<PAGE>
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, 1995
ROBERTS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2429994
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
MERIDIAN CENTER II
4 INDUSTRIAL WAY WEST
EATONTOWN, NEW JERSEY 07724
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code:
(908) 389-1182)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Class Outstanding Shares at
April 27, 1995
Common Stock 18,531,393
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ROBERTS PHARMACEUTICAL CORPORATION
INDEX
PAGE
Part I
Item 1 - Financial Statements 2
Item 2 - Management's Discussion
and Analysis 8
Part II
Item 6 - Exhibits and Reports on
Form 8-K 11
Signatures
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<PAGE>
PART I. FINANCIAL STATEMENTS
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $11,323 $9,819
Marketable securities 23,793 26,663
Accounts receivable, net 20,434 28,882
Accounts receivable from
shareholder 1,536 7,256
Inventory 24,802 19,797
Other current assets 3,334 3,784
----- -----
Total current assets 85,222 96,201
Fixed assets, net 16,920 16,800
Other assets, principally
acquired intangibles,
net 244,999 223,191
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Total assets $347,141 $336,192
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
LIABILITIES, AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $34,086 $34,277
Accounts payable 6,653 6,735
Other current liabilities 10,339 12,922
------ ------
Total current liabilities 51,078 53,934
Long-term debt, excluding
current installments 36,850 22,411
Other liabilities 748 718
Shareholders' equity:
Class B preferred stock,
$.10 par 10,000,000 shares
authorized, none issued - - - - - -
Common stock, $.01 par,
50,000,000 shares authorized,
18,531,393 and 18,370,805
outstanding 189 188
Additional paid-in capital 256,481 255,994
Cumulative translation
adjustments (632) (674)
Retained earnings (deficit) 2,664 3,858
Treasury stock, 387,594 shares
of common stock, at cost (237) (237)
Total shareholders' equity 258,465 259,129
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Total liabilities, and
shareholders' equity $347,141 $336,192
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1995 1994
---- ----
<S> <C> <C>
Sales and Revenue:
Sales $18,363 $20,388
Contract research revenue 1,675 667
Contract research-shareholder 180 4,655
Other revenue 11 12
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Total sales and revenue 20,229 25,722
Operating costs and expenses:
Cost of sales 6,596 5,102
Cost of contract research 1,236 3,377
Research & development 2,034 2,273
Marketing & administration 12,189 10,366
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Total operating costs & expenses 22,055 21,118
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Operating (loss) income (1,826) 4,604
Other income (expense):
Interest income 496 718
Interest expense (689) (1,019)
Other income (expense), net 61 (1)
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Total other income(expense) (132) (302)
(Loss) income before income taxes (1,958) 4,302
Benefit (provision) for income taxes 764 (140)
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Net (loss) income ($1,194) $4,162
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per share of common stock,
primary and fully diluted: ($0.06) $0.23
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Weighted average number of
common shares outstanding,
primary and fully diluted 18,705,880 18,454,905
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities: $6,038 $443
Cash flows from investing activities:
Redemption of marketable securities 2,869 7,078
Purchases of intangible assets (2,664) (3,800)
Purchases of fixed assets (323) (233)
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Net cash (used in) provided by
investing activities (118) 3,045
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Cash flows from financing activities:
Payments on notes payable and
long term debt (4,878) (6,894)
Net proceeds from issuance of
common stock 488 405
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Net cash (used in)
financing activities (4,390) (6,489)
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Exchange rate changes on cash and
cash equivalents (26) (24)
Change in cash and cash equivalents 1,504 (3,025)
Beginning cash and cash equivalents 9,819 6,071
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Ending cash and cash equivalents $11,323 $3,046
======= ======
Supplemental cash flow information:
Interest and dividends received $496 $718
Interest paid 176 873
Income taxes paid 2,019 134
Contract research receipts from shareholder 5,900 1,358
Non cash activities:
Present value of notes issued in
connection with product acquisitions $18,279 - - -
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
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 periods
reported. All dollar amounts are presented in thousands, except per share
data.
