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 KALAMAZOO, Mich., Oct. 19 /PRNewswire/ -- The Upjohn Company today reported that 1993 third-quarter and nine-month sales increased 1 and
4 percent, respectively, over prior-year levels. A restructuring charge was recorded in the third quarter as part of the company's ongoing strategy to reduce costs and improve future financial performance.
 Sales growth was led by human health care products, increasing 2 percent and 6 percent for the third quarter and first nine months of 1993, respectively. The human health care segment showed good sales volume growth worldwide. These gains were partially offset by unfavorable foreign exchange comparisons and a decrease in sales price.
 Before restructuring charges and unusual items, third quarter net earnings and primary earnings per share would have increased 5 percent and 6 percent over third quarter 1992 levels, respectively, to $153 million or 86 cents per share. After-tax restructuring charges and unusual items of $183 million ($255 million before tax) and $15 million ($24 million before tax) for the third quarter of 1993 and 1992, respectively, resulted in a net loss of $30 million in the third quarter of 1993 compared to net earnings of $131 million in the third quarter of 1992. These charges resulted in a primary loss per share of 19 cents in the third quarter of 1993 compared to earnings of 73 cents in the prior- year period.
 The 1993 restructuring and unusual items include costs associated with a worldwide work force reduction of approximately 1,500 employees to be substantially completed by December 1994; elimination or reduction of excess manufacturing capacity in 14 plantsworldwide to be completed over the next several years; the write-down of certain intangible assets and an increase in liability reserves.
 Commenting on the company's results, President and Chief Operating Officer Ley S. Smith said: "The restructuring charges are part of our ongoing plan to adjust our cost structure to reflect the changing dynamics in the worldwide marketplace. These actions are expected to save a minimum of $150 million in annual operating expenses."
 "Our strategic plan remains on course and is working," said Smith. "The plan includes maintaining a strong investment in our focused product development programs; improving operating efficiency through organizational restructuring and other cost control measures; concentrating our efforts on core business strengths; and remaining a flexible organization able to adapt quickly to a changing customer base. This plan will help reduce the effect of patent expirations and bridge Upjohn to the future when important products will emerge from our pipeline."
 Smith said, "We will continue to prudently manage our resources and strategically position Upjohn in order to enhance shareholder value in the future and take advantage of growth opportunities in new markets such as Central Europe, China and India."
 By the end of 1994, the company expects worldwide employment levels to be approximately 17,500. Since the beginning of 1989, the Upjohn work force has been reduced from 21,100, primarily as a result of two voluntary early retirement programs, the divestiture of businesses and the elimination of activities that did not fit strategic objectives.
 Smith said, "While we are taking actions to reduce costs, we are not reducing our investment in important research and development programs that are critical to the rapid development of innovative products. As a result of this continued strong investment in research and development and the loss of U.S. patent protection on several major products, we expect earnings in 1994 to be below 1993 levels."
 Financial highlights listed below are in millions of dollars (except per-share data). Data presented for 1992 reflects restatements related to the adoption of new accounting principles in the fourth quarter of 1992.
 Third Quarter
 Ended September 30
 1993 1992 Percent change
 Net sales $900 $894 1 pct.
 Earnings before restructuring
 and unusual items $153 $146 5 pct.
 Restructuring and unusual items 183 15
 Net earnings (loss) ($30) $131
 Primary earnings per share
 before restructuring and
 unusual items $.86 $.81 6 pct.
 Restructuring and unusual items
 per share 1.05 .08
 Primary earnings (loss) per share($.19) $.73
 Nine Months
 Ended September 30
 1993 1992 Percent change
 Net sales $2,747 $2,650 4 pct.
 Earnings before restructuring,
 unusual items and the cumulative
 effect of accounting changes $ 431 $408 6 pct.
 Restructuring and unusual items 183 15
 Accounting changes 8 223
 Net earnings $240 $170 41 pct.
 Nine Months
 Ended September 30
 1993 1992 Percent change
 Primary earnings per share
 before restructuring, unusual items
 and the cumulative effect of
 accounting changes $2.41 $2.26 7 pct.
 Restructuring and unusual items
 per share 1.05 .08
 Accounting changes per share .04 1.26
 Primary earnings per share $1.32 $.92 43 pct.
 Unless noted otherwise, the financial results exclude the restructuring charges and unusual items that were recorded in the third quarters of 1993 and 1992.
 Consolidated U.S. sales for the quarter were $568 million, up 1 percent from a year ago. Non-U.S. sales of $332 million were down 1 percent and amounted to 37 percent of consolidated sales.
 Operating income of $197 million was up 5 percent from the third quarter of 1992 and amounted to 22 percent of sales. Cost of products sold decreased slightly and remained at 25 percent of sales. Marketing and administrative costs decreased to 36 percent of sales (40 percent of sales after unusual items), compared to 38 percent in the third quarter of 1992. Research and development expense increased to 18 percent of sales from 16 percent a year ago. Accelerated clinical testing of Freedox, the lazaroid compound being tested for the treatment of head injury, spinal cord injury, subarachnoid hemorrhage and ischemic stroke; anti-AIDS compounds; Caverject, for erectile dysfunction; and several central nervous system compounds continued.
