-----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, MTUxqZI07wWJRSujkavPn+R6A0UgfLRme9UV91sTI8yCZGWEb3PAtSfZZnV6Y3ub aw2wSWLZd79yyW9IsYgMUQ== 0000950130-95-002410.txt : 19951208 0000950130-95-002410.hdr.sgml : 19951208 ACCESSION NUMBER: 0000950130-95-002410 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROBERTS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000853022 STANDARD INDUSTRIAL CLASSIFICATION: 2834 IRS NUMBER: 222429994 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10432 FILM NUMBER: 95590674 BUSINESS ADDRESS: STREET 1: MERIDIAN CENTRE II STREET 2: 4 INDUSTRIAL WAY W CITY: EATONTOWN STATE: NJ ZIP: 07724 BUSINESS PHONE: 908-389-11 MAIL ADDRESS: STREET 1: MERIDIAN CTR II STREET 2: 4 INDUSTRIAL WAY WEST CITY: EATONTOWN STATE: NJ ZIP: 07724 10-Q 1 FORM 10-Q 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 September 30, 1995 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: (908) 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 October 27, 1995 Common Stock 18,531,240 ROBERTS PHARMACEUTICAL CORPORATION INDEX Page Part I Item 1 - Financial Statements 2 Item 2 - Management's Discussion and Analysis 9 Part II Item 1 - Legal Proceedings 12 Item 6 - Exhibits and Reports on Form 8-K 13 Signatures 14 - 1 - PART I.FINANCIAL STATEMENTS ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) September 30, December 31, 1995 1994 ----- ----- ASSETS: Current assets: Cash and cash equivalents $ 10,913 $ 9,819 Marketable securities 20,996 26,663 Accounts receivable, net 32,445 28,882 Accounts receivable from shareholder 1,200 7,256 Inventory 22,632 19,797 Net assets held for sale 2,200 - - - Other current assets 4,109 3,784 ----- ----- Total current assets 94,495 96,201 Fixed assets, net 16,158 16,800 Other assets, principally acquired intangibles, net 238,961 223,191 ------- ------- Total assets $349,614 $336,192 ======== ======== The accompanying notes are an integral part of these financial statements. - 2 - ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED BALANCE SHEETS (Continued) (In thousands) (Unaudited)
September 30, December 31, 1995 1994 ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 45,302 $ 34,277 Accounts payable 18,586 6,735 Other current liabilities 20,541 12,922 -------- -------- Total current liabilities 84,429 53,934 Long-term debt, excluding current installments 16,197 22,411 Other liabilities 595 718 Shareholders' equity: Class B preferred stock, $.10 par 10,000,000 shares authorized, none issued - - - - - - Common stock, $.01 par, 50,000,000 shares authorized, 18,530,490 and 18,370,805 outstanding 189 188 Additional paid-in capital 256,183 255,994 Cumulative translation adjustments (104) (674) Retained earnings (deficit) (7,638) 3,858 Treasury stock, 387,594 shares of common stock, at cost (237) (237) -------- -------- Total shareholders' equity 248,393 259,129 -------- -------- Total liabilities and shareholders' equity $349,614 $336,192 ======== ========
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 nine months For the three months ended September 30, ended September 30, 1995 1994 1995 1994 ------------ ---------- ---------- ---------- Sales and Revenue: Sales $ 80,824 $67,232 $34,309 $27,821 Contract research revenue 3,218 1,889 553 828 Contract research-shareholder 531 7,445 171 51 Other revenue 35 33 12 11 -------- ------- ------- ------- Total sales and revenue 84,608 76,599 35,045 28,711 Operating costs and expenses: Cost of sales 37,337 15,136 18,398 6,152 Cost of contract research 2,918 7,936 643 2,316 Research & development 5,329 7,189 1,729 2,496 Marketing & administration 37,310 28,094 13,457 9,703 -------- ------- ------- ------- Total operating costs & expenses 82,894 58,355 34,227 20,667 -------- ------- ------- ------- Operating income 1,714 18,244 818 8,044 Other income (expense): Interest income 1,520 2,188 537 737 Interest expense (2,463) (3,032) (844) (1,004) Other income (expense), net 54 6 30 2 -------- ------- ------- ------- Total other income (expense) (889) (838) (277) (265) Income from continuing operations before income taxes 825 17,406 541 7,779 Benefit (provision) for income taxes (320) (2,987) (210) (2,407) -------- ------- ------- ------- Income from continuing operations 505 14,419 331 5,372 Discontinued operations (Loss) from operations of discontinued Pronetics (Homecare) Division, net of tax benefits of $652, $584, $0 and $295, respectively. (1,009) (913) - - - (457) Estimated (Loss) on disposal of Pronetics (Homecare) Division, net of tax benefits of $995. (10,992) - - - - - - - - - -------- ------- ------- ------- (Loss) from discontinued operations (12,001) (913) 0 (457) -------- ------- ------- ------- Net (loss) income ($11,496) $13,506 $331 $4,915 ======== ======= ======= ======= per share of common stock, primary and fully diluted: Net income from continuing operations $0.03 $0.78 $0.02 $0.29 Net (loss) from discontinued operations ($0.64) ($0.05) - - - ($0.02) -------- ------- ------- ------- Net (loss) income ($0.62) $0.73 $0.02 $0.27 ======== ======= ======= ======= Weighted average number of common shares outstanding, primary and fully diluted: 18,646,636 18,467,396 18,604,968 18,467,396
The accompanying notes are an integral part of these financial statements. - 4 -
