10-Q 1 c72670e10vq.txt QUARTERLY REPORT DATED 9/28/02 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: SEPTEMBER 28, 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) (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 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 OCTOBER 21, 2002 --------------------- ------------------- WITHOUT PAR 69,363,134 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 quarters ended September 28, 2002 and September 29, 2001 1 Condensed consolidated balance sheets -- September 28, 2002, June 29, 2002 and September 29, 2001 2 Condensed consolidated statements of cash flows -- For the quarters ended September 28, 2002 and September 29, 2001 3 Notes to condensed consolidated financial statements -- September 28, 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 Item 4. Controls and Procedures 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 CERTIFICATIONS 14
PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited)
First Quarter ---------------------------- 2003 2002 --------- --------- Net sales $ 213,215 $ 217,116 Cost of sales 151,536 164,777 --------- --------- Gross profit 61,679 52,339 --------- --------- Operating expenses Distribution 4,027 4,017 Research and development 5,448 5,296 Selling and administration 24,270 22,576 --------- --------- Subtotal 33,745 31,889 Unusual litigation (3,128) -- --------- --------- Total 30,617 31,889 --------- --------- Operating income 31,062 20,450 Interest and other, net (208) (163) --------- --------- Income before income taxes 31,270 20,613 Income tax expense 11,259 7,523 --------- --------- Net income $ 20,011 $ 13,090 ========= ========= Earnings per share Basic $ 0.28 $ 0.18 Diluted $ 0.28 $ 0.17 Weighted average shares outstanding: Basic 70,719 74,314 Diluted 72,136 76,925
See accompanying notes to condensed consolidated financial statements. -1- PERRIGO COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 28, June 29, September 29, 2002 2002 2001 --------- --------- --------- Assets: (unaudited) (unaudited) Current assets Cash and cash equivalents $ 49,214 $ 76,824 $ 297 Accounts receivable, net of allowances 105,777 82,560 120,525 Inventories, net of allowances 163,704 155,611 171,119 Prepaid expenses and other current assets 8,635 6,896 11,536 Current deferred income taxes 19,863 19,860 19,203 Assets held for sale -- -- 16,207 --------- --------- --------- Total current assets 347,193 341,751 338,887 Property and equipment 405,258 399,461 382,055 Less accumulated depreciation 195,486 188,417 171,990 --------- --------- --------- 209,772 211,044 210,065 Goodwill, net 35,919 35,919 47,045 Other 4,295 5,073 3,820 --------- --------- --------- $ 597,179 $ 593,787 $ 599,817 ========= ========= ========= Liabilities and Shareholders' Equity: Current liabilities Accounts payable $ 78,431 $ 74,449 $ 84,862 Notes payable 8,729 8,338 8,979 Payrolls and related taxes 23,232 31,338 18,934 Accrued expenses 39,740 32,721 31,141 Income taxes 17,864 8,088 19,097 --------- --------- --------- Total current liabilities 167,996 154,934 163,013 Deferred income taxes 21,143 20,313 17,784 Long-term debt -- -- 21,380 Other long-term liabilities 3,079 2,396 2,353 Shareholders' equity Preferred stock, without par value, 10,000 shares authorized -- -- -- Common stock, without par value, 200,000 shares authorized 57,340 89,222 105,497 Unearned compensation (499) (608) (1,017) Accumulated other comprehensive income 952 373 757 Retained earnings 347,168 327,157 290,050 --------- --------- --------- Total shareholders' equity 404,961 416,144 395,287 --------- --------- --------- $ 597,179 $ 593,787 $ 599,817 ========= ========= ========= Supplemental Disclosures of Balance Sheet Information: Allowance for doubtful accounts $ 8,050 $ 7,569 $ 6,902 Allowance for inventory $ 20,714 $ 21,360 $ 30,722 Working capital $ 179,197 $ 186,817 $ 175,874 Preferred stock, shares issued -- -- -- Common stock, shares issued 69,424 72,550 73,996
See accompanying notes to condensed consolidated financial statements. -2- PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