 Earnings before tax were $197 million, compared to $190 million in the third quarter of 1992.
 The effective tax rate for the first nine months of 1993 is 19.5 percent. Excluding the tax benefits related to the restructuring charges and other unusual items (including adjustment of deferred tax amounts due to the new tax aw), the effective tax rate for the first nine months would have been 24 percent. The effective tax rate for the first nine months of 1992 was 23 percent.
 Worldwide sales of human health care products increased 2 percent over third-quarter 1992 levels. New products introduced in the U.S. since the first quarter of 1992 contributed more than 8 percent of U.S. sales in the third quarter of 1993. These products include Vantin, the broad-spectrum oral antibiotic; Glynase, the oral antidiabetes agent, and Depo-Provera, the injectable contraceptive. Sales of the anti- anxiety agent, Xanax (alprazolam); the injectable steroid, Solu-Medrol; and the progestational agent, Provera (medroxyprogesterone), also contributed to the sales growth. Worldwide sales of the sleep medication, Halcion (triazolam), rose slightly in the third quarter.
 Sales of Rogaine, the treatment for hair loss, were down significantly. Sales of Ansaid, the nonsteroidal anti-inflammatory agent remained down. Sales of the oral antidiabetes agent Micronase (glyburide) were down due to a shift of promotional support to Glynase, the glyburide formulation introduced in 1992.
 Human health care sales outside the U.S. were up 1 percent, reflecting increased sales of the antibiotic Dalacin (Cleocin) and Xanax; strong sales gains in Latin America and emerging markets in Asia, Central Europe and China; and a stronger Japanese Yen. These gains were partially offset by unfavorable foreign exchange comparisons in Europe.
 Worldwide agricultural sales decreased 6 percent over prior-year levels as unfavorable exchange rates in Europe and Canada depressed sales. A strong performance in the U.S. animal health business was more than offset by a decline in sales of non-U.S. animal health and worldwide agronomic seed businesses. Animal health sales were led by a strong worldwide performance from Naxcel, the antibiotic. Agronomic seed sales were unfavorably affected by the switch to calendar versus fiscal year accounting which had the effect of shifting June sales, a planting period, into the second quarter of 1993 compared to the third quarter of 1992. Unfavorable weather conditions in the U.S. also contributed to the decline in agronomic seed sales.
 The Upjohn Company is a worldwide, research-based provider of human health care products, animal health products, agronomic and vegetable seeds and specialty chemicals. Headquartered in Kalamazoo, the company has been dedicated to improving health and nutrition for more than a century.
 THE UPJOHN COMPANY and subsidiaries
 report for the quarter and nine months ended September 30, 1993
 (unaudited; amounts in thousands, except per-share data):
 Third Quarter Nine Months
 1993 1992 1993 1992
 Net sales $899,860 $894,364 $2,747,387 $2,649,807
 Other revenue 10,039 6,313 24,878 19,249
 Operating revenue 909,899 900,677 2,772,265 2,669,056
 Cost of products sold 222,049 225,405 731,000 720,519
 Research & development 165,940 145,161 481,996 417,962
 Marketing & administrative 364,410 343,514 1,054,444 1,014,771
 Restructuring 216,000 23,956 216,000 23,956
 Operating income (loss) (58,500) 162,641 288,825 491,848
 Interest income 14,335 15,240 41,082 42,445
 Interest expense (7,630) (7,949) (25,737) (22,890)
 Foreign exchange losses (2,133) (1,279) (4,324) (2,798)
 All other, net (4,442) (2,528) 5,402 2,241
 Earnings (loss) before income
 taxes, accounting changes
 and minority equity (58,370) 166,125 305,248 510,846
 Provision for income taxes (27,800) 34,800 59,500 117,500
 Minority equity in
 (losses) earnings (500) (173) (1,833) 372
 Earnings (loss) before
 cumulative effect of
 accounting changes (30,070) 131,498 247,581 392,974
 Cumulative effect of
 accounting changes
 (net of tax) --- --- (7,791) (222,895)
 Net earnings (loss) (30,070) 131,498 239,790 170,079
 Dividends on preferred stock 2,962 3,036 9,084 9,056
 Net earnings (loss)
 on common stock ($33,032) $128,462 $230,706 $161,023
 Earnings per common share:
 -Earnings (loss)
 before accounting
 changes $ (.19) $ .73 $ 1.36 $ 2.18
 -Cumulative effect of
 accounting changes --- --- (.04) (1.26)
 -Net earnings (loss) $ (.19) $ .73 $ 1.32 $ .92
 Fully Diluted
 -Earnings (loss) before
 accounting changes $ (.19) $ .71 $ 1.34 $ 2.12
 -Cumulative effect of
 accounting changes --- --- (.04) (1.21)
 -Net earnings (loss) $ (.19) $ .71 $ 1.30 $ .91
 -0- 10/19/93
 /CONTACT: (Media Contact) John P. Lambrechts, 616-323-7076, or (Investor Contact) Barbara L. Guinness, 616-323-5918, both of The Upjohn Company/

CO: The Upjohn Company ST: Michigan IN: MTC SU: ERN

SM -- DE015 -- 3880 10/19/93 10:49 EDT
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Publication:PR Newswire
Date:Oct 19, 1993
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