<PAGE> 1
] UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
---------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: APRIL 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-19725
PERRIGO COMPANY
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2799573
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
515 EASTERN AVENUE
ALLEGAN, MICHIGAN 49010
--------------------- ----------
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
(616) 673-8451
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
----------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK APRIL 24, 2000
--------------------- -----------------
WITHOUT PAR 73,368,848 SHARES
<PAGE> 2
PERRIGO COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated statements of income -- For the
quarter and year-to-date ended April 1, 2000 and
April 3, 1999 3
Condensed consolidated balance sheets-- April 1, 2000
and July 3, 1999 4
Condensed consolidated statements of cash flows-- For the
year-to-date ended April 1, 2000 and April 3, 1999 5
Notes to condensed consolidated financial statements--
April 1, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risks 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 17
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<PAGE> 3
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME
(in thousands, except per share
amounts)
(Unaudited)
Third Quarter Year-To-Date
---------------------- ----------------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
---- ---- ---- ----
Net sales $181,494 $251,426 $588,105 $689,845
Cost of sales 144,698 193,563 452,669 542,382
-------- -------- -------- --------
Gross profit 36,796 57,863 135,436 147,463
-------- -------- -------- --------
Operating expenses
Distribution 4,087 9,658 12,624 26,376
Research and development 2,799 3,525 10,192 10,982
Selling and administrative 19,923 25,375 65,792 90,383
Unusual litigation -- 1,954 -- 3,628
-------- -------- -------- --------
26,809 40,512 88,608 131,369
-------- -------- -------- --------
Operating income 9,987 17,351 46,828 16,094
Interest and other, net 10 3,001 4,521 9,038
-------- -------- -------- --------
Income before income taxes 9,977 14,350 42,307 7,056
Income tax expense 3,602 4,638 14,943 2,597
-------- -------- -------- --------
Net income $ 6,375 $ 9,712 $ 27,364 $ 4,459
======== ======== ======== ========
Basic earnings per share $ 0.09 $ 0.13 $ 0.37 $ 0.06
======== ======== ======== ========
Diluted earnings per share $ 0.09 $ 0.13 $ 0.37 $ 0.06
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
<TABLE>
<CAPTION>
PERRIGO COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
April 1, July 3,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 883 $ 1,695
Accounts receivable, net of allowances of $3,877 and
$3,281, respectively 96,139 89,123
Inventories 139,147 197,437
Prepaid expenses and other current assets 12,749 7,811
Current deferred income taxes 15,600 33,476
Assets held for sale 19,430 53,045
-------------- --------------
Total current assets 283,948 382,587
Property and equipment 335,638 325,444
Less accumulated depreciation 141,402 125,782
-------------- --------------
194,236 199,662
Goodwill, net of accumulated amortization of $10,972 and
$10,121, respectively 18,482 19,334
Other 10,215 14,275
-------------- --------------
$ 506,881 $ 615,858
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 46,840 $ 68,240
Notes payable 7,470 6,694
Payrolls and related taxes 14,001 18,166
Accrued expenses 29,005 34,787
Income taxes 3,364 4,983
Current installments on long-term debt - 300
-------------- --------------
Total current liabilities 100,680 133,170
Deferred income taxes 18,600 14,674
Long-term debt, less current installments 26,900 135,026
Minority interest 849 569
Shareholders' equity
Preferred stock, without par value, 10,000 shares authorized,
none issued - -
Common stock, without par value, 200,000 shares authorized,
73,369 and 73,301 issued, respectively 102,164 102,030
Unearned compensation (68) (53)
Accumulated other comprehensive income 386 436
Retained earnings 257,370 230,006
-------------- --------------
Total shareholders' equity 359,852 332,419
-------------- --------------
$ 506,881 $ 615,858
============== ==============
See accompanying notes to condensed consolidated financial statements.
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</TABLE>
<PAGE> 5
PERRIGO COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Year-To-Date
------------
April 1, April 3,
2000 1999
--------- --------
Cash Flows From Operating Activities:
Net income $ 27,364 $ 4,459
Depreciation and amortization 16,987 16,458
Write-off of Russian investment -- 14,177
--------- --------
44,351 35,094
Accounts receivable (7,220) (49,142)
Inventories 58,290 (25,369)
Current and deferred income taxes 14,359 1,862
Change in long-term licensing agreements 3,110 (8,700)
Assets held for sale 2,429 (2,020)
Accounts payable (21,400) 12,626
Other (7,845) 553
--------- --------
Net cash from (for) operating activities 86,074 (35,096)
--------- --------
Cash Flows From (For) Investing Activities:
Additions to property and equipment (10,634) (28,071)
Proceeds from sale of assets held for sale 31,186 --
Other -- (6,667)
--------- --------
Net cash from (for) investing activities 20,552 (34,738)
--------- --------
Cash Flows (For) From Financing Activities:
Borrowings of long-term debt, net -- 83,108
Repayment of long-term debt, net (108,126) --
Borrowings of short-term debt, net 476 1,486
Issuance of common stock 134 84
Repurchase of common stock -- (14,820)
Other 78 --
--------- --------
Net cash (for) from financing activities (107,438) 69,858
--------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (812) 24
Cash and Cash Equivalents, at Beginning of Period 1,695 1,496
--------- --------
Cash and Cash Equivalents, at End of Period $ 883 $ 1,520
========= ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 4,598 $ 6,459
Income taxes paid $ 764 $ 299
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
PERRIGO COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 1, 2000
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 changed its fiscal year end from June 30 to the 52 or 53-week
period that ends on the Saturday closest to June 30, effective for fiscal year
1999. After the transition year of fiscal year 1999, the Company's quarters will
each be comprised of 13 weeks and end on a Saturday, except in certain years
when the Company will have one quarter comprised of 14 weeks. During fiscal year
1999, the first quarter included the period from July 1 through October 3, 1998.
The second through fourth quarters were comprised of 13 weeks ending on January
2, April 3, and July 3, 1999, respectively.
Operating results for the quarter and year-to-date ended April 1, 2000 are
not necessarily indicative of the results that may be expected for the year
ending July 1, 2000. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended July 3, 1999. See Note D regarding the inclusion of personal care
operations for the periods presented.
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<PAGE> 7
EARNINGS PER SHARE
A reconciliation of the numerators and denominators used in the "basic" and
"diluted" Earnings per Share ("EPS") calculations follows:
<TABLE>
<CAPTION>
Third Quarter Year-To-Date
-------------------- --------------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income used for both "basic"
and "diluted" EPS calculation $ 6,375 $ 9,712 $27,364 $ 4,459
======= ======= ======= =======
Denominator:
Weighted average shares outstanding
for the period - used for "basic"
EPS calculation 73,367 73,265 73,347 73,662
Dilutive effect of stock options 170 254 184 295
------- ------- ------- -------
Weighted average shares outstanding
for the period - used for "diluted"
EPS calculation 73,537 73,519 73,531 73,957
======= ======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
Third Quarter Year-To-Date
---------------------- ----------------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 6,375 $ 9,712 $ 27,364 $ 4,459
Other comprehensive income:
Unrealized holding gains (losses) on securities 672 (1,921) 1,286 (1,921)
Reclassification adjustment for gains realized in net income (1,286) -- (1,286) --
-------- -------- -------- --------
Net unrealized gains (losses) on investments (614) (1,921) -- (1,921)
Foreign currency translation adjustments (2) (99) (50) (99)
-------- -------- -------- --------
Comprehensive income $ 5,759 $ 7,692 $ 27,314 $ 2,439
======== ======== ======== ========
</TABLE>
For the first half of fiscal year 1999 the Company treated the Mexican
economy as highly inflationary. Accordingly, the translation impacts were
reported as a component of income and losses during these periods. Subsequent to
January 2, 1999, the Mexican economy was not considered highly inflationary.
Accordingly, the translation impacts are included as a component of
comprehensive income.
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<PAGE> 8
NOTE B - INVENTORIES
The components of inventories consist of the following:
April 1, July 3,
2000 1999
---- ----
Finished goods $ 59,176 $ 85,267
Work in process 54,262 79,104
Raw materials 25,709 33,066
-------- --------
$139,147 $197,437
======= =======
NOTE C - LONG-TERM BORROWING AND CREDIT ARRANGEMENTS
In connection with the sale of the personal care business, the Company paid
off its obligation of $1,440 to the Industrial Development Board of Rutherford
County, Tennessee in the first quarter of fiscal year 2000.
