<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999
Commission File Number: 1-10432
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:
(732) 676-1200
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 5, 1999
Common Stock 31,901,445
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
INDEX
Page
Part I
Item 1 - Financial Statements 2
Item 2 - Management's Discussion and Analysis 10
Part II
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
FORWARD LOOKING STATEMENTS
Certain statements included in the notes to the Registrant's
consolidated financial statements and Items 2 and 6 of this form
10-Q are intended to be, and are hereby identified as, forward
looking statements for purposes of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. The
Registrant cautions readers that forward looking statements,
including, without limitation, those relating to the Registrant's
research and development, income taxes, liquidity and capital
resources, Euro conversion, and year 2000 readiness are subject to
certain risks and uncertainties, including, without limitation, the
ability of the Registrant to secure regulatory approval in the
United States and in foreign jurisdictions for the Registrant's
developmental pipeline drugs, the efforts of the Registrant's
competitors and the introduction of rival pharmaceutical products
which may prove to be more effective than the Registrant's
products, general market conditions, the availability of capital,
and the uncertainty over the future direction of the healthcare
industry, that could cause actual results to differ materially from
those indicated in the forward looking statements.
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<S> <C> <C>
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 15,352 $ 39,280
Marketable securities 31,420 36,062
Accounts receivable, net 43,257 40,412
Inventory 28,305 23,573
Notes receivable, current 5,699 9,426
Deferred tax assets 4,988 5,222
Other current assets 5,224 3,259
--------- ---------
Total current assets 134,245 157,234
Fixed assets, net 35,920 34,911
Intangible assets 351,486 315,865
Notes receivable 1,473 2,369
Deferred non-current tax asset 500 3,392
Other assets 12,102 12,465
--------- ---------
Total assets $535,726 $526,236
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
<TABLE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<S> <C> <C>
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt $ 7,850 $ 11,178
Accounts payable 16,421 21,897
Other current liabilities 30,632 24,612
--------- ---------
Total current liabilities 54,903 57,687
Long-term debt, excluding
current installments 122,500 126,739
Shareholders' equity:
Common stock, $.01 par,
100,000,000 shares authorized,
31,822,948 and 31,507,442
outstanding 323 320
Additional paid-in capital 385,282 381,631
Accumulated other comprehensive
income (2,360) (2,716)
Deficit (24,685) (37,188)
Treasury stock, 387,594 shares
of common stock, at cost (237) (237)
--------- ---------
Total shareholders' equity 358,323 341,810
--------- ---------
Total liabilities and
shareholders' equity $535,726 $526,236
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
<TABLE>
ROBERTS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share and per share data)
(Unaudited)
For the six months For the three months
ended June 30, ended June 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
-------- -------- -------- --------
Sales and Revenue:
Sales $94,019 $76,384 $49,936 $43,796
Other revenue 987 827 531 568
-------- -------- -------- --------
Total sales and revenue 95,006 77,211 50,467 44,364
-------- -------- -------- --------
Operating costs and expenses:
Cost of sales 27,961 28,261 12,595 15,658
Research & Development 7,273 6,168 4,533 3,508
Marketing 22,162 17,378 12,516 9,515
Administration 15,090 18,085 7,555 10,898
-------- -------- -------- --------
Total operating costs & expenses 72,486 69,892 37,199 39,579
-------- -------- -------- --------
Operating income 22,520 7,319 13,268 4,785
-------- -------- -------- --------
Other income (expense):
Interest income 2,010 2,386 973 1,113
Interest expense (4,876) (466) (2,328) (197)
Foreign currency gain (loss) (39) (25) (21) 1
Other income(expense), net (197) (99) (175) (56)
-------- -------- -------- --------
Total other income (expense) (3,102) 1,796 (1,551) 861
-------- -------- -------- --------
Income before income taxes 19,418 9,115 11,717 5,646
Provision for income taxes 6,915 3,584 4,230 2,260
-------- -------- -------- --------
Net income 12,503 5,531 7,487 3,386
======== ======== ======== ========
Net income per share of common stock:
Basic $ 0.40 $ 0.18 $ 0.24 $ 0.11
Diluted $ 0.39 $ 0.18 $ 0.23 $ 0.11
Weighted average number of common
shares outstanding:
Basic 31,625,472 30,134,518 31,708,727 31,143,362
Diluted 32,142,013 30,342,548 32,140,337 31,351,392
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
</TABLE>
<TABLE>
For the six months
ended June 30,
<S> <C> <C>
1999 1998
-------- --------
Cash flows provided by operating activities: $12,829 $11,140
-------- --------
Cash flows from investing activities:
Redemption (purchase) of marketable securities 4,642 (6,620)
Purchases of intangible assets (40,474) (143,654)
Purchases of fixed assets (1,389) (6,392)
