-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qapz7JzikifHWTa5r6HMoERwlz1dgHu+NAzu25LNnsNjsSgSwHyoGskXrpSix5sj jL6vN8cl7253dHVA/zh2iQ== 0000853022-98-000014.txt : 19980518 0000853022-98-000014.hdr.sgml : 19980518 ACCESSION NUMBER: 0000853022-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROBERTS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000853022 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 222429994 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10432 FILM NUMBER: 98625000 BUSINESS ADDRESS: STREET 1: MERIDIAN CENTER II STREET 2: 4 INDUSTRIAL WAY W CITY: EATONTOWN STATE: NJ ZIP: 07724 BUSINESS PHONE: 7323891182 MAIL ADDRESS: STREET 1: 4 INDUSTRIAL WAY WEST STREET 2: 4 INDUSTRIAL WAY WEST CITY: EATONTOWN STATE: NJ ZIP: 07755 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number: 1-10432 March 31, 1998 ROBERTS PHARMACEUTICAL CORPORATION (Exact name of registrant as specified in its charter) NEW JERSEY 22-2429994 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) MERIDIAN CENTER II 4 INDUSTRIAL WAY WEST EATONTOWN, NEW JERSEY 07724 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (732) 389-1182 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Class Outstanding Shares at May 13, 1998 Common Stock 31,253,335 ROBERTS PHARMACEUTICAL CORPORATION INDEX Page Part I Item 1 - Financial Statements 2 Item 2 - Management's Discussion and Analysis 9 Signatures 12 ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 1998 December 31, 1997 -------------- ----------------- ASSETS: Current assets: Cash and cash equivalents $ 37,381 $ 42,950 Marketable securities 45,008 39,887 Accounts receivable, net 25,833 24,730 Inventory 20,781 19,826 Notes receivable, current 225 225 Deferred tax assets 4,962 4,962 Net assets held for sale 4,186 3,760 Other current assets 3,555 1,647 -------- -------- Total current assets 141,931 137,987 Fixed assets, net 28,954 25,913 Intangible assets 189,095 190,724 Notes receivable 643 729 Deferred non-current tax asset 12,332 12,332 Other assets 1,169 170 -------- -------- Total assets $374,124 $367,855 ======== ========
The accompanying notes are an integral part of these financial statements. - 2 - ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 1998 December 31, 1997 -------------- ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 7,881 $ 8,037 Accounts payable 12,839 13,188 Income taxes payable 4,442 3,022 Dividends payable 34 150 Other current liabilities 18,508 15,584 -------- -------- Total current liabilities 43,704 39,981 Long-term debt, excluding current installments 6,552 10,327 Other liabilities 219 244 Shareholders' equity: Class B preferred stock, $.10 par 10,000,000 shares authorized, 109,841 and 1,004,622 outstanding 11 48 Common stock, $.01 par, 100,000,000 shares authorized, 30,819,836 and 27,234,370 outstanding 313 299 Additional paid-in capital 376,440 372,384 Accumulated other comprehensive income (1,047) (1,250) Retained earnings (deficit) (51,831) (53,941) Treasury stock, 387,594 shares of common stock, at cost (237) (237) --------- --------- Total shareholders' equity 323,649 317,303 --------- --------- Total liabilities and shareholders' equity $374,124 $367,855 ========= =========
The accompanying notes are an integral part of these financial statements. - 3 - ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
For the three months ended March 31, 1998 1997 --------- --------- Sales and Revenue: Sales $ 32,588 $ 26,330 Other revenue 259 0 --------- --------- Total sales and revenue 32,847 26,330 --------- --------- Operating costs and expenses: Cost of sales 12,603 11,652 Research & development 2,660 1,834 Marketing & administration 15,050 12,421 --------- --------- Total operating costs & expenses 30,313 25,907 --------- --------- Operating income 2,534 423 --------- --------- Other income (expense): Interest income 1,273 1,168 Interest expense (269) (254) Foreign currency gain (loss) (26) (13) Other income(expense), net (43) --- --------- --------- Total other income 935 901 --------- --------- Income from continuing operations before income taxes 3,469 1,324 Provision from income taxes 1,324 414 --------- --------- Net income $ 2,145 $ 910 ========= ========= Net income per share of common stock Basic .07 .03 ========= ========= Diluted .07 .02 ========= ========= Weighted average number of common shares outstanding: Basic 30,185,163 26,265,681 Diluted 30,205,280 27,421,143
The accompanying notes are an integral part of these financial statements. - 4 - ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the three months ended March 31, 1998 1997 -------- --------- Net income $ 2,145 $ 910 -------- --------- Other comprehensive income: Foreign currency translation adjustment 203 (240) -------- --------- Other comprehensive income 203 (240) -------- --------- Comprehensive income $ 2,348 $ 670 ======== =========
The accompanying notes are an integral part of these financial statements. - 5 - ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