NOTE D - RESTRUCTURING COSTS
The personal care business was sold in August 1999. Proceeds from the sale
were $32,200 including funds held in escrow, and are subject to post-closing
adjustment. No gain or loss was recorded for this sale in fiscal year 2000.
Fiscal year 2000 reflects one month of the personal care business. Net sales for
the personal care business were zero and $50,536 for the third quarter of fiscal
year 2000 and 1999, respectively. Net sales for the personal care business were
$17,778 and $143,620 for year-to-date fiscal year 2000 and 1999, respectively.
The Company does not maintain operating income information by its main product
lines; however, based on the incremental approach, the Company estimates that
the pre-tax operating income was zero and $5,000 for the third quarter of fiscal
year 2000 and 1999, respectively. Estimated pre-tax operating income was $1,000
and $2,000 for the year-to-date fiscal year 2000 and 1999, respectively.
Included in pre-tax operating income is the effect of suspending personal care
depreciation of zero and $1,500 for the third quarter of fiscal year 2000 and
1999, respectively. The effect of suspending personal care depreciation was $700
and $4,700 for year-to-date fiscal year 2000 and 1999, respectively.
For year-to-date fiscal year 2000, $1,807 was paid primarily related to
professional fees and transitional costs associated with the sale of the
personal care business. These costs were charged against a reserve established
in fiscal year 1998. The 1998 restructuring reserve balance was $363 and $2,170
at April 1, 2000 and July 3, 1999, respectively.
Assets held for sale decreased to $19,430 at April 1, 2000 primarily due to
the sale of the personal care business and the change in the underlying assets
during the first three quarters of fiscal year 2000. Assets held for sale at
April 1, 2000 is comprised of the LaVergne, Tennessee logistics facility. While
the Company continues to operate the LaVergne, Tennessee logistics facility, the
Company has the ability to remove the facility from its operations with no
effect on continuing operations. The buyer of the personal care business is
operating out of this facility under a two-year lease agreement. The Company
intends to sell this facility and has been
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<PAGE> 9
actively seeking a buyer since the close of fiscal year 1998. As a part of the
1998 restructuring, in fiscal year 1998 the Company wrote the assets down to
their estimated fair value less cost to sell and included the net assets in the
assets held for sale classification on the balance sheet. The effect of
suspending depreciation on this facility was $210 and $240 for the third quarter
of fiscal year 2000 and 1999, respectively. The effect of suspending
depreciation on this facility was $640 and $600 for year-to-date fiscal year
2000 and fiscal year 1999, respectively.
For year-to-date fiscal year 2000, $2,045 was paid primarily for severance
and outplacement costs related to the 1999 restructuring. These costs were
charged against a reserve established in fiscal year 1999. The 1999
restructuring reserve balance was $410 and $2,455 at April 1, 2000 and July 3,
1999, respectively.
The restructuring charges as described above are detailed in the following
table:
1998 Restructuring 1999 Restructuring
Professional Fees Severance and
And Transitional Costs Outplacement
---------------------- ------------
Balance at July 3, 1999 $2,170 $2,455
Reductions/Charges 1,807 2,045
------ ------
Balance at April 1, 2000 $ 363 $ 410
====== ======
NOTE E - COMMITMENTS AND CONTINGENCIES
In July 1994 the Company was served a "summons with notice" alleging breach
of fiduciary duties by its officers in connection with their purchase of the
Company from the former owner in April 1988. In February 1995 a complaint was
filed seeking unspecified damages. In June 1998 the United States District Court
for the Western District of Michigan dismissed, at the close of the plaintiff's
case, the action filed by the former owner. In July 1998 the former owner filed
an appeal. In March 2000 the Company entered into a settlement agreement with
the former owner that resulted in the dismissal of the lawsuit and the
withdrawal of all pending appeals thus ending any further action against the
Company. No payment or financial compensation was required of either party. The
effect of the settlement was to leave in place the Court's original order
dismissing the plaintiff's case.
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. In March 2000 the Company entered into a settlement agreement
with one minor defendant providing for a payment to the Company of an immaterial
amount.
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THIRD QUARTER AND YEAR-TO-DATE FOR FISCAL YEARS 2000 AND 1999
RESULTS OF OPERATIONS
THIRD QUARTER OF FISCAL YEARS 2000 AND 1999
- -------------------------------------------
RESULTS OF OPERATIONS
The Company's net sales decreased by $69,932 or 27.8% to $181,494 during
the third quarter of fiscal year 2000, from $251,426 during the third quarter of
fiscal year 1999. The decrease was primarily due to the sale of the personal
care business. Excluding the effect of the personal care business, net sales
decreased by $19,396 or 9.7% during the third quarter of fiscal year 2000 to
$181,494 from $200,890 during the third quarter of fiscal year 1999. Higher
sales in the third quarter of fiscal year 1999 resulted primarily from the
shipment of a backlog of orders due to the implementation of a new software
system in the first quarter of fiscal year 1999 as well as the timing of the
cough/cold/flu season. The decrease in the third quarter of fiscal year 2000 was
partially offset by sales to existing customers of new products such as the
nicotine transdermal system patch for smoking cessation, an OTC pharmaceutical
product.
Gross profit decreased $21,067 during the third quarter of fiscal year 2000
compared to the same period of fiscal year 1999. The gross profit percent to net
sales was 20.3% for the third quarter of fiscal year 2000 compared to 23.0% for
the same period of fiscal year 1999. Excluding the personal care business, gross
profit decreased $9,452 during the third quarter of fiscal year 2000 compared to
the same period of fiscal year 1999 and gross profit percent to net sales
decreased to 20.3% for the third quarter of fiscal year 2000 compared to 23.0%
for the same period of fiscal year 1999. Gross margin for the third quarter of
fiscal year 2000 was negatively impacted by higher than anticipated inventory
obsolescence expense of approximately $7,000 related to inventory built in
anticipation of the Company's conversion to a new software system in fiscal year
1999. The Company believes the valuation of its inventory adequately covers
obsolescence related to inventory on hand at April 1, 2000. Gross margin was
also negatively impacted by lower than normal production levels as the Company
reduced inventory. Approximately $4,000 of production costs were under-absorbed
due to the low production levels and were expensed during the quarter. Gross
margin for the third quarter of fiscal year 1999 was negatively impacted by
outsourcing costs incurred to meet customer service requirements and high
obsolescence expense.
Operating expenses decreased $13,703 or 33.8% during the third quarter of
fiscal year 2000 compared to the same period in fiscal year 1999. Operating
expenses as a percentage of net sales were 14.8% for the third quarter of fiscal
year 2000 compared to 16.1% for the same period of fiscal year 1999. Operating
expenses consist of distribution, research and development, selling and
administrative and unusual litigation expenses. Distribution expenses decreased
$5,571 or 57.7% from the third quarter of fiscal year 1999 primarily due to the
sale of the personal care business. Distribution expenses were also favorably
impacted in the third quarter of fiscal year 2000 by fewer expedited shipments
and lower warehousing costs as the Company benefited from its shift from leased
warehouses to its owned warehouse in Allegan, Michigan.
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<PAGE> 11
Research and development expenses were 1.5% of net sales for the third quarter
of fiscal year 2000 compared to 1.4% for the same period of fiscal year 1999.
Selling and administrative expenses decreased $5,452 or 21.5% from the third
quarter of fiscal year 1999 primarily due to the sale of the personal care
business. Selling and administrative expense as a percentage of net sales was
11.0% in the third quarter of fiscal year 2000 compared to 10.1% of net sales
for the same period in fiscal year 1999. Unusual litigation costs were zero and
$1,954 for the third quarter of fiscal year 2000 and 1999, respectively.
Interest and other, net decreased $2,991 from the third quarter of fiscal
year 1999. Interest expense decreased $1,520 to $1,676 during the third quarter
of fiscal year 2000 compared to $3,196 for the same period in fiscal year 1999
due primarily to lower levels of borrowing. Other income was $1,666 for the
third quarter of fiscal year 2000 compared to other income of $195 for the same
period in fiscal year 1999. The increase in other income was primarily due to
the gain of $1,300 on the sale of an investment classified as
available-for-sale.
The effective tax rate was 36.1% for the third quarter of fiscal year 2000
compared to 32.3% for the same period in fiscal year 1999.
YEAR-TO-DATE FOR FISCAL YEARS 2000 AND 1999
- -------------------------------------------
RESTRUCTURING UPDATE
The personal care business was sold in August 1999. Proceeds from the sale
were $32,200 including funds held in escrow, and are subject to post-closing
adjustment. No gain or loss was recorded for this sale in fiscal year 2000.