First Quarter ------------------------ 2003 2002 -------- -------- Cash Flows From (For) Operating Activities: Net income $ 20,011 $ 13,090 Depreciation and amortization 6,812 6,808 -------- -------- 26,823 19,898 Accounts receivable (23,219) (24,697) Inventories (8,111) (10,007) Current and deferred income taxes 10,587 (1,115) Accounts payable 3,998 477 Payrolls and related taxes (8,106) (7,187) Other 6,798 2,522 -------- -------- Net cash from (for) operating activities 8,770 (20,109) -------- -------- Cash Flows For Investing Activities: Additions to property and equipment (4,950) (4,786) -------- -------- Net cash for investing activities (4,950) (4,786) -------- -------- Cash Flows From (For) Financing Activities: Borrowings of long-term debt -- 21,380 Borrowings/(repayments) of short-term debt 393 (3,780) Issuance of common stock 143 9,785 Repurchase of common stock (32,025) (13,240) Other 59 31 -------- -------- Net cash (for) from financing activities (31,430) 14,176 -------- -------- Net Decrease in Cash and Cash Equivalents (27,610) (10,719) Cash and Cash Equivalents, at Beginning of Period 76,824 11,016 -------- -------- Cash and Cash Equivalents, at End of Period $ 49,214 $ 297 ======== ======== Supplemental Disclosures of Cash Flow Information: Interest paid $ 257 $ 604 Income taxes paid $ 657 $ 8,344
See accompanying notes to condensed consolidated financial statements. -3- PERRIGO COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 28, 2002 (in thousands) 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 to conform to the current year presentation. Operating results for the quarter ended September 28, 2002 are not necessarily indicative of the results that may be expected for the year ending June 28, 2003. 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 29, 2002. In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. This statement supercedes the guidance provided by Emerging Issues Task Force 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS 146 is required to be adopted for exit or disposal activities initiated after December 31, 2002. Because SFAS 146 only affects the timing of the recognition of the liabilities to be incurred if an entity makes a decision to exit or dispose of a particular activity, the Company does not expect the adoption of SFAS 146 to have a material impact on the Company's financial statements. Accordingly, the application of SFAS 146 to the restructuring recorded in fiscal 2002 would have resulted in no material difference in the Company's financial statements. NOTE B - INVENTORIES
September 28, June 29, September 29, 2002 2002 2001 -------- -------- -------- Finished goods $ 66,765 $ 62,360 $ 76,240 Work in process 59,629 57,870 57,009 Raw materials 37,310 35,381 37,870 -------- -------- -------- $163,704 $155,611 $171,119 ======= ======= ========
-4- NOTE C - SHAREHOLDERS' EQUITY During the first quarter of fiscal 2003, the Company purchased 3,142 shares of common stock for $32,025 under its common stock repurchase program. As of October 29, 2002, the Company has purchased 61 shares for $642 in the second quarter of fiscal 2003 and may purchase shares with a value of up to $14,321. All repurchased common stock has been retired. NOTE D - 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:
First Quarter --------------------- 2003 2002 ------ ------ Net income $20,011 $13,090 Other comprehensive income: Foreign currency translation adjustments 579 329 ------ ------ Comprehensive income $20,590 $13,419 ====== ======
NOTE E - EARNINGS PER SHARE A reconciliation of the numerators and denominators used in the basic and diluted Earnings per Share (EPS) calculation follows:
First Quarter -------------------- 2003 2002 ------- ------- Numerator: Net income used for both basic and diluted EPS $20,011 $13,090 ======= ======= Denominator: Weighted average shares outstanding for basic EPS 70,719 74,314 Dilutive effect of stock options 1,417 2,611 ------- ------- Weighted average shares outstanding for diluted EPS 72,136 76,925 ======= =======
Options outstanding where the exercise price was higher than the market price were 1,402 and 446 for the first quarter of fiscal 2003 and 2002, respectively. These options are excluded from the diluted EPS calculation. NOTE F - 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 also name -5- 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 Company has entered into settlement agreements with the remaining defendants. The Company received settlement payments of $3,128 in fiscal 2003, net of attorney fees and expenses that were withheld prior to the disbursement of the funds to the Company. NOTE G - SEGMENT INFORMATION The Company has one reportable segment, store brand health care, that encompasses two operating segments, OTC pharmaceuticals and nutritional products. All other consists of the operating segments, Quimica y Farmacia S.A. de C.V. (Quifa), the Company's Mexican operating subsidiary; and Wrafton Laboratories Limited (Wrafton), the Company's United Kingdom operating subsidiary, neither of which meet the quantitative thresholds for separate disclosure. The accounting policies of all of the operating segments are the same as those described in the summary of significant accounting policies in Note A.
