<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 33-30999
-----------------------
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: (248) 649-0900
----------------------
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 _
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares outstanding of the registrant's common stock as of August 7,
1997: 24,256,927 shares of common stock, par value $.01.
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<PAGE>
PART I
ITEM 1 FINANCIAL STATEMENTS
R.P. SCHERER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED JUNE 30,
-----------------------------------
1997 1996
---------- -----------
Net sales $149,091 $145,297
Cost of sales 99,885 96,488
Selling and administrative expenses 18,637 17,076
Research and development expenses, net 5,297 4,662
---------- -----------
Operating income 25,272 27,071
Interest expense 2,238 2,972
Interest earned and other (611) (349)
---------- -----------
Income before income taxes and minority interests 23,645 24,448
Income taxes 6,505 7,215
Minority interests 2,924 3,640
---------- -----------
Net income $14,216 $13,593
---------- -----------
---------- -----------
Per Common and Common Equivalent Share:
Net income $0.58 $0.56
---------- -----------
---------- -----------
Average number of common and common
equivalent shares 24,715 24,473
The accompanying notes are an integral part of this statement.
2
<PAGE>
R.P. SCHERER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, MARCH 31,
1997 1997
----------- ---------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 26,219 $ 24,955
Short-term investments 4,792 3,262
Receivables, less reserves of:
June 30, 1997- $3.6 million;
March 31, 1997- $3.5 million 136,687 127,717
Inventories 65,710 59,280
Other current assets 10,203 8,620
--------- ---------
243,611 223,834
--------- ---------
PROPERTY:
Property, plant and equipment, at cost 456,289 439,069
Accumulated depreciation and reserves (123,764) (119,895)
--------- ---------
332,525 319,174
--------- ---------
OTHER ASSETS:
Goodwill and intangibles, net of amortization 166,589 168,772
Other assets 15,476 16,465
--------- ---------
182,065 185,237
--------- ---------
$758,201 $728,245
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 5,436 $ 1,499
Accounts payable 66,975 61,026
Accrued liabilities 36,647 37,329
Accrued income taxes 1,046 10,934
--------- ---------
110,104 110,788
--------- ---------
LONG-TERM LIABILITIES AND OTHER:
Long-term debt 143,525 141,822
Other long-term liabilities 48,928 50,758
Deferred income taxes 36,615 36,086
Minority interests in subsidiaries 35,795 35,762
--------- ---------
264,863 264,428
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Preferred stock, 500,000 shares authorized, none issued - -
Common stock, $.01 par value, 50,000,000 shares
authorized; shares issued: June 30, 1997 - 24,277,927
shares; March 31, 1997 - 23,568,255 shares 243 236
Additional paid-in capital 259,519 242,500
Retained earnings 136,890 122,673
Currency translation adjustment (13,418) (12,380)
--------- ---------
383,234 353,029
--------- ---------
$758,201 $728,245
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
R.P. SCHERER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
1997 1996
-------- ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $14,216 $13,593
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 5,502 6,859
Amortization of intangible assets and debt discount 1,579 1,648
Minority interests in net income 2,924 3,640
Deferred tax provision and other 2,949 295
Increase in receivables (10,605) (10,502)
Increase in inventories and other current assets (10,495) (6,634)
Increase (decrease) in accounts payable and accrued
expenses 4,759 (2,365)
-------- ------
Net cash provided by operating activities 10,829 6,534
-------- ------
INVESTING ACTIVITIES:
Purchases of plant and equipment (20,803) (10,955)
Other (2,088) (144)
-------- ------
Net cash used by investing activities (22,891) (11,099)
-------- ------
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 2,167 17,740
Long-term debt retirements and payments (733) (7,691)
Short-term borrowings, net 3,754 (570)
Proceeds from exercise of stock options 9,702 -
Repurchase of common shares (905) -
Cash dividends paid to minority shareholders of subsidiaries (352) -
-------- ------
Net cash provided by financing activities 13,633 9,479
-------- ------
Effect of currency translation on cash and cash equivalents (307) (319)
-------- ------
Net increase in cash and cash equivalents 1,264 4,595
Cash and cash equivalents, beginning of period 24,955 21,007
-------- ------
Cash and cash equivalents, end of period $26,219 $25,602
-------- ------
-------- ------
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
R.P. SCHERER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of R.P. Scherer Corporation (the "Company"), a Delaware corporation and
its subsidiaries, some of which are less than wholly-owned. In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments (consisting only of normal recurring items) necessary for the
fair presentation of financial position and results of operations. These
consolidated financial statements and related notes have been prepared pursuant
to the Rules and Regulations set forth by the Securities and Exchange Commission
and should be read in conjunction with the financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended March
31, 1997, as filed with the Securities and Exchange Commission.
