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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 EVENT REPORTED) MAY 9, 1996
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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) In a press release dated May 9, 1996 (filed herewith as Exhibit 99), the
Company released its financial results for the fiscal year ended March 31,
1996, and the special charge recorded for the Company's previously
announced restructuring plan.
(b) EXHIBITS TO THIS FORM 8-K
EXHIBIT NUMBER DESCRIPTION
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99 Press Release of R.P. Scherer Corporation, dated
May 9, 1996, reporting fiscal year 1996 financial
results and special charge for restructuring plan.
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
(Registrant)
Date: May 10, 1996 By: /s/ Thomas J. Stuart
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Thomas J. Stuart, Senior Vice
President
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EXHIBIT 99
[R.P. Scherer Press Release Letterhead]
Nicole Williams
Executive VP & CFO
(810)649-0900
FOR IMMEDIATE RELEASE
SCHERER REPORTS RESULTS FOR FISCAL YEAR ENDED
MARCH 31, 1996 AND ANNOUNCES SPECIAL CHARGE
FOR RESTRUCTURING PLAN
TROY, MI, May 9, 1996 ..... R. P. Scherer Corporation (NYSE Symbol: SHR)
reported today its sales and earnings results for the fiscal year and fourth
quarter ended March 31, 1996. In addition, the Company disclosed that it has
recorded a $33.8 million (approximately $.94 per share after tax) special charge
for its previously announced restructuring plans. As a result of the special
charge, the Company reported a net loss of $4.6 million, or $.19 per share, for
the March 31, 1996 quarter.
Before special charges and tax adjustments, net earnings for the fourth
quarter ended March 31, 1996 were $15.0 million, or $.61 per share, an increase
of 20% compared to $12.7 million, or $.51 per share, for the same quarter last
year. For the full fiscal year, net earnings before the special items amounted
to $50.1 million, or $2.04 per share, an increase of 11% from the $44.9 million,
or $1.83 per share, reported for the prior year.
FOURTH QUARTER FINANCIAL RESULTS
Sales were $152.2 million in the fourth fiscal quarter ended March 31,
1996, an increase of 1% from sales of $150.2 million reported for the same
quarter last year. This modest sales growth reflects continued weakness of the
nutritional softgel markets in the United Kingdom and elsewhere, as compared to
an exceptionally strong sales performance in the prior year fourth quarter. The
Company continued making progress in growing its pharmaceutical businesses,
which represent a majority of the Company's total sales. Pharmaceutical softgel
sales increased 10%, and sales of the Company's ZYDIS-Registered Trademark- fast
dissolving drug delivery system increased 41% for the quarter ended March 31,
1996, compared to the same quarter last year.
The Company recorded restructuring and other charges aggregating $33.8
million pretax in the March 31, 1996 quarter. The restructuring plan is
designed to enhance the Company's long-term
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profitability by reducing and rationalizing manufacturing and overhead
structures which were primarily servicing non-pharmaceutical markets. The
restructuring plan includes the closure of the Company's softgel manufacturing
plants in Windsor, Canada and Neuvic, France, as well as the consolidation and
elimination of certain administrative, marketing and development staff positions
in several other locations. A total of about 250 people have been or will be
affected by the plan, representing approximately 7% of the Company's total work
force. The restructuring and other charges include approximately $17.1 million
in cash expenses, primarily for severance and other employee termination
benefits, and approximately $16.7 million for fixed asset writedowns and other
non-cash costs in connection with the facility closures.
The after tax cost of the restructuring and other charges was approximately
$.94 per share. The Company estimates the restructuring plan will result in
cost savings of between $7 million and $9 million pretax in its fiscal year
ending March 31, 1997, depending on the timing of completion of the
restructuring plan. Cost savings after fiscal year 1997 are expected to exceed
$10 million annually.
The Company incurred an operating loss of $8.8 million for the fourth
quarter of fiscal year 1996 as a result of the restructuring and other special
charges. Operating income was $25.0 million before these charges, representing
a 11% decline from operating income of $28.0 million in the prior year fourth
quarter. Such decline in operating income is primarily the result of sub-
optimal production capacity utilization and pricing pressures related to the
nutritionals market situation, as well as higher depreciation and other costs
associated with recent expansions and upgrades to the Company's pharmaceutical
facilities. In addition, the prior year fourth quarter's results, which had set
a new quarterly record for the Company, included sales related to the launches
of certain high profit margin pharmaceutical softgel products.