Fiscal year 2000 reflects one month of the personal care business. Net sales for
the personal care business were zero and $50,536 for the third quarter of fiscal
year 2000 and 1999, respectively. Net sales for the personal care business were
$17,778 and $143,620 for year-to-date fiscal year 2000 and 1999, respectively.
The Company does not maintain operating income information by its main product
lines; however, based on the incremental approach, the Company estimates that
the pre-tax operating income was zero and $5,000 for the third quarter of fiscal
year 2000 and 1999, respectively. Estimated pre-tax operating income was $1,000
and $2,000 for the year-to-date fiscal year 2000 and 1999, respectively.
Included in pre-tax operating income is the effect of suspending personal care
depreciation of zero and $1,500 for the third quarter of fiscal year 2000 and
1999, respectively. The effect of suspending personal care depreciation was $700
and $4,700 for year-to-date fiscal year 2000 and 1999, respectively.
For year-to-date fiscal year 2000, $1,807 was paid primarily related to
professional fees and transitional costs associated with the sale of the
personal care business. These costs were charged against a reserve established
in fiscal year 1998. The 1998 restructuring reserve balance was $363 and $2,170
at April 1, 2000 and July 3, 1999, respectively.
Assets held for sale decreased to $19,430 at April 1, 2000 primarily due to
the sale of the personal care business and the change in the underlying assets
during the first three quarters of fiscal year 2000. Assets held for sale at
April 1, 2000 is comprised of the LaVergne, Tennessee logistics facility. While
the Company continues to operate the LaVergne, Tennessee logistics facility, the
Company has the ability to remove the facility from its operations with no
effect on continuing operations. The buyer of the personal care business is
operating out of this facility
-11-
<PAGE> 12
under a two-year lease agreement. The Company intends to sell this facility and
has been actively seeking a buyer since the close of fiscal year 1998. As a part
of the 1998 restructuring, in fiscal year 1998 the Company wrote the assets down
to their estimated fair value less cost to sell and included the net assets in
the assets held for sale classification on the balance sheet. The effect of
suspending depreciation on this facility was $210 and $240 for the third quarter
of fiscal year 2000 and 1999, respectively. The effect of suspending
depreciation on this facility was $640 and $600 for year-to-date fiscal year
2000 and fiscal year 1999, respectively.
For year-to-date fiscal year 2000, $2,045 was paid primarily for severance
and outplacement costs related to the 1999 restructuring. These costs were
charged against a reserve established in fiscal year 1999. The 1999
restructuring reserve balance was $410 and $2,455 at April 1, 2000 and July 3,
1999, respectively.
RESULTS OF OPERATIONS
The Company's net sales decreased $101,740 or 14.7% to $588,105 for
year-to-date fiscal year 2000, from $689,845 for year-to-date fiscal year 1999.
The decrease was primarily due to the sale of the personal care business.
Excluding the effect of personal care, net sales increased $24,102 or 4.4% to
$570,327 for year-to-date fiscal year 2000 compared to $546,225 for the same
period of fiscal year 1999. The increase was primarily due to an increase in
sales to existing customers of new products such as the nicotine transdermal
system patch for smoking cessation, an OTC pharmaceutical product, an increase
in sales of existing vitamin products to existing customers as well as an
increase in international sales, partially offset by a decrease in sales of
analgesic products.
During the first quarter of fiscal year 1999, the Company wrote off
inventory of $1,663, accounts and notes receivable of $10,874 and the balance of
its Russian investment of $1,640 for a total of $14,177 due to the collapse of
the Russian economy. The inventory amount is included in cost of sales; the
accounts and notes receivable amount is included in selling and administrative
expense; and the investment amount is included in other income and expense. The
discussion below related to gross profit, operating expenses and interest and
other, net excludes the effect of these charges.
Gross profit decreased $10,364 or 7.1% for year-to-date fiscal year 2000
compared to the same period of fiscal year 1999. The gross profit percentage for
year-to-date fiscal year 2000 was 23.0% compared to 21.1% for the same period of
fiscal year 1999. Excluding the effect of the personal care business, the gross
profit percent to net sales was 23.3% and 23.0% for fiscal years 2000 and 1999,
respectively. Fiscal year 2000 was negatively impacted by higher than
anticipated inventory obsolescence expense related to inventory built in
anticipation of the Company's conversion to a new software system in fiscal year
1999. The Company believes the valuation of its inventory adequately covers
obsolescence related to inventory on hand at April 1, 2000. Gross margin was
negatively impacted by lower than normal production levels as we reduced
inventory resulting in under-absorbed production costs that were expensed during
the year. Increased costs to comply with FDA regulations also negatively
impacted gross margin. Fiscal year 1999 was negatively impacted by
inefficiencies resulting from the Company's conversion to a new software system
and outsourcing costs incurred to meet customer service demand.
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<PAGE> 13
Operating expenses decreased $31,887 for year-to-date fiscal year 2000
compared to the same period of fiscal year 1999. Operating expenses, as a
percentage of net sales, were 15.1% for year-to-date fiscal year 2000 compared
to 17.5% for the same period of fiscal year 1999. Operating expenses consist of
distribution, research and development, selling and administrative and unusual
litigation expenses. Distribution expenses decreased $13,752 or 52.1% for the
year-to-date fiscal year 2000 due primarily to the sale of the personal care
business. Distribution expenses were also favorably impacted by fewer expedited
shipments and lower warehousing costs as the Company benefits from its shift
from a leased warehouse to its owned warehouse in Allegan, Michigan.
Distribution expense, as a percentage of net sales, was 2.1% for year-to-date
fiscal year 2000 compared to 3.8% for the same period of fiscal year 1999.
Research and development expense, as a percentage of net sales, was 1.7% for
year-to-date fiscal year 2000 compared to 1.6% for the same period of fiscal
year 1999. Selling and administrative expense decreased $13,717 or 17.3% for
year-to-date fiscal year 2000, primarily due to the sale of the personal care
business and lower salaries and wages resulting from the workforce reduction
plan announced in fiscal year 1999. Selling and administrative expense was 11.2%
of net sales for year-to-date fiscal year 2000 compared to 11.5% of net sales
for the same period fiscal year 1999. Unusual litigation costs were zero and
$3,628 for year-to-date fiscal year 2000 and 1999, respectively.
Interest and other, net decreased $2,877 for year-to-date fiscal year 2000.
Interest expense decreased $1,678 to $6,491 for year-to-date fiscal year 2000
compared to $8,169 for the year-to-date fiscal year 1999 primarily due to lower
levels of borrowing. Other income was $1,970 for year-to-date fiscal year 2000
compared to other income of $771 for the same period of fiscal year 1999. The
increase in other income was primarily due to the gain of $1,300 on the sale of
an investment classified as available-for-sale.
The effective tax rate was 35.3% for year-to-date fiscal year 2000 compared
to 36.8% for the same period of fiscal year 1999.
LIQUIDITY AND CAPITAL RESOURCES
For year-to-date fiscal year 2000, working capital decreased $66,149 and
cash flow from operating activities was $86,074. Accounts receivable increased
$7,220. Inventories decreased $58,290 primarily due to inventory reduction
initiatives. Current and deferred income taxes decreased $14,359 primarily due
to the recognition of timing differences related to the sale of personal care
and the write-off of the Russian investment. Accounts payable decreased $21,400,
primarily due to lower production levels and inventory reduction initiatives.
Capital expenditures were $10,634 for year-to-date fiscal year 2000.
Capital expenditures for fiscal year 2000 are anticipated to be approximately
$15,000 to $20,000 primarily for normal equipment replacement and productivity
enhancements to equipment.
The personal care business was sold during the first quarter of fiscal year
2000. The proceeds received from the sale during the first quarter were $31,186
and were used to fund operations and reduce debt as noted below.
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<PAGE> 14
Long-term debt decreased $108,126 for year-to-date fiscal year 2000 as the
Company paid down on its $200,000 unsecured revolving credit facility. At April
1, 2000 the Company had $173,100 available on this facility.
YEAR 2000 READINESS DISCLOSURE
As of the date of this filing, the Company has not incurred any significant
business interruptions as a result of Y2K issues. Costs to address Y2K issues
have approximated $1,000. No key suppliers or customers have reported any issues
related to year 2000 that might cause an adverse affect on business operations.