2. INCOME TAXES
The effective income tax rates in the current and prior year quarters were lower
than the U.S. Federal income tax rate due primarily to the mix of taxable income
between jurisdictions as well as the anticipated utilization of carryforward
foreign and other tax credits.
3. INVENTORIES
The components of inventories are as follows:
(IN THOUSANDS) JUNE 30, MARCH 31,
1997 1997
-------- ----------
Raw materials and supplies $35,482 $32,886
Work in process 9,356 8,604
Finished goods 20,872 17,790
-------- ----------
$65,710 $59,280
-------- ----------
-------- ----------
4. CONTINGENCIES
On March 30, 1992, OCAP Acquisition Corp. ("OCAP") commenced an action in the
Supreme Court of the State of New York, County of New York, against Paco
Pharmaceutical Services, Inc. ("Paco"), certain of its subsidiaries, the Company
and R.P. Scherer International Corporation (collectively, the "defendants"),
arising out of the termination of an Asset Purchase Agreement dated February 21,
1992 (the "Purchase Agreement") between OCAP and the defendants providing for
the purchase of substantially all the assets of Paco. On May 15, 1992, OCAP
served an amended verified complaint (the "Amended Complaint"), asserting causes
of action for breach of contract and breach of the implied covenant of good
faith and fair dealing, arising out of defendants' March 25, 1992 termination of
the Purchase Agreement, as well as two additional causes of action that were
subsequently dismissed by order of the court. The Amended Complaint sought $75
million in actual damages and $100 million in punitive damages, as well as
OCAP's attorney fees and other litigation expenses, costs and disbursements
incurred in bringing this action. The Company and R.P. Scherer International
Corporation asserted a counterclaim against OCAP for breach of contract and
breach of the covenant of good faith and fair dealing arising out of the
termination of the Purchase Agreement. In April 1996, the court rendered a
verdict in the Company's favor on all claims in the Amended Complaint and also
dismissed the
5
<PAGE>
R.P. SCHERER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. CONTINGENCIES (CONTINUED)
Company's counterclaim against OCAP. OCAP has filed a notice of appeal for the
dismissal of its claims and the Company has filed a notice of cross appeal for
the dismissal of its counter claim. In the opinion of management, the ultimate
outcome of any potential appeals related to this decision will not have a
material adverse effect on the Company's business or financial condition.
The Company is a party to various other legal proceedings arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position, results of operations,
liquidity or capital resources.
5. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS
128"), effective for periods ending after December 15, 1997. The Company will
adopt the new standard in its fiscal 1998 third-quarter financial statements.
Early adoption is not permitted. FAS 128 supersedes existing generally accepted
accounting principles related to the calculation of earnings per share and
requires restatement of all prior period earnings per share information upon
adoption. FAS 128 requires a dual presentation of new "basic" and "diluted"
earnings per share amounts on the face of the income statement. Basic earnings
per share excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average common shares outstanding during the
period. Diluted earnings per share, which is computed similarly to current
fully diluted earnings per share, takes into effect the potential dilution that
could occur were outstanding stock options to be exercised. Diluted earnings
per share as calculated under FAS 128 is not expected to be materially different
from earnings per share as calculated currently.