2. Acquisitions
------------
In January, 1995, the Company acquired exclusive Canadian rights to market,
sell and distribute REPLENS from Columbia Labs., Ltd. The Company's
Canadian subsidiary will launch this product later in 1995.
On February 23, 1995, the Company licensed exclusive U.S. rights to market,
sell and distribute NOROXIN, a currently marketed product, from Merck and
Company, Inc..
In March, 1995, the Company acquired inventory, trademarks and other rights
to TIGAN in the U.S. and EMINASE throughout the world from SmithKline
Beecham.
Cash paid for these acquisitions amounted to $2.7 million with balances
payable through March, 2000.
3. Inventory
---------
Inventory consists of:
March 31, 1995
---------------- -------
Raw Materials $ 3,362
Finished Goods 21,440
-------
$24,802
=======
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<PAGE>
4. Leases and Other Commitments
----------------------------
The Company leases office space and certain office equipment under
operating leases. Minimum rental payments in each of the next five fiscal
years required under leases which have initial or remaining lease terms in
excess of one year are as follows:
December 31,
1995 $2,810
1996 2,146
1997 1,556
1998 1,301
1999 1,069
The total of the above minimum lease payments has not been reduced by
$1,572 which the Company expects to receive in the future under non-
cancelable subleases.
In accordance with several product acquisitions and licensing agreements
and subject to certain cancellation rights reserved by the Company, Roberts
may be required to purchase inventory or make minimum payments totalling
$51,933 through 2001 and make royalty payments totalling $2,000 through
1998.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Results of Operations
Three Months Ended March 31, 1995 and 1994
Corporate Revenues
- ------------------
Total revenue for the First Quarter 1995 decreased $5.5 million as compared with
the First Quarter of 1994. This decrease was the result of $2 million decline
in product revenue and a $3.5 million decline in contract research revenue. The
Company believes that the decline in revenue in the First Quarter of 1995 is
attributed to several factors, including (1) a decline in demand for its
existing pharmaceutical products; (2) the negative impact that the mild 1994
winter weather had on the Company's over-the-counter and prescription cold
remedies (3) the diversion of the Company's sales force from the promotion of
existing products to allow for sales training related to new product
acquisitions; and (4) a reduction in revenues derived from contract research.
Product Sales
- -------------
For the three months ended March 31, 1995, product sales decreased $2 million
from $20.4 million to $18.4 million primarily as a result of a decline in
demand for its existing products in the U.S. The U.S. product sales decrease was
partially offset by the sales results of NOROXIN in the month of March. After
including sales of NOROXIN, sales in the U.S. decreased from $15.6 million to
$13.1 million. Sales of the Company's Canadian subsidiary decreased from $2.7
million to $2.4 million. Sales of the Company's United Kingdom subsidiary,
Monmouth Pharmaceuticals, Ltd., increased $.8 million to $2.9 million, primarily
as a result of 1994 product acquisitions.
Contract Research
- -----------------
For the three months ended March 31, 1995, revenue from contract research
decreased $3.5 million to $1.9 million as Phase III clinical research studies
for a major shareholder neared completion. With the completion of these studies,
the Company expects contract research revenue to decline substantially in 1995
from revenue levels achieved in 1994.
Cost of Sales
- -------------
For the three months ended March 31, 1995, cost of sales amounted to 35.9% of
product sales, a 10.9 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 in
the current period. With the continued distribution of NOROXIN, the Company
expects cost of sales and gross profit, as percentages of product sales, to be
similarly impacted for the foreseeable future.
Cost of Contract Research
- -------------------------
Cost of contract research decreased to $1.2 million from $3.4 million incurred
in the prior year's comparable period as a result of decreased contract research
activity.
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<PAGE>
Research and Development
- ------------------------
Research and Development expenses decreased $.2 million to $2 million during the
three months ended March 31, 1995 as compared to the comparable prior year
period. This decrease is due to a reduced level of expenditure in support of the
Company's development program for AGRELIN.