ROBERTS PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the nine months ended September 30, 1995 1994 ------- ------- Cash flows from operating activities: $14,572 $3,111 Cash flows from investing activities: Redemption of marketable securities 5,666 35,456 Purchases of intangible assets (2,802) (12,867) Purchases of fixed assets (434) (584) Impact of discontinued operations (7) (80) ------- ------- Net cash provided by investing activities 2,423 21,925 ------- ------- Cash flows from financing activities: Payments on notes payable and long term debt (16,631) (26,478) Net proceeds from issuance of common stock 690 416 Impact of discontinued operations (7) (732) ------- ------- Net cash (used in) financing activities (15,948) (26,794) ------- ------- Exchange rate changes on cash and cash equivalents 47 (50) Change in cash and cash equivalents 1,094 (1,808) Beginning cash and cash equivalents 9,819 6,071 ------- ------- Ending cash and cash equivalents $10,913 $4,263 ======= ======= Supplemental cash flow information: Interest and dividends received $1,520 $2,188 Interest paid 2,364 2,582 Income taxes paid 2,624 484 Non cash activities: Present value of notes issued in connection with product acquisitions $18,279 $5,992 Acquisition of subsidiary; fair value of assets acquired - - - 2,535 Liabilities assumed - - - (367) Common stock issued - - - (500) ------- ------- Amounts paid - - - $1,668 ======= =======
The accompanying notes are an integral part of these financial statements. - 5 - NOTES TO FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - - - - - ------------------------------------------ 1. Basis of Presentation --------------------- In the opinion of management, the accompanying consolidated financial statements include all necessary adjustments, consisting of normal adjustments, necessary for a fair presentation of results for the period reported. All dollar amounts are presented in thousands, except per share data. Certain revenue amounts previously reported in the September 1994 Financial Statements have been reclassified. (See Note 8.) 2. Acquisitions ------------ In January, 1995, the Company acquired exclusive Canadian rights to market, sell and distribute REPLENS from Columbia Laboratories, Ltd. The Company's Canadian subsidiary launched this product in August, 1995. On February 23, 1995, the Company licensed exclusive U.S. rights to market, sell and distribute NOROXIN, a currently marketed product, from Merck and Company, Inc. In March, 1995, the Company acquired inventory, trademarks and other rights to TIGAN in the U.S. and EMINASE throughout the world from SmithKline Beecham. In May, 1995, the Company acquired exclusive Canadian rights to market, sell and distribute ADVANTAGE 24 from Columbia Laboratories, Inc. The Company's Canadian subsidiary will launch this product in early 1996. Cash paid for these acquisitions amounted to $2.8 million with balances payable through March, 2000. 3. Inventory --------- Inventory consists of: September 30, 1995 ------------- ------- Raw Materials $ 3,474 Finished Goods 19,158 ------- Total $22,632 ======= - 6 - 4. Leases and Other Commitments ---------------------------- The Company leases office space and certain office equipment under operating leases. Minimum rental payments in each of the next five fiscal years required under leases which have initial or remaining lease terms in excess of one year are as follows: December 31, 1995 $2,810 1996 2,146 1997 1,556 1998 1,301 1999 1,069 The total of the above minimum lease payments has not been reduced by $1.6 million which the company expects to receive in the future under non- cancelable subleases. In accordance with several product acquisitions and licensing agreements and subject to certain cancellation rights reserved by the Company, Roberts may be required to purchase inventory or make minimum payments totalling $51.9 million through 2001 and make royalty payments totalling $2 million through 1998. 5. Long Term Debt -------------- The Company previously reported in Note 7 to its Consolidated Financial Statements for the year ended December 31, 1994 that principal payments on the $56.7 million of long term debt outstanding at December 31, 1994, would be $34.3 million in 1995 and $20.6 million in 1996. In consideration of certain information being furnished by the Company to the seller of certain product rights to the Company, $8 million due in 1995 is now required to be paid in 1996 and the principal payments in 1995 and 1996 will be reduced and increased, respectively, by that amount. 6. Contingency ----------- A shareholder class action suit has been instituted in the United States District Court for the District of New Jersey against Roberts Pharmaceutical Corporation and certain of its officers for alleged violations of certain federal securities laws. The Company is not able to predict the outcome of this proceeding at this time, and management is not able to determine the amount of the potential liability, if any. Roberts Pharmaceutical believes that it has complied with all - 7 - of its obligations under the federal securities laws. Roberts Pharmaceutical intends to defend vigorously against the plaintiff's allegations and considers such allegations to be without merit. 