<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
June 30, 1996
ROBERTS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2429994
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
MERIDIAN CENTER II
4 INDUSTRIAL WAY WEST
EATONTOWN, NEW JERSEY 07724
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code:
(908) 389-1182
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ----
Class Outstanding Shares at
August 13, 1996
Common Stock 19,187,648
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
INDEX
Page
PART I
Item 1 - Financial Statements 2
Item 2 - Management's Discussion and Analysis 8
PART II
Item 1 - Legal Proceedings 11
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 14
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
June 30, 1996 December 31, 1995
------------- -----------------
ASSETS:
Current assets:
Cash and cash equivalents $ 15,143 $ 16,357
Marketable securities 4,350 13,649
Accounts receivable, net 21,630 26,318
Accounts receivable from
shareholder 0 600
Inventory 19,081 20,785
Deferred tax assets 10,419 10,419
Net assets held for sale 4,300 4,300
Other current assets 2,523 1,342
-------- --------
Total current assets 77,446 93,770
Fixed assets, net 15,473 15,681
Intangible assets 227,672 230,681
Other assets 249 158
-------- --------
Total assets $320,840 $340,290
======== ========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
June 30, 1996 December 31, 1995
------------- -----------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $ 26,583 $ 34,809
Accounts payable 14,358 14,737
Income taxes payable 4,252 3,708
Other current liabilities 23,436 28,528
-------- --------
Total current liabilities 68,629 81,782
Long-term debt, excluding
current debt installments 11,377 16,183
Deferred taxes payable 6,311 6,311
Other liabilities 530 547
Shareholders' equity:
Class B preferred stock,
$.10 par 10,000,000 shares
authorized, none issued --- ---
Common stock, $.01 par,
50,000,000 shares authorized,
18,546,090 and 18,536,590
outstanding 189 189
Additional paid-in capital 256,823 256,296
Cumulative translation adjustments (300) (296)
Retained earnings (deficit) (22,482) (20,485)
Treasury stock, 387,594 shares
of common stock, at cost (237) (237)
-------- --------
Total shareholders' equity 233,993 235,467
-------- --------
Total liabilities and
shareholders' equity $320,840 $340,290
======== ========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
For the six months For the three months
ended June 30, ended June 30,
1996 1995 1996 1995
------- -------- ------- --------
Sales and Revenue:
Sales $44,007 $ 46,515 $26,791 $ 30,353
Other revenue 24 23 12 12
------- -------- ------- --------
Total sales and revenue 44,031 46,538 26,803 30,365
------- -------- ------- --------
Operating costs and expenses:
Cost of sales 22,393 19,105 13,466 13,387
Research & development 1,996 3,600 847 1,566
Marketing 16,768 10,440 9,009 5,603
Distribution 1,447 1,504 746 951
Administration 9,421 8,713 5,211 5,045
------- -------- ------- --------
Total operating costs &
expenses 52,025 43,362 29,279 26,552
------- -------- ------- --------
Operating (loss) income (7,994) 3,176 (2,476) 3,813
------- -------- ------- --------
Other income (expense):
Interest income 806 981 368 485
Interest expense (1,171) (1,617) (520) (928)
Foreign currency gain(loss) (13) (20) 127 (78)
Other income(expense), net (1) 19 (26) (8)
------- -------- ------- --------
Total other income(expense) (379) (637) (51) (529)
------- -------- ------- --------
(Loss) income from continuing
operations before income
taxes (8,373) 2,539 (2,527) 3,284
(Benefit) provision for
income taxes (2,407) 990 (773) 1,226
------- -------- ------- --------
(Loss) income from continuing
operations (5,966) 1,549 (1,754) 2,058
Discontinued operations
Loss from operations
of Discontinued
Divisions, net of tax
benefits of $1,228 and
$875, respectively. 0 (2,384) 0 (1,699)
Gain (loss) on disposal of
Discontinued Operations,
net of tax benefits of
$2,044 and $995, respectively. 3,969 (10,992) 3,969 (10,992)
------- -------- ------- --------
Net (loss) income $(1,997) $(11,827) $(2,215) $(10,633)
======= ======== ======= ========
-4-
<PAGE>
Per share of common stock,
primary and fully diluted:
(Loss) income from
continuing operations $ (0.32) $ 0.08 $ (0.09) $ 0.11
Net income (loss) from
discontinued operations $ 0.21 $ (0.71) $ 0.21 $ (0.68)
======= ======== ======= ========
