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
March 31, 1996
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
May 17, 1996
Common Stock 18,561,440
ROBERTS PHARMACEUTICAL CORPORATION
INDEX
Page
Part I
Item 1 - Financial Statements 2
Item 2 - Management's Discussion and Analysis 7
Part II
Item 1 - Legal Proceedings 10
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
PART I. FINANCIAL STATEMENTS
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
1996 1995
--------- ------------
ASSETS:
Current assets:
Cash and cash equivalents $27,399 $16,357
Marketable securities 6,122 13,649
Accounts receivable, net 11,866 26,318
Accounts receivable from
shareholder 0 600
Inventory 20,914 20,785
Deferred tax assets 10,419 10,419
Net assets held for sale 4,300 4,300
Other current assets 2,692 1,342
--------- ---------
Total current assets 83,712 93,770
Fixed assets, net 15,562 15,681
Intangible assets 228,981 230,681
Other assets 165 158
--------- ---------
Total assets $328,420 $340,290
========= =========
The accompanying notes are an integral part of these financial statements.
- 2 -
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands)
(Unaudited)
March 31, December 31,
1996 1995
--------- -----------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $27,161 $34,809
Accounts payable 13,329 14,737
Other current liabilities 33,936 32,236
--------- -----------
Total current liabilities 74,426 81,782
Long-term debt, excluding
current installments 16,171 16,183
Deferred taxes payable 6,311 6,311
Other liabilities 517 547
Shareholders' equity:
Class B preferred stock,
$.10 par 10,000,000 shares
authorized, none issued - - - - - -
Common stock, $.01 par,
50,000,000 shares authorized,
18,546,090 and 18,536,590
outstanding 189 189
Additional paid-in capital 256,435 256,296
Cumulative translation adjustments (273) (296)
Retained earnings (deficit) (25,119) (20,485)
Treasury stock, 387,594 shares
of common stock, at cost (237) (237)
--------- -----------
Total shareholders' equity 230,995 235,467
--------- -----------
Total liabilities and
shareholders' equity $328,420 $340,290
========= ===========
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,
1996 1995
------- -------
Sales and Revenue:
Sales $17,216 $16,162
Other revenue 12 11
------- -------
Total sales and revenue 17,228 16,173
------- -------
Operating costs and expenses:
Cost of sales 8,748 5,718
Research & development 1,149 2,034
Marketing & administration 12,989 9,000
------- -------
Total operating costs & expenses 22,886 16,752
------- -------
Operating loss (5,658) (579)
------- -------
Other income (expense):
Interest income 438 496
Interest expense (651) (689)
Other income (expense), net 25 27
------- -------
Total other income (expense) (188) (166)
------- -------
Loss from continuing operations before
income taxes (5,846) (745)
Benefit from income taxes (1,634) (236)
------- -------
Loss from continuing operations (4,212) (509)
Discontinued operations
(Loss) from operations of discontinued Pronetics
and VRG Divisions, net of tax benefits of
$0, and $428, respectively 0 (685)
------- -------
Net income (loss) ($4,212) ($1,194)
======= =======
Per share of common stock, primary and fully diluted:
Loss from continuing operations ($0.22) ($0.03)
Net loss from discontinued operations $0.00 ($0.03)
------- -------
Net loss ($0.22) ($0.06)
======= =======
Weighted average number of common shares
outstanding, primary and fully diluted: 18,722,259 18,705,880
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 three months
ended March 31,
1996 1995
------- ------
Cash flows from operating activities: $11,781 $5,976
------- ------
Cash flows from investing activities:
Redemption of marketable securities 7,527 2,869
Purchases of intangible assets (40) (2,664)
Purchases of fixed assets (78) (262)
Impact of discontinued operations 2 1
Net cash provided by used in ------- ------
investing activities 7,411 (56)
------- ------
Cash flows from financing activities:
Payments on notes payable and
long term debt (8,280) (4,875)
Net proceeds from issuance of
common stock (217) 488
Impact of discontinued operations 355 (3)
Net cash used in ------ ------
financing activities (8,142) (4,390)
------ ------
Exchange rate changes on cash and
cash equivalents (8) (26)
------- ------
Change in cash and cash equivalents 11,042 1,504
Beginning cash and cash equivalents 16,357 9,819
------- ------
Ending cash and cash equivalents $27,399 $11,323
======= =======
Supplemental cash flow information:
Interest and dividends received $438 $496
Interest paid 62 176
Income taxes paid - - - 2,019
Non cash activities:
Present value of notes issued in
connection with product acquisitions - - - $18,279
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.