Collection of notes receivable 4,623 171
-------- --------
Net cash used in investing activities (32,598) (156,495)
-------- --------
Cash flows from financing activities:
Debt financing --- 125,000
Payments on notes payable and
long term debt (7,724) (15,291)
Net proceeds from issuance of
common stock 3,654 3,029
Net proceeds from issuance of
5% Preferred stock --- 4,492
5% Preferred stock dividends paid --- (37)
-------- --------
Net cash (used in) provided by
financing activities (4,070) 117,193
-------- --------
Exchange rate changes on cash and
cash equivalents (89) 20
-------- --------
Change in cash and cash equivalents (23,928) (28,142)
Beginning cash and cash equivalents 39,280 42,950
-------- --------
Ending cash and cash equivalents $15,352 $14,808
======== ========
Supplemental cash flow information:
Interest paid $ 7,681 $ 729
Income taxes paid $ 456 $ 11
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
1. Summary of Significant Accounting Policies
------------------------------------------
Interim Reporting
- -----------------
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnote disclosures normally
included in complete financial statements prepared in accordance
with generally accepted accounting principles. For further
information, such as significant accounting policies followed by
the Company, refer to the notes to the Company's audited
consolidated financial statements.
In the opinion of management, the unaudited financial statements
include all necessary adjustments (consisting of normal, recurring
accruals) for a fair presentation of the financial position,
results of operations and cash flows for the interim periods
presented. The results of operations for the six- and three-month
periods ended June 30, 1999 and 1998, are not necessarily
indicative of the operating results to be expected for a full year.
Basis of Presentation
- ---------------------
Roberts Pharmaceutical Corporation is an international
pharmaceutical company which licenses, acquires, develops and
commercializes post-discovery drugs in selected therapeutic
categories. The Company currently markets approved pharmaceutical
products in the United States, Canada, the United Kingdom and
several other European countries. The consolidated financial
statements include the accounts of Roberts Pharmaceutical
Corporation and its wholly-owned subsidiaries. All significant
intercompany transactions are eliminated. All dollar amounts are
presented in thousands, except for earnings per share.
New Accounting Pronouncements
- -----------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This Statement
requires that all derivatives be recorded in the balance sheet as
either an asset or liability measured at its fair value and that
changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. In
June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Investments and Hedging Activities - Deferral of the Effective Date
of FASB No. 133". This statement defers for one year the effective
date of SFAS No. 133 to all fiscal quarters beginning after June
15, 2000. The Company is in the process of evaluating this
statement and has not yet determined the future impact on its
consolidated financial statements.
- 6 -
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
2. Inventory
---------
<TABLE>
Inventory consists of: June 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Raw Materials $ 9,220 $ 6,249
Work in Process 1,190 1,456
Finished Goods 17,895 15,868
-------- --------
Total $28,305 $23,573
======== ========
</TABLE>
3. Earnings per Share
------------------
Net income per share used in the calculation of earnings per share
was calculated as follows:
<TABLE>
For the six months For the three months
ended June 30, ended June 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $12,503 $ 5,531 $ 7,487 $ 3,386
Preferred dividends --- (34) --- ---
------- ------- ------- -------
Net income for computation
of earnings per share 12,503 $ 5,497 $ 7,487 $ 3,386
======= ======= ======= =======
</TABLE>
Total common stock and potentially dilutive common stock for the
calculation of diluted earnings per share were calculated as
follows:
<TABLE>
For the six months For the three months
ended June 30, ended June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average
common shares
outstanding 31,625,472 30,134,518 31,708,727 31,143,362
Dilutive effect of:
Stock options 516,520 208,030 431,589 208,030
Common stock
warrants 21 --- 21 ---
---------- ---------- ---------- ----------
Total shares for
computation of EPS 32,142,013 30,342,548 32,140,337 31,351,392
========== ========== ========== ==========
</TABLE>
- 7 -
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
4. Segment Reporting
-----------------
The Company has three segments, determined geographically which are
made up of the operations of the U.S., Canada, and the U.K. Each
segment sells pharmaceutical products; the Canadian operations also
include a manufacturing plant. Manufacturing revenues were not
material to the Canadian operations or to the consolidated
operations. Each segment has its own management team, markets to
different countries and the results of each segment are evaluated
independently.
