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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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) JANUARY 25, 1996
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
In a press release dated January 25, 1996 (filed herewith as Exhibit 99), the
Company announced its financial results for the three and nine month
periods ended December 31, 1995. The Company also announced its plans to
restructure and consolidate certain of its softgel operations to improve
efficiencies and productivity. As discussed further in the press release,
the Company expects to record special charges relating to this
restructuring in its fourth fiscal quarter ending March 31, 1996. These
charges are currently estimated at $30 million before tax effects, and will
include severance and other employee termination benefits and fixed asset
write-downs in connection with facility closures.
(b) EXHIBITS TO THIS FORM 8-K
EXHIBIT NUMBER DESCRIPTION
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99 Press Release of R.P. Scherer Corporation, dated
January 25, 1995, reporting third quarter
financial results and announcing restructuring
plans.
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: January 25, 1996 By: /s/ Thomas J. Stuart
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Thomas J. Stuart, Vice President & Controller
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EXHIBIT 99
[R.P. Scherer Press Release Letterhead]
Nicole Williams
Executive VP & CFO
(810)649-0900 FOR IMMEDIATE RELEASE
R. P. SCHERER REPORTS THIRD QUARTER FINANCIAL RESULTS AND ANNOUNCES
RESTRUCTURING PLANS
TROY, MI, January 25, 1996 ..... R. P. Scherer Corporation reported net earnings
for its third fiscal quarter ended December 31, 1995 were $ 13.3 million, or
$.54 per share, an increase of 14% compared to $11.6 million, or $.47 per share,
for the same quarter last year. For the first nine months, net earnings
amounted to $35.3 million, or $1.43 per share, an increase of 10% from the $32.2
million, or $1.31 per share, reported for the prior year nine-month period.
The Company also announced its plans to restructure and consolidate certain
of its softgel operations to improve efficiencies and profitability. As
discussed further below, the Company expects to record charges relating to the
restructuring in its fourth fiscal quarter ending March 31, 1996. The charges
are currently estimated to total approximately $30 million pretax.
THIRD QUARTER FINANCIAL RESULTS
SALES
Sales were $137.6 million in the third fiscal quarter ended December 31,
1995, amounting to a 4% increase from sales of $132.2 million reported for the
same quarter last year. The moderate sales improvement reflects continued
weakness in the health and nutritionals markets, especially in the United
Kingdom, Japan and Australia. The Company made further gains in sales of its
pharmaceutical softgel and Zydis-Registered Trademark- drug delivery products.
A Company spokesperson commented, "The sluggishness in certain key
nutritionals markets has significantly restrained the Company's sales growth and
adversely affected operating margins this fiscal year. Although we are unable
to predict how soon this situation will improve, the Company continues to take
steps necessary to address these market conditions. We remain pleased with the
Company's progress in growing its pharmaceutical business. Through the first
nine months of the current fiscal year, pharmaceutical softgel sales have
increased 15%, while sales of the Company's Zydis-Registered Trademark- fast
dissolving drug delivery system rose 37%."
OPERATING INCOME
The Company's operating income was $25.1 million for the quarter ended
December 31,
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1995, representing a 3% decline from the $25.8 million earned in the same
quarter of the prior year. Part of the decline in operating income is
attributable to a 7% increase in research and development expenses, including
spending related to the Advanced Therapeutic Products group, which is engaged in
the development of pharmaceutical products utilizing the Company's proprietary
drug delivery technologies. Operating margin before research and development
expenses was 22.3% for the December 31, 1995 quarter, down from 23.5% for the
same quarter a year earlier. The reduced operating margin is primarily the
result of sub-optimal capacity utilization and downward pricing pressures
related to the nutritionals market situations described above, combined with
higher depreciation and overhead costs associated with recent manufacturing
facility additions and upgrades.
NET INCOME
The Company generated net income of $13.3 million ($.54 per share) for the
quarter ended December 31, 1995, a 14% increase as compared to net income of
$11.6 million ($.47 per share) in last year's third fiscal quarter. In addition
to lower net interest expenses, the current fiscal year's income has benefited
from a reduction of the estimated consolidated effective income tax rate to
30.1% of pretax income, from 35.0% in the prior year period. The lower income
tax rate reflects changes in the geographic mix of pretax income and expected
improvements in the utilization of foreign tax credits and other tax benefits in
the current fiscal year.
Foreign currency exchange rate fluctuations did not have a significant
effect on reported financial results when comparing the third fiscal quarters of
the current and prior fiscal years.