6. FINANCIAL INSTRUMENTS
The Company periodically enters into forward foreign currency exchange contracts
to hedge certain exposures related to identifiable foreign currency transactions
that are relatively certain as to both timing and amount and does not engage in
speculation. Gains and losses on the forward contracts are recognized
concurrently with the gains or losses from the underlying transactions and
accounted for as part of the basis of such transaction. At June 30, 1997, the
Company was party to forward foreign currency exchange contracts of $20.4
million (notional amounts), denominated in various European currencies. The
contracts outstanding at June 30, 1997 matured on July 31, 1997 and were
intended to hedge, and were accounted for as hedges of, various foreign currency
commitments.
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion and analysis of financial results and condition covers
the three month periods ended June 30, 1997 and 1996. A majority of the
Company's sales, income and cash flows are derived from its international
operations. The financial position and the results of operations of the
Company's foreign operations are measured using the local currencies of the
countries in which they operate and are translated into U.S. dollars. Although
the effects of foreign currency fluctuations are mitigated by the fact that
expenses of foreign subsidiaries are generally incurred in the same currencies
in which sales are generated, the reported results of operations of the
Company's foreign subsidiaries are affected by changes in foreign currency
exchange rates and, as compared to prior periods, will be higher or lower
depending upon a weakening or strengthening of the U.S. dollar. In addition, a
substantial portion of the Company's net assets are based in its foreign
operations and are translated into U.S. dollars at the foreign currency exchange
rates in effect at the end of each period. Accordingly, the Company's
consolidated shareholders' equity will fluctuate depending upon the
strengthening or weakening of the U.S. dollar.
RESULTS OF OPERATIONS
QUARTERS ENDED JUNE 30, 1997 AND 1996
First-quarter sales of $149.1 million increased 3% over the $145.3 million
reported in the prior year period. The strength of the U.S. dollar relative to
certain key foreign currencies adversely affected financial statement
comparisons in the quarter; first-quarter sales increased 7% when measured using
constant foreign exchange rates. The first-quarter sales increase was driven by
a 7% constant dollar gain in sales of pharmaceutical softgel products combined
with a doubling in manufacturing revenues related to ZYDIS-Registered
Trademark-, the Company's rapid-dissolve drug delivery system. The
pharmaceutical softgel sales gain reflected a 10% increase in over-the-counter
("OTC") pharmaceutical softgel sales primarily in the United States, a 30%
increase in sales of Novartis' NEORAL-Registered Trademark- softgels and strong
demand for valproic acid, Abbot's HYTRIN-Registered Trademark- and for other
prescription softgel products in the United States. Sales of health and
nutritional ("H&N") softgels increased only 2% in the period, as continued
strength of U.S. demand for natural Vitamin E and complex nutritional products,
was largely offset by economic-related weakness in European H&N softgel sales.
Operating income for the quarter ended June 30, 1997 was $25.3 million as
compared to $27.1 million earned in the prior year quarter, a 7% decline. On
a constant exchange rate basis, first-quarter operating income was flat.
First-quarter operating income comparisons were favorably affected by the
above discussed sales increases, offset by: lower profitability in
continental Europe, primarily France and Germany, resulting from continued
weak demand for discretionary OTC and H&N softgel products; and incremental
manufacturing and staffing expense incurred as the Company's new "Best in
Class" pharmaceutical facilities near completion. Due to certain information
systems and Good Manufacturing Practice (GMP) infrastructure enhancements,
first-quarter selling and administrative ("SG&A") expenses represented 12.5%
of sales versus 11.8% of sales in the same period last year. However for the
full fiscal year, the Company expects that SG&A expenses as a percent of
sales will be at or below fiscal 1997 levels. Net research and development
expense ("R&D") increased $0.6 million to $5.3 million in the first quarter
of fiscal 1998. As compared to the same quarter last year, first-quarter R&D
spending by the Company's Advanced Therapeutic Products Group ("ATP")
increased $0.7 million due to expenditures for clinical trials. ATP is
engaged in the development of pharmaceutical products incorporating
off-patent drugs in the Company's proprietary drug delivery technologies.
