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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 June 30, 1994
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 1-5851
Rhone-Poulenc Rorer Inc.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 23-1699163
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Arcola Road
Collegeville, Pennsylvania 19426-0107
- - -------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
(610)454-8000
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(Registrant's telephone number, including area code)
(Former name, address and 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 (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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
135,292,548 shares as of July 15, 1994.
The exhibit index is located on page 25.
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RHONE-POULENC RORER INC.
TABLE OF CONTENTS
--------------------------------------------------
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Report of Independent Accountants 3
Condensed Consolidated Statements of Income (Loss) 4
Condensed Consolidated Balance Sheets 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 12 - 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 23
2
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Rhone-Poulenc Rorer Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Rhone-Poulenc Rorer Inc. and subsidiaries as of June 30, 1994, and the related
condensed consolidated statements of income (loss) and cash flows for the three
and six-month periods ended June 30, 1994 and 1993. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Rhone-Poulenc Rorer Inc. and
subsidiaries as of December 31, 1993, and the related consolidated statements
of income (loss) and cash flows for the year then ended (not presented herein)
and, in our report, which includes an explanatory paragraph on the Company's
change in its method of accounting for income taxes in 1992, dated January
26, 1994, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1993, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
July 19, 1994
3
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
---------------------
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited - amounts in millions except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
1994 1993 1994 1993
--------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 973.0 $ 1,008.1 $ 1,843.6 $ 1,924.4
Cost of products sold 322.7 326.4 616.0 635.2
Selling, delivery and
administrative expenses 371.3 372.3 689.7 698.8
Research and development expense 145.5 141.4 274.6 269.2
Restructuring and other charges 121.2 77.2 121.2 77.2
Proceeds from litigation settlement -- 105.0 -- 105.0
--------------------------------------------
Operating income 12.3 195.8 142.1 349.0
Interest expense - net 11.5 17.1 23.3 37.6
Other (income) expense - net 14.6 (0.1) 22.7 (3.5)
-------------------------------------------
Income (loss) before income taxes (13.8) 178.8 96.1 314.9
Provision for income taxes (11.1) 57.2 20.9 96.9
-------------------------------------------
Net income (loss) (2.7) 121.6 75.2 218.0
Dividend on preferred stock (4.7) (2.0) (8.9) (4.2)
-------------------------------------------
Net income (loss) available to common
shareholders $ (7.4) $ 119.6 $ 66.3 $ 213.8
===========================================
Earnings (loss) per common share $ (0.05) $ .87 $ .49 $ 1.55
===========================================
Cash dividend per common share $ .28 $ .24 $ .56 $ .46
Average common shares outstanding 135.6 138.2 136.1 138.2
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
4
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RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - dollars in millions)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------------------------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 42.4 $ 35.4
Short-term investments 7.1 --
Trade accounts and notes receivable,
less reserves of $59.5 (1993: $68.3) 613.9 746.6
Inventories 594.0 504.1
Other current assets 460.8 382.7
-----------------------------------
Total current assets $ 1,718.2 $ 1,668.8
Time deposits, at cost 56.2 64.3
Property, plant and equipment, net
of accumulated depreciation of
$1,019.6 (1993: $926.6) 1,074.8 1,032.0
Goodwill, net of accumulated
amortization of $194.6 (1993: $172.1) 704.1 676.5
Intangibles, net of accumulated
amortization of $106.1 (1993: $96.5) 225.4 206.1
Other assets 397.9 402.5
----------------------------------
Total assets $ 4,176.6 $ 4,050.2
==================================
LIABILITIES
Current:
Short-term debt $ 95.5 $ 108.6
Notes payable to Rhone-Poulenc
S.A. and affiliates 105.3 201.3
Accounts payable 344.1 365.6
Other current liabilities 679.6 546.7
--------------------------------
Total current liabilities 1,224.5 1,222.2
Long-term debt 582.6 432.2
Deferred income taxes 13.1 29.5
Other liabilities 528.8 545.1
--------------------------------
Total liabilities 2,349.0 2,229.0
Contingencies
SHAREHOLDERS' EQUITY
Market Auction Preferred Shares, without par value
(liquidation preference $1,000 per share); author-
ized, issued and outstanding 225,000 shares 225.0 225.0
Money market preferred stock, without par value
(liquidation preference $100,000 per share);
authorized, issued and outstanding 1,750 shares 175.0 175.0
Common stock, without par value; stated value $1
per share; authorized 200,000,000 shares; issued
and outstanding 135,423,748 shares (1993:
136,996,345 shares) 139.0 139.0
Capital in excess of stated value 297.9 290.0
Retained earnings 1,197.4 1,207.3
Employee Benefits Trust (135.8) (75.8)
Cumulative translation adjustments (70.9) (139.3)
---------------------------------
Total shareholders' equity 1,827.6 1,821.2
---------------------------------
Total liabilities and shareholders' equity $ 4,176.6 $ 4,050.2
=================================
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
5
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RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1994 1993
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 258.7 $ 428.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (86.5) (111.9)
Assets (acquired) sold, net (14.0) 19.5
Net investment hedging, net (23.2) (7.5)
-------------------------------
Net cash used in investing activities (123.7) (99.9)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings (repayments):
Long-term debt, net (16.9) (15.4)
Short-term debt, net 30.0 (244.4)
Issuances of common stock 1.1 6.1
Shares repurchased for Employee Benefits Trust (60.0) (9.7)
Dividends paid (84.8) (68.0)
------------------------------
Net cash used in financing activities (130.6) (331.4)
Effect of exchange rate changes on cash 2.6 (3.3)
-----------------------------
Net increase (decrease) in cash and cash equivalents 7.0 (6.3)
Cash and cash equivalents at beginning of year 35.4 39.5
------------------------------
Cash and cash equivalents at June 30 $ 42.4 $ 33.2
==============================
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
6
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RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. - RESULTS FOR INTERIM PERIODS
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments necessary for a fair presentation
of financial position, cash flows and results of operations for the periods
presented. Certain adjustments have been made to reflect transactions which are
unusual and nonrecurring in nature. Such transactions are described in
detail in the accompanying footnotes. Certain prior year items have been
reclassified to conform to current classifications.
