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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST REPORT REPORTED) MAY 18, 1994
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R.P. SCHERER CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3523163
(State of Incorporation) (I.R.S. Employer Identification Number)
2075 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 649-0900
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ITEM 5. OTHER EVENTS
(a) On May 18, 1994, the Company issued a press release reporting its
fourth quarter and full fiscal year operating results for the fiscal year ended
March 31, 1994. This press release also discussed special operating charges
recognized in the fourth quarter for an anticipated litigation settlement and
for costs associated with a planned plant relocation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
R.P. Scherer Corporation
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(Registrant)
Date: May 19, 1994 By: /s/ THOMAS J. STUART
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Thomas J. Stuart,
Controller
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[R.P. Scherer Corporation Press Release Letterhead]
Nicole Williams
Executive VP & CFO
(810) 649-0900
FOR IMMEDIATE RELEASE
SCHERER REPORTS SALES AND EARNINGS FOR THE
FOURTH QUARTER AND THE FULL FISCAL YEAR 1994
COMPANY ANNOUNCES ANTICIPATED LITIGATION SETTLEMENT
AND PLANNED AUSTRALIAN PLANT RELOCATION
TROY, MI, May 18, 1994 ... R.P. Scherer Corporation announced today sales and
earnings for the fourth quarter and the full fiscal year 1994, ended March 31.
FOURTH QUARTER
SALES
Sales for the fourth quarter of fiscal 1994 were $120.8 million, representing
an increase of 22% over the same period a year ago. In constant exchange
rates, the sales increase was 25%, reflecting the continued strength of the
U.S. dollar. The Company's U.S. operations experienced a sales increase of 34%
during this period, while European operations' local currency sales grew at
27%. The Company's German subsidiary's sales, which were adversely impacted by
changes in health care regulations for the prior year fourth quarter, grew 20%
in local currency compared to a year ago. Revenues contributed by Pharmagel,
acquired last July, totaled $4.1 million for this year's fourth quarter.
OPERATING EARNINGS
In the fourth quarter, the Company earned operating income of $25.2 million
before special charges of $4.5 million for an anticipated litigation settlement
and planned relocation of a production facility discussed below, an increase of
26% from operating income of a year ago. If measured in constant exchange
rates, operating income would have increased 27%. Operating income in Germany,
as measured in local currency, increased by 50%, while the subsidiary's backlog
was up 24% over the prior year. Operating margin before R&D expense and the
special charges improved to 23.9% in this year's fourth quarter, compared to
23.1% for the same quarter last year.
In the fourth quarter, the Company succeeded in containing selling and
administrative expenses to only 14% of sales, compared to 15% in the same
period a year ago. Excluding Pharmagel, SG&A would have increased only 3% in
the fourth quarter versus the same period a year ago.
In commenting on these results, the Company spokesman said: "We are pleased
with the strong performance shown in the fourth quarter by nearly all of our
operating units. We are particularly encouraged by the continued operating
improvement at our German affiliate. The record high backlogs provide reason
for optimism for continued growth in the next fiscal year."
ANTICIPATED LITIGATION SETTLEMENT AND PLANNED AUSTRALIAN PLANT RELOCATION
The fourth quarter operating results of the Company were adversely impacted by
a $4.5 million pre-tax charge for the accrual of a proposed settlement for Paco
Development Partners (PDP II) litigation, which has been outstanding since
1990, and a decision made by the Company to relocate its Australian plant
operations.
The Company has reached an agreement in principle with the plaintiffs in the
PDP II litigation, and is in the process of formalizing that agreement and
seeking all the necessary approvals. The Company recognized
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during the fourth quarter the anticipated amount of settlement costs in excess
of previously provided reserves. In addition, during the fourth quarter, the
Company finalized its plans for the modernization and expansion of its
Australian manufacturing facility. The Company has purchased a new facility
and recognized as a charge to operations the costs it expects to incur on
disposal of its existing facility and land.
NET INCOME
In March 1994, the Company completed the renegotiation of its bank credit
facility and recognized an extraordinary loss of $0.3 million, or $.01 per
share, which represents the after-tax effect of the write-off of unamortized
deferred financing fees related to the former agreement.
Net income for the quarter of $6.5 million or $.41 per share, before the
special charges for the anticipated litigation settlement and planned
relocation of a production facility and the extraordinary loss from debt
extinguishment, represents an increase of 32% over net earnings of $.31 per
share for the same quarter last year.
FULL FISCAL YEAR RESULTS
SALES AND BACKLOG
Consolidated sales for the year were $449.3 million, an increase of 13% over
the previous year. Adjusted for foreign exchange rate differences between
years, sales grew by 19%. Pharmagel contributed $15.5 million to the sales
increase. Sales backlog worldwide at March 31, 1994 was $136.3 million, up 24%
from $110.2 million at the same time last year. When adjusted for constant
exchange rates, the backlog increased by 26% compared to a year ago and
represents a new record high.
The growth in worldwide sales of its core softgel products was led by the
Company's U.S. operations, with an increase of 37%. European operations'
reported sales gains were 4%, or 14% in constant exchange rates. The growth of
the European segment accelerated in the second half of the fiscal year as
economic conditions stabilized and pharmaceutical sales, which were adversely
affected earlier in the year by changes in health care regulations in Germany,
showed significant improvement.