For the quarter ended March 31, 1996, the Company recorded a net loss of
$4.6 million, or $.19 per share. Before the restructuring and other special
items referred to above, the Company generated net income of approximately $15.0
million, or $.61 per share, a 20% increase as compared to $12.7 million, or $.51
per share, for the same quarter a year ago. The improvement in income before
the restructuring and other charges resulted from declines in non-operating
expenses, primarily minority interests in income of less than wholly owned
subsidiaries, and, to a lesser extent, interest expense and a reduction in
income taxes, as discussed below. Foreign currency exchange rate fluctuations
did not have a significant effect on reported financial results when comparing
the fourth quarters of the current and prior fiscal years.
FULL YEAR FINANCIAL RESULTS
Sales for the year ended March 31, 1996 were $571.7 million, or an increase
of 7% over sales of $536.7 million in the prior fiscal year. Part of the sales
gain in fiscal 1996 was the result of a weaker U.S. dollar, on average, as
compared to most foreign currencies. The sales increase would have been 3% as
measured using constant exchange rates. A majority of the sales gain for fiscal
1996 resulted from a 13% improvement in sales of pharmaceutical softgels. Sales
of non-pharmaceutical softgels, which include nutritional, cosmetic and
recreational products, declined 2% overall as a result of the weakness of
certain
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key markets, primarily in Europe. The Company's ZYDIS-Registered Trademark-
operation generated revenues of $16.2 million for fiscal 1996, or an increase of
approximately 40% from the prior year.
Operating income for fiscal 1996 amounted to $66.9 million, as compared to
$103.8 million in the prior fiscal year. Before the restructuring and other
special charges, operating income for fiscal 1996 was $100.8 million,
representing a decline of $3.0 million, or 3%, from the prior year level. Such
decline was primarily the result of a $2.1 million increase in research and
development expenditures, including a 42% increase in spending related to the
Advanced Therapeutic Products group ("ATP"). ATP is engaged in the development
of pharmaceutical products utilizing the Company's proprietary drug delivery
technologies. The increase in sales did not yield incremental operating income,
as pricing pressures and other factors related to the market situations
discussed above, combined with higher depreciation and overhead costs associated
with new and upgraded manufacturing facilities, resulted in a decline in gross
margin to 34.4% in fiscal 1996 from 36.7% in fiscal 1995.
The Company generated net income of $30.7 million, or $1.25 per share, for
the year ended March 31, 1996. Before the effects of the restructuring and
other special items, net income approximated $50.2 million, or $2.04 per share,
an increase of 11% from net income of $44.9 million, or $1.83 per share,
reported for the year ended March 31, 1995. In addition to a $2.1 million
decline in minority interests in earnings of subsidiaries, the 1996 fiscal
year's income benefited from a reduction of the consolidated effective income
tax rate as a result of an approximate $3.0 million favorable adjustment related
to the resolution of an outstanding tax audit issue in Australia. Before the
effects of this adjustment and the restructuring and other charges, the
consolidated effective tax rate was approximately 30%, as compared to
approximately 33% in the prior fiscal year. Such lower income tax rate reflects
changes in the geographic mix of pretax income, higher utilization of foreign
tax and other tax credits and the effectiveness of various tax planning
strategies. The favorable effects of the weaker U.S. dollar added an estimated
$.04 to the Company's increase in earnings per share for fiscal year 1996.
OUTLOOK
In commenting on the financial results for fiscal 1996 and management's
expectations for the future, a Company spokesperson said, "We continue to face a
number of difficult issues which may constrain our fiscal 1997 earnings growth.
The nutritional markets remain weak in Europe and Asia, and while we continue to
take steps necessary to address these conditions, we are not able to predict
with confidence the extent or timing of a turnaround in these markets.
Furthermore, certain important pharmaceutical softgel products which showed
large sales increases in fiscal 1996 may experience a decline in fiscal year
1997 as a result of inventory pipeline adjustments and other reasons. These
factors, combined with a comparatively stronger U.S. dollar and increasing
infrastructure costs related to the Company's pharmaceutical segment strategy,
will likely affect the sales and income results in fiscal 1997, with the first
quarter expected to be the most difficult comparison."