The statements are presented in accordance with the requirements of Form 10-Q
and do not include all disclosures required by generally accepted accounting
principles or those made in the Annual Report on Form 10-K. The Annual Report
on Form 10-K for the year 1993 is on file with the Securities and Exchange
Commission and should be read in conjunction with these condensed consolidated
financial statements.
NOTE 2. - RESTRUCTURING AND OTHER CHARGES AND PROCEEDS FROM
LITIGATION SETTLEMENT
In the 1994 second quarter, the Company recorded a $121.2 million ($.58 per
share) pretax charge in connection with a global restructuring plan that
is expected to be completed in 1995. The restructuring will reduce the Company's
workforce by approximately 1,300 positions, or 6%. The reductions will be
primarily from manufacturing, sales/marketing and administrative functions
in North America and in France, although other locations in Europe and
elsewhere are also included. Reductions are being effected through a variety of
local programs which typically include retirement incentives or other
severance benefits as well as outplacement services. The cash outlay related
to the plan is expected to approximate $100.0 million, half of which should
occur in 1994. The remainder of the restructuring charge relates to asset
writeoffs in conjunction with certain production facilities. Annual pretax
savings should grow to over $60.0 million in 1996.
In the 1993 second quarter, the Company recorded a charge of $77.2 million for
the cost of certain restructuring and manufacturing streamlining programs and
increased provisions for certain litigation. The programs, principally in
Europe, included restructuring of the Company's German and Italian prescription
pharmaceutical businesses.
At June 30, 1994, the 1994 restructuring provision had been reduced by
approximately $9.6 million of cash payments, primarily for social costs, and
$8.4 million of noncash asset writeoffs. Year-to-date cash payments for
social costs associated with the 1993 restructuring provision approximated
$9.3 million. At June 30, 1994, the remaining restructuring accruals
reflected in other current liabilities totaled $133.0 million.
During the 1993 second quarter, the Company also recorded $105.0 million cash
proceeds from the settlement of patent litigation.
7
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NOTE 3. - INCOME TAXES
The Company records income tax expense based on an estimated full year effective
income tax rate. The second quarter and year-to-date estimated effective tax
rate on operations excluding nonrecurring items was approximately 29% in
both 1994 and 1993.
NOTE 4. - INVENTORIES
Inventories consisted of the following:
(Dollars in millions) June 30, 1994 December 31, 1993
---------------------------------------
Finished goods $ 307.5 $ 235.3
Work in process 137.2 111.5
Raw materials and supplies 149.3 157.3
----------------- -------------------
$ 594.0 $ 504.1
======================================
8
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<TABLE>
<CAPTION>
NOTE 5.- SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Market Money
Auction market Common Capital in Employee Cumulative
Preferred preferred shares at excess of Retained Benefits translation
Shares stock stated value stated value earnings Trust adjustments
--------------------------------------------------------------------------------------------------
(Dollars in millions)
Balance, December
31, 1993 $ 225.0 $ 175.0 $ 139.0 $ 290.0 $ 1,207.3 $ (75.8) $ (139.3)
Net income 75.2
Cash dividend,
$.56 per common
share (76.2)
Dividend on preferred stock (8.9)
Issuance of shares under
employee benefit plans 7.9
Repurchase of shares for
Employee Benefits Trust (60.0)
Translation adjustments,
including $20.0 million
hedging losses, net
of tax effect 68.4
---------------------------------------------------------------------------------------------------
Balance, June 30, 1994 $ 225.0 $ 175.0 $ 139.0 $ 297.9 $ 1,197.4 $ (135.8) $ (70.9)
===================================================================================================
<FN>
In March 1993, the Company's Board of Directors approved the repurchase of up to 5 million of its common shares on the
open market from time to time. During the first six months of 1994, the Company repurchased approximately 1.7 million of
its common shares at a cost approximating $60.0 million. As of July 15, 1994, just over 3.8 million shares ($142.8 million)
had been acquired since the inception of the program. These shares are held in an Employee Benefits Trust to fund
employee benefits in the U.S.
</FN>
</TABLE>
9
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NOTE 6. - RELATED PARTY TRANSACTIONS
Receivables from Rhone-Poulenc S.A. and affiliates (RP) at June 30, 1994 include
$14.1 million in accounts receivable from sales of products and services to RP
and $36.2 million classified as other current assets.
Accounts payable related to the purchase of materials and services from RP were
$8.9 million at June 30, 1994; accrued and other liabilities due to RP totaled
$22.0 million.
As of June 30, 1994, the Company had $105.3 million short-term and $30.8
million long-term debt outstanding with RP.
Sales to RP in 1994 were $29.9 million in the second quarter and $41.0 million
for the six-month period; services purchased from and interest paid to RP were
$9.0 million in the second quarter and $18.0 million for the six-month period.
For the comparable 1993 quarter and six months, sales to RP were $6.0 million
and $17.1 million, respectively. Amounts paid to RP for services and interest
were $10.4 million for the second quarter and $22.4 million for the six-month
period.
