SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 1996
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 0-11274
PHARMACEUTICAL FORMULATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2367644
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 Plainfield Avenue, Edison, NJ 08818
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code) (908) 985-7100
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
The number of shares outstanding of common stock, $.08 par value, as of April
30, 1996 was 29,438,814.
<PAGE>
PHARMACEUTICAL FORMULATIONS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 1996 June 30,
Actual Pro-Forma 1995
(Unaudited) (Unaudited) (Note 1)
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 6,000 $ 2,506,000 $ 655,000
Accounts receivable - net of allowance for
doubtful accounts of $217,000 and $333,000 8,947,000 8,947,000 $ 8,093,000
Inventories 9,669,000 9,669,000 14,915,000
Prepaid expenses and other current assets 609,000 609,000 696,000
Income taxes recoverable 888,000 888,000 -
Deferred tax asset 400,000 400,000 400,000
---------- ----------- -----------
Total current assets 20,519,000 23,019,000 24,759,000
PROPRETY, PLANT AND EQUIPMENT
Net of accumulated depreciation and
amortization of $11,877,000 and $10,832,000 16,275,000 16,275,000 14,346,000
OTHER ASSETS
Deferred financing costs 115,000 115,000 130,000
Deferred tax asset 1,150,000 1,150,000 1,000,000
Other assets 184,000 184,000 221,000
----------- ----------- -----------
$38,243,000 $40,743,000 $40,456,000
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Current portion of long-term debt $ 622,000 $ 622,000 $ 642,000
Current portion of capital lease obligations 1,834,000 1,834,000 1,529,000
Accounts payable 8,735,000 8,735,000 9,829,000
Accrued expenses 1,438,000 1,438,000 549,000
Income taxes payable - - 38,000
----------- ----------- ----------
Total current liabilities 12,629,000 12,629,000 12,587,000
LONG TERM DEBT 16,924,000 16,924,000 18,207,000
LONG TERM CAPITAL LEASE OBLIGATIONS 9,825,000 9,825,000 8,731,000
DEFERRED GAIN ON SALE/LEASEBACK 438,000 438,000 477,000
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock - par value $1.00 per share
Authorized - 10,000 shares, 2,500,000
shares issued on April 8, 1996 - 2,500,000 -
Common stock - par value $.08 per share
Authorized - 40,000,000 shares
Issued and outstanding - 29,438,814 and
29,311,816 shares 2,355,000 2,355,000 2,347,000
Capital in excess of par value 37,239,000 37,239,000 27,200,000
Accumulated deficit (41,167,000) (41,167,000) (39,093,000)
----------- ----------- -----------
Total stockholders' equity (deficiency) ( 1,573,000) 927,000 454,000
----------- ----------- -----------
$38,243,000 $40,743,000 $40,456,000
----------- ----------- -----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PHARMACEUTICAL FORMULATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net sales $43,218,000 $48,214,000 $14,051,000 $14,650,000
COST AND EXPENSES
Cost of goods sold 33,197,000 34,133,000 10,908,000 10,344,000
Selling, general and
administrative 9,026,000 8,258,000 2,915,000 3,023,000
Special compensation
expense 678,000 - - -
Research and
development 703,000 1,095,000 277,000 347,000
-----------
43,604,000 43,486,000 14,100,000 13,714,000
PROFIT (LOSS) FROM
OPERATIONS ( 386,000) 4,728,000 ( 49,000) 936,000
OTHER INCOME (EXPENSE)
Interest expense ( 2,787,000) ( 2,864,000) ( 876,000) ( 965,000)
Other 61,000 89,000 21,000 54,000
----------
( 2,726,000) ( 2,775,000) ( 855,000) ( 911,000)
INCOME (LOSS) BEFORE
INCOME TAXES ( 3,112,000) 1,953,000 ( 904,000) 25,000
INCOME TAXES (BENEFIT) ( 1,038,000) 60,000 ( 307,000) ( 300,000)
---------- ---------- ----------
NET INCOME (LOSS) ($2,074,000) $ 1,893,000 ($ 597,000) $ 325,000
========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 29,400,000 29,890,000 29,439,000 29,965,000
========== ==========
INCOME (LOSS) PER COMMON
AND COMMON EQUIVALENT ($.07) $.06 ($.02) $.01
SHARE ==== ==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PHARMACEUTICAL FORMULATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($2,074,000) $1,893,000
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization of