The Company evaluates performance based on profit or loss from
operations before income taxes, with intercompany revenues, shown
below, eliminated. The accounting policies of the reportable
segments are consistent with the corporate accounting policies
except that the results of the foreign operations are translated at
the budgeted rate rather than the actual rate with the differences
accumulated and shown separately as an adjustment to operating
income.
The changes in total assets by segment between December 31, 1998,
and June 30, 1999, were not material.
Selected operating results of the reportable segments for the six
month periods ended June 30, 1999 and 1998 are as follows:
<TABLE>
<C> <C> <C> <C> <C>
1999 U.S. Canada U.K. Total
------- ------ ------- -------
Revenues $76,595 $7,791 $10,836 $95,222
Segment profit 16,833 679 1,906 19,418
Intersegment revenues 7,397 2,773 --- 10,170
1998 U.S. Canada U.K. Total
------- ------ ------- -------
Revenues $59,790 $6,882 $10,402 $77,074
Segment profit 6,748 552 1,815 9,115
Intersegment revenues 5,470 805 --- 6,275
Selected operating results of the reportable segments for the three
month periods ended June 30, 1999 and 1998 are as follows:
1999 U.S. Canada U.K. Total
------- ------ ------ -------
Revenues $41,089 $3,983 $5,439 $50,511
Segment profit 10,131 674 912 11,717
Intersegment revenues 4,527 1,404 --- 5,931
1998 U.S. Canada U.K. Total
------- ------ ------ -------
Revenues $35,761 $3,570 $4,950 $44,281
Segment profit 4,517 456 673 5,646
Intersegment revenues 1,403 --- --- 1,403
</TABLE>
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<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
5. Comprehensive Income
--------------------
Presented below is a reconciliation of net income to comprehensive
income:
<TABLE>
For the six months For the three months
ended June 30, ended June 30,
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 12,503 $ 5,531 $ 7,487 $ 3,386
Foreign currency
translation adjustment 356 (464) 324 (667)
-------- -------- ------- -------
Comprehensive income $ 12,859 $ 5,067 $ 7,811 $ 2,719
======== ======== ======= =======
</TABLE>
6. Subsequent Event
----------------
On July 26, 1999, the Company announced its intention to enter into
a merger with Shire Pharmaceuticals Group plc, a specialty
pharmaceutical company located in the United Kingdom with
subsidiaries in the United States. In the transaction, a tax-free
exchange of Shire shares, Shire will exchange no more than 1.2802
and no less than 1.0427 Shire American Depositary Shares ( an
"ADS") for each share of Roberts. Each Shire ADS represents
three Shire ordinary shares. Roberts shares may also be exchanged
for ordinary shares of Shire. The merger is expected to close in the
fourth quarter of 1999, subject to shareholder approval.
- 9 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Results of Operations
Three and six months ended June 30, 1999 and 1998
Revenues
- --------
Total revenue for the six months and quarter ended June 30, 1999
increased $17.8 million and $6.1 million respectively as compared
with the first six months and quarter ended June 30, 1998. This
increase was primarily due to an increase in revenues from product
sales.
Sales
- -----
For the six months ended June 30, 1999, product sales increased
$17.6 million from $76.4 million to $94.0 million due primarily to
growth of U.S. sales.