NOTE 7. - CONTINGENCIES
The Company is involved in litigation incidental to its business, including, but
not limited to: (1) approximately 261 pending lawsuits in the United States,
Canada and Ireland against the Company and its Armour Pharmaceutical Company
subsidiary ("Armour"), in which it is claimed by individuals infected with the
Human Immunodeficiency Virus (HIV) that their infection with HIV and, in some
cases, resulting illnesses, including Acquired Immune Deficiency Syndrome-
related conditions or death therefrom, may have been caused by administration of
antihemophilic factor (AHF) concentrates processed by Armour in the early
and mid-1980's. Armour has also been named as a defendant in five proposed
class action lawsuits filed on behalf of HIV-infected hemophiliacs and their
families. None of the cases involves Armour's currently distributed AHF
concentrates. In the U.S., Armour and another plasma fractionator have reached
a tentative settlement with attorneys representing claimants in the pending
purported class action lawsuits; (2) legal actions pending against one or
more subsidiaries of the Company and various groupings of more than one hundred
pharmaceutical companies,in which it is generally alleged that certain
individuals were injured as a result of the development of various
reproductive tract abnormalities because of in utero exposure to
diethylstilbestrol (DES) (typically, two former operating subsidiaries of
the Company are named as defendants, along with numerous other DES
manufacturers, when the claimant is unable to identify the manufacturer);
(3) antitrust actions alleging that the Company engaged in price discrimination
practices to the detriment of certain independent community pharmacists; (4) two
lawsuits alleging breach of contract by a subsidiary of the Company with respect
to agreements involving a bisphosphonate compound and LozolR; (5) an alleged
infringement by the Company of a process patent for the manufacture of
bulk diltiazem, an ingredient in the Company's product Dilacor XRR; (6)
potential responsibility relating to past waste disposal practices, including
potential involvement, for which the Company believes its share of liability,
if any, to be negligible, at three sites on the U.S. National Priority List
created by Superfund legislation.
10
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The eventual outcomes of the above matters of pending litigation cannot be
predicted with certainty. The defense of these matters and the defense of
expected additional lawsuits related to these matters may require substantial
legal defense expenditures. The Company follows Statement of Financial
Accounting Standards No. 5 in determining whether to recognize losses and
accrue liabilities relating to such matters. Accordingly, the Company
recognizes a loss if available information indicates that a loss or range of
losses is probable and reasonably estimable. The Company estimates such losses
on the basis of current facts and circumstances, prior experience with similar
matters, the number of claims and the anticipated cost of administering,
defending and, in some cases, settling such claims. The Company has also
recorded as an asset certain insurance recoveries which are determined
to be probable of occurrence on the basis of the status of current discussions
with its insurance carriers. If a contingent loss is not probable but is
reasonably possible, the Company discloses this contingency in the notes
to its consolidated financial statements if it is material. Based on the
information available, the Company does not believe that reasonably possible
uninsured losses in excess of amounts recorded for the above matters
of litigation would have a material adverse impact on the Company's financial
position or results of operations.
11
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ITEM 2.
RHONE-POULENC RORER INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Rhone-Poulenc Rorer Inc. ("RPR" or "the Company") was formed in 1990 by the
combination of Rorer Group Inc. (Rorer) and substantially all of the Human
Pharmaceutical Business of Rhone-Poulenc S.A. (RP). RP, based in Paris, France,
owns approximately two-thirds of RPR's common stock and controls the Company.
Rhone-Poulenc Rorer is one of the largest research-based pharmaceutical
companies in the world. In the discussion which follows, percentage comparisons
of year-to-year sales, except when noted as reported sales, exclude the effects
of exchange rate fluctuations.
RESULTS OF OPERATIONS (Three and six months ended June 30, 1994 versus
comparable 1993 periods)
On sales of $1,843.6 million, net income available to common shareholders for
the six months ended June 30, 1994 was $66.3 million ($.49 per common share)
compared with $213.8 million ($1.55 per common share) for the corresponding
prior year period. The Company recorded a net loss for the second quarter of
$7.4 million ($.05 loss per common share) compared with net income of $119.6
million ($.87 per common share) in 1993. Year-to-date 1994 results included
pretax restructuring charges of $121.2 million ($78.8 million after-tax
or $.58 per common share) recorded during the second quarter. Prior year
results included after-tax income of $14.6 million ($.11 per common share) from
the net effects of proceeds from settlement of patent litigation less
restructuring and other charges recorded during the 1993 second quarter.
Pretax gains on the sale of certain assets and product rights totaled $4.0
million ($.02 per common share) and $12.7 million ($.06 per common share)
year-to-date in 1994 and 1993, respectively. Prior year results also
reflected a $.02 per common share benefit from a change in accounting estimate
related to depreciation lives.
The global pharmaceutical industry continues to be affected by initiatives in
several markets to reduce pharmaceutical prices and limit the volume of
prescriptions written. The Company's second quarter and year-to-date
reported sales were down approximately 4% from 1993. On a basis which
excludes the effects of currency fluctuations and product divestitures, net
sale were essentially level with the prior year for both the three- and six-
month periods. Price decreases reduced sales by approximatley 2 percentage
points in the quarter and just under 1.5 percentage points for the first half
of 1994.
12
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Quarterly and year-to-date sales by geographic area were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
(Dollars in millions) 1994 1993 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. $ 289.4 $ 296.3 $ 501.9 $ 481.2
-------------------------------------------
France 307.0 324.2 617.2 699.1
Other Europe 239.8 247.7 476.9 488.1
Rest of World 136.8 139.9 247.6 256.0
-------------------------------------------
Total Non-U.S. 683.6 711.8 1,341.7 1,443.2
-------------------------------------------
Total Sales $ 973.0 $1,008.1 $1,843.6 $1,924.4
===========================================
</TABLE>
Sales in the United States declined by 2% in the second quarter; for the
six-month period, U.S. sales grew 4%. U.S. sales increases were led by
continued growth of the Armour business and good performance by Dilacor XRR
and by LovenoxR, launched in the U.S. in the second quarter of 1993.