property, plant and equipment 1,220,000 996,000
Amortization of bond discount and
deferred financing costs 89,000 235,000
Amortization of deferred gain on
sale/leaseback ( 39,000) ( 37,000)
Deferred tax benefit ( 150,000) ( 600,000)
Common stock issued for services 21,000
Special compensation expense 678,000 -
Changes in current assets and liabilities:
(Increase)/Decrease in accounts receivable ( 854,000) 102,000
(Increase) in income taxes recoverable ( 888,000)
(Increase)/Decrease in inventories 5,246,000 ( 2,270,000)
(Increase)/Decrease in other current assets 87,000 ( 109,000)
Increase/(Decrease) in accounts payable,
accrued expenses and income taxes payable ( 921,000) 866,000
----------
Net cash provided from operating
activities 2,394,000 1,097,000
----------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/Decrease in other assets 37,000 ( 246,000)
(Increase) in property, plant and equipment ( 1,501,000) ( 1,651,000)
---------- ----------
Net cash (used in) investing
activities ( 1,464,000) ( 1,897,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(Decrease) in borrowings under line
of credit ( 895,000) 1,440,000
Principal payments of capital lease
obligations ( 1,217,000) ( 1,056,000)
Principal repayments of long-term debt ( 454,000) ( 351,000)
Refinancing of capital leases 968,000
Receipt of restricted cash 125,000
Issuance of common stock 19,000
Net cash provided by (used for) financing
activities ( 1,579,000) 158,000
---------- ----------
Net (decrease) in cash ( 649,000) ( 642,000)
CASH, beginning of period 655,000 1,212,000
---------- ----------
CASH, end of period $ 6,000 $ 570,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PHARMACEUTICAL FORMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1: Interim Financial Reporting:
The consolidated balance sheet as of June 30, 1995 has been
derived from the audited consolidated balance sheet and is
presented for comparative purposes.
The accompanying financial statements presume that users have
read the audited financial statements for the preceding fiscal
year. Accordingly, footnotes which would substantially duplicate
such disclosure have been omitted.
The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair statement
of the results for the interim periods presented. Such
adjustments consist solely of normal recurring accruals.
Certain amounts appearing in the March 31, 1995 and June 30, 1995
financial statements have been reclassified to conform to the
March 31, 1996 presentation. There was no effect on net income
due to the reclassification.
The results of operations for the nine and three months ended
March 31, 1996 are not necessarily indicative of the results to
be expected for a full year.
Note 2: Contingencies:
Other than described below, no material proceedings to which the
Company is a party, or to which any of its properties are
subject, are pending or are known to be contemplated, and the
Company knows of no material legal proceedings, pending or
threatened, or judgments entered against any director or officer
of the Company in his capacity as such.
In or about October 1991, an action was instituted in the
Superior Court of New Jersey, County of Middlesex, against the
Company by an individual seeking monies claimed to be due under
an alleged employment agreement. The Company believes that the
amount sought, $3,500,000 has been frivolously asserted to harass
the Company and that the allegations are completely baseless. The
Company has interposed counterclaims against plaintiff for fraud
and related claims and seeks damages in the amount of $5,000,000.
As a result of plaintiff's poor physical condition, in April
1994, he moved to transfer the matter to the "inactive" trial
list which motion has been granted. Accordingly, no further
action will be taken by either party with respect to the matter
unless and until plaintiff seeks to restore the matter to the
active trial calendar.
In or about November 1992, an action was instituted against the
Company in the Supreme Court of New York, County of New York by
Univest Technologies, alleging that the Company breached its
agreement by refusing to furnish Soluble Aspirin to such entity.