Though the Company is unaware of any Y2K issues, the Company cannot make
assurances that such issues will not arise, subsequent to this filing date,
which may have a significant negative impact on results of operations and
financial condition. However, in the event of a Y2K failure of a critical
system, contingency plans developed prior to year 2000 will be implemented to
reduce and manage the risk to our business and customers.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
In accordance with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, please see Perrigo Company's Form 10-K for the
fiscal year ended July 3, 1999, under the heading "Cautionary Note Regarding
Forward-Looking Statements" for a discussion of certain important factors as
they relate to forward-looking statements contained in this quarterly report.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
The Company has evaluated possible disclosures required under this item and
has determined that no market, interest rate or foreign currency risk exists
that would require disclosure.
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<PAGE> 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Description
2(a) Asset Purchase Agreement, dated August 25,
1999, among Perrigo Company of Tennessee as
Sellers; and Cumberland Swan Holdings, Inc. as
Buyer, incorporated by reference from the
Registrant's Form 10-K filed on October 1,
1999.
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, incorporated by
reference from the Registrant's Form
8-K filed on April 10, 1996.
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 Plan,
incorporated by reference from Registration
Statement No. 33-69324 filed by the Registrant
on September 23, 1993.
10(b) Registrant's 1988 Employee Incentive Stock
Option Plan as amended, incorporated by
reference to Exhibit A of the Registrant's 1997
proxy statement.
10(c) Registrant's 1989 Non-Qualified Stock Option
Plan for Directors, as amended, incorporated by
reference from Exhibit B of the Registrant's
1997 Proxy Statement as amended at the Annual
Meeting of Shareholders on November 6, 1997.
10(d) Registrant's Restricted Stock Plan
for Directors, dated November 6,
1997, incorporated by reference from
Registrant's Form 10-K filed on
October 6, 1998.
10(e) Credit Agreement, dated September 23, 1999,
between Registrant and Bank One, Michigan,
incorporated by reference from the Registrant's
Form 10-K filed on October 1, 1999.
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<PAGE> 16
10(f) Guaranty Agreement, dated September 23, 1999,
between L. Perrigo Company and Perrigo Company
of South Carolina, Inc., incorporated by
reference from the Registrant's Form 10-K filed
on October 1, 1999.
10(g) Consulting Agreement, dated December 7, 1999,
between Registrant and F. Folsom Bell,
incorporated by reference from the Registrant's
Form 10-Q filed on February 9, 2000.
10(h) Employment Agreement, Restricted Stock
Agreement, Contingent Restricted Stock
Agreement, and Noncompetition and Nondisclosure
Agreement, dated April 19, 2000, between
Registrant and David T. Gibbons.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a form 8-K on January 5, 2000 that named
Douglas R. Schrank Executive Vice President and Chief Financial
Officer. Mr. Schrank joins the Company from M. A. Hanna Company
where he most recently served as President of its Hanna Color
subsidiary.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERRIGO COMPANY
-------------------------
(Registrant)
Date: April 25, 2000 /s/ Michael J. Jandernoa
--------------------------- --------------------------------------
Michael J. Jandernoa
Chairman of the Board, President and
Chief Executive Officer
Date: April 25, 2000 /s/ Douglas R. Schrank
---------------------------- --------------------------------------
Douglas R. Schrank
Executive Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 10(h)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of April 19, 2000, by and between
Perrigo Company (the "Company") and David T. Gibbons (the "Executive");
WITNESSETH THAT:
WHEREAS, the Company and Executive desire to enter into this Agreement
pertaining to the employment of the Executive by the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Executive and the Company hereby agree as follows:
1. Performance of Services. The Executive's employment with the Company
shall be subject to the following:
(a) Subject to the terms of this Agreement, the Company hereby agrees to employ
the Executive as its President and Chief Executive Officer during the
Agreement Term (as defined below) and the Executive hereby agrees to remain
in the employ of the Company during the Agreement Term. The Executive shall
be appointed as a member of the Board of Directors of the Company (the
"Board") at the first regularly-scheduled Board meeting coincident with or
next following the Executive's commencement of employment with the Company,
and during the Agreement Term, while the Executive is employed by the
Company, the Board shall use its best efforts to cause the Executive to
continue as a member of such Board.
(b) During the Agreement Term, while the Executive is employed by the Company,
the Executive shall devote his full time (reasonable sick leave and
vacations excepted) and best efforts, energies and talents to serving as
its President and Chief Executive Officer.
(c) The Executive agrees that he shall perform his duties faithfully and
efficiently subject to the direction of the Board. The Executive's duties
shall include providing services for both the Company and its Affiliates
(as defined below), as determined by the Board (as used herein, Company
shall mean and include the Company and all of its Affiliates); provided,
that the Executive shall not, without his consent, be assigned tasks that
would be inconsistent with those of President and Chief Executive Officer.
The Executive will have such authority, power, responsibilities and duties
as are inherent to his position (and the undertakings applicable to his
position) and necessary to carry out his responsibilities and the duties
required of him hereunder.
(d) Notwithstanding the foregoing provisions of this paragraph 1, during the
Agreement Term the Executive may devote reasonable time to activities other
than those required under this Agreement, including activities involving
professional, charitable, educational,
<PAGE> 2
religious and similar types of organizations, speaking engagements,
membership on the boards of directors of other profit or not-for-profit
organizations, and similar activities, to the extent that such other
activities do not, in the judgment of the Board, inhibit or prohibit the
performance of the Executive's duties under this Agreement or conflict in
any material way with the Company's business.
(e) Subject to the terms of this Agreement, the Executive shall not be required
to perform services under this Agreement during any period that he is
Disabled (as defined in paragraph 3(b)).
(f) The "Agreement Term" shall be the period beginning on May 1, 2000 and
ending on June 30, 2005. Thereafter, the Agreement shall automatically be
extended for additional 12-month periods, unless either party to this
Agreement provides notice of non-renewal to the other party at least 90
days before the last day of the Agreement Term. The term "Agreement Term"
shall also include any renewal period under the foregoing provisions of
this paragraph 1(f).
(g) Notwithstanding the foregoing provisions of this Agreement, this Agreement
and commencement of the Executive's employment hereunder shall be
contingent on the background investigative report ordered by the Company
being received and approved by the Chairman of the Compensation Committee
of the Board (the "Compensation Committee"). The General Counsel of the
Company shall notify the Executive in writing when the Chairman has
approved such report.
(h) For purposes of this Agreement, the term "Affiliate" shall mean any
corporation, partnership, joint venture or other entity in which at least a
fifty percent interest in such entity is owned, directly or indirectly, by
the Company (or a successor to the Company).
2. Compensation and Benefits. Subject to the terms of this Agreement,
during the Agreement Term while the Executive is employed by the Company, the
Company shall compensate him for his services as follows:
(a) Base Salary. The Executive shall receive for the 14-month period beginning
on May 1, 2000 base salary at an annual rate of $440,000, payable in
substantially equal monthly or more frequent installments (the "Salary").
For the fiscal year beginning July 1, 2001 and thereafter, the Executive's
Salary shall be reviewed by the Board no less frequently than annually to
determine whether an increase in the amount of Salary is appropriate.
(b) Annual Bonus. The Executive shall be eligible to participate in the
Management Incentive Bonus Plan (the "MIB") administered by the
Compensation Committee, or any successor annual bonus plan or arrangement
generally made available to the executive officers of the Company. The MIB
shall provide the Executive with a target bonus opportunity of not less
than 100% of annual Salary for each fiscal year of the Company (July 1 to
June 30); provided, that the Executive shall be guaranteed a minimum bonus
under the MIB for the fiscal years ending June 30, 2000 and June 30, 2001
of $36,667
2
<PAGE> 3
and $220,000, respectively. Any bonus payable under this paragraph 2(b)
shall be paid in accordance with the terms of the MIB.
(c) Transition Bonus. The Executive shall receive a transition bonus
payable in accordance with the following:
(i) Restricted Stock Award. On a date to be determined by the
Compensation Committee but in no event later than June 30, 2000, the
Executive shall be awarded shares of common stock of the Company
subject to the restrictions described below ("Restricted Stock"), the
number of shares of which shall be determined by dividing $240,000 by
the fair market value of a share of common stock on such date. "Fair
market value" shall mean the average of the highest and lowest price
at which the common stock is traded on such award date, as reported
on the NASDAQ National Market. Such Restricted Stock award shall be
subject to the terms and conditions of the restricted stock agreement
set forth in Exhibit A. Except as otherwise specifically provided in
this Agreement or the restricted stock agreement, such shares of
Restricted Stock shall be forfeited if the Executive's Date of
Termination occurs prior to the end of the Restricted Period. The
"Restricted Period" shall end with respect to all of the shares
awarded under this paragraph 2(c)(i) on June 30, 2003.