For the three months ended March 31, 1998 1997 -------- --------- Cash flows from operating activities: $ 2,972 $ 3,164 -------- --------- Cash flows from investing activities: Purchase (redemption) of marketable securities (5,120) 467 Purchases of intangible assets (45) 0 Purchases of fixed assets (3,221) (92) Collection on notes receivable 100 1,424 -------- -------- Net cash provided by (used in) investing activities (8,286) 1,799 -------- -------- Cash flows from financing activities: Payments on notes payable and long term debt (4,200) (4,655) 5% Preferred stock dividends paid (150) (920) Net proceeds from issuance of common stock 76 288 Net proceeds from issuance of 5% preferred stock 3,957 0 -------- -------- Net cash used in financing activities (317) (5,287) -------- -------- Exchange rate changes on cash and cash equivalents 62 (35) -------- -------- Change in cash and cash equivalents (5,569) (359) Beginning cash and cash equivalents 42,950 87,125 -------- -------- Ending cash and cash equivalents $37,381 $86,766 ======== ======== Supplemental cash flow information: Interest paid $ 638 $ 862 Income taxes paid 15 7
The accompanying notes are an integral part of these financial statements. - 6 - 1. Summary of Significant Accounting Policies ------------------------------------------ Basis of Presentation - --------------------- Roberts Pharmaceutical Corporation is an international pharmaceutical company which licenses, acquires, develops and commercializes post-discovery drugs in selected therapeutic categories. The Company currently markets approved pharmaceutical products in the United States, Canada, the United Kingdom and several other European countries. The consolidated financial statements include the accounts of Roberts Pharmaceutical Corporation and its majority-owned subsidiaries. All significant intercompany transactions are eliminated. All dollar amounts are presented in thousands, except for earnings per share. Foreign Currency Translation - ---------------------------- Effective January 1, 1997, the functional currency of the United Kingdom subsidiary, Monmouth Pharmaceutical, Ltd., was changed from the U.S. Dollar to the British Pound. Monmouth's translation gains and losses are accumulated as a separate component of Shareholders' Equity. New Accounting Pronouncements - ----------------------------- Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general- purpose financial statements. This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This Statement requires that a company (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This Statement is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise Related Information" (SFAS No. 131), establishes standards for the way that public business companies report information about operating segments in annual financial statements and requires that those companies report selected information about operating segments in annual financial - 7 - statements and requires that those companies report selected information about operating segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. This Statement supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains the requirement to report information about major customers. This Statement is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. The adoption of these Statements will not have an impact on the Company's consolidated results of operation, financial position or cash flow. Reclassification - ---------------- Certain items have been reclassified to conform to the current year presentation. 2. Inventory --------- Inventory at March 31, 1998 consists of: Raw Materials $ 3,154 Finished Goods 17,627 ------- Total $20,781 ======= 3. Change in Accounting Estimate ----------------------------- During the first quarter 1998, management made a change in accounting estimate in the amount of $1.0 million relating to the accrual of rebates for a product to which Roberts has sole United States distribution rights. - 8 - Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations Three months ended March 31, 1998 and 1997 Corporate Revenues - ------------------ Total revenue for the three months ended March 31, 1998 increased $6.5 million as compared with the first three months of 1997. This increase was principally due to an increase in revenues from product sales, however with the addition of Roberts manufacturing facility during the second half of 1997, there is now a contract manufacturing revenue component included in corporate revenue. Product Sales - ------------- For the three months ended March 31, 1998, product sales increased $6.2 million from $26.3 million to $32.5. U.S. product sales increased $6.2 million from $17.8 million to $24.0 million. PROAMATINE provided $2.4 million of this increase, NOROXIN provided $2.7 million and SLOWMAG showed a net increase over NORETHIN of $0.9 million. Sales of the Company's United Kingdom subsidiary, Monmouth Pharmaceuticals, Ltd., remained even with the prior year reporting a $0.05 million increase. Sales of the Company's Canadian subsidiary decreased slightly by $0.02 million from $3.21 million to $3.19 million due to negative currency rate fluctuations. Product sales in local currency actually increased over the same period last year. Contract Manufacturing - ---------------------- Outside contract manufacturing performed at Roberts manufacturing facility amounted to $0.3 million for the three months ended March 31, 1998. The manufacturing facility, located in Oakville, Ontario, Canada, was acquired in July 1997 and will continue to provide outside contract and clinical manufacturing revenue. Cost of Sales - ------------- For the three months ended March 31, 1998, cost of sales amounted to 38.4% of product sales, a 5.9 percentage point decrease as compared to the prior year's comparable period. This decrease in cost of sales and corresponding increase in gross profit percentage is the result of the first quarter 1997 inclusion of a $1.8 