Plaintiff seeks "consequential damages" of $1,500,000. The
Company denies that any such agreement existed and vigorously
denies that any monies are owed to plaintiff. The Company moved
to dismiss the complaint, which motion was granted with leave to
replead. Plaintiff served an amended complaint thereafter and the
Company again moved to dismiss the complaint. The Company is
awaiting a decision from the court with respect to the Company's
second motion. If the complaint is not dismissed, the Company
intends to assert counterclaims against plaintiff for amounts in
excess of the amount sought, on the basis of, among other things,
plaintiff's fraud and misrepresentation.
In or about July 1994, Puritan Quartz, Inc. ("Puritan") brought
suit against the Company, in the U.S. District Court for the
Southern District of New York, alleging breach of (i) the
Company's purported contractual obligations to supply Puritan
with acetaminophen and ibuprofen for resale to an unaffiliated
party; and (ii) related confidentiality obligations. The
complaint seeks damages in the aggregate amount of $3,600,000,
plus $300,000 for each additional month of continuing breach. The
Company believes that the clear meaning of the language of the
agreement between the parties was that the agreement had a one
year term, ending October 26, 1993, prior to the events of the
alleged breach, and that such agreement was never extended.
Accordingly, in the Company's view, it had no obligation
whatsoever to Puritan at the time of the alleged breach. The
Company further believes that Puritan's claims as to the
aggregate amount of its alleged lost profits are overstated. The
Company has answered the complaint and served preliminary
discovery demands upon Puritan.
Note 3: Inventories:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, June 30,
Inventories consist of the 1996 1995
following:
Raw materials $3,768,000 $ 5,321,000
Work in process 527,000 375,000
Finished goods 5,374,000 9,219,000
---------- ---------
$9,669,000 $14,915,000
</TABLE>
Note 4: Dividends:
No dividends were declared during any period presented.
Note 5: Earnings per Share:
Earnings per share are based on the weighted average number of
common and common equivalent shares outstanding for the period.
Common equivalent shares consist of the dilutive effect of
unissued shares under options, warrants, and in the case of
fully-diluted earnings per share, convertible debentures,
computed using the treasury stock method with the average stock
prices for primary basis and the higher of average or period end
stock prices for fully-diluted basis. Fully-diluted earnings per
share are not presented since the amounts are substantially the
same as primary earnings per share.
No effect has been given to shares issuable for common stock
equivalents for the nine and three months ended March 31, 1996 as
the effect would be anti-dilutive.
Note 6: Related Party Transactions:
The following transactions with ICC Industries Inc. ("ICC"), an
affiliated company, are reflected in the consolidated financial
statements as of or for the nine months ended March 31, 1996 and
1995:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Inventory purchases from ICC $493,000 $1,019,000
Interest expense 364,000 444,000
Accounts payable to ICC 178,000 256,000
Equipment lease obligations due ICC 4,812,000 3,910,000
</TABLE>
Note 7: Special Compensation Expense:
In December 1995, the Company replaced its former President and
Chief Executive Officer. The Company accrued the estimated
remaining obligation due to this individual under his employment
contract. In addition, as part of a continuing effort to improve
operations, the Company has embarked on a resizing plan. The
Company has accrued the estimated severance and other fees to be
provided as part of this plan.
Note 8: Subsequent Events:
On April 8, 1996, the Company sold 2,500,000 shares of Series A
Preferred Stock to ICC for an aggregate of $2,500,000. The
preferred stock is redeemable at the option of PFI and
convertible into common stock of the Company by ICC at any time
after 36 months at the lower of market price of the common stock
of the Company or $2.00 per share. The preferred stock sold to
ICC pays dividends at the rate of $.08 per share, payable
semiannually on January 1st and July 1st each year and are
cumulative and non-participating. Due to the significance of this
transaction, the pro-forma affect has been shown on the balance
sheet as if it occurred on March 31, 1996.