(ii) Cash Award. The Executive shall be entitled to a lump sum cash
payment of $160,000, which shall be paid as soon as practicable
following the Executive's commencement of employment.
(d) Contingent Restricted Stock Award. On a date to be determined by the
Compensation Committee but in no event later than June 30, 2000, the
Executive shall also be awarded 50,000 shares of Restricted Stock (referred
to as "Contingent Restricted Stock"). Such Contingent Restricted Stock
award shall be subject to the terms and conditions of the restricted stock
award agreement set forth in Exhibit B. Except as otherwise specifically
provided in this Agreement or the restricted stock agreement, the shares of
Contingent Restricted Stock shall be permanently forfeited if the
Executive's Date of Termination occurs prior to June 30, 2001 (the
"Contingent Vesting Date"). If the Executive is employed by the Company on
the Contingent Vesting Date, the Company shall review the number of shares
of Common Stock that the Executive has purchased in open market
transactions and shall contingently vest the Executive in one share of the
Contingent Restricted Stock for each two shares of Company common stock so
purchased by the Executive and held by him on the Contingent Vesting Date.
Any shares of Contingent Restricted Stock that are not contingently vested
on the Contingent Vesting Date in accordance with foregoing provisions of
this paragraph 2(c)(ii) shall be permanently forfeited on such date. Except
as otherwise specifically provided in this Agreement or the restricted
stock agreement, (A) the Contingent Restricted Stock still held after June
30, 2001, if any, shall become fully vested and nonforfeitable on June 30,
2003, and (B) the Contingent Restricted Stock shall be permanently
forfeited if the Executive's Date of Termination occurs prior to such date.
3
<PAGE> 4
(e) Stock Options. The Executive shall be granted an option to purchase 750,000
shares of common stock of the Company ("Common Stock") under the Perrigo
Company Employee Incentive Stock Option Plan (the "Option Plan") as of a
date to be determined by the Compensation Committee but in no event later
than June 30, 2000 (the "Grant Date"). The shares subject to such option
shall have an exercise price equal to the fair market value (as defined in
the Option Plan) of a share of Common Stock on the Grant Date and shall
become exercisable with respect to 187,500 of the shares granted on each of
the second, third, fourth and fifth anniversaries of the Grant Date. Such
option shall be subject to the terms and conditions of the option agreement
set forth in Exhibit C. The Option Plan as in effect on the date of this
Agreement is attached hereto as Exhibit D.
The Executive shall also be eligible for annual stock option grants under
the Option Plan in amounts determined by the Compensation Committee;
provided, however, for the fiscal years ended June 30, 2001 and June 30,
2002, each such annual option grant shall not be less than 125,000 shares.
Such annual option grants shall vest with respect to 25% of the shares
awarded on each of the second through fifth anniversaries of the grant
date; provided, however, if the Executive remains employed until the end of
the Agreement Term, all unvested outstanding options shall become fully
vested. Such options shall be nonqualified stock options and, except as
specifically provided in this Agreement, such annual option awards shall be
subject to the terms and conditions of the Option Plan and the applicable
provisions of the option agreement attached to this Agreement as Exhibit C.
(f) Temporary Housing and Moving Expenses. Through August 31, 2000 or, if
earlier, the date the Executive relocates his primary residence to
Michigan, the Executive shall be entitled to reimbursement for temporary
housing expenses, air travel and other out-of-pocket travel expenses in
connection with commuting from his residence in the Santa Barbara,
California area to his temporary residence in western Michigan, including
reimbursement of expenses relating to family travel for purposes of
locating permanent housing in Michigan. Expenses related to the Executive's
relocation of his primary residence to Michigan shall be fully reimbursed,
subject to the terms of the Company's relocation policy for executives. The
Company's relocation policy is attached to this Agreement as Exhibit E. All
reimbursements under this paragraph 2(f) shall be subject to the
Executive's presenting supporting documentation of such expenses as may be
reasonably required by the Company.
(g) Other Benefits. The Executive shall be eligible to participate in any and
all plans maintained by the Company from time to time to provide benefits
for its senior executives, and for its salaried employees generally,
including, without limitation, any pension, profit sharing or other
retirement plan, any life, accident, medical, hospital or similar group
insurance program and any other fringe benefit plan, subject to the normal
terms and conditions of such plans.
(h) Perquisites. The Executive shall be entitled to the perquisites
historically provided by the Company to its Chief Executive Officer,
excluding country club dues and car allowance.
4
<PAGE> 5
(i) Deferred Compensation. The Company agrees that it will cooperate with the
Executive in the establishment of a deferred compensation plan with terms
that are mutually agreeable to both parties to defer until a future date
payment of such portion of the Executive's annual compensation as he may
elect to defer.
3. Termination. The Executive's employment with the Company during the
Agreement Term may be terminated under the following circumstances.
(a) Death. The Executive's employment hereunder shall terminate upon his death.
(b) Disability. If the Executive becomes Disabled, the Company may terminate
his employment with the Company. For purposes of this Agreement, the
Executive shall be deemed to be "Disabled" if (i) he is eligible for
disability benefits under the Company's long term disability plan, or (ii)
he has a physical or mental disability which renders him incapable, after
reasonable accommodation, of performing substantially all of his duties
hereunder for a period of 180 days (which need not be consecutive) in any
12-month period. In the event of a dispute as to whether the Executive is
Disabled, the Company may, at its expense, refer him to a licensed
practicing physician of the Company's choice and the Executive agrees to
submit to such tests and examination as such physician shall deem
appropriate. The determination of such physician shall be final and binding
on the Company and Executive.
(c) Cause. The Company may terminate the Executive's employment hereunder
immediately and at any time for Cause by written notice to the Executive
detailing the basis for the Cause termination. For purposes of this
Agreement, "Cause" means in the reasonable judgment of the Board (i) gross
negligence or willful and continued failure by the Executive to
substantially perform his duties as an employee of the Company (other than
any such failure resulting from incapacity due to physical or mental
illness), (ii) willful misconduct by the Executive which is demonstrably
and materially injurious to the Company, monetarily or otherwise, (iii) the
engaging by the Executive in egregious misconduct involving serious moral
turpitude to the extent that his creditability and reputation no longer
conforms to the standard of senior executives of the Company, or (iv) the
commission by the Executive of a material act of dishonesty or breach of
trust resulting or intending to result in personal benefit or enrichment to
the Executive at the expense of the Company. For purposes of this
provision, no act or failure to act shall be deemed "willful" unless done
or omitted to be done not in good faith and without reasonable belief that
such action or omission was in the best interest of the Company.
(d) Good Reason. The Executive may terminate his employment hereunder for Good
Reason, provided that he gives the Company notice of such Good Reason
within a reasonable period (but, except as provided below, in no event more
than 30 days) after he has knowledge of the events giving rise to the Good
Reason and the Company fails to correct such events within a reasonable
period (but in no event more than 30 days) after receiving such notice from
the Executive. "Good Reason" means, without the Executive's consent, (i)
assigning duties to the Executive that are inconsistent in any substantial
respect with the position, authority, or responsibilities associated with
the
5
<PAGE> 6
office of President and Chief Executive Officer, (ii) the failure by the
Company to pay the Executive any portion of his current compensation within
ten (10) business days of the date such compensation is due, (iii) the
failure by the Company to continue any incentive compensation plan in which
the Executive participates which is material to his compensation, unless an
equitable substitute plan or alternative plan is made available to the
Executive; and (iv) the failure by the Company to obtain a satisfactory
agreement from any successor to the business of the Company to assume and
agree to perform this Agreement. In the case of clause (iv) next above,
notice of termination for Good Reason shall be given, if at all, within 30
days following the occurrence of the event giving rise to the right to
terminate for Good Reason.
(e) Termination by Executive. The Executive may terminate his employment
hereunder at any time for any reason by giving the Company prior written
notice not less than 30 days prior to such termination. Any termination
pursuant to this paragraph 3(e) shall preclude a later claim that such
termination was for Good Reason.
(f) Mutual Agreement. This Agreement may be terminated at any time by mutual
written agreement of the parties.
(g) Termination by the Company without Cause. The Company may terminate the
Executive's employment hereunder at any time for any reason by giving the
Executive written notice of such termination; provided, however,
termination by the Company shall be deemed to have occurred under this
paragraph 3(g) only if such termination by the Company is not pursuant to
paragraph 3(b), 3(c) or 3(f).
(h) Date of Termination. "Date of Termination" means the last day that the
Executive is employed by the Company under the terms of this Agreement,
provided that his employment is terminated in accordance with one of the
foregoing provisions of this paragraph 3.