Store Brand All Health Care Other Total ----------- ----- ----- First Quarter 2003 Net sales $195,069 $ 18,146 $213,215 Operating income $ 30,482 $ 580 $ 31,062 Operating income % 15.6% 3.2% 14.6% First Quarter 2002 Net sales $202,888 $ 14,228 $217,116 Operating income $ 19,887 $ 563 $ 20,450 Operating income % 9.8% 4.0% 9.4%
NOTE H - RESTRUCTURING In the fourth quarter of fiscal 2002, the Company approved a restructuring plan related to Quifa. The implementation of the plan began in June 2002 and is expected to be completed in its entirety by June 2003. No additional charges related to this restructuring plan were recorded or are expected to be recorded in fiscal 2003. In the first quarter of fiscal 2003, $328 was paid primarily related to severance costs and professional fees. Twenty-one administrative employees have been terminated in fiscal 2003. -6- The activity of the restructuring reserve is detailed in the following table:
2002 Restructuring Severance and Other Costs Balance at June 29, 2002 $2,500 Reductions (328) ------ Balance at September 28, 2002 $2,172 ======
-7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FIRST QUARTER OF FISCAL YEARS 2003 AND 2002 (in thousands) RESULTS OF OPERATIONS FIRST QUARTER OF FISCAL YEARS 2003 AND 2002 Results of Operations STORE BRAND HEALTH CARE
First Quarter ----------------------- 2003 2002 ----------------------- Net sales $195,069 $202,888 Gross profit $ 57,017 $ 48,355 Gross profit % 29.2% 23.8% Operating expenses $ 26,535 $ 28,468 Operating expenses % 13.6% 14.0% Operating income $ 30,482 $ 19,887 Operating income % 15.6% 9.8%
Net Sales Fiscal 2003 net sales decreased 4% or $7,819 to $195,069 from $202,888 during fiscal 2002. Net sales decreased approximately $12,000 primarily due to lower unit sales of analgesic and antacid products. The net sales decrease was partially offset by a favorable mix of products sold and improved net realized pricing. The analgesic sales decline was related to existing products. Sales of antacid products were enhanced in fiscal 2002 by famotidine 10 mg tablets, then recently introduced. Gross Profit Gross profit increased $8,662 or 18% during fiscal 2003 compared to fiscal 2002. The gross profit percent to net sales was 29.2% in fiscal 2003 compared to 23.8% in fiscal 2002. Approximately half of the increase in gross profit was due to lower obsolescence expenses resulting from lower finished goods inventory when compared to the first quarter of fiscal 2002 and improved aging of that inventory. The remaining increase resulted from a favorable mix of products sold and improved net realized pricing. Operating Expenses Operating expenses decreased $1,933 during fiscal 2003 compared to fiscal 2002. Operating expenses were favorably impacted by unusual litigation income of $3,128. Selling and administration increased $1,202 primarily due to rising insurance costs. The Company expects insurance costs to continue to be higher in fiscal 2003 than fiscal 2002. -8- ALL OTHER
First Quarter ---------------------- 2003 2002 ---------------------- Net sales $18,146 $14,228 Gross profit $ 4,662 $ 3,984 Gross profit % 25.7% 28.0% Operating expenses $ 4,082 $ 3,421 Operating expenses % 22.5% 24.0% Operating income $ 580 $ 563 Operating income % 3.2% 4.0%
The increases in net sales, gross profit and operating expenses were primarily due to Wrafton. Because fiscal 2002 was a transitional year for Wrafton, the first quarter of fiscal 2002 included two months of results compared to the first quarter of fiscal 2003, which included three months of results. INTEREST AND OTHER Interest and other, net decreased $45 during fiscal 2003. Interest expense was $46 for fiscal 2003 compared to $380 for fiscal 2002. The difference in interest expense was primarily due to invested cash in fiscal 2003 versus borrowings in fiscal 2002. INCOME TAXES The effective tax rate was 36.0% for fiscal 2003 and 36.5% for fiscal 2002. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES For fiscal 2003, working capital, including cash, decreased $7,620 to $179,197 from $186,817. Cash and cash equivalents decreased from $76,824 to $49,214. Cash flow from operating activities was $8,770 for fiscal 2003. Cash flow was positively impacted by net income of $20,011 that included $2,000 of after-tax income related to vitamin litigation settlements and depreciation of $6,812. Income taxes increased $10,587 primarily due to the timing of certain payments and accounts payable increased $3,998. Cash flow was negatively impacted by an increase in accounts receivable of $23,219 primarily due to seasonal sales increases and a decrease in payrolls and related taxes of $8,106 primarily due to the timing