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Revenues for the nine months ended March 31, 1996 were $43,218,000 compared to
$48,214,000 in the comparable period in the prior fiscal year. The decrease in
revenues of $4,996,000 or 108 is the result of reductions in both the private
label (store brand) and contract manufacturing sector of the business. The
majority of the reduction in private label (store brand) is the result of a
reduction in Revco D.S., Inc. ("Revco") for which the prior year period
included increased sales to fill start-up requirements for a new acquisition by
Revco. In addition, a major contract manufacturing project from the prior year
did not continue at the same rate in the current year. Three customers
represent approximately 53% of the Company's sales for the nine months ended
March 31, 1996. These three customers are Revco, Price-Costco, Inc.
("Price-Costco") and Walgreen Company ("Walgreen"). Sales to Revco amounted to
$9,403,000 for the nine months ended March 31, 1996 or 228 of total sales
compared to $12,338,000 or 26% of total sales in the comparable period in the
prior fiscal year. Sales to Walgreen amounted to $6,457,000 or 156 of total
sales for the nine months ended March 31, 1996 compared to $6,703,000 or 14% of
total sales in the comparable period in the prior fiscal year. Sales to
Price-Costco were $6,944,000 or 16% of total sales compared to $5,550,000 or
12% of total sales in the comparable period in the prior fiscal year.
Sales for the three months ended March 31, 1996 were $14,051,000 compared to
$14,650,000 in the comparable period in the prior fiscal year. The decrease of
$599,000 or 4% resulted from lower sales in the bulk and contract manufacturing
sectors of the business.
Cost of sales as a percentage of sales was 77% for the nine months ended March
31, 1996 compared to 71% in the comparable period in the prior fiscal year. The
increase in cost of sales as a percentage of sales is due to the lower sales
volume especially in the contract manufacturing sector which traditionally has
the lower cost of sales as a percent of sales. In addition, there was an
increase in certain operating costs such as raw materials and labor rates. Cost
of sales as a percentage of sales was 78% in the three months ended March 31,
1996 as compared to 71% in the comparable period in the prior fiscal year, due
to the reduced sales especially in the bulk and contract manufacturing sectors
which traditionally have a lower cost of sales as a percent of sales. In
addition, there was an increase in certain operating costs such as raw
materials and labor rates.
Selling, general and administrative expenses were $9,026,000 for the nine
months ended March 31, 1996 compared to $8,258,000 in the comparable period in
the prior fiscal year. The increase of $768,000 is due to increased selling and
distribution costs as a result of efforts to continually expand the customer
and product base. The Company has a new warehouse and distribution center to
facilitate the movement of finished goods.
Research and development costs were $703,000 for the nine months ended March
31, 1996 compared to $1,095,000 in the comparable period in the prior fiscal
year. The decrease of $392,000 is due to research projects which are not being
performed at the same rate as the prior year.
Selling, general and administrative expenses decreased by $108,000 for the
three months ended March 31, 1996 due partly to the resizing program
initiated in January 1996 to reduce costs. Research and development costs
decreased by $70,000 due to the reasons stated above.
Interest and other expenses were $2,726,000 for the nine months ended March 31,
1996 compared to $2,775,000 in the comparable period in the prior fiscal year.
Interest and other expenses were $855,000 in the three months ended March
31, 1996 vs. $911,000 in the prior three month period.
As stated above, revenues decreased by $4,996,000 in the nine months ended
March 31, 1996 as compared to the comparable period in the prior fiscal year.
If the Company's bulk and contract manufacturing business continues to decline
and if the Company's private label (store brand) business does not grow above
the prior year's levels, there will be a negative effect on the Company's
future operating results. The Company has embarked on an aggressive marketing
and selling program to reverse this sales trend in both the private label
(store brand), bulk and contract manufacturing sectors. In addition, a resizing
program is being implemented to reduce costs and improve productivity aimed at
positive operating results in the future. As part of the resizing, a provision
for the estimated cost of special compensation and other expenses has been
reflected in the financial statements for the nine months ended March 31, 1996
(see Note 7).
LIQUIDITY AND CAPITAL RESOURCES
Accounts receivable increased by $854,000 due to the higher sales in the three
months ended March 31, 1996 as compared to the quarter ending June 30, 1995.
Inventories decreased by $5,246,000 as the Company reduced its inventory
requirements due to the lower sales in the nine months ended March 31, 1996 as
compared to the prior year.