Ex-factory sales for certain key U.S. prescription products were down, however,
despite growth in prescriptions, due to the reduction of inventory balances
by the wholesale/retail trade during the first half of the year. Management
expects that any further impact of trade inventory practices on U.S.
prescription pharmaceutical sales will not be significant in the second
half of 1994.
Excluding the effects of currency fluctuations and product divestitures,
three-month sales in France and other European countries were approximately
level with the prior year quarter while sales in the Rest of the World
region increased slightly. On a year-to-date basis, non-U.S. sales declined
2% as lower sales in France (-6%), the Company's largest market, were partially
offset by sales increases in the rest of Europe. Year-to-date sales of anti-
infectives and analgesics in France have declined following strong demand in
1993 related to a high incidence of influenza. Cost containment measures and
physician prescribing habits are restricting growth of the French pharmaceutical
market and are expected to continue. Performance in certain other key European
markets has been affected by restrictive government programs and reduced
prescription prices. On a year-to-date basis, prescription pharmaceutical
sales in Germany have recovered by approximately 18% from depressed prior
year levels while ethical product sales in Italy and the U.K. were 22% and 13%
below the first half of 1993, respectively.
Sales in the Rest of World region for the first six months of 1994 were
approximately level with 1993 as sales growth in many of the smaller emerging
markets counterbalanced lower sales in Japan where price reductions effective
April 1st contributed to declines in sales.
On a quarterly and year-to-date basis, plasma derivatives continued to perform
well, led by sales of Monoclate-PR and MononineTM in the U.S. and Germany as
well as U.S. sales of IVGGTM gamma globulin. The benefit of increased sales of
Albuminar in the United States was mitigated by sales declines in Japan for
the three- and six-months ended June 30.
13
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Cardiovascular products also experienced sales growth during the quarter and
first six months of the year, led by sales of LovenoxR/ClexaneR in the United
States and Europe and U.S. sales of Dilacor XRR. The FDA exclusivity of LozolR
expired in mid-1993. Although LozolR sales were partially replaced by sales
of the generic indapamide, overall LozolR product sales trailed prior year
levels as expected.
Year-to-date sales of anti-infectives and analgesia products were below prior
year levels following unusually strong demand in France during the first and
fourth quarters of 1993. Despite increasing competitive pressure in the
French antibiotics market, total Company sales of anti-infectives were up
slightly in the second quarter due principally to higher sales of FlagylR
in the Rest of World region.
The Company's hypersensitivity products, particularly AzmacortR and Slo-bidTM/
Slo-PhyllinR, have experienced quarterly and six-month sales shortfalls.
Despite growth in prescriptions, year-to-date U.S ex-factory sales of
AzmacortR declined due to trade inventory reductions. Sales of NasacortR
were up slightly for the quarter and six-month sales remained level with
the prior year. A declining market due to a shift in use to inhaled steroids
has contributed to reduced sales of Slo-bidTM. In response to increasing
generic competition, the Company launched a generic version of Slo-bidTM in
the U.S. in the second quarter.
MaaloxR sales for the quarter were slightly above the prior year as increases in
Other Europe markets, particularly Germany, offset declines in the U.S. and
Canada. On a year-to-date basis, sales remained below 1993 levels. The
Company's share of the U.S. antacid market trailed the prior year due to
competitive activity and a shift away from the liquid segment where MaaloxR
has a strong presence. In an effort to protect the MaaloxR brand position in
the U.S., the Company has committed additional resources for marketing and
advertising initiatives.
As anticipated, sales of calcitonin products continued to be well below prior
year levels due to government cost containment programs in Italy, Spain and
Japan and generic competition in the United States. The present non-
reimbursement status of calcitonin in Italy has been appealed; a decision is
expected sometime in the fourth quarter of 1994. Quarterly and year-to-
date sales of the anti-inflammatory OrudisR/ProfenidR/OruvailR increased over
the comparative prior year periods, particularly in Europe.
Sales of oncology products have increased over the prior year periods, driven
by the launch of GranocyteR for chemotherapy-induced neutropenia in France,
Germany and other European markets in the first half of 1994. In the first
quarter, the Company also acquired the U.S. marketing rights to OncasparTM
for use in the treatment of acute lymphoblastic leukemia; OncasparTM is the
first oncology drug to be marketed in the United States by RPR.
Quarterly gross margin was down almost one percentage point primarily due to
unfavorable price changes. On a year-to-date basis, gross margin was down
slightly as a result of unfavorable changes in both price, particularly in
Europe, and product mix. Excluding the effects of nonrecurring items,
operating income margin was approximately three percentage points below 1993
on a quarterly basis and two percentage points lower for the year-to-date
period. For both periods, marketing expenses increased as a percentage of
sales,
14
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particularly in Germany and in support of Eastern Europe and other emerging
markets. Research and development expenditures approached 15% of net sales
for the first half of 1994; on a full year basis, investment in research and
development is expected to approach $600 million.
In June 1993, the Company approved a global restructuring plan and recorded a
charge of $121 million in the second quarter. The plan, which is expected
to be completed in 1995, is intended to contribute toward management's
objective to reduce the Company's cost base (exclusive of research and
development expenditures) as a percentage of sales. The cash outlay is expected
to approximate $100 million, half of which will occur in 1994. The remainder of
the restructuring charge relates to asset writeoffs in conjunction with certain
production facilities. Annual pretax savings should grow to over $60 million
in 1996. The restructuring will reduce the Company's workforce by
approximately 1,300 positions, or 6%, primarily from manufacturing, sales/
marketing and administrative functions in North America and in France,
although other locations in Europe and elsewhere are also included. Reductions
are being effected through a variety of local programs which typically include
retirement incentives or other severance benefits as well as outplacement
services.