2. Inventory
---------
Inventory at March 31, 1996 consists of:
Raw Materials $ 3,588
Finished Goods 17,326
------
Total $20,914
======
3. 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 of its obligations under the federal securities
laws. Roberts Pharmaceuticals intends to defend vigorously against
the plaintiff's allegations and considers such allegations to be
without merit.
- 6 -
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Results of Operations
Three months ended March 31, 1996 and 1995
Corporate Revenues
------------------
Total revenue for the three months ended March 31, 1996 increased $1.0
million as compared with the first three months of 1995. This increase was
the result of a $1.0 million increase in product revenue.
Product Sales
-------------
For the three months ended March 31, 1996, product sales increased $1.0
million from $16.2 million to $17.2 million primarily as a result of an
increase in demand for the Company's newer products, NOROXIN and TIGAN.
U.S. product sales increased $0.6 million from $10.9 million to $11.5
million. Sales of the Company's United Kingdom subsidiary, Monmouth
Pharmaceuticals Ltd., decreased slightly by $0.1 million from $2.9 million
to $2.8 million. Sales of the Company's Canadian subsidiary increased $0.5
million from $2.4 million to $2.9 million.
Cost of Sales
-------------
For the three months ended March 31, 1996, cost of sales amounted to 50.8%
of product sales, a 15.4 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 as well as a decrease in sales of some higher margin products.
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.
- 7 -
Research and Development
------------------------
Research and development expenses decreased $0.9 million to $1.1 million
during the three months ended March 31, 1996 as compared to the comparable
prior year period. This decrease is due to a reduced level of expenditure
required to support the Company's development program for AGRELIN.
Marketing and Administration Expenses
-------------------------------------
For the three months ended March 31, 1996, Marketing and Administration
expenses increased $3.9 million from $9.0 million to $12.9 million.
Marketing expenses increased $2.9 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 $1.0
million primarily as a result of an increase in salaries, insurance,
charitable product contributions, distribution expenses, and other
corporate support costs totalling $0.8 million, and a $0.2 million increase
in amortization of intangibles related to product acquisitions.
Interest Income and Expense
---------------------------
Interest income decreased $0.1 million as a result of a decrease in
invested marketable securities. Interest expense remained stable at $0.6
million.
Income Taxes
------------
For the three months ended March 31, 1996 and 1995 income tax expense
represents a normal statutory rate of continuing operations except for
certain taxes related to foreign operations.
Liquidity and Capital Resources
-------------------------------
For the three months ended March 31, 1996, cash flows from operating
activities amounted to $11.8 million. This resulted from a $15.1 million
decrease in accounts receivable and $2.5 million of non cash charges,
offset by the Company's net loss and $1.6 million of increased working
capital requirements. Cash flows from operating activities in the
comparable 1995 period amounted to $6.0 million, resulting primarily from a
decrease in accounts receivable and non cash charges offset by the
Company's net loss and increased working capital requirements. As of March
31, 1996, the Company had cash, cash equivalents, and marketable securities
of $33.5 million. This balance results primarily from the public offering
of Common Stock completed in October, 1993.
- 8 -
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 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.
- 9 -
Item 1. Legal Proceedings
The Company previously reported in its Current Reports on Form 8K 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.
- 10 -
Item 6 Exhibits and Reports on Form 8K
Reports on Form 8K
Date of Report Item
-------------- ----
03/20/96 Roberts Pharmaceutical Corporation announces it has filed
the first of several process patents with the U.S. Patent
and Trademark Office for improved methods for the
chemical synthesis of anagrelide, the active ingredient
in AGRELIN(R) whose New Drug Application is currently
under active regulatory review by the Food and Drug
Administration. The Company also announces that this
patent application was also submitted to international
markets including Europe, Scandinavia and Japan.
03/20/96 Roberts Pharmaceutical Corporation announces that it has
received notice from the Food and Drug Administration
that the Company's New Drug Application for AGRELIN(R)
(anagrelide) has been officially accepted for filing,
effective January 29, 1996.
03/26/96 Roberts Pharmaceutical Corporation announces that the
Food and Drug Administration has requested additional
information regarding the Company's New Drug Application
for PROAMATINE(TM) (midodrine).
- 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: _________________ _____________________________
Peter M. Rogalin
Vice President and Treasurer
Date: ________________ _____________________________
Peter M. Rogalin
Chief Accounting Officer
- 12 -
EX-27
2
FINANCIAL DATA SCHEDULE
5
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
27,399
6,122
11,866
0
20,914
83,712
15,562
0
328,420
74,426
16,171
0
0
189
230,806
328,420
17,216
17,228
8,748
8,748
1,149
0
651
(5,846)
(1,634)
(4,212)
0
0
0
(4,212)
(.22)
(.22)
Includes Raw Material Inventory of $3,588