The Company incurred $3,149,000 of capital expenditures in the nine months
ended March 31, 1996 most of which related to the upgrade of the manufacturing
facility. This was partially financed through capital leases entered into with
ICC for a total of $1,205,000. ICC also refinanced certain equipment lease
obligations of the Company which provided an additional $968,000 to finance the
plant upgrade. In addition, the Company borrowed $443,000 from its
institutional lender. Principal payments on capital leases and long-term debt
were $895,000 and $454,000, respectively.
In the nine months ended March 31, 1996, certain of the 8.25% Debentures were
converted into common stock of the Company. The conversion reduced debt and
increased stockholders' equity (deficiency) by approximately $28,000. In
addition, ICC exercised its' preemptive rights with respect to such conversions
and purchased shares of common stock, which increased stockholders equity
(deficiency) by $19,000.
The Company continues to take steps to reduce costs to improve operating
results to meet its working capital needs. Significant capital expenditures,
however, will require additional financing. While the Company has in the past
had no difficulty obtaining such financing, there can be no assurance the
Company will obtain the additional financing necessary for the capital
expenditures.
The receipt of the funds for the 2,500,000 shares of Series Preferred Stock
sold in April 1996 increased the Company's working capital and stockholders'
equity as shown in the pro-forma balance sheet.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
See Note 2 to the Company's Notes to Consolidated Financial
Statements.
Item 2: Changes in Securities
None.
Item 3: Defaults upon Senior Securities
None.
Item 4: Submission of Matters to a Vote of Securities Holders
None.
Item 5: Other Information
None.
Item 6: Exhibits and Reports on Form 8-K
(a). Exhibits.
10.1 Employment Agreement with
Charles E. LaRosa
dated April 4, 1996*
27. Financial Data Schedule.
(b). Reports on Form 8-K
None.
- --------
* Management contracts or compensatory plans or arrangements
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.
PHARMACEUTICAL FORMULATIONS. INC.
(REGISTRANT)
Date: May 9, 1996 By: /s/ Charles E. LaRosa
----------------------
Charles E. LaRosa
Chief Executive Officer
(Principal Executive Officer)
Date: May 9, 1996 By: /s/ Frank Marchese
-------------------
Frank Marchese
Chief Financial Officer and Treasurer
(Principal Financial officer
EXHIBIT INDEX
10.1 Employment Agreement with
Charles E. LaRosa
dated April 4, 1996
27 Financial Data Schedule.
Exhibit 10.1
PHARMACEUTICAL FORMULATIONS, INC.
460 Plainfield Avenue, Edison, NJ 08818
Tel 908-985-7100 Fax 908-819-3330
April 4, 1996
Mr. Charles E. LaRosa
801 Dartmoor
Westfield, New Jersey 07090
Dear Mr. LaRosa:
This letter will confirm the terms and conditions under which you will continue
your employment with Pharmaceutical Formulations, Inc. (the "Company") in the
position of President and Chief Executive Officer after the first six months.
You shall report to the Board of Directors of the Company.
You shall devote all of your working time to the above position.
1. Compensation and Benefits:
You shall receive the following:
(a) A salary of $250,000 (two hundred fifty thousand dollars) per annum,
payable in accordance with the Company's normal payroll practices;
(b) You may be entitled to a bonus at the end of each year based
upon Company results and your performance, which bonus shall be at the sole
discretion of the Board of Directors, with no guaranteed minimum or maximum
bonus payable;
(c) You may receive long-term incentives (e.g., stock options),
as determined by the Board of Directors upon recommendation of the Stock Option
Committee. Upon acceptance of this Agreement and effective June 7, 1996, you
will be awarded a stock grant of 25,000 (twenty-five thousand) shares of the
Company's Common Stock as additional compensation. Additionally, upon
acceptance of this Agreement and effective June 7, 1996, provided you are an
employee of the Company as of that date, you shall receive a qualified stock
option for 75,000 (seventy-five thousand) shares of the Company's Common Stock
in accordance with the Company's qualified stock option plan currently in
effect, at the current market price of such Stock as of the date of the grant
of the options exercisable in accordance with the terms of the Company's 1994
Qualified Stock Option Plan;
(d) The Company has a non-contributory 401(k) plan, which you may
join when eligible;
(e) Other benefits, including Company-paid medical and dental
insurance, Company-paid health exam upon starting employment and annually
thereafter, $500,000 life insurance, short-term and long-term disability, and
travel accident coverage, are offered when you become eligible in accordance
with the Company's normal benefit programs;
(f) Reimbursement of financial planning services, up to maximum
of $5,200 per annum, to be paid upon presentation of invoice, which amount
shall be paid as additional salary and subject to taxes;
(g) Four (4) weeks annual vacation, in accordance with Company
policy, which provides that unused vacation may not be carried over from year
to year.