Net interest expense declined 33% and 38% during the quarter and six-month
period, respectively, as a result of lower average net debt balances and
lower average interest rates in Europe. Preferred dividends were higher due
to a net increase in outstanding preferred shares and the effect on auction rate
dividends of higher U.S. short-term interest rates during 1994.
Other expense for the six months ended June 30 included approximately $21
million of losses from equity affiliates, including $10 million associated
with the Company's equity investment in Applied Immune Sciences, Inc.
Foreign exchange losses, including effects of translation and financing
policy in high-inflation economies, totaled $5 million in the first half
of 1994.
The Company records income tax expense based on an estimated full year effective
income tax rate. Excluding the effects of nonrecurring items, the estimated
effective tax rate for the second quarter and first six months of both 1994
and 1993 was approximately 29%.
Full year earnings per share, excluding restructuring charges, are expected to
approximate reported 1993 results. In the second half of 1994, U.S. ex-factory
sales of prescription pharmaceuticals are expected to reflect underlying
prescription trends. Continued good performance is anticipated in the
Armour business, in Germany and in certain emerging markets, although
pressures on other businesses (North American over-the-counter) and
markets (France, the U.K. and Italy) are expected to persist.
FINANCIAL CONDITION
Net cash provided by operating activities was $259 million for the first six
months of 1994, representing a $170 million decrease versus the comparable
prior year period. The reduction reflects lower earnings and a $106 million
increase in cash outlays for income
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taxes due to deferral of prior year tax payments, partially offset by lower
working capital needs. Prior year earnings and operating cash flows included
$105 million proceeds from the settlement of patent litigation.
Investing activities used cash of $124 million, including $87 million for
capital expenditures. Although lower in the first half of 1994, capital
expenditures for the full year are expected to approximate 1993 levels.
Current year investing activities also reflected cash outflows of $18 million
for the acquisition of various product rights while 1993 investing cash flows
benefitted from higher proceeds from the sale of assets. Year-to-date net
cash outflows associated with hedging certain net investment exposures
approximated $23 million compared with $7 million in 1993.
Cash used in financing activities decreased $201 million to $131 million due to
a lower level of debt repayments, offset in part by common share repurchases
and higher dividends. During the 1994 six-month period, the Company
repurchased approximately 1.7 million of its common shares ($60 million) for the
Employee Benefits Trust to fund employee benefits in the U.S; such share
repurchases totaled $10 million for the comparable 1993 period. Dividends paid
to common shareholders were $76 million or $.56 per share, an increase of
22% per share from the prior year period.
The Company's net debt (short- and long-term debt including notes payable to RP,
less cash and cash equivalents, short-term investments and time deposits) to net
debt plus equity ratio was .27 to 1 at June 30, 1994 compared with .26 to 1 at
December 31, 1993. At June 30, 1994, the Company classified approximately $415
million of notes payable as long-term debt in accordance with the Company's
intention and ability to refinance such obligations on a long-term basis.
The Company had committed lines of credit totaling $1.3 billion on June 30, 1994
with no borrowings outstanding under these lines. Of this amount, $600 million
relates to a long-term revolving credit facility unconditionally guaranteed by
RP; the amount reduces by $200 million per year until expiration of the facility
in 1997. On April 30, $100 million of the facility expired. In a separate
agreement with RP, the Company has agreed to maintain as unused under this
facility the smaller of $325 million or the principal amount of debt outstanding
(excluding borrowings from, or guaranteed by, RP). The Company has an
additional $745 million available under several multi-currency line of credit
agreements expiring throughout the next five years.
Pursuant to a U.S. shelf registration filed in 1993, the Company has the ability
to issue $325 million in public debt securities or preferred shares.
At June 30, 1994, the ratio of current assets to current liabilities was 1.40
to 1 compared with 1.37 to 1 at year-end. Management believes that cash
flows from operations, supplemented by financing expected to be available
from external sources, will provide sufficient liquidity for the foreseeable
future. Long-term liquidity is dependent upon the Company's competitive
position, including its ability to discover, develop and market innovative
new therapies, and maximize the benefits of new business alliances. In
addition to its 1993 collaboration with AIS in the area of gene and cell
therapy, in 1994 the
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Company entered into an alliance with Caremark International Inc., a
pharmaceutical benefit management company, to enhance the delivery of
cost-effective drug therapies. The Company will continue to explore new
strategic business relationships as such opportunities arise.
On July 28, 1994, the Board of Directors declared a cash dividend of $.28 per
common share payable August 31, 1994 to shareholders of record August 10,
1994, an increase of 8% from the third quarter 1993.
The Company is involved in litigation incidental to its business. A discussion
of contingencies appears in Note 7 of the Notes to Condensed Consolidated
Financial Statements and in Legal Proceedings in Part II of Form 10-Q.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
-------------------
Diethylstilbestrol ("DES") Litigation
- - --------------------------------------
There are approximately two hundred legal actions pending against one or more
subsidiaries of the Company and various groupings of more than one hundred
pharmaceutical companies, in which it is generally alleged that "DES
daughters" and/or their offspring were injured as a result of the development
of various reproductive tract abnormalities in the "DES daughters" because of
their in utero exposure to DES. Typically, William H. Rorer, Inc. ("WHR")
and Kremers-Urban Company ("K-U"), two former operating subsidiaries of the
Company, are named as defendants, along with numerous other former DES
manufacturers, when the claimant is unable to identify the manufacturer of
the DES to which she was exposed. While the aggregate monetary damages sought
in all of these DES actions are substantial, the Company believes that both WHR
and K-U have adequate defenses to DES claims. In May 1994, a proposed class
action was filed on behalf of persons alleging injuries caused by DES living
in the state of Ohio (Kurczi, et al. v. Eli Lilly, et al., United States
District Court for the Northern District of Illinois). The Company and certain
of its current and former subsidiaries were named among the 192 defendants.