Net (loss) income $ (0.11) $ (0.63) $ 0.12 $ (0.57)
======= ======== ======== ========
Weighted average number
of common shares
outstanding, primary
and fully diluted: 18,695,868 18,649,093 18,658,601 18,514,493
-5-
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
For the six months
ended June 30,
1996 1995
---- ----
Cash flows from operating activities: $ 3,727 $ 9,845
-------- --------
Cash flows from investing activities:
Redemption of marketable securities 9,299 6,702
Purchases of intangible assets (40) (2,618)
Purchases of fixed assets (76) (419)
Impact of discontinued operations 0 (139)
-------- --------
Net cash provided by
investing activities 9,183 3,526
-------- --------
Cash flows from financing activities:
Payments on notes payable and
long term debt (14,643) (8,117)
Net proceeds from issuance of
common stock 527 520
Impact of discontinued operations 0 (7)
-------- --------
Net cash used in
financing activities (14,116) ( 7,604)
Exchange rate changes on cash and
cash equivalents (8) 2
-------- --------
Change in cash and cash equivalents (1,214) 5,769
Beginning cash and cash equivalents 16,357 9,819
-------- --------
Ending cash and cash equivalents $ 15,143 $ 15,588
======== ========
Supplemental cash flow information:
Interest paid $ 1,284 $ 523
Income taxes paid 233 2,616
Contract research receipts from
shareholder --- 5,900
Non cash activities:
Present value of notes issued in
connection with product acquisitions --- $ 18,279
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
1. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
In the opinion of management, the accompanying consolidated financial
statements include all necessary adjustments, consisting of normal
adjustments, necessary for a fair presentation of results for the period
reported. All dollar amounts are presented in thousands, except per share
data.
2. Inventory
---------
Inventory at June 30, 1996 consists of:
Raw Materials $ 3,453
Finished Goods 15,628
-------
Total $19,081
=======
3. Contingency
-----------
A shareholder class action suit has been instituted in the United States
District Court for the District of New Jersey against Roberts
Pharmaceutical Corporation and certain of its officers and a former officer
for alleged violations of certain federal securities laws. The Company is
not able to predict the outcome of this proceeding at this time, and
management is not able to determine the amount of the potential liability,
if any. Roberts Pharmaceutical believes that it has complied with all of
its obligations under the federal securities laws. Roberts Pharmaceutical
intends to defend vigorously against the plaintiff's allegations and
considers such allegations to be without merit.
4. Discontinued Operations
-----------------------
The Company has reassessed the estimated 1996 operating loss (reflected in
the year end 1995 financial statements) of its VRG Division. This has
resulted in a revision of the expected annual earnings from operations for
the VRG Division in the amount of $4.0 million, which adjustment is being
reflected in this quarter's operating results.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Results of Operations
Six months ended June 30, 1996 and 1995
Corporate Revenues
- ------------------
Total revenue for the six months and quarter ended June 30, 1996 decreased $2.5
million and $3.6 million respectively as compared with the first six months and
second quarter of 1995. This decrease was the result of a decrease in product
revenue.
Product Sales
- -------------
For the six months ended June 30, 1996, product sales decreased $2.5 million
from $46.5 million in 1995 to $44.0 million primarily as a result of an increase
in chargeback and return activity.
Second quarter sales of the Company's United Kingdom subsidiary, Monmouth
Pharmaceuticals, Ltd., decreased $0.4 million from $5.6 million to $5.2 million
primarily as a result of foreign exchange impact. Sales of the Company's
Canadian subsidiary increased $0.4 million from $5.4 million to $5.8 million.
Product sales in the second quarter decreased $3.6 million from $30.4 million in
1995 to $26.8 million. Product sales in the U.S. decreased $3.2 million from
$24.7 million to $21.5 million. Sales in the United Kingdom decreased $0.3
million from $2.7 million to $2.4 million. Sales of the Company's Canadian
subsidiary decreased slightly by $0.1 million from $2.9 million to $2.8 million.