Net first-quarter recurring R&D spending of $3.1 million approximated the
prior year first quarter, as increased softgel R&D outlays were compensated
by a
7
<PAGE>
$1.4 million increase, to $2.7 million, in customer reimbursements of
pharmaceutical softgel development services.
The Company generated net income of $14.2 million, or $0.58 per share, in the
quarter ended June 30, 1997, as compared to the $13.6 million, or $0.56 per
share, earned in last year's first quarter. The strengthening of the U.S.
dollar had the effect of reducing first-quarter net income by $0.03 per share as
compared to the same quarter last year. Net interest expense fell 38% versus
the prior-year first quarter due to lower average net borrowings and favorable
short-term interest rates. Minority interests in net income fell $0.7 million
due primarily to a combination of lower earnings and the adverse impact of the
stronger U.S. dollar on less than wholly-owned subsidiaries in Germany, France
and Japan. Additionally, current quarter net income comparisons benefited from
a reduction of the estimated consolidated effective tax rate to 28% versus 30%
in the prior year period. The lower effective income tax rate reflects a
favorable shift 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.
RESULTS BY GEOGRAPHIC SEGMENT
The following sets forth operating results for each of the Company's geographic
segments for the quarters ended June 30, 1997 and 1996:
(IN THOUSANDS) SALES OPERATING INCOME OPERATING MARGIN
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
United States $47,775 $42,159 $9,788 $9,305 20.5% 22.1%
Europe 74,506 77,106 14,479 14,886 19.4 19.3
Other International 26,810 26,032 5,255 6,318 19.6 24.3
Unallocated (1) - - (4,250) (3,438) - -
-------- -------- -------- ------- ----- -----
$149,091 $145,297 $25,272 $27,071 17.0% 18.6%
======== ======== ======== ======= ===== =====
(1) Includes general Corporate expenses and expenses associated with the
ATP Group.
The Company's United States operations generated a 13% sales gain for the
quarter ended June 30,1997. The increase resulted from strong sales of
prescription and OTC pharmaceutical softgel products and increased production of
more profitable natural Vitamin E. First quarter prescription pharmaceutical
sales increased 63% due primarily to strong demand for valproic acid, Abbot's
HYTRIN-Registered Trademark- and other prescription softgel products. OTC
pharmaceutical softgel sales increased 33% in the quarter, primarily as a result
of increased penetration of Scherer OTC softgel products into generic markets.
Operating income grew by 5%, or $0.5 million, yielding a 20.5% operating margin
as compared with 22.1% in the prior year first quarter. The first-quarter
decline in operating margin resulted from a shift in sourcing of certain
pharmaceutical and recreational softgel products from the United States to
Company production facilities in other geographic segments.
Sales in Europe decreased 3% in the June 30, 1997 quarter, as compared to the
same quarter last year. Reported European sales growth was adversely impacted
by the strength of the U.S. dollar versus key European currencies, primarily the
German deutsche mark. On a constant dollar basis, first-quarter sales in Europe
increased 3% as a result of increased ZYDIS-Registered Trademark- production
volumes, a 30% increase in sales of Novartis' NEORAL-Registered Trademark-
softgels and increased export of other pharmaceutical softgel products from
Germany and France, partially offset by weak demand for both pharmaceutical and
non-pharmaceutical softgel products throughout Europe. European operating
margin approximated the prior-year quarter.
Sales in the Company's Other International segment increased 3% in the quarter
ended June 30, 1997. Strong first-quarter sales gains in Australia, Argentina
and Japan were partially offset by the transfer of Canadian softgel production
to the United States late in the prior-year first quarter and by the weakness of
the Japanese yen versus the U.S. dollar. Excluding Canada softgels, Other
International sales on a
8
<PAGE>
constant dollar basis increased 18% due primarily to the strengthening of
Vitamin E and health and nutritional softgel markets in Australia and Japan,
strong demand for the Company's hardshell capsules and expanded export of
pharmaceutical softgels from Argentina. For the same period, operating
income declined significantly due to development costs associated with
the Windsor, Canada cytotoxic softgel facility.