In at least seven prior DES actions, plaintiffs have sought certification of
a class and have been unsuccessful. As the facts of each individual lawsuit
vary widely, the Company does not believe that class action status is warranted
and intends to vigorously oppose this petition requesting class action
certification. All pending cases are currently being defended by insurance
carriers, sometimes under a reservation of rights. The Company is also
responsible for the obligations of Nattermann & Cie GmbH ("Nattermann") with
respect to DES-related legal actions brought against certain of its former
U.S. subsidiaries. Under the terms of the 1990 Acquisition Agreement
with Rhone-Poulenc S.A. (RP), RP is obligated to indemnify the Company for
amounts expended on the Nattermann DES claims in excess of $2 million. The
Company believes that the former Nattermann subsidiaries have adequate defenses
to DES claims.
AHF Litigation
- - ---------------
There are approximately one hundred eighty-nine pending lawsuits in the United
States, seventeen in Canada and fifty-five in Ireland against the Company's
Armour Pharmaceutical Company ("Armour") subsidiary, and in some instances,
the Company and certain of its other subsidiaries, in which individuals
with hemophilia and infected with the Human Immunodeficiency Virus ("HIV"), or
their representatives, claim that their infection with HIV and, in some cases,
resulting illnesses, including Acquired Immune Deficiency Syndrome-related
conditions or death therefrom, may have been caused by administration of anti-
hemophilic factor ("AHF") concentrates processed by Armour in the early and
mid-1980's; none of these cases involves Armour's currently distributed AHF
concentrates. In most of these suits, Armour is one of a number of
defendants, including other fractionators who supplied AHF during that period.
To date, approximately seventy-seven claims have been resolved either
by dismissal by the plaintiffs or the Court or through settlement. A majority
of the currently pending lawsuits were filed in 1993, and management believes
the number of lawsuits filed will continue to trend upward. It is not
possible, however, to predict with
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certainty the number of additional lawsuits that may eventually be filed
alleging HIV-related claims.
In January 1993, a jury in Florida held that Armour was liable to the parents of
a deceased HIV-infected hemophiliac for damages of approximately $2 million.
Armour believes this verdict to be inconsistent with evidence specific to the
case and, accordingly, it filed motions with the trial court seeking reversal
or, alternatively, a new trial. The trial court has denied both motions.
Armour has appealed this judgment to the United States Court of Appeals for
the Eleventh Circuit. Regardless of the outcome of this case, and because the
facts vary widely in such cases, the Company does not view this verdict as
predictive of, or as precedent for, decisions in any other cases. Juries in
other AHF cases have determined that Armour and the other plasma
fractionators acted responsibly and were not negligent. In October 1993,
Armour obtained a directed verdict dismissing it from a lawsuit pending in
Louisiana State Court on the basis that the plaintiff had not presented
evidence sufficient to maintain an action against Armour. Additionally, a
jury verdict in favor of Armour and the other plasma fractionators was obtained
in an action pending in the United States District Court for the Northern
District of Illinois in November 1993. The jury concluded that the
fractionators of Factor VIII concentrate in the early 1980's were not
negligent as alleged and accordingly were not liable to the claimant.
Plaintiff's post-trial motion seeking a new trial was denied. Plaintiff
recently appealed the judgment to the United States Court of Appeals for
the Seventh Circuit. Although there are no other actions pending against
Armour which are presently at trial, two cases are presently set for trial in
1994 and Armour reasonably expects that other cases will proceed to trial in
the future.
In December 1993, the Federal Multi-District Litigation Panel authorized the
consolidation of all AHF litigation pending in U.S. Federal Courts for
purposes of pre-trial discovery and the transfer of such cases to the U.S.
District Court for the Northern District of Illinois for this purpose.
As of June 1994, four proposed federal class action lawsuits (Wadleigh, et
al. v. Armour Pharmaceutical Company, et al., United States District Court,
Northern District, Illinois; Richard Roe and his mother, Jane Roe v. Armour
Pharmaceutical Company, et al., United States District Court, Idaho District;
Jose Alvarez, Jr. et al. v. Armour Pharmaceutical Company, et al., United
States District Court for the Eastern District of Louisiana; and
Timmy Dale Martin, et al. v. Armour Pharmaceutical Company, et al., United
States District Court for the Northern District of Alabama); and one proposed
state class action (Jeffrey Stanger, et al. v. Armour Pharmaceutical Company,
et al., Superior Court, Pima County, Arizona), have been filed against
several fractionators, including Armour. As the facts in each individual
lawsuit vary widely, Armour does not believe that class action status is
warranted in any of these actions. Previously, two U.S. Federal Courts and one
State Court had denied petitions for class action certification; most recently,
in April 1994, the New Jersey Superior Court denied permission to bring a
previously proposed state class-action lawsuit (D.K., L.K., R.K., Sr., et al.
v. Armour Pharmaceutical Company, et al., Superior Court, Middlesex County,
New Jersey). The Company intends to vigorously oppose the remaining
petitions requesting class action certification.
In the U.S., Armour and other plasma fractionators have participated in
discussions with representatives of the hemophilia community, including the
National Hemophilia Foundation, concerning the issue of assistance for U.S.
hemophiliacs infected with HIV. In the U.S., Armour and Baxter Healthcare
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Corporation ("Baxter") have reached a tentative settlement with attorneys
representing claimants in the purported class-action lawsuits pending against
the respective companies. Under the agreement Armour, Baxter and the attorneys
representing the claimants will petition the Court to conditionally certify a
class-action for settlement purposes only. If the settlement is confirmed by
the Court, Armour and Baxter will agree to create a Fund in a total amount
not to exceed $160 million, based upon a one time payment from each company.