Cost of Sales
- -------------
For the six months ended June 30, 1996, cost of sales amounted to 50.9% of
product sales, a 9.8 percentage point increase as compared to the prior year's
comparable period. For the three months ended June 30, 1996, cost of sales
amounted to 50.3% of product sales, a 6.2 percentage point increase over the
second quarter of 1995. This increase is due to a number of factors, including
higher NOROXIN sales, increased levels of chargebacks, returns and medicaid, and
increased cost of purchased product.
Research and Development
- ------------------------
Research and Development expenses decreased $1.6 million from $3.6 million to
$2.0 million. For the quarter ended June 30, 1996, Research and Development
expenses decreased $0.7 million to $0.9 million from $1.6 million incurred for
the comparable period in 1995. Both decreases are due to a reduced level of
expenditure required to support the Company's development program for AGRELIN.
-8-
<PAGE>
Marketing and Administrative Expenses
- -------------------------------------
For the six months ended June 30, 1996, Marketing and Administrative expenses
increased $7.0 million from $20.7 million to $27.7 million. Marketing expenses
increased $6.3 million as a result of promotional activities for new products
and the expansion of sales forces in the United States, United Kingdom and
Canada. Administrative expenses increased $0.7 million primarily as a result of
an increase in salaries, insurance, and other corporate support totalling $0.5
million and a $0.2 million increase in amortization of intangibles related to
prior product acquisitions.
For the quarter ended June 30, 1996, Marketing and Administrative expenses
increased $3.4 million from $11.6 million to $15.0 million as administration and
support costs increased to accommodate expanded promotional activities as
compared to the comparable 1995 period. For the second quarter of 1996,
intangible amortization was $1.7 million, a $0.1 million increase from 1995.
The Company is considering selling certain non core minor brands and is in
advanced negotiations with certain parties with respect thereto. If the sale
were to be consummated, the Company would incur a one time, non-cash, write off
of goodwill for these brands approximating $17.0 million, net of anticipated
proceeds from the sale of these brands.
Interest Income and Expense
- ---------------------------
Interest income decreased $0.2 million from $1.0 million to $0.8 million as a
result of a decrease in invested marketable securities. Interest expense
decreased $0.4 million from $1.6 million to $1.2 million primarily as a result
of a decrease in long term debt as compared to the prior year's comparable
period.
Income Taxes
- ------------
For the six months and quarter ended June 30, 1996, the income tax benefit is
calculated using a normal statutory rate for continuing operations except for
certain taxes related to foreign operations.
The Company has recorded a deferred tax asset of $10.4 million since the
Company believes it is more likely than not that such asset will be realized by
future profitable operations. However, if the company assessment is incorrect,
this asset may not be realized.
Liquidity and Capital Resources
- -------------------------------
For the six months ended June 30, 1996, cash flows from operating activities
amounted to $3.7 million. This resulted from a $5.3 million decrease in accounts
receivables, $4.9 million non cash charges and $0.9 million of decreased working
capital requirements offset by the Company's net loss. Cash flows from operating
activities in the comparable 1995 period amounted to $9.8 million, resulting
primarily from a decrease in accounts receivable and non cash charges offset by
the Company's net loss and increased working capital requirements. As of June
30, 1996, the Company had cash, cash equivalents, and marketable securities
totalling $19.5 million. This balance results primarily from the public offering
of Common Stock completed in October, 1993 and the impact of operating
activities.
-9-
<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
1996. If additional funds are required, the Company believes that it has
various alternative funding sources available to it including bank debt, private
debt financing, equity financing and the sale or licensing of product rights.
Foreign Currency Fluctuations
- -----------------------------
The Company has subsidiary operations outside the United States. As a result,
the Company 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. Such fluctuations
were not material for the three or six months ended June 30, 1996.
Subsequent Events
- -----------------
On July 22, 1996 the Company issued 600,000 shares of its common stock at a per
share price of $16.65 to a series of institutional investors.
-10-
<PAGE>
Item 1. Legal Proceedings
The Company previously reported in its Current Reports on Form 8K dated
April 10, 1995 and June 26, 1995, respectively, and its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, that two shareholder class
action suits had been instituted against it and certain of its officers in
the United States District Court for the District of New Jersey. The second
suit filed by Dieter Zander has been voluntarily dismissed by the
plaintiff. The first complaint, as amended, was filed by Grace Cowit on
behalf of all persons who purchased shares of the Company's Common Stock
between November 7, 1994 and May 31, 1995.