2. Confidential Information:
You agree that you will not, without specific written authorization by the
Board of Directors of the Company, at any time during or after the Term of
Employment, use any confidential information of the Company for your own
benefit, and you will not, directly or indirectly, reveal, divulge, disclose or
communicate such information to any person, firm, corporation or other entity
not authorized by the Board of Directors of the Company to know same, except as
may be required by law, in which case, notice and sufficient opportunity to
obtain a protective order shall be given by the Executive to the Company.
3. Non-Compete and Solicitation of Employment of Other Company
Employees:
During the term of your employment, and for a period of one (1) year
thereafter, you agree not to engage, directly or indirectly, in any commercial
activities that compete with the business of the Company. For purposes of this
clause, competition with the Company shall be defined as commercial activities
involving the same products for the same suppliers or customers with whom the
Company has engaged in business as of the date of this Agreement and/or during
the term of your employment. You also agree during the same period, not to
influence or seek to influence any employee of the Company to terminate his or
her employment with the Company.
4. Termination:
The Company may terminate this Agreement upon three (3) months' notice in
writing to you. If the Company terminates the Agreement, the Company may at its
sole option require you to cease your employment activities at any time during
the three (3) month period. You will, however, continue to receive compensation
for a twelve (12) month period from the date on which the Company chooses to
cease your employment activities.
You will be paid any accrued and unused vacation effective the date of
termination, in accordance with Company policy. All contributions to the 401(k)
plan will cease as of the effective date of the termination, and the
distribution of accumulated account balance will be in accordance with the
terms of the plan.
In the event of termination by the Company, and if you so request, you
will be provided with payment of or reimbursement for executive outplacement
services effective as of the date of termination and for twelve (12) months
thereafter, but said cost shall not exceed a total of $12,500 (twelve thousand,
five hundred dollars).
You may terminate this Agreement upon two (2) weeks' notice in writing to
the Company. Upon receipt of your notice of termination, the Company may cease
your employment at any time. If business needs dictate, as determined by the
Company, the Company may also require your continued employment for two (2)
additional weeks beyond the two (2) week notice period.
If the foregoing represents your understanding, please sign and return the
enclosed copy of this letter.
Very truly yours,
PHARMACEUTICAL FORMULATIONS, INC.
By: /s/ John L. Oram
John L. Oram
Chairman
ACCEPTED AND AGREED TO:
/s/ Charles LaRosa
CHARLES LAROSA
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 353827
<NAME> Pharmaceutical Formulations, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,000
<SECURITIES> 0
<RECEIVABLES> 9,164,000
<ALLOWANCES> 217,000
<INVENTORY> 9,669,000
<CURRENT-ASSETS> 20,519,000
<PP&E> 16,275,000
<DEPRECIATION> 11,877,000
<TOTAL-ASSETS> 38,243,000
<CURRENT-LIABILITIES> 12,629,000
<BONDS> 0
0
0
<COMMON> 2,355,000
<OTHER-SE> 37,239,000
<TOTAL-LIABILITY-AND-EQUITY> 38,243,000
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<TOTAL-REVENUES> 43,218,000
<CGS> 33,197,000
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<OTHER-EXPENSES> 2,726,000
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<INTEREST-EXPENSE> 2,787,000
<INCOME-PRETAX> (3,112,000)
<INCOME-TAX> (1,038,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,074,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