Marketing and Administrative Expenses
- -------------------------------------
For the three months ended March 31, 1995, Marketing and Administrative expenses
increased $1.8 million from $10.4 million to $12.2 million. Marketing expenses
increased $.6 million as a result of promotional activities for new products and
the expansion of sales forces in the United States, United Kingdom and Canada.
Administrative expenses increased $1.2 million primarily as a result of the
Company's 1994 acquisition of Global Nutritional Care, Inc., a non-recurring
charge of $.3 million associated with the relocation of the Company's clinical
research division, and $.2 million increase in amortization of intangibles
related to product and company acquisitions.
Interest Income and Expense
- ---------------------------
Interest income decreased from $.7 million to $.5 million as a result of a
decrease in invested marketable securities. Interest expense decreased $.3
million from $1 million primarily as result of a decrease in long term debt as
compared to the prior year's comparable period.
Income Taxes
- ------------
For the quarter ended March 31, 1995, the income tax benefit represents a normal
statutory rate. For the quarter ended March 31, 1994, the rate was lower than
the normal statutory rate due to the recognition of tax benefits associated with
operating losses and credits.
Liquidity and Capital Resources
- -------------------------------
For the three months ended March 31, 1995, cash flows from operating activities
amounted to $6 million. This resulted from a $12 million decrease in accounts
receivables and $2.7 million of non cash charges offset by the Company's net
loss and $7.6 million of increased working capital requirements, primarily an
increase in finished goods inventory of $4.9 million. Cash flows from operat-
ing activities in the comparable 1994 period amounted to $.4 million, resulting
primarily from net income and non cash charges offset by working capital
requirements due to increased sales levels. As of March 31, 1995, the Company
had cash, cash equivalents, and marketable securities of $35.1 million. This
balance results primarily from the public offering of Common Stock completed in
October, 1993.
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<PAGE>
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
fiscal 1995. 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. Cash equivalents
and marketable securities currently consist of immediately available money
market fund balances and investment grade securities.
Foreign Currency Fluctuations
- -----------------------------
Roberts has subsidiary operations outside of the United States. As a result,
Roberts is subject to fluctuations in reported revenues and costs reported in
United States dollars as a consequence of changing currency exchange rates,
especially rates for the British pound and Canadian dollar.
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<PAGE>
Item 6 Exhibits and Reports on Form 8-K
Reports on Form 8-K
Date of Report Item
- -------------- ----
01/05/95 The FDA approved the use and sale of PRO-AMATINE tablets
under cost recovery regulations.
01/10/95 Roberts Pharmaceutical Corporation's wholly owned Canadian
subsidiary, Roberts Pharmaceutical Canada, Inc. is granted
exclusive rights to market, sell and distribute REPLENS, a
vaginal moisturizer by Columbia Laboratories, Inc.
02/24/95 Roberts Pharmaceutical Corporation signs exclusive
marketing, sales and distribution agreement with Merck
and Company, Inc. for NOROXIN, a broad spectrum
antibiotic.
03/23/95 Roberts Pharmaceutical Corporation announces that a
preliminary review of Roberts' sales activity for the
first two months of 1995 indicates that sales and profit
for the First Quarter of 1995 will be below Fourth Quarter
1994 results.
04/10/95 On April 10, 1995, a shareholders' class action suit was
instituted against Roberts Pharmaceutical Corporation and
certain of its officers alleging violations of Section
10(b) and 20(a) Securities and Exchange Act of 1934, as
amended, and Rule 10b-5. Roberts believes that such
allegations are without merit and intends to vigorously
defend against them.
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<PAGE>
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.
ROBERTS PHARMACEUTICAL CORPORATION
/s/ Anthony P. Maris
Date: May 12, 1995 ----------------------------------
Vice President and Treasurer
/s/ Anthony P. Maris
Date: May 12, 1995 ----------------------------------
Chief Accounting Officer