4. Rights Upon Termination. The Executive's right to payments and benefits
under this Agreement for periods after his Date of Termination shall be
determined in accordance with the following provisions of this paragraph 4:
(a) If the Executive's Date of Termination occurs during the Agreement Term for
any reason, the Company shall pay to the Executive:
(i) The Executive's Salary for the period ending on the Date of
Termination.
(ii) Payment for unused vacation days, as determined in accordance with
Company policy as in effect from time to time.
(iii) Any other payments or benefits to be provided to the Executive by the
Company pursuant to any employee benefit plans or arrangements
adopted by the Company, to the extent such payments and benefits are
earned and vested as of the Date of
6
<PAGE> 7
Termination, or are required by law to be offered for periods
following the Executive's Date of Termination.
The amounts payable under clauses (i) and (ii) above shall be paid in a
lump sum as soon as practicable following such Date of Termination. Any
amounts payable under clause (iii) above shall be paid in accordance with
the terms of the applicable plan or arrangement.
(b) Notwithstanding the terms of the MIB plan, if the Executive's Date of
Termination occurs under paragraph 3(a) (relating to death) or paragraph
3(b) (relating to being Disabled), then in addition to the amounts payable
in accordance with paragraph 4(a), the Executive will be entitled to:
(i) a pro rata bonus payment for the year in which such Date of
Termination occurs, which shall be an amount equal to the product of:
(A) the bonus the Executive would have received for the fiscal year
which includes his Date of Termination if he had remained
employed by the Company until the end of such year,
Multiplied by
(B) a fraction, the numerator of which is the number of days in the
fiscal year preceding the Executive's Date of Termination and
the denominator of which is 365.
Such pro rata bonus shall be payable in a lump sum payment on the
next installment date on which bonus payments are made to
participants in the MIB plan following the end of the fiscal year to
which such bonus relates.
(ii) Vesting in outstanding stock options and restricted stock in
accordance with the applicable agreement.
(c) If the Executive's Date of Termination occurs under paragraph 3(d)
(relating to termination by the Executive for Good Reason) or paragraph
3(g) (relating to non-Cause termination by the Company), then in addition
to the amounts payable under paragraph 4(a), the Executive shall be
entitled to:
(i) An amount equal to 12 months of Salary, at the rate in effect as of
his Date of Termination.
(ii) A pro rata bonus payment for the year in which the Date of
Termination occurs, determined using the method described in
paragraph 4(b).
(iii) Vesting in outstanding stock options and restricted stock in
accordance with the applicable agreement.
7
<PAGE> 8
The amount payable under clause (i) above shall be paid in a lump sum cash
payment as soon as practicable following the Executive's Date of
Termination, but in no event later than 30 days thereafter.
(d) In the event of a Change in Control of the Company (within the meaning of
the Option Plan), all outstanding options held by the Executive shall
become immediately vested and exercisable pursuant to the terms of the
Option Plan and the restrictions on restricted stock awards shall lapse
pursuant to the applicable restricted stock agreement.
(e) Exercise of the Executive's options for periods following the Executive's
Date of Termination shall be determined in accordance with the applicable
option agreement.
(f) Notwithstanding any provision of this Agreement to the contrary, in the
event that the Executive's Date of Termination occurs for the reasons set
forth in paragraph 3(c) (relating to termination for Cause), or the Board
reasonably determines that the Executive has violated the terms of the
Noncompetition and Nondisclosure Agreement described in paragraph 6, all
outstanding options (vested and unvested), Restricted Stock and Contingent
Restricted Stock held by the Executive shall be immediately forfeited and
all payments and benefits under this Agreement, except those described in
paragraph 4(a), shall cease and be permanently forfeited.
5. Mitigation and Set Off. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise. The Company shall not be entitled to set off against
the amounts payable to the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive had he sought such other
employment.
6. Confidentiality and Noncompetition. The Executive acknowledges and
agrees that simultaneous with the execution of this Agreement, he will be
required to execute the Company's standard Noncompetition and Nondisclosure
Agreement in the form attached to this Agreement as Exhibit F. The Executive
further acknowledges that as a condition of receiving any option grants or
restricted stock awards, including those described in paragraphs 2(c) and (d),
he will be required to execute a new standard Noncompetition and Nondisclosure
Agreement substantially in the form attached to this Agreement as Exhibit F,
which shall supercede and replace any prior Noncompetition and Nondisclosure
Agreement as of the date it is executed.
7. Nonalienation. The interests of the Executive under this Agreement are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by the Executor's
creditors or beneficiaries.
8. Successors. This Agreement shall be binding upon, and inure to the
benefit of, the Company and its successors and assigns and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business.
8
<PAGE> 9
9. Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid, or sent
by facsimile or prepaid overnight courier to the parties at the addresses set
forth below (or such other addresses as shall be specified by the parties by
like notice):
to the Company:
Perrigo Company
515 Eastern Avenue
Allegan, Michigan 49010
Attn.: General Counsel
To the Executive:
David T. Gibbons
3249 Short Road
Santa Ynez, California 93460
10. Severability. The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, and this Agreement will be construed as if such
invalid or unenforceable provision were omitted (but only to the extent that
such provision cannot be appropriately reformed or modified).
11. Waiver of Breach. No waiver of any party hereto of a breach of any
provision of this Agreement by any other party will operate or be construed as a
waiver of any subsequent breach by such other party. The failure of any party
hereto to take any action by reason of such breach will not deprive such party
of the right to take action at any time while such breach continues.
12. Amendment. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other person. So
long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
13. Survival of Agreement. Except as otherwise expressly provided in this
Agreement, the rights and obligations of the parties to this Agreement shall
survive the termination of the Executive's employment with the Company.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior and contemporaneous agreements, if any, between the parties relating to
the subject matter hereof.
9
<PAGE> 10
15. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Michigan without
regard to principals of conflict of laws.
16. Acknowledgement by Executive. The Executive represents to the Company
that he is knowledgeable and sophisticated as to business matters, including the
subject matter of this Agreement, that he has read this Agreement and that he
understands its terms. The Executive acknowledges that, prior to assenting to
the terms of this Agreement, he has been given a reasonable time to review it,
to consult with counsel of his choice, and to negotiate at arm's-length with the
Company as to the contents. The Executive and the Company agree that the
language used in this Agreement is the language chosen by the parties to express
their mutual intent, and that no rule of strict construction is to be applied
against any party hereto.
IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
as of the date above first written.
EXECUTIVE PERRIGO COMPANY
____________________________ By________________________________
Its_______________________________
10
<PAGE> 11
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT entered into as of this _________ day of __________, 2000
(the "Award Date") by and between Perrigo Company, a Delaware corporation (the
"Company"), and David T. Gibbons (the "Executive")
WITNESSETH THAT:
WHEREAS, the Executive and Company have entered into an employment
agreement dated April 19, 2000 (the "Employment Agreement"); and
WHEREAS, pursuant to such Employment Agreement, the Company, by action of
the Compensation Committee of the Board of Directors, has agreed to award the
Executive shares of common stock of the Company, $.10 par value ("Common
Stock"), subject to the restrictions described in the Employment Agreement and
the following provisions of this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. Subject to the terms of this Agreement, the Executive is hereby
awarded _____________ shares of Common Stock ("Restricted Stock"), which
number of shares represents $240,000 divided by the fair market value
(within the meaning of the Employment Agreement) of a share of Common Stock
on the Award Date, rounded to the next highest whole share. Except as
otherwise specifically provided in this Agreement, the defined terms in
this Agreement shall have the meaning ascribed to such terms under the
Employment Agreement.
2. Vesting. Except as provided in paragraph 3 below, the Restricted Stock
awarded hereunder shall be permanently forfeited if the Executive's Date of
Termination occurs prior to the end of the Restricted Period. The
"Restricted Period" shall end with respect all of the shares of Restricted
Stock awarded hereunder on June 30, 2003.
3. Accelerated Vesting. Notwithstanding paragraph 2 above, if the Executive's
Date of Termination occurs because of death, Disability, involuntary
termination by the Company without Cause or voluntary termination by the
Executive for Good Reason, or in the event of a Change in Control of the
Company, the Restricted Period shall end with respect to all of the shares
of Restricted Stock awarded hereunder.
4. Terms and Conditions of Restricted Stock. The Restricted Stock granted
under this Agreement shall be subject to the following additional terms and
conditions:
(i) Shares of Restricted Stock may not be sold, assigned, pledged or
otherwise encumbered prior to the end of the Restricted Period
applicable to the shares.