The Company's Zydis advanced drug delivery technology generated revenues of
$7.8 million, an increase of 64%.
OPERATING INCOME
Operating income for fiscal 1994 was $82.9 million, a decrease of 6% from the
$88.1 million earned last year. Reported income was affected by charges
recorded for an anticipated litigation settlement and planned relocation of the
Australian production facility. Without these charges, operating income would
have been essentially comparable with last year. Research and development
expenses, net of customer reimbursements, increased by 15% to $13.1 million.
This increase reflects continued investment in the development of the Company's
advanced drug delivery systems.
NET INCOME
Income from continuing operations increased 7% to $30.9 million from the $29.0
million a year ago. Prior to recognizing special charges for the anticipated
litigation settlement and the planned relocation of a production facility, the
Company earned $1.40 per share, a 17% increase from $1.20 earned in prior year
on a comparable basis. Including the special charges, the Company generated
earnings from continuing operations of $1.27 per share, compared to $1.20 a
year ago.
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In January 1994, the Company defeased all of its currently outstanding 14%
Senior Subordinated Debentures which resulted in an extraordinary loss of $15.5
million, or $.64 per share. The Company issued $100 million Senior Notes at
6 3/4%, the proceeds of which, together with bank borrowings, funded the
defeasance.
R.P. Scherer Corporation, an international developer and manufacturer of drug
delivery systems, is the world's largest producer of soft gelatin capsules
("softgels"). The Company is currently developing and commercializing advanced
drug delivery systems, including SCHERERSOL(TM), ZYDIS(R) and PULSINCAP(R)
technologies. The Company's proprietary drug delivery systems improve the
efficacy of drugs by regulating the dosage, rate of absorption and place of
release. The Company operates a global network of 18 facilities in 11
countries.
NYSE: SHR
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R.P. SCHERER CORPORATION AND SUBSIDIARY
SUMMARY OF FINANCIAL RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED MARCH 31,
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%
1994 1993 CHANGE
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<S> <C> <C> <C>
SUMMARY FINANCIAL INFORMATION:
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Net Sales $449,297 $398,011 13%
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Operating Margin exclusive of Litigation
Settlement and Other $87,391 $88,097 -1%
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Operating Margin exclusive of R&D and Litigation
Settlement and Other 22.4% 25.0%
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Income from Continuing Operations per Common Share
before Litigation Settlement and Other $1.40 $1.20 17%
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SUMMARY INCOME STATEMENT DATA: 1994 1993
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Net Sales $449,297 $398,011
Cost of Sales 287,389 242,108
Selling and Administrative Expenses 61,427 56,413
Litigation Settlement and Other 4,478 -
Research and Development Expenses 13,090 11,393
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Operating Income 82,913 88,097
Interest Expense 22,480 25,436
Interest Earned and Other (1,911) (3,630)
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Income from Continuing Operations before
Income Taxes, Minority Interests, and
Accounting Change 62,344 66,291
Income Taxes 18,737 24,056
Minority Interests 12,693 13,275
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Income from Continuing Operations 30,914 28,960
Loss from Discontinued Operation - (647)
Extraordinary Loss from Debt Extinguishment (15,820) (8,392)
Cumulative Effect of Accounting Change - 974
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Net Income $15,094 $20,895
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Per Common Share:
Income before Other Items $1.27 $1.20
Loss from Discontinued Operation - (0.03)
Extraordinary Loss from Debt Extinguishment (0.65) (0.35)
Accounting Change - 0.04
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Net Income $0.62 $0.86
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Average Number of Common Shares 24,388 24,223
</TABLE>
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R.P. SCHERER CORPORATION AND SUBSIDIARY
SUMMARY OF FINANCIAL RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
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%
1994 1993 CHANGE
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<S> <C> <C> <C>
SUMMARY FINANCIAL INFORMATION:
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Net Sales $120,844 $99,021 22%
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Operating Income exclusive of Litigation
Settlement and Other $25,249 $19,962 26%
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Operating Margin exclusive of R&D and Litigation
Settlement and Other 23.9% 23.1%
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Income from Continuing Operations per Common Share
before Litigation Settlement and Other $0.41 $0.31 32%
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SUMMARY INCOME STATEMENT DATA: 1994 1993
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Net Sales $120,844 $99,021
Cost of Sales 75,080 61,011
Selling and Administrative Expenses 16,924 15,179
Litigation Settlement and Other 4,478 -
Research and Development Expenses 3,591 2,869
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Operating Income 20,771 19,962
Interest Expense 4,684 5,732
Interest Earned and Other (370) (987)
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Income from Continuing Operations before
Income Taxes and Minority Interests 16,457 15,217
Income Taxes 4,283 4,743
Minority Interests 5,317 3,064
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Income from Continuing Operations 6,857 7,410
Extraordinary Loss from Debt Extinguishment (320) 0
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Net Income $6,537 $7,410
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Per Common Share:
Income before Other Items $0.28 $0.31
Extraordinary Loss from Debt Extinguishment (0.01) 0.00
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Net Income $0.27 $0.31
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Average Number of Common Shares 24,399 24,275
</TABLE>