U.S. product sales increased $17.4 million from $59.0 million to
$76.4 million. AGRYLIN, PENTASA and PROAMATINE provided $15.4,
$10.1 and $2.2 million, respectively, of the increase and were
offset by a decrease in NOROXIN and COLACE sales of $5.1 and $1.1
million, respectively. Sales of the Company's United Kingdom
subsidiary, Monmouth Pharmaceuticals and the Company's Canadian
subsidiary remained consistent with prior year.
Product sales in the second quarter increased $6.1 million from
$43.8 million in 1998 to $49.9 million in 1999 principally due to
an increase in sales of AGRYLIN. Second quarter product sales in
the U.S. increased $6.2 million from $35.2 million in 1998 to $41.4
million in 1999. Sales in the U.K. increased $0.3 million to $5.2
million in second quarter 1999 from $4.9 million in 1998. Canada's
second quarter sales decreased to $3.4 million in 1999 from $3.7
million in 1998.
Cost of Sales
- -------------
For the six months ended June 30, 1999, cost of sales amounted to
29.7% of product sales, a 7.3 percentage point decrease as compared
to the prior year's comparable period. This decrease in cost of
sales and corresponding increase in gross profit percentage is
primarily the result of a change in product mix. Sales of low-
margin NOROXIN decreased while sales of higher margin products,
particularly AGRYLIN, but also including PROAMATINE and PENTASA
increased significantly.
- 10 -
<PAGE>
Research and Development
- ------------------------
Research and Development expenses increased $1.1 million to $7.3
million and $1.0 million to $4.5 million during the six and three
month periods, respectively, ended June 30, 1999 as compared to the
comparable prior year periods. The largest component of this
change is a $0.7 million spending increase in outside services for
the propiram development project.
Marketing Expenses
- ------------------
For the six months ended June 30, 1999, marketing expenses
increased $4.7 million from $17.4 million to $22.1 million. The
largest components of the increase are compensation and benefit
increases of $1.3 million, partially attributable to timing of
bonus accruals, an increase in sample expense of $0.9 million,
particularly due to a full years' share of PENTASA samples in 1999,
and television and journal advertising increases of $0.7 million.
For the quarter ended June 30, 1999, marketing expenses increased
$3.0 million to $12.5 million.
Administrative Expenses
- -----------------------
For the six months ended June 30, 1999, administrative expense
decreased $3.0 million from $18.1 million to $15.1 million. The
largest components of the decrease are a $3.3 million decrease in
stock appreciation rights (SAR) expense offset by a $0.5 million
increase in amortization expense. There was no SAR expense in 1999
due to the exercise of all SARs in second quarter 1998.
Amortization expense in 1999 includes six months expense related to
PENTASA compared to three months in 1998.
Administrative expenses decreased $3.3 million from the second
quarter 1998 to $7.6 million in the second quarter 1999 due to the
same factors causing the year to date decrease.
Interest Income and Expense
- ---------------------------
Interest income for the six months ended June 30, 1999, decreased
$0.4 million as a result of a decrease in invested marketable
securities due to utilization of funds for the purchase of the
distribution facility and improvements made to the Canadian
manufacturing facility as well as debt payments on purchased
products. Interest expense for the same period increased $4.4
million as a result of the debt incurred in connection with the
acquisition of PENTASA.
For the three months ended June 30, 1999 interest income decreased
$0.1 million and interest expense increased $2.1 million, both due
to the same factors causing the changes in the year to date
results.
- 11 -
<PAGE>
Income Taxes
- ------------
For the six months ended June 30, 1999 and 1998, income tax expense
was calculated using the expected effective statutory rates except
for certain taxes related to foreign operations.The Company has
recorded net deferred tax assets of approximately $5.5 million.
Realization is dependent upon generating sufficient taxable income
to utilize such items. Although realization is not assured,
management believes it is more likely than not that the deferred
tax assets for which a valuation allowance has not been provided,
will be realized. The amount of the deferred tax assets considered
realizable, however, could be reduced at any time if estimated of
future taxable income are reduced.