RESTRUCTURING OF OPERATIONS
The decision to undertake a restructuring at this time is the result of
recently completed evaluations of Scherer's global resources and capacity
requirements in different geographical and market segments. The restructuring
plan, approved by the Company's Board of Directors on Wednesday, is designed to
enhance long-term profitability by reducing and rationalizing certain
manufacturing and overhead structures. The plan calls for consolidation of
facilities and will primarily affect non-pharmaceutical operations in Europe and
North America.
"As a result of a thoughtful and systematic evaluation of our businesses,
markets, customer needs and internal operating requirements, a business model
more appropriate for the competitive realities of the rapidly evolving market of
the 1990s is being put in place," Alex Erdeljan, President of R. P. Scherer
Corporation, said, commenting on this decision.
As part of the restructuring, the Company intends to close, during the next
several months, its softgel manufacturing plants in Neuvic, France and Windsor,
Canada. Additionally, administrative, marketing and development staffs will be
consolidated and reduced in other locations. These actions will affect
approximately 250 people, or 7% of Scherer's total work force. The Company will
record special charges, preliminarily estimated at $30 million pretax, in its
fourth fiscal quarter ending March 31, 1996. Such charges will include
severance and other
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employee termination benefits, as well as fixed asset write downs in connection
with the facility closures.
"We believe we are setting the Company on the right course for continued
profitable growth in the years to come," Erdeljan said. "The process we have
gone through over the past several months has been geared to establishing
sustainable competitive advantage in certain very competitive market segments."
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 R.P. SCHERERSOL-TM-, ZYDIS-Registered
Trademark-, PULSINCAP-Registered Trademark- and OPTIDYNE technologies. 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 20 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 DECEMBER 31,
---------------------------------------
%
1995 1994 CHANGE
------------ ------------ -------------
SUMMARY FINANCIAL INFORMATION:
- ------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $137,582 $132,215 4%
------------ ------------
------------ ------------
Operating Income exclusive of R&D Expenses $30,709 $31,040 -1%
------------ ------------
------------ ------------
Operating Margin exclusive of R&D Expenses 22.3% 23.5%
------------ ------------
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Operating Income $25,119 $25,804 -3%
------------ ------------
------------ ------------
Net Income per Common and Common Equivalent $0.54 $0.47 15%
Share
------------ ------------
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SUMMARY INCOME STATEMENT DATA: 1995 1994
- -----------------------------
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Net Sales $137,582 $132,215
Cost of Sales 90,201 83,743
Selling and Administrative Expenses 16,672 17,432
Research and Development Expenses:
Recurring Activities $3,965 $3,819
Advanced Therapeutics Products Group 1,625 1,417
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Total Research and Development Expenses 5,590 5,236
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Operating Income 25,119 25,804
Interest Expense 2,953 3,410
Interest Earned and Other (675) (555)
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Income from Operations before
Income Taxes and Minority Interests 22,841 22,948
Income Taxes 6,286 7,840
Minority Interests 3,301 3,501
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Net Income $13,254 $11,607
------------ ------------
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Per Common and Common Equivalent Shares:
Net Income $0.54 $0.47
------------ ------------
------------ ------------
Average Number of Common and Common
Equivalent Shares 24,600 24,573
</TABLE>
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R.P. SCHERER CORPORATION AND SUBSIDIARIES
SUMMARY OF FINANCIAL RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED DECEMBER 31,
-------------------------------------
%
1995 1994 CHANGE
------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SUMMARY FINANCIAL INFORMATION:
- -----------------------------
Net Sales $419,471 $386,465 9%
------------ ------------
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Operating Income exclusive of R&D Expenses $93,141 $90,078 3%
------------ ------------
------------ ------------
Operating Margin exclusive of R&D Expenses 22.2% 23.3%
------------ ------------
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Operating Income $75,756 $75,860 0%
------------ ------------
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Net Income per Common and Common Equivalent
Share $1.43 $1.31 9%
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SUMMARY INCOME STATEMENT DATA: 1995 1994
- ------------------------------ ------------ ------------
Net Sales $419,471 $386,465
Cost of Sales 273,203 244,612
Selling and Administrative Expenses 53,127 51,775
Research and Development Expenses:
Recurring activities $11,571 $10,835
Advanced Therapeutics Products Group 5,814 3,383
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Total Research and Development Expenses 17,385 14,218
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Operating Income 75,756 75,860
Interest Expense 9,938 10,630
Interest Earned and Other (1,474) (1,257)
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Income from Operations before
Income Taxes and Minority Interests 67,292 66,487
Income Taxes 20,222 23,270
Minority Interests 11,797 11,041
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Net Income $35,273 $32,176
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Per Common and Common Equivalent Shares:
Net Income $1.43 $1.31
------------ ------------
------------ ------------
Average Number of Common and Common
Equivalent Shares 24,612 24,476
</TABLE>