- 11 -
<PAGE>
Item 6 Exhibits and Reports on Form 8K
Reports on Form 8K
Date of Report Item
- -------------- ----
5/17/96 Roberts Pharmaceutical Corporation announced that it has
agreed with the Food and Drug Administration (FDA) to
explore the approval of ProAmatine/TM/ (midodrine) under
regulations for the "Accelerated Approval of New Drugs for
Serious or Life-Threatening Illnesses".
On March 26, 1996, Roberts announced that the FDA had
requested additional information with regard to the
Company's New Drug Application for ProAmatine. The FDA has
reconsidered this position and has agreed to discuss
Accelerated Approval which, if granted, would allow Roberts
to provide such information through a post-marketing Phase
IV study. The Company and the FDA have further agreed to
meet as soon as possible in order to pursue expeditiously
the potential Accelerated Approval for ProAmatine.
5/31/96 Roberts Pharmaceutical Corporation has announced that it has
been informed that the Food and Drug Administration (FDA)
will shortly issue an "approvable letter" for ProAmatine/TM
(midodrine) pursuant to Subpart H regulations for
"Accelerated Approval of New Drugs for Serious or Life-
Threatening Illnesses". ProAmatine would be the first
cardiovascular drug to be approved by the FDA under the
accelerated process.
A meeting of the Company and FDA took place on May 22, 1996,
to discuss accelerated approval of ProAmatine and the FDA
has now agreed that under the accelerated process,
ProAmatine is eligible for approval based on a surrogate
endpoint for orthostatic hypotension, i.e., the drug's
clinically demonstrated ability to increase blood pressure,
with Roberts performing post-marketing Phase IV studies to
satisfy the FDA's request for additional studies to verify
clinical benefit.
6/14/96 Roberts Pharmaceutical Corporation announced that the Food
and Drug Administration has issued an approvable letter
stating the Company's New Drug Application for
ProAmatine/TM/ (midodrine) "is approvable under 21 CFR
Subpart H - Accelerated Approval of New Drugs
-12-
<PAGE>
for Serious or Life-Threatening Illnesses". No other
studies are required prior to commercialization, although
Roberts will conduct post-approval, post-launch studies of
ProAmatine with regard to certain specific symptoms of
orthostatic hypotension.
7/18/96 On July 18, 1996, Mr. John T. Spitznagel was elected Vice
President and a Director of Roberts Pharmaceutical
Corporation. Mr. Spitznagel is responsible for worldwide
sales and marketing.
7/22/96 On July 22, 1996, Roberts Pharmaceutical Corporation
announced that the Health Protection Branch, Canada has
notified it that Eminase(R), the Company's life saving
thrombolytic therapy, has been approved for that market.
7/24/96 On July 24, 1996, Roberts Pharmaceutical Corporation
announced that inventory is in place for the near-term
Canadian launch of Advantage 24(R), a vaginally delivered
contraceptive gel.
-13-
<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.
Date: August 13, 1996
-------------------- -------------------------
Peter M. Rogalin
Vice President and Treasurer
Date: August 13, 1996
-------------------- -------------------------
Peter M. Rogalin
Chief Accounting Officer
- 14 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q FOR
THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,143
<SECURITIES> 4350
<RECEIVABLES> 21,630
<ALLOWANCES> 0
<INVENTORY> 19,081<FN>
<CURRENT-ASSETS> 77,446
<PP&E> 15,473
<DEPRECIATION> 0
<TOTAL-ASSETS> 320,840
<CURRENT-LIABILITIES> 68,629
<BONDS> 11,377
0
0
<COMMON> 189
<OTHER-SE> 233,804
<TOTAL-LIABILITY-AND-EQUITY> 320,840
<SALES> 44,007
<TOTAL-REVENUES> 44,031
<CGS> 22,393
<TOTAL-COSTS> 22,393
<OTHER-EXPENSES> 1,996
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1171
<INCOME-PRETAX> (8373)
<INCOME-TAX> (2407)
<INCOME-CONTINUING> (5966)
<DISCONTINUED> 3969
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1997)
<EPS-PRIMARY> 0
<EPS-DILUTED> (.11)
<FN>
<F1>Includes Raw Material Inventory of $3,453
</FN>
</TABLE>