Liquidity and Capital Resources
- -------------------------------
For the year to date June 30, 1999, operating cash inflows amounted
to $12.8 million as a result of the Company's net income of $12.5
million enhanced by non-cash charges, primarily depreciation and
amortization and offset by changes in accounts receivable and
payable and inventory. As of June 30, 1998, the Company had cash,
cash equivalents and marketable securities of $46.8 million.
Investing activities used $32.6 million, comprised of $4.6 million
in marketable securities redemptions, fixed and intangible asset
purchases of $1.4 and $40.5 million, respectively, and collections
of notes receivable of $4.6 million. The majority of the
expenditures for intangible assets was for the purchase of the
worldwide rights to AGRYLIN.
Financing activities used $4.0 million, comprised of $7.7 million
of payments on notes payable offset by proceeds from the issuance
of Common Stock of $3.7 million resulting primarily from the
exercise of stock options.
The Company's funding requirements depend on a number of factors,
including the Company's product development programs, product
acquisitions, the level of resources required for the expansion of
marketing capabilities as the product base expands, increased
investment in accounts receivable and inventory which may arise
from increased sales levels, competitive and technological
developments, the timing and cost of obtaining required regulatory
approvals for new products, relationships with parties to
collaborative agreements, the success of acquisition activities and
the continuing revenues generated from sales of PROAMATINE, AGRYLIN
and PENTASA.
Existing cash and securities balances and cash generated from
operations are expected to be sufficient to fund the Company's
operating activities for the foreseeable future, as well as support
near and long term debt obligations, completion of the capital
improvements to the manufacturing facility, development of the
- 12 -
<PAGE>
existing pipeline compounds and to fund future acquisitions of
products. Cash equivalents and marketable securities currently
consist of immediately available money market funds, balances and
investment grade securities.
Foreign Currency Fluctuations
- -----------------------------
Roberts has subsidiary operations outside the United States. As a
result, Roberts is subject to fluctuations in revenues and costs
reported in United States dollars as a consequence of changing
currency exchange rates, especially rates for the British pound and
Canadian dollar. Fluctuations in foreign currency exchange rates
were not material for the period ended June 30, 1999.
Euro Conversion
- ---------------
On January 1, 1999, a majority of the European Union member
countries converted to a common currency, the "Euro". The existing
national currencies of the participating countries will continue to
be acceptable until January 1, 2002 after which the Euro will be
the sole legal tender for the participating countries. The Company
is currently evaluating the economic and operational impact,
including competition, pricing, contracts, taxation and foreign
currency exchange rate risk, of the Euro conversion but does not
expect it to have a material effect on its financial condition or
results of operations.
Year 2000 Conversion
- --------------------
The year 2000 conversion problem arises from the inability of some
information systems and other date-sensitive equipment with
embedded chips or processors to properly recognize and process
information after January 1, 2000. The Company's project to
identify and remediate year 2000 issues is proceeding on schedule.
The four main areas that have been or are being addressed are
financial systems, non-financial systems, customers and suppliers
readiness and other date-sensitive equipment.
Over the past year, the Company has replaced or upgraded much of
its software and systems in the normal course of business. The
financial system was replaced with an Enterprise Resource Planning
System which is year 2000 compliant based on the Company's review
of the developer's certification documentation. The system was
implemented in the U.S. in April, 1998, due to the need for an
integrated, more advanced system to link the Finance and Sales
departments located at headquarters with the new distribution
facility. The Canadian and U.K. subsidiary implementations were
completed as of January 4, 1999. These upgrades are also due to
the new integrated reporting system and not year 2000 compliance.
Due to the completion of the implementation, the three financial
locations are electronically linked, enabling more timely
completion of financial requirements. Non-financial software and
hardware were also replaced in the normal course of business as the
previous systems were outdated.
- 13 -
<PAGE>
The manufacturing plant, located in Canada, which was purchased by
the Company in 1997, required various upgrades to its operating
systems. New hardware and upgraded software were installed. The
hardware was installed to replace outdated processing equipment.
The software was installed to ensure year 2000 compliance. The
Company's investment in this software was approximately $225,000
U.S. dollars.