of certain payments. Additionally, inventory increased $8,111. The impact on both accounts payable and inventory was primarily due to seasonal production levels. Capital expenditures for facilities and equipment of $4,950 during fiscal 2003 were primarily for normal equipment replacement, productivity enhancements and capacity additions. During fiscal 2003, the Company continued to repurchase shares of its common stock. The Company purchased 3,142 shares for $32,025 in the first quarter of fiscal 2003. As of -9- October 29, 2002, the Company has purchased 61 shares for $642 in the second quarter of fiscal 2003 and may purchase additional shares with a value of up to $14,321. The Company had no long-term debt at September 28, 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 and/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 Note A of the condensed consolidated financial statements. 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 $8,050, $7,569 and $6,902 at September 28, 2002, June 29, 2002 and September 29, 2001, 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, current and future customer demand, and market conditions. Changes in these conditions may result in additional allowances. The allowance for inventory was $20,714, $21,360 and $30,722 at September 28, 2002, June 29, 2002 and September 29, 2001, 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. 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 -10- 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 23-27 of the Company's Form 10-K for the year ended June 29, 2002 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 interest expense related to its variable rate line of credit used to finance working capital when necessary and for general corporate purposes. The Company had invested cash and cash equivalents of $49,214 and no outstanding borrowings on its credit facility at September 28, 2002. 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. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures The Company's Chief Executive Officer and its Chief Financial Officer, have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the filing date of this quarterly report on Form 10-Q (the "Evaluation Date"). Based on their review and evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities in a timely manner, particularly during the period in which this quarterly report on Form 10-Q was being prepared, and that no changes are required at this time. (b) Changes in Internal Controls -11- There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the Evaluation Date, or any significant deficiencies or material weaknesses in such internal controls requiring corrective actions. As a result, no corrective actions were taken. PART II. OTHER INFORMATION 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 Registrant's 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. 10(a)* Registrant's Management Incentive Bonus Plan for Fiscal Year 2003. 10(b)* Registrant's Nonqualified Deferred Compensation Plan, as amended. 10(c)* Consulting Agreement, dated July 31, 2002, between Registrant and Michael J. Jandernoa, incorporated by reference from the Registrant's Form 10-K filed on September 18, 2002. 99(a) Certification under Section 906 of the Sarbanes-Oxley Act of 2002.
* Denotes management contract or compensatory plan or arrangement. (b) Reports on Form 8-K The Company filed a report on August 20, 2002 that announced it entered into settlement agreements with the remaining defendants related to a civil antitrust lawsuit. The Company filed a report on August 20, 2002 that announced the Board of Directors had approved extending the Company's share repurchase program. -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: October 30, 2002 By: /s/David T. Gibbons ------------------ ---------------------------------------------------- David T. Gibbons President and Chief Executive Officer Date: October 30, 2002 By: /s/Douglas R. Schrank ------------------ ---------------------------------------------------- Douglas R. Schrank Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) -13- CERTIFICATION I, David T. Gibbons, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Perrigo Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 30, 2002 /s/ David T. Gibbons -------------------------------------- David T. Gibbons President and Chief Executive Officer -14- CERTIFICATION I, Douglas R. Schrank, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Perrigo Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 30, 2002 /s/ Douglas R. Schrank ------------------------------------ Douglas R. Schrank Executive Vice President and Chief Financial Officer -15-