million charge for minimum royalties due to Ortho Pharmaceutical Corporation for SUPPRELIN sales and the first quarter 1998 $1.0 million credit related to change in estimate for rebates. The 1997 charge of $1.8 million was partially reversed during the third quarter 1997 after contract renegotiations substantially reduced the minimum royalty due. - 9 - Research and Development - ------------------------ Research and Development expenses increased $0.8 million to $2.7 million during the three months ended March 31, 1998 as compared to the comparable prior year period. This increase is due to an increased level of expenditure required to support the Company's development program for STANATE and an increase due to the ongoing Phase IV MIDODRINE trials offset by a decrease in the cost of purchased research and development. Marketing and Administrative Expenses - ------------------------------------- For the three months ended March 31, 1998, Marketing and Administrative expenses increased $2.6 million from $12.4 million to $15.0 million. Marketing expenses increased $0.9 million as a result of many factors, including $0.3 million attributable to the 1997 initiation of auto and equipment leasing agreements, $0.3 million in sales meetings, and $0.2 million in increased brokers commissions. Administrative expense increased $1.7 million from $5.5 million to $7.2 million. This increase was due primarily to $1.2 million increase in compensation cost, however $0.2 million relates to a distribution cost overlap as Roberts moves from an outside distribution center to the newly purchased, wholly owned, distribution facility located in Buffalo Grove, Illinois, and $0.1 million is caused by an increase in goodwill amortization for products purchased during 1997. Interest Income and Expense - --------------------------- Interest income increased $0.1 million. Interest expense increased by $0.01 million as a result of an increase in long-term debt related to product acquisitions with the current increase mainly due to the addition of debt associated with the December 1997 acquisition of SLOWMAG. Income Taxes - ------------ For the three months ended March 31, 1998 and 1997, income tax expense was calculated using a normal statutory rate for continuing operations, except for certain taxes related to foreign operations. The Company has recorded net deferred tax assets of approximately $17.3 million. Realization is dependent upon generating sufficient taxable income to utilize such items. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized; however, these assets could be reduced at any time if estimates of future taxable income are reduced. - 10 - Liquidity and Capital Resources - ------------------------------- Operating activities provided $3.0 million in cash. The primary components of cash provided by operating activities were net income of $2.1 million, which includes $2.1 million of non-cash charges, offset by a $1.0 million increase in accounts receivable and increased working capital requirements of $0.2 million. Investing activities used $8.3 million, comprised primarily of $5.1 million in marketable securities purchases and $3.2 million in purchases of fixed assets. Financing activities used $0.3 million, including $4.2 million of payments on notes payable and payment of $0.2 million of preferred stock dividends paid partially offset by proceeds from the issuance of Common Stock. In April, the Company acquired exclusive U.S. rights to market PENTASA(r), a patented gastrointestinal drug for ulcerative colitis, from Hoechst Marion Roussel (HMR). According to the terms of the agreement, Roberts has exclusive marketing rights for PENTASA in the U.S. and a two year supply agreement with HMR. A $100 million financing commitment has been signed to facilitate the acquisition. The Company will use its existing cash and securities balances and cash generated from operations to fund its operating activities and its near-term and long-term debt obligations from previous product acquisitions as well as future acquisitions of new products and capital improvements scheduled for the Canadian manufacturing facility. Foreign Currency Fluctuations - ----------------------------- Roberts has subsidiary operations outside the United States. As a result, Roberts is subject to fluctuations in revenues and costs reported in United States dollars as a consequence of changing currency exchange rates, especially rates for the British pound and Canadian dollar. Such fluctuations were not material for the first quarter 1998. - 11 - Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. Date: 5/15/98 /s/ Peter M. Rogalin ------------------- ---------------------------- Peter M. Rogalin Vice President and Treasurer Date: 5/15/98 /s/ Peter M. Rogalin ------------------- ---------------------------- Peter M. Rogalin Chief Accounting Officer - 12 - Item 6 EXHIBITS AND REPORTS ON FORM 8K REPORTS ON FORM 8K Date of Report January 8, 1998 Roberts Pharmaceutical Corporation announced that it has submitted a regulatory application in the U.S. for approval to expand the current indication for AGRYLIN(r) (anagrelide hydrochloride) to include polycythemia vera, a chronic myeloproliferative disorder where an increase in blood platelets in present. The current approved indication for AGRYLIN is to treat essential thrombocythemia. A Product License Application has been filed with the Medicines Control Agency in the United Kingdom seeking approval to market PROAMATINE(r) (midodrine