This Fund is intended for the benefit of HIV-infected hemophiliac claimants,
including family members. Fund claimants would agree to release the
participating fractionators from all legal claims related to their use of the
participating fractionators' blood factor concentrates and derivatives. The
settlement has several pre-conditions, including a maximum of 150 claimants
who choose to opt-out and pursue independent legal actions. Armour will
continue to vigorously defend its position in all other cases and claims brought
against it, including those brought by claimants who choose to opt-out of the
proposed settlement program.
The Company has contractual rights to certain insurance coverage provided by
insurance carriers to Revlon, Inc., the party from which it purchased the
Armour business in 1986 ("Revlon carriers"). The Company also believes it
has certain insurance coverage from another principal insurance carrier
("principal carrier") and from an umbrella insurance carrier. In addition,
the Company believes it has access to "excess" liability insurance coverage
from other carriers, effective in 1986, for certain of these cases if
certain self-insured retention levels from relevant insurable losses are
exceeded. The Company has been involved in litigation with the principal
and umbrella carriers as well as with certain of the Revlon carriers, relative
to carrier defense and indemnity obligations associated with
AHF litigation. A trial in the insurance coverage litigation, if necessary,
would take place in the United States District Court for the Eastern District
of Pennsylvania sometime in 1994. In August 1993, the Court granted the
Company's motion for partial summary judgment, deciding that the principal
carrier is obligated to provide a defense to the Company for the
AHF litigation. The Company and certain of the carriers are engaged in
extensive discussions aimed principally at settling the extent and other
conditions of coverage of those carriers. Based upon these discussions, the
Company believes that, although not a certainty, a substantial level of
coverage (including substantial coverage for legal defense expenditures) for
the Company's estimated liability determined in accordance with
Statement of Financial Accounting Standards No. 5 ("SFAS 5") is probable
of occurrence.
Certain Contract Litigation
- - ----------------------------
Rhone-Poulenc Rorer Pharmaceuticals ("RPRP"), a subsidiary of the Company, has
been named as a defendant in two related breach of contract lawsuits initiated
by Boehringer Mannheim GmbH and its American subsidiary, Boehringer Mannheim
Pharmaceuticals Corporation (collectively, "BM"), seeking compensatory damages.
Specifically, BM has commenced arbitration proceedings in Switzerland and
litigation in the state court of Maryland alleging that RPRP breached an
agreement related to the development of BM's bisphosphonate compound
and a copromotion agreement pertaining to the Company's licensed product LozolR.
The Company believes that the claims are without merit and RPRP intends to
vigorously defend these actions. RPR has filed a counterclaim against BM for
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fraud related to representations made by BM and its agents prior to the
execution of the agreements.
Antitrust Litigation
- - ---------------------
The Company has been named as a defendant in seven antitrust actions pending in
state and federal courts in Northern California, eleven in Federal Court in the
Southern District of New York, and single actions in the District of Minnesota,
the District of South Carolina, the Southern District of Ohio, the Southern
District of Georgia, and in state court in Alabama. The suits allege
that RPR, certain other pharmaceutical companies and wholesalers and a
large mail order concern discriminated against independent community
pharmacist plaintiffs with respect to the prices charged for pharmaceutical
products and further conspired to maintain prices at artificially high levels
to the detriment of these pharmacies. One suit alleges injury to a proposed
class of California residents who are consumers of brand name prescription
products. Most of the federal actions purport to be class actions, as do four
of the five state cases. Plaintiffs in these lawsuits seek injunctive relief
and a monetary award for past damages alleged. The federal class plaintiffs
have filed an amended consolidated Complaint so that issues affecting the
class are pleaded consistently.
The Judicial Panel on Multi-District Litigation has consolidated federal cases
in which the Company is a named defendant with several other related federal
actions in which the Company is not named as a defendant for purposes of
coordinating overlapping pre-trial proceedings, such as discovery. The cases
have been coordinated in the Northern District of Illinois. Similarly,
five state cases in which the Company is named have been coordinated with
four other cases in which the Company is not named as a defendant in the
Superior Court for the County of San Francisco.
While the aforementioned cases are in their early stages, the Company believes
that the claims are without merit and it intends to vigorously defend these
lawsuits.
Patent and Intellectual Property Litigation
- - --------------------------------------------
The Company is a plaintiff in a patent infringement lawsuit with Chiron
Corporation filed in the United States District Court in California involving
the patent licensed exclusively to the Company by the Scripps Research
Institute ("Scripps") covering the antihemophilic Factor VIII:C. The Court
is considering pending summary judgment motions. If this case goes to trial,
such trial is likely to be scheduled to commence within the next six to
twelve months.
In February 1993, Tanabe Seiyaku Company ("Tanabe") of Japan and their U.S.
licensee, Marion Merrell Dow Inc. ("MMD") initiated an action before the
International Trade Commission ("ITC"), the administrative agency
responsible for handling complaints of imports which allegedly infringe U.S.
patent rights. The complaint names ten domestic and foreign respondents,
including the Company, and alleges infringement of a Tanabe U.S. patent,
claiming a process for preparing bulk diltiazem, the active ingredient in the
Company's Dilacor XRR product. Tanabe and MMD are requesting relief in the
form of an Exclusion Order and a Cease and Desist Order. The Company has
raised several defenses, including lack of jurisdiction, patent invalidity,
and non-infringement. The ITC had suspended the proceeding indefinitely in
view of a reexamination proceeding in the U.S. Patent and Trademark office
involving the Tanabe U.S. process patent. Reexamination is
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complete and the ITC is expected to reconvene with a hearing anticipated
in the fourth quarter 1994.