One of the Company's customers requires the Company to meet certain
electronic data interface (EDI) requirements related to year 2000
compliance in order for the customer to continue its relationship
with the Company. The Company completed the testing and
implementation of the compliant version in 1998 and is now listed
on a national database of Y2K compliant trading partners in the
healthcare pharmaceutical industry. The cost of meeting these EDI
requirements was approximately $1,000. Approximately 50 to 60
percent of the Company's sales are currently made through EDI,
through primarily one clearinghouse. This clearinghouse is year
2000 compliant and upgrades non-year 2000 compliant incoming
transmissions to compliant transmissions. In the event that a non-
compliant customer could not interface electronically, orders can
be transmitted via phone, fax or mail, and therefore no disruption
of sales would be expected.
The Company is continuing its efforts to ascertain the compliance
of other customers and suppliers through the means of a survey.
Results to date indicate acceptable compliance levels. This program
is ongoing and assessments regarding additional work, if necessary,
will be made as responses are received. To assist in the effort,
the Company has developed a tracking database to help monitor which
business partners have taken part in the Company's survey, surveyed
the Company or received a compliance letter from the Company. In
the event that any of the Company's significant customers or
suppliers do not achieve compliance on a timely basis, the
Company's business or operations could be adversely impacted if new
customers or alternate suppliers can not be found.
Other date-sensitive equipment includes primarily telephones and
the building security system. The telephone system at the U.S.
headquarters was replaced in 1998 in the normal course of business
as the lease on the former system expired. The new system is year
2000 compliant. The phone systems at the Canadian and U.K.
locations and at the U.S. distribution facility have been replaced
in order to be year 2000 compliant. The total cost of these new
systems was approximately $70,000 U.S. dollars. The Company's
security systems software will be upgraded, at a cost of
approximately $6,000, in third quarter 1999 to assure compliance.
In accordance with the Company's fixed asset capitalization policy,
the hardware, software and phone systems purchased are added to
fixed assets and amortized over the appropriate useful life. The
Company has not retained any consultants nor hired additional
employees to assist in achieving compliance. Other IT projects
have not been delayed by the Company's year 2000 readiness project.
- 14 -
<PAGE>
Based on the Company's progress to date and timeline to complete
the work on the Year 2000 compliance issue, the Company does not
foresee significant financial or operational risks associated with
its compliance at this time. However, these expectations are
subject to uncertainties. These include, but are not limited to
the ability to assess suppliers and customers readiness, failure to
identify all susceptible systems and the availability and cost of
personnel necessary to remediate any unforeseen problems.
- 15 -
<PAGE>
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. 27 Financial Data Schedules
(b) Reports on Form 8-K
During the second quarter ended June 30, 1999, the following
reports on Form 8-K were filed by the Company with the Securities
and Exchange Commission:
Form 8-K (Item 5. Other Events), date of earliest event reported
May 5, 1999, with respect to the end of third party distribution of
AMATINE in Canada and the beginning of the Company's own sales
operations for the product.
Form 8-K (Item 5. Other Events), date of earliest event reported
May 11, 1999, with respect to a strategic alliance with Gynetics to
market PREVEN/TM/ in Canada.
Form 8-K (Item 5. Other Events), date of earliest event reported
June 2, 1999, with respect to the addition of Ronald M. Nordmann to
the Board of Directors.
Form 8-K (Item 5. Other Events), date of earliest event reported
June 8, 1999 with respect to the granting of orphan drug status to
AGRYLIN by the Japanese Ministry of Health and Welfare.
Form 8-K (Item 5. Other Events), date of earliest event reported
June 23, 1999 with respect to the purchase of worldwide rights to
market AGRYLIN.
- 16 -
<PAGE>
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.
Roberts Pharmaceutical Corporation
(Registrant)
Date: August 11, 1999 /s/ Peter M. Rogalin
----------------- ----------------------
Peter M. Rogalin
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Form 10-Q for the Quarter ended June 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
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<SECURITIES> 31,420
<RECEIVABLES> 43,257
<ALLOWANCES> 0
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<PP&E> 35,920
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<BONDS> 122,500
0
0
<COMMON> 323
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<FN>
<F1>Includes raw material and work in process inventory of $10,410.
</FN>
</TABLE>