(ii) Except as otherwise provided in this Agreement, the Executive shall
have all of the rights of a stockholder, including, but not limited
to, the right to vote such shares and the right to receive dividends
paid on such shares.
11
<PAGE> 12
(iii) Each certificate issued with respect to the Restricted Stock granted
under paragraph 1 shall be registered in the name of the Executive
and shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions, including
forfeiture, of an agreement entered into between the registered owner
and Perrigo Company. A copy of such agreement is on file in the
office of the Secretary of Perrigo Company, 515 Eastern Avenue,
Allegan, Michigan 49010."
(iv) The Company may require a written statement that the Executive is
acquiring the shares of Restricted Stock for investment and not for
the purpose or with the intention of distributing the shares, except
for a sale to a purchaser who makes the same representation in
writing, and that the holder of the shares of Restricted Stock,
either before or after the end of the Restricted Period, will not
dispose of them in violation of the registration requirements of the
Securities Act of 1933 or any other applicable law.
5. Adjustment to Shares. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Common Stock as a class
without receipt of consideration, then any new, substituted or additional
securities or other property (including money paid other than as a regular
cash dividend), which is by reason of any such transaction distributed to
the Executive with respect to the shares of Restricted Stock, shall be
immediately subject to a similar Restricted Period. Appropriate adjustments
to reflect the distribution of such securities or property shall also be
made to the number of shares of Restricted Stock.
6. Withholding. This award is subject to the withholding of all applicable
taxes. The Company may withhold, or permit the Executive to remit to the
Company, any Federal, state or local taxes applicable to the grant, vesting
or other event giving rise to tax liability with respect to this award. The
Executive may elect to surrender previously acquired Common Stock or to
have the Company withhold Common Stock relating to this award in an amount
sufficient to satisfy all or a portion of such tax liability.
7. Compliance with Applicable Law. Notwithstanding any other provision of this
Agreement, the Company shall have no obligation to issue any shares of
Restricted Stock or Common Stock under this Agreement if such issuance
would violate any applicable law or any applicable regulation or
requirement of any securities exchange or similar entity.
8. Successors and Assigns. This Agreement shall be binding upon any or all
successors and assigns of the Company.
12
<PAGE> 13
9. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Michigan
without regard to principals of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the day and year first above written.
PERRIGO COMPANY
By________________________________
Its_______________________________
ATTEST:
- --------------------------------
EXECUTIVE
----------------------------------
<PAGE> 14
CONTINGENT RESTRICTED STOCK AGREEMENT
THIS AGREEMENT entered into as of this _________ day of _______________,
2000 (the "Award Date") by and between Perrigo Company, a Delaware corporation
(the "Company"), and David T. Gibbons (the "Executive")
WITNESSETH THAT:
WHEREAS, the Executive and Company have entered into an employment
agreement dated April 19, 2000 (the "Employment Agreement"); and
WHEREAS, pursuant to such Employment Agreement, the Company, by action of
the Compensation Committee of the Board of Directors, has agreed to award the
Executive shares of common stock of the Company, $.10 par value ("Common
Stock"), subject to the restrictions described in the Employment Agreement and
the following provisions of this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. Subject to the terms of this Agreement, the Executive is hereby
awarded 50,000 shares of Common Stock ("Contingent Restricted Stock") as
of the Award Date. Except as otherwise specifically provided in this
Agreement, the defined terms in this Agreement shall have the meaning
ascribed to such terms under the Employment Agreement.
2. Vesting. Except as provided in paragraph 3 below, the Contingent
Restricted Stock awarded hereunder shall be permanently forfeited if the
Executive's Date of Termination occurs prior to June 30, 2001 (the
"Contingent Vesting Date"). If the Executive remains employed until the
Contingent Vesting Date, then on such date the Executive shall
contingently vest in one share of Contingent Restricted Stock for each two
shares of Common Stock that the Executive has acquired in open market
transactions and that are held by him on the Contingent Vesting Date. Any
shares of Contingent Restricted Stock that do not contingently vest on the
Contingent Vesting Date shall be permanently forfeited. Except as
otherwise specifically provided in this Agreement, the Contingent
Restricted Stock still held after June 30, 2001, if any, shall become
fully vested and nonforfeitable on June 30, 2003 and, except as otherwise
provided in paragraph 3 below, shall be permanently forfeited if the
Executive's Date of Termination occurs prior to such date.
3. Accelerated Vesting. Notwithstanding paragraph 2 above, if the Executive's
Date of Termination occurs prior to the Contingent Vesting Date because of
death, Disability, involuntary termination of employment by the Company
without Cause or voluntary termination by the Executive for Good Reason,
or in the event of a Change in Control of the Company prior to the
Contingent Vesting Date, then on such Date of Termination or Change in
Control, as applicable, the Executive shall vest and have a nonforfeitable
interest in one share of Contingent Restricted Stock for each two shares
of Common Stock that the Executive has acquired in open market
transactions and that are held by him on such Date of Termination or date
of a Change in Control and, if such Date of
14
<PAGE> 15
Termination or Change in Control occurs after the Contingent Vesting Date,
the Executive shall have a fully vested and nonforfeitable interest in all
of the Contingent Restricted Stock that has not been permanently forfeited
prior to such Date of Termination or Change in Control.
4. Terms and Conditions of Contingent Restricted Stock. The Contingent
Restricted Stock granted under this Agreement shall be subject to the
following additional terms and conditions:
(i) The shares of Contingent Restricted Stock may not be sold, assigned,
pledged or otherwise encumbered prior to the date on which the
Executive vests in and acquires a nonforfeitable interest in such
shares.
(ii) Except as otherwise provided in this Agreement, the Executive shall
have all of the rights of a stockholder, including, but not limited
to, the right to vote such shares and the right to receive regular
cash dividends paid on such shares.
(iii) Each certificate issued with respect to the Contingent Restricted
Stock granted under paragraph 1 shall be registered in the name of
the Executive and shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions,
including forfeiture, of an agreement entered into between the
registered owner and Perrigo Company. A copy of such agreement is on
file in the office of the Secretary of Perrigo Company, 515 Eastern
Avenue, Allegan, Michigan 49010."
(iv) The Company may require a written statement that the Executive is
acquiring the shares of Contingent Restricted Stock for investment
and not for the purpose or with the intention of distributing the
shares, except for a sale to a purchaser who makes the same
representation in writing, and that the holder of the shares of
Contingent Restricted Stock, either before or after the end of the
vesting period, will not dispose of them in violation of the
registration requirements of the Securities Act of 1933 or any other
applicable law.
5. Adjustment to Shares. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Common Stock as a class
without receipt of consideration, then any new, substituted or additional
securities or other property (including money paid other than as a regular
cash dividend), which is by reason of any such transaction distributed to
the Executive with respect to the shares of Contingent Restricted Stock,
shall be immediately subject to a similar restrictions. Appropriate
adjustments to reflect the distribution of such securities or property
shall also be made to the number of shares of Contingent Restricted Stock
and the number of shares of Common Stock that must be acquired by the
Executive to vest in such Contingent Restricted Stock.
15
<PAGE> 16
6. Withholding. This award is subject to the withholding of all applicable
taxes. The Company may withhold, or permit the Executive to remit to the
Company, any Federal, state or local taxes applicable to the grant,
vesting or other event giving rise to tax liability with respect to this
award. The Executive may elect to surrender previously acquired Common
Stock or to have the Company withhold Common Stock relating to this award
in an amount sufficient to satisfy all or a portion of such tax liability.
7. Compliance with Applicable Law. Notwithstanding any other provision of
this Agreement, the Company shall have no obligation to issue any shares
of Contingent Restricted Stock or Common Stock under this Agreement if
such issuance would violate any applicable law or any applicable
regulation or requirement of any securities exchange or similar entity.
8. Successors and Assigns. This Agreement shall be binding upon any or all
successors and assigns of the Company.
9. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Michigan
without regard to principals of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the day and year first above written.
PERRIGO COMPANY
By
-------------------------------
Its
-------------------------------
ATTEST:
- --------------------------------
EXECUTIVE
-------------------------------
16
<PAGE> 17
NONCOMPETITION AND NONDISCLOSURE AGREEMENT
THIS NONCOMPETITION AND NONDISCLOSURE AGREEMENT ("Agreement") entered into
on ________________, 2000 by and between PERRIGO COMPANY, a Michigan
corporation, for and in behalf of itself and each of its subsidiary and
affiliated companies (collectively referred to as "Perrigo" or the "company"),
and David T. Gibbons (referred to as "Employee").