The eventual outcomes of the above matters of pending litigation cannot be
predicted with certainty. The defense of these matters and the defense of
expected additional lawsuits related to these matters may require substantial
legal defense expenditures. The Company follows SFAS 5 in determining
whether to recognize losses and accrue liabilities relating to such matters.
Accordingly, the Company recognizes a loss if available information indicates
that a loss or range of losses is probable and reasonably estimable. The
Company estimates such losses on the basis of current facts and circumstances,
prior experience with similar matters, the number of claims and the
anticipated cost of administering, defending and, in some cases, settling
such claims. The Company has also recorded as an asset insurance recoveries
which are determined to be probable of occurrence on the basis of the status of
current discussions with its insurance carriers. If a contingent loss is
not probable, but is reasonably possible, the Company discloses this
contingency in the notes to its consolidated financial statements if it is
material. Based on the information available, the Company does not believe
that reasonably possible uninsured losses in excess of amounts recorded for
the above matters of litigation would have a material adverse impact on the
Company's financial position or results of operations.
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ITEM 6. Exhibits and Reports on Form 8-K
-----------------------------------
a. Exhibits
11 Statement re computation of earnings per common share.
15 Letter re unaudited interim financial information.
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated June 22, 1994 announcing
lower-than-expected second quarter 1994 earnings per share and, as a result,
lower anticipated full-year 1994 earnings. The Company also described a
global restructuring plan approved during the quarter.
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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.
RHONE-POULENC RORER INC.
---------------------------
(Registrant)
August 2, 1994 /s/ PATRICK LANGLOIS
- - ------------------ -------------------------
Patrick Langlois
Senior Vice President
Chief Financial Officer
August 2, 1994 /s/ DANIEL J. PEDRIANI
- - ------------------ ---------------------------
Daniel J. Pedriani
Vice President-Corporate Controller
Chief Accounting Officer
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INDEX TO EXHIBITS
Exhibit No. Page
- - ----------- -------
11 Statement re computation of earnings (loss)
per common share. 26 - 27
15 Letter re unaudited interim financial
information. 28
25
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<PAGE>
EXHIBIT 11
RHONE-POULENC RORER INC. AND SUBSIDIARIES
Computation of Earnings (Loss) Per Common Share
(Unaudited-dollars and shares in millions except per share data)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------
1994 1993
---------------------
<S> <C> <C>
Net income (loss) per common share as reported:
Net income (loss) before preferred dividend $ (2.7) $ 121.6
Less: Dividend on preferred stock 4.7 2.0
---------------------
Net income (loss) available to common shareholders $ (7.4) $ 119.6
=====================
Average shares outstanding 135.6 138.2
=====================
Net income (loss) available to common shareholders
per share $ (0.05) $ .87
=====================
Net income (loss) per common share assuming full dilution:
Net income (loss) before preferred dividend $ (2.7) $ 121.6
Less: Dividend on preferred stock 4.7 2.0
---------------------
Net income (loss) available to common shareholders $ (7.4) $ 119.6
=====================
Average shares outstanding 135.6 138.2
Shares contingently issuable for stock plan 0.3 1.4
---------------------
Average shares outstanding, assuming full dilution 135.9 139.6
=====================
Net income (loss) available to common shareholders
per share, assuming full dilution $ (0.05) $ .86
=====================
<FN>
This calculation is submitted in accordance with the regulations of the
Securities and Exchange Commission although not required by APB Opinion
No. 15 because it results in dilution of less than 3%.
</FN>
</TABLE>
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EXHIBIT 11
RHONE-POULENC RORER INC. AND SUBSIDIARIES
Computation of Earnings (Loss) Per Common Share
(Unaudited-dollars and shares in millions except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1994 1993
----------------------
<S> <C> <C>
Net income per common share as reported:
Net income before preferred dividend $ 75.2 $ 218.0
Less: Dividend on preferred stock (8.9) (4.2)
---------------------
Net income available to common shareholders $ 66.3 $ 213.8
=====================
Average shares outstanding 136.1 138.2
=====================
Net income available to common shareholders per share $ 0.49 $ 1.55
=====================
Net income per common share assuming full dilution:
Net income before preferred dividend $ 75.2 $ 218.0
Less: Dividend on preferred stock (8.9) (4.2)
---------------------
Net income available to common shareholders,
assuming full dilution $ 66.3 $ 213.8
=====================
Average shares outstanding 136.1 138.2
Shares contingently issuable for stock plan 0.3 1.2
---------------------
Average shares outstanding, assuming full dilution 136.4 139.4
=====================
Net income available to common shareholders
per share, assuming full dilution $ 0.49 $ 1.53
=====================
<FN>
This calculation is submitted in accordance with the regulations of the
Securities and Exchange Commission although not required by APB Opinion
No. 15 because it results in dilution of less than 3%.
</FN>
</TABLE>
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EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Rhone-Poulenc Rorer Inc.
Quarterly Report on Form 10-Q
We are aware that our report dated July 19, 1994, on our review of interim
financial information of Rhone-Poulenc Rorer Inc. (the Company), for the
period ended June 30, 1994, and included in the Company's quarterly report
on Form 10-Q for the quarter then ended is incorporated by reference
in the registration statements of the Company on Form S-3 (Registration
No. 33-62052, Registration No. 33-36558, Registration No. 33-30795,
Registration No. 33-23754, Registration No. 33-4876, Registration No. 33-19936,
Registration No. 22-18034, Registration No. 33-43941, Registration No. 33-
53378 and Registration No. 33-55694) and on Form S-8 (Registration No. 33-58998,
Registration No. 33-24537, Registration No. 2-61635, Registration No. 2-78374
and Registration No. 33-2403). Pursuant to Rule 436(c) under the Securities
Act of 1933, this report should not be considered a part of the registration
statements prepared or certified by us within the meaning of Sections 7 and
11 of that Act.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------------
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
August 2, 1994