7. Discontinued Operations ----------------------- In August, 1995, the Company decided to seek a buyer for the assets of its Pronetics (Homecare) subsidiaries which are located in New York, New Jersey, North Carolina, and South Carolina. The Company expects the sale of Homecare to be completed within a year and to result in a loss at closing. Accordingly, the Company has charged current operations with the estimated loss on discontinuing Homecare of $10.9 million, including a provision of $1.9 million for operating losses until disposal of which $.4 million has been utilized in the Third Quarter. The Company has also reclassified its consolidated financial statements to report separately the net assets expected to be realized and operating results of its discontinued operations. The Company's loss on discontinued operations includes management's best estimates of the amounts expected to be realized on the sale of Homecare. The amounts the Company will ultimately realize could differ materially in the near term from the amounts assumed in calculating the loss on disposal of Homecare. 8. Quarterly Results of Operations ------------------------------- The Company previously reported in Note 16 to its Consolidated Financial Statements for the year ended December 31, 1994 that its net earnings for the Third Quarter of 1994 of $4.9 million included a $2.7 million charge against revenues and a $1.0 increase in general and administrative expenses resulting from an increase in estimated reserves for contracts with a related party. As a result, operating income and net income were reduced by approximately $3.7 million and $2.6 million, respectively. The $2.7 million charge was taken against product revenue and has been reclassified to contract research revenue. As a result of this reclassification, product revenue and contract research revenue for the Third Quarter of 1994 were increased and decreased, respectively, by $2.7 million. - 8 - Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations Nine months ended September 30, 1995 and 1994 Corporate Revenues - - - - - ------------------ Total revenue for the nine months ended September 30, 1995 increased $8 million as compared with the first nine months of 1994. This increase was the result of a $13.6 million increase in product revenue offset by a $5.6 million decrease in contract research revenue. For the quarter ended September 30, 1995, total revenue increased $6.3 million as compared with the Third Quarter of 1994. This increase was the result of a $6.5 million increase in product revenue offset by a $.2 million decrease in contract research revenue. (See Note 8.) Product Sales - - - - - ------------- For the nine months ended September 30, 1995, product sales increased $13.6 million from $67.2 million to $80.8 million primarily as a result of new product acquisitions in the U.S. and United Kingdom in 1995 and 1994. After including sales of TIGAN, EMINASE and NOROXIN, U.S. product sales increased $12.1 million from $52 million to $64.1 million. Sales of the Company's United Kingdom subsidiary, Monmouth Pharmaceuticals Ltd., increased $2 million from $6.7 million to $8.7 million. Sales of the Company's Canadian subsidiary decreased slightly from $8.5 million to $7.9 million. (See Note 8.) Product sales in the third quarter increased $6.5 million from the $27.8 million reported for the quarter ended September 30, 1994, primarily as a result of new product acquisitions in both the U.S. and United Kingdom. Product sales in the U.S. increased $6.7 million from $21.9 million to $28.6 million. Sales in the United Kingdom increased $.1 million from $3.1 million to $3.2 million. Sales in Canada decreased $.3 million from the Third Quarter of 1994. (See Note 8.) Contract Research - - - - - ----------------- For the nine months and the quarter ended September 30, 1995, revenue from contract research decreased $5.6 million to $3.7 million and $.2 million to $.7 million, respectively, as Phase III clinical research studies for a major shareholder neared completion. (See Note 8.) With the completion of these studies, contract research revenue will decline substantially in 1995 from revenue levels achieved in 1994. - 9 - Cost of Sales - - - - - ------------- For the nine months ended September 30, 1995, cost of sales amounted to 46.2% of product sales, a 23.7 percentage point increase as compared to the prior year's comparable period. This increase in cost of sales and corresponding decrease in gross profit percentage is primarily the result of the addition of NOROXIN. For the current period, cost of sales amounted to 53.6% of product sales, a 31.5 percentage point increase from the Third Quarter of 1994. (See Note 8.) With the continued distribution of NOROXIN, the Company expects cost of sales and gross profit as percentages of product sales to be similarly impacted for the foreseeable future. Cost of Contract Research - - - - - ------------------------- During the nine months ended September 30, 1995, cost of contract research decreased to $2.9 million from $7.9 million incurred in 1994 as a result of decreased contract research activity. For the current period, cost of contract research decreased $1.7 million to $.6 million as a result of decreased contract research activity. Research and Development - - - - - ------------------------ Research and development expenses decreased $1.9 million to $5.3 million during the nine months ended September 30, 1995 as compared to the comparable prior year period. For the quarter ended September 30, 1995, research and development expenses decreased $.8 million to $1.7 million from $2.5 million incurred in 1994. Both decreases are due to a reduced level of expenditure required to support the Company's development program for AGRELIN. Marketing and Administration Expenses - - - - - ------------------------------------- For the nine months ended September 30, 1995, Marketing and Administration expenses increased $9.2 million from $28.1 million to $37.3 million. Marketing expenses increased $3.3 million as a result of promotional activities for new products and the expansion of sales forces in the United States, United Kingdom and Canada. Administration expenses increased $5.9 million primarily as a result of an increase in personnel costs associated with and the relocation of the Company's contract research division of $1.5 million, an increase in legal and professional fees, insurance, bad debt, charitable product contributions, distribution expenses, and other corporate support costs totalling $3.7 million, and a $.7 million increase in amortization of intangibles related to product acquisitions. For the quarter ended September 30, 1995, Marketing and Administration expenses increased $3.7 million from $9.7 million to $13.4 million as administration and support costs increased to accommodate expanded promotional activities as compared to the comparable 1994 period. For the Third Quarter of 1995, intangible amortization increased to $1.8 million, a $.3 million increase from 1994. - 10 - Interest Income and Expense - - - - - --------------------------- Interest income decreased from $2.2 million to $1.5 million as a result of a decrease in invested marketable securities. Interest expense decreased $.6 million from $3 million primarily as a result of a decrease in long term debt as compared to the prior year's comparable period. Income Taxes - - - - - ------------ For the nine months and quarter ended September 30, 1995, the income tax expense represents a normal statutory rate for continuing operations. For the nine months and quarter ended September 30, 1994, the rate was lower than the normal statutory rate due to the recognition of tax benefits associated with operating losses and credits. Liquidity and Capital Resources - - - - - ------------------------------- For the nine months ended September 30, 1995, cash flows from operating activities amounted to $14.6 million. This resulted from a $11.7 million increase in accounts payable and $18.9 million of non cash charges, including $11 million related to the disposal of Pronetics, offset by the Company's net loss and $4.5 million of increased working capital requirements. Cash flows from operating activities in the comparable 1994 period amounted to $3.1 million, resulting primarily from net income and non cash charges offset by working capital requirements due to increased sales levels. As of September 30, 1995, the Company had cash, cash equivalents, and marketable securities of $31.9 million. This balance results primarily from the public offering of Common Stock completed in October, 1993. 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. Based upon its present plans, the Company believes that it may require additional funding in 1996. If additional funds are required, the Company believes that it has various alternative funding sources including bank debt, private debt financing, equity financing and the sale or licensing of product rights. Foreign Currency Fluctuations - - - - - ----------------------------- Roberts has subsidiary operations outside the United States. As a result, Roberts is subject to fluctuations in reported 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. - 11 - Item 1. Legal Proceedings The Company previously reported in its Current Reports on Form 8-K dated April 10, 1995 and June 26, 1995, respectively, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, that two shareholder class action suits had been instituted against it and certain of its officers in the United District Court for the District of New Jersey. The second suit filed by Dieter Zander has been voluntarily dismissed by the plaintiff. The first complaint, as amended, was filed by Grace Cowit on behalf of all persons who purchased shares of the Company's common stock between November 7, 1994 and May 31, 1995. - 12 - Item 6 Exhibits and Reports on Form 8K Reports on Form 8K Date of Report Item - - - - - -------------- ---- 08/21/95 Roberts Pharmaceutical Corporation announces the discontinuance of its Homecare Division and its Medical Products Division. The Company plans to also divest certain of its non-core prescription and non-prescription products. The Company states that it is engaging in a more focused utilization of resources to optimize growth. - 13 - 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: 11/10/95 /s/ Anthony P. Maris ------------------- --------------------------------- Anthony P. Maris Vice President and Treasurer Date: 11/10/95 /s/ Anthony P. Maris ------------------- --------------------------------- Anthony P. Maris Chief Accounting Officer - 14 - EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 10,913 20,996 33,645 0 22,632 94,495 16,158 0 349,614 84,429 16,197 189 0 0 248,204 349,614 80,824 84,608 37,337 40,255 5,329 0 2,463 825 320 505 (12,001) 0 0 (11,496) (.62) (.62) Includes shareholder receivable of $1,200. Includes raw material inventory of $3,474. In August, 1995, the Company decided to sell its Pronetics (Homecare) subsidiaries. Estimated loss on discontinuing Pronetics (Homecare) is $10,992, including a provision of $1,931 for operating losses until disposal of which $.4 million was utilized in the third quarter.
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