WITNESSETH:
WHEREAS Perrigo's special competence in its various fields of endeavor is
the secret of its growth, and provides the source of both career opportunities
and security for employees throughout the company. Such growth depends to a
significant degree on Perrigo's confidential, proprietary information. This is
information that is not generally known to others and includes more and better
information than our competitors have about research, development, production,
marketing and management in the manufacture, preparation, handling, treatment,
storage, sale, distribution, shipment and use of products for the Store and
Value Brand Product (as herein defined) ("Company Business"). To obtain such
information and use it successfully, Perrigo spends considerable sums of money
in product development, the development of marketing methods, training its
employees, and service to its customers; and
WHEREAS Employee is a key employee of Perrigo. In connection with
providing such employment services, Employee has obtained or will obtain access
to sensitive information regarding the Company's Business and its customers. The
parties agree that improper disclosure or use of that information will cause
serious and irreparable harm to the company; and
WHEREAS Perrigo has established the Perrigo Company Employee Incentive
Stock Option Plan (the "Incentive Stock Option Plan") as an incentive to certain
key employees of Perrigo to remain in the employ of the company and to encourage
stock ownership in the company; and
WHEREAS on the date hereof Perrigo has issued to Employee under the
Incentive Stock Option Plan an option to purchase a specified number of shares
of the Common Stock of Perrigo on the condition that Employee enter into this
Agreement.
NOW, THEREFORE, in consideration for the issuance of stock pursuant to the
Incentive Stock Option Plan and for other good and valuable consideration, the
receipt of which is acknowledged, the parties agree as follows:
2
<PAGE> 18
1. Restriction on Competing Activities During Term of Employment. During
the term of Employee's employment with Perrigo, Employee will not, directly or
indirectly, alone or as a partner, officer, director, owner, employee, or
consultant of any business or other entity, be engaged in any business or other
enterprise that competes, directly or indirectly, with the Company Business
without the express written consent of the Board of Directors of Perrigo.
2. Restriction on Post-Employment Activities. If Employee's employment
with Perrigo is terminated, either voluntarily by him or by Perrigo, within a
period of five (5) years from the date of this Agreement, then, for a period of
two (2) years thereafter, Employee shall not, directly or indirectly, alone or
as a partner, director, officer, owner, employee or consultant of any business
or other entity, compete in any way with the Company Business. In addition to
its plain meaning and understanding, "compete in any way with the Company
Business" shall also specifically include engaging in any way in the production,
distribution or sale of any products to the Store and Value Brand Products that
are similar to or competitive with those now or hereafter produced, distributed
or sold by Perrigo. As used in this Agreement, "Store and Value Brand Products"
means those products that are supplied by a manufacturer or marketer through
channels of distribution (including but not limited to, wholesalers,
distributors and retailers) that bear either (i) a label or brand name that is
used exclusively by the wholesaler, distributor or retailer, or (ii) a label or
brand name that is not regularly advertised by national broadcast, print, direct
mail or other media for the purpose of establishing brand name recognition of
the manufacturer, marketer and/or distributor with the general public.
Employee also agrees that during this two-year period, he will not,
directly or indirectly, either for himself or any other person, solicit or
induce, or attempt to solicit or induce, any individual who is an employee,
independent contractor, supplier, or customer of Perrigo to terminate his, her,
or its business relationship with the company or in any way interfere with or
disrupt the company's relationship with any of its employees, independent
contractors, suppliers, or customers.
3. Nondisclosure. Employee will not during or at any time after the
termination of employment with Perrigo use, divulge, or convey to others any
secret or confidential information, knowledge or data of Perrigo or that of
third parties obtained by Employee during the period of employment with Perrigo.
Such secret or confidential information, knowledge or data includes, but is not
limited to, secret or confidential matters:
(a) of a technical nature such as, but not limited to, methods,
know-how, formulas, compositions, processes, discoveries, machines,
inventions, computer programs and similar items or research projects,
3
<PAGE> 19
(b) of a business nature such as, but not limited to, information
about costs, purchasing, profits, marketing, sales or lists of customers,
and
(c) pertaining to future developments such as, but not limited to,
research and development or future marketing or merchandising.
4. Return of Company Property. Upon termination of employment with
Perrigo, or at any other time at Perrigo's request, Employee agrees:
(a) To deliver promptly to Perrigo all manuals, letters, notes,
papers, books, reports, sketches, computer data or disks, files and
programs, price lists, customer files, memoranda, contracts and
agreements, business and marketing plans, product formulations,
manufacturing processes, procedures and methods (including equipment
specifications and drawings), vendor lists, vendor files, customer lists,
stored or recorded documents, and all other materials and copies thereof
relating in any way to the Company's Business and in any way obtained by
Employee during the period of employment with Perrigo which are in
Employee's possession or under his control. Employee further agrees that
he will not make or retain any copies of any of the foregoing and will so
represent to Perrigo upon termination of employment.
(b) To confirm to Perrigo that all of Perrigo's computer records,
files and programs have first been turned over to Perrigo and then deleted
or erased from all computer equipment owned, leased or used by Employee.
(c) To return to Perrigo all personal property provided for
Employee's use during his employment with Perrigo including, but not
limited to, automobiles, computers and related equipment, telephones,
credit cards, security cards and identifications, keys and tools.
5. Remedies. Employee acknowledges and agrees that monetary damages for
his breach of any provision of this Agreement would be an inadequate remedy and
that the company would not have an adequate remedy at law for such breach.
Accordingly, Employee agrees that, in addition to all other rights and remedies
available to the company to enforce its rights pursuant to this Agreement, the
company shall, without the necessity of proving irreparable harm or of posting a
bond, be entitled to such equitable relief from any court with proper
jurisdiction, including, but not limited to, an injunction, a temporary
restraining order, or an order for specific performance, as may be necessary to
enforce or prevent a violation (whether anticipatory, continuing, or future) of
any provision of this Agreement. If Employee breaches
4
<PAGE> 20
any provision of this Agreement, he shall pay all expenses, including court
costs and actual attorney fees, incurred by the company in enforcing such
provision.
6. Enforceability. The unenforceability of any provision or portion of any
provision of this Agreement shall not affect the enforceability of the remaining
provisions or the remainder of any provision of this Agreement. If at any time a
court determines that any restrictive covenant contained in this Agreement is
unreasonable, the parties agree that the maximum restriction permitted by law
shall be substituted for the stated restriction and that such substitution shall
govern this Agreement as if originally part of this Agreement.
7. Binding Effect. This Agreement and the rights and obligations of
Perrigo hereunder shall inure to the benefit of and be binding upon Perrigo and
its successors and assigns.
8. Entire Agreement Modifications. This Agreement contains the entire
agreement between the parties with respect to its subject matter and supersedes
all other agreements, whether oral or written, between the parties regarding
such subject matter. This Agreement may be modified or terminated only through a
written instrument signed by each of the parties.
9. Waiver. The waiver by either party of the enforcement or the breach of
any provision of this Agreement shall not operate or be construed as a
subsequent or continuing waiver of the enforcement or the breach of any
provision. The failure by either party to insist upon strict compliance of any
provision of this Agreement shall not be deemed a waiver of such provision. No
waiver shall be valid unless in writing and signed by the party giving the
waiver.
10. Governing Law. This Agreement shall be enforced, governed, and
construed by the laws of the state of Michigan, regardless of the fact that
either of the parties may be or becomes a resident of another state.
The parties have executed this Agreement as of the date first appearing
above.
PERRIGO COMPANY
By
---------------------------------------
Chairman of the Compensation Committee
5
<PAGE> 21
DAVID T. GIBBONS
-------------------------------------
6
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> APR-01-2000
<CASH> 883
<SECURITIES> 0
<RECEIVABLES> 96,139
<ALLOWANCES> 3,877
<INVENTORY> 139,147
<CURRENT-ASSETS> 283,948
<PP&E> 335,638
<DEPRECIATION> 141,402
<TOTAL-ASSETS> 506,881
<CURRENT-LIABILITIES> 100,680
<BONDS> 26,900
0
0
<COMMON> 102,164
<OTHER-SE> 257,688
<TOTAL-LIABILITY-AND-EQUITY> 506,881
<SALES> 588,105
<TOTAL-REVENUES> 588,105
<CGS> 452,669
<TOTAL-COSTS> 452,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 204
<INTEREST-EXPENSE> 6,491
<INCOME-PRETAX> 42,307
<INCOME-TAX> 14,943
<INCOME-CONTINUING> 27,364
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<EXTRAORDINARY> 0
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<NET-INCOME> 27,364
<EPS-BASIC> 0.37
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</TABLE>