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"While we have a cautious revenue outlook for fiscal 1997, the cost savings
and other benefits of our restructuring program are expected to provide earnings
improvements. The Company has a number of important pharmaceutical softgel and
ZYDIS-Registered Trademark- products in the later stages of development which we
project will allow pharmaceutical sales to resume mid-teens annual growth in
fiscal 1998 and after. We remain committed to the investment program in support
of our pharmaceutical business, and though these investments are significant and
will largely precede the associated revenues, they give us ample reason for
confidence in the Company's future. We believe that our stated objective of
average long-term net earnings growth of 20% or more per year continues to be
appropriate."
Except for the historical information contained herein, the matters
discussed in this release are forward looking statements that involve risks and
uncertainties, including whether certain of the Company's products can be
successfully developed and commercialized, whether regulatory approvals can be
obtained and the impact of competitive products and pricing. These forward
looking statements represent R. P. Scherer's judgment as of the date this
information was prepared.
The Company will be conducting an analyst meeting later today to discuss
the 1996 fiscal-year results, key pharmaceutical products under development and
other aspects of the Company's business situation and strategies. Persons
interested in listening to a taped recording of management's comments during
this meeting may do so by telephoning (800)839-8336 or (402)280-9013 after
approximately 8:00 p.m. on Thursday, May 9.
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 a variety
of advanced drug delivery systems. The Company's proprietary drug delivery
systems improve the efficacy of drugs by regulating the dosage so as to ease
administration, increase absorption, enhance bioavailability and control the
time and place of release. The Company operates a global network of 18
facilities in 12 countries.
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R.P. SCHERER CORPORATION AND SUBSIDIARIES
SUMMARY OF FINANCIAL RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
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1996 1995 CHANGE
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<S> <C> <C> <C> <C> <C>
SUMMARY FINANCIAL INFORMATION:
Net Sales $152,239 $150,217 1%
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Operating Income exclusive of Restructuring
and Other Charges $24,994 $27,962 -11%
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Operating Margin exclusive of R&D Expenses and
Restructuring and Other Charges 20.4% 23.3%
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Income from Continuing Operations per Common Share
before Restructuring and Other Special Items $0.61 $0.51 20%
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SUMMARY INCOME STATEMENT DATA: 1996 1995
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Net Sales $152,239 $150,217
Cost of Sales 101,885 95,311
Selling and Administrative Expenses 19,359 19,886
Restructuring and Other Charges 33,804 -
Research and Development Expenses:
Recurring Activities $3,340 $4,453
Advanced Therapeutics Products Group 2,661 2,605
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Total Research and Development Expenses 6,001 7,058
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Operating Income (8,810) 27,962
Interest Expense 2,657 3,128
Interest Earned and Other (807) (267)
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Income (Loss) from Operations before
Income Taxes and Minority Interests (10,660) 25,101
Income Taxes (8,567) 7,082
Minority Interests 2,477 5,336
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Net Income ($4,570) $12,683
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Per Common and Common Equivalent Shares:
Net Income ($0.19) $0.51
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Average Number of Common and Common
Equivalent Shares 24,563 24,640
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R.P. SCHERER CORPORATION AND SUBSIDIARIES
SUMMARY OF FINANCIAL RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED MARCH 31,
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%
1996 1995 CHANGE
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<S> <C> <C> <C> <C> <C>
SUMMARY FINANCIAL INFORMATION:
Net Sales $571,710 $536,682 7%
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Operating Income exclusive of Restructuring and
Other Charges $100,750 $103,822 -3%
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Operating Margin exclusive of R&D Expenses and
Restructuring and Other Charges 21.7% 23.3%
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Income from Continuing Operations per Common Share
before Restructuring and Other Special Items $2.04 $1.83 11%
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SUMMARY INCOME STATEMENT DATA: 1996 1995
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Net Sales $571,710 $536,682
Cost of Sales 375,088 339,923
Selling and Administrative Expenses 72,485 71,661
Restructuring and Other Charges 33,804 -
Research and Development Expenses:
Recurring activities $14,912 $15,288
Advanced Therapeutics Products Group 8,475 5,988
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Total Research and Development Expenses 23,387 21,276
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Operating Income 66,946 103,822
Interest Expense 12,595 13,758
Interest Earned and Other (2,281) (1,523)
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Income from Operations before
Income Taxes and Minority Interests 56,632 91,587
Income Taxes 11,655 30,352
Minority Interests 14,274 16,276
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Net Income $30,703 $44,859
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Per Common and Common Equivalent Shares:
Net Income $1.25 $1.83
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Average Number of Common and Common
Equivalent Shares 24,535 24,519
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