hydrochloride) for the treatment of orthostatic hypotension by Monmouth Pharmaceuticals, Ltd., a wholly owned subsidiary of Roberts located in Guildford, England who currently markets PROAMATINE in Ireland under the name MIDON(r) for the treatment of orthostatic hypotension. January 22, 1998 Roberts Pharmaceutical Corporation announced that based on preliminary unaudited data, the Company expects per share earnings for the fourth quarter of 1997 to be in the range of $0.07 to $0.09, significantly exceeding the FIRST CALL(r) consensus estimate of $0.05. February 5, 1998 Roberts Pharmaceutical Corporation announced that it is voluntarily recalling its 4-ounce size antitussive, decongestant and expectorant product ENTUSS-D Jr. Pediatric Expectorant, due to a labelling error in the adult dosage instructions. Only 538 bottles of a single lot of product is involved, Lot J960855A. This labeling error represents a major potential risk to health due to the potential for overdose, which may result in serious adverse health consequences. No patient/pharmacist complaints subsequent to usage since the lot was released in January 1997 have been received. April 9, 1998 Roberts Pharmaceutical Corporation announced that it has acquired a U.S. distribution facility located in Buffalo Grove, Illinois from Novartis Pharmaceutical Company with an experienced management and operational staff in place. It is estimated that the facility will be fully operational during 1998. This acquisition complements the purchase of a manufacturing facility in July 1997. - 13 - April 21, 1998 Roberts Pharmaceutical Corporation announced that it has acquired the exclusive U.S. rights to market PENTASA(r), a patented gastrointestinal drug for ulcerative colitis, from Hoechst Marion Roussel, the pharmaceutical company of Hoechst AG. Roberts expects the first 12 months of PENTASA sales to exceed $40 million. This would make PENTASA the Company's largest revenue generating drug and one of the highest gross- profit-margin products in Roberts portfolio of marketed pharmaceuticals. The transaction is expected to be accretive to the Company's 1998 income and improve cash flow to help fund an expected substantial increase in R&D investments. It is anticipated that per share earnings will substantially exceed current estimates. The transaction will involve net payments to Hoechst Marion Roussel totalling approximately $130 million. Donaldson, Lufkin, Jenrette Securities Corporation is arranging for $100 million in financing for the transaction. April 30, 1998 Roberts Pharmaceutical Corporation announced the cash sale of its subsidiary VRG International to Verum Staticon GmbH of Munich, Germany. Financial details are not disclosed, but under the terms of the agreement, Roberts will receive cash payments from this transaction over the next twelve months and realize a gain on the sale of this company over its book value. Roberts also announced that it expects to report strong year to year improvements in first quarter 1998 revenues, operating profits and net earnings. Per share earnings for the first quarter 1998 are expected to exceed the FIRST CALL estimate of $0.05. - 14 - FORWARD LOOKING STATEMENTS Certain statements included in Footnote #1 and Items 2 and 6 of this form 10-Q are intended to be, and are hereby identified as, forward looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The Registrant cautions readers that forward looking statements, including, without limitation, those relating to the Registrant's future business prospects, revenues, cost of sales, intangible dispositions and write-offs, continuing operations and discontinued operations, and liquidity and capital resources, are subject to certain risks and uncertainties, including, without limitation, the ability of the Registrant to secure regulatory approval in the United States and in foreign jurisdictions for the Registrant's developmental pipeline drugs, the efforts of the Registrant's competitors and the introduction of rival pharmaceutical products which may prove to be more effective than the Registrant's products, general market conditions, the availability of capital, and the uncertainty over the future direction of the healthcare industry, that could cause actual results to differ materially from those indicated in the forward looking statements. - 15 - EX-5 2 [ARTICLE] 5 [LEGEND] This schedule contains summary financial information extracted from Form 10Q for the quarter This schedule contains summary financial information extracted from Form 10Q for the quarter ended March 31, 1998 and is qualified in its entirety by reference to such financial statements. [MULTIPLIER] 1,000 [PERIOD-TYPE] 3-MOS [FISCAL-YEAR-END] DEC-31-1997 [PERIOD-END] MAR-31-1998 [CASH] 37,381 [SECURITIES] 45,008 [RECEIVABLES] 25,833 [ALLOWANCES] 0 [INVENTORY] 20,781 [CURRENT-ASSETS] 141,931 [PP&E] 28,954 [DEPRECIATION] 0 [TOTAL-ASSETS] 374,124 [CURRENT-LIABILITIES] 43,704 [BONDS] 6,552 [PREFERRED-MANDATORY] 0 [PREFERRED] 11 [COMMON] 313 [OTHER-SE] 323,325 [TOTAL-LIABILITY-AND-EQUITY] 374,124 [SALES] 32,588 [TOTAL-REVENUES] 32,847 [CGS] 12,603 [TOTAL-COSTS] 12,603 [OTHER-EXPENSES] 2,660 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] (269) [INCOME-PRETAX] 3,469 [INCOME-TAX] (1,324) [INCOME-CONTINUING] 2,145 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 2,145 [EPS-PRIMARY] .07 [EPS-DILUTED] .07 Includes raw material and work in process inventory of $3,154.
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