2003’s fourth quarter. Net income for the just-passed quarter was $8.1 million, or 11 cents per share, compared with $4.3 million, or 6 cents per share in the prior year’s fourth quarter.

Douglas Schrank, executive vice president and CFO, said the company saw strong volume sales in the quarter from Peter Black Pharmaceutical products and that financial results also benefited from increased production in Perrigo’s consumer health-care business.

“We made a conscious decision to get our annual inventory built earlier this cycle to improve service levels and drive sales during the peak of the 2004-2005 cough and cold season,” he said.

During the last quarter the company also announced it would pay a $4.75 million settlement with the U.S. Federal Trade Commission to close the FTC’s investigation into its 1998 agreement with New Jersey-based Alpharma Inc.

Fiscal 2004’s record earnings were the result of good revenue growth and “operational excellence,” according to Perrigo Chairman, President and CEO David Gibbons. He said the loratadine family of over-the counter (OTC) allergy/sinus medications was a key contributor to the revenue increase.

Gibbons also noted that Perrigo received seven FDA new product approvals during 2004 and launched a broad range of products that included national brand equivalents, Rx-to-OTC switches and brand name nutritional products.

A cash flow of $119 million from operations, he said, allowed the company to increase its quarterly dividend, invest in its new generic drug business, acquire the Peter Black Pharmaceuticals operation, and fund $28 million in capital projects.

In June the company announced it had no intention of acting on an option to acquire controlling interest in Lannett Co., which manufactures generic pharmaceuticals.

That same month Perrigo entered into a purchase agreement to acquire certain assets of Indiana-based APG Inc., a contract manufacturer of aerosol products. The deal is expected to close on or before Sept. 1 and is expected to add about $4 million in sales in 2005, according to the company.

Schrank said Perrigo changed its accounting classification for brokerage commissions in fiscal 2004 and restated all prior years. Brokerage commission is now recognized as a selling expense and not as a deduction from net sales, he explained.

“So the net effect is that this change increased sales in fiscal 2003 and 2004 by $8.1 million, increased gross margin in both years by $8.1 million and increased direct G&A expense by $8.1 million.”

Gibbons predicted continued growth of Perrigo’s core OTC business and further development of its start-up generic prescription drug business in fiscal 2005.

“We remain committed to growing the Perrigo Pharmaceutical business through internal development or an appropriate acquisition,” Gibbons stated.

He said Perrigo plans to use its “strong” financial position to develop a pipeline of prescription generic drug products, investing $10 million to $12 million primarily in research and development in 2005, up from $5 million in 2004.

Perrigo also will continue to look for potential acquisitions that could speed its entry into the prescription generic drug market, Gibbons noted.    

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