OUTLOOK
The Company's business strategy is focused on strengthening its presence and
capabilities in the pharmaceutical industry. Execution of this strategy will
continue to require significant outlays for development and manufacturing
resources, including new staff and state-of-the-art pharmaceutical development
and production facilities. These costs will, to a large extent, precede the
related revenues from anticipated pharmaceutical product sales and, therefore,
will continue to impact the Company's operating results for the remainder of
fiscal 1998 and thereafter.
In addition to the substantial incremental infrastructure costs supporting the
Company's pharmaceutical strategy, a number of other factors are expected to
influence sales and earnings growth in fiscal 1998. These factors include the
recent strength of the U.S. dollar as compared to that experienced in fiscal
1997, the weak pharmaceutical and economic environments in certain European
markets as well as the precise timing of new product launches, the conclusion of
certain product licensing agreements and the timing and extent of ATP clinical
trial expenditures.
CASH FLOWS
Cash and cash equivalents increased by $1.3 million and $4.6 million in the
first quarters of fiscal 1998 and 1997, respectively. Operating activities
provided cash of $10.8 million and $6.5 million in the respective current and
prior year periods. The $4.3 million increase in cash provided by operations in
the fiscal 1998 period resulted primarily from increased earnings and improved
net working capital. First-quarter depreciation expense declined due to the
strong dollar and to inclusion in the prior year of depreciation expense related
to two softgel plants closed last year.
Capital expenditures for the current year quarter totaled $20.8 million as
compared to $11.0 million in the prior year period. Fiscal 1998 capital
expenditures are currently expected to approximate $90-to-$100 million versus
fiscal 1997 expenditures of $69.9 million. First quarter capital
expenditures consisted primarily of costs related to the continuing expansion
of the ZYDIS- Registered Trademark- production facility in the United
Kingdom and softgel production facilities in France, the United States,
Argentina and Japan. In the prior year, first quarter capital spending
consisted primarily of expenditures for the expansion and upgrade of softgel
production facilities in France, the United States and Japan.
Financing activities for the quarter ended June 30, 1997 were primarily
comprised of $9.7 million in proceeds from the exercise of stock options, less
net borrowings of $5.2 million. The prior year first quarter included proceeds
of $17.7 million, primarily from borrowings under the Company's bank credit
facility, to fund capital and research expenditures in the U.K.
9
<PAGE>
LIQUIDITY AND FINANCIAL CONDITION
During the next several years, a significant portion of the Company's cash flow
will be used to fund capital expenditures, to fund research and development, to
service indebtedness and, depending on market conditions, to repurchase up to 5%
of the Company's outstanding common stock. The Company believes that future
cash flow from operations, together with cash and short-term investments
aggregating $31.0 million at June 30, 1997 and amounts available under existing
bank credit facilities totaling $171.0 million at June 30, 1997 will be adequate
to meet anticipated capital investment, working capital, stock repurchase and
debt service requirements. The Company does not currently have plans to declare
or pay cash dividends. At June 30, 1997 the Company's debt-to-equity ratio,
including the capitalization of operating leases, was 31%. The Company has as
one of its long-term financial objectives maintenance of a debt-to-equity ratio
within the range of 35% to 40%.
Capital expenditures are currently anticipated to approximate $90-to-$100
million in each of fiscal 1998 and fiscal 1999 and to decline to a lower level
per year thereafter. Such expenditures will be used to upgrade and expand the
"Best-in-Class" pharmaceutical softgel production facilities in France, Japan,
Germany and the United States to meet anticipated customer demand and to ensure
compliance with increasingly stringent pharmaceutical Good Manufacturing
Practices (GMP) standards worldwide. In addition, a significant portion of
capital spending will include the further expansion of production facilities for
the ZYDIS-Registered Trademark- advanced drug delivery system. As of June 30,
1997, the Company had approximately $7.5 million of commitments for future
capital expenditures.
The Company will also continue to increase its spending for research and
development activities for its advanced drug delivery systems, as well as to
develop new drug delivery technologies and to fund the Company's ATP
initiative. The Company believes that changes currently affecting worldwide
pharmaceutical markets will enhance the commercial value of products which
demonstrate therapeutic and cost benefits over existing therapies. Through
ATP, the Company intends to capitalize upon these trends by creating new
products which reformulate existing compounds utilizing the Company's
proprietary drug delivery technologies. Expenses associated with ATP totaled
$8.0 million in fiscal 1997 and are expected to increase significantly during
the remainder of fiscal 1998 due to costs related to certain clinical trials.
First-quarter ATP expenses totaled $2.1 million. The Company anticipates
that ATP group expenses will represent a significant portion of the Company's
total R&D spending over the next few years. The Company further anticipates
that ATP product sales and royalty revenues will exceed ATP group expenses no
earlier than fiscal 2000, assuming that the development and commercialization
of such ATP products is successful.
The Company periodically reviews drug delivery technologies and other
businesses for potential investment, consistent with its strategic
objectives. Such investments will not necessarily involve significant
initial funding or funding commitments by the Company. Management intends
that any acquisition which would require significant funding would be
financed using a combination of available cash and short-term investments
and, depending upon market conditions, the issuance of common stock.
Management further intends that the Company's financing of any such
acquisition would not materially increase the Company's debt-to-equity ratio
over its stated long-term objective of 35% to 40%.
At June 30, 1997, the Company's outstanding long-term indebtedness consisted
of approximately $99.5 million of 6 3/4% senior notes (net of a $0.5 million
discount) due in February 2004, $27.5 million of borrowings under the
Company's bank credit facility, $6.4 million of industrial development
revenue bonds and $10.1 million of other indebtedness.
INFLATION
In the view of management, the effects of inflation and changing prices on the
Company's net results of operations and financial condition were not
significant.
10
<PAGE>
FORWARD LOOKING INFORMATION
Except for the historical information contained herein, the matters discussed
in this Report Form 10-Q are forward looking statements that involve risks
and uncertainties. Certain important factors could cause the Company's
actual results to differ materially from expected and historical results,
including, but not limited to, the following: the relative strength of key
nutritional products markets; generic competition to key customer
pharmaceutical products; successful formulation, scale-up, development and
commercialization of customer and company products within the expected time
frame, global economic factors; regulatory matters related to product testing
and approvals for the Company and its customers; competitive products and
pricing; and product and drug delivery system development and other
technological issues. These forward looking statements, as further described
in the Company's Annual Report and on Form 10-K, as filed with the Securities
and Exchange Commission, represent R.P. Scherer's judgment as of the date the
information was prepared.
11
<PAGE>
PART II
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT NUMBER DESCRIPTION
27 Financial Data Schedule. Filed herewith.
(b) REPORTS ON FORM 8-K: None.
12
<PAGE>
SIGNATURE
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, thereunto duly authorized.
R.P. SCHERER CORPORATION
Date: August 14, 1997 By: /s/ Nicole S. Williams
----------------- ------------------------------
Nicole S. Williams
Executive Vice President, Finance,
Chief Financial Officer and
Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM R.P SCHERER
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILING.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 26,219
<SECURITIES> 4,792
<RECEIVABLES> 140,328
<ALLOWANCES> 3,641
<INVENTORY> 65,710
<CURRENT-ASSETS> 243,611
<PP&E> 456,289
<DEPRECIATION> 123,764
<TOTAL-ASSETS> 758,201
<CURRENT-LIABILITIES> 110,104
<BONDS> 143,525
0
0
<COMMON> 243
<OTHER-SE> 382,991
<TOTAL-LIABILITY-AND-EQUITY> 758,201
<SALES> 149,091
<TOTAL-REVENUES> 149,091
<CGS> 99,885
<TOTAL-COSTS> 123,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,238
<INCOME-PRETAX> 23,645
<INCOME-TAX> 6,505
<INCOME-CONTINUING> 14,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,216
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
