<PAGE> 1
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, 1996
COMMISSION FILE NUMBER 0-20045
WATSON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3872914
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
311 BONNIE CIRCLE
CORONA, CA 91720
(Address of principal executive offices) (Zip Code)
909-270-1400
(Registrant's telephone number, including area code)
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 twelve 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 _______
The number of shares outstanding of the Registrant's only class of common stock
as of August 1, 1996 was 36,771,139 shares.
<PAGE> 2
WATSON PHARMACEUTICALS, INC.
INDEX TO THE FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
as of June 30, 1996 and
December 31, 1995 3
Consolidated Statements of
Income for Three and Six
Months Ended June 30, 1996
and 1995 5
Consolidated Statements of Cash
Flows for the Six Months Ended
June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote
of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $119,346 $92,214
Marketable securities 33,952 26,038
Accounts receivable, net of allowances for
doubtful accounts of $1,375 and $1,320 24,168 25,081
Royalty receivable 6,125 8,205
Inventories:
Raw materials 12,579 11,483
Work-in-process 4,368 5,112
Finished goods 10,014 6,042
Prepaid expenses and other current assets 3,565 2,344
Current deferred tax assets 13,364 21,115
-------- --------
Total current assets 227,481 197,634
Property and equipment, net 73,147 69,999
Investments in joint ventures and
other long-term investments 62,756 49,355
Other assets 4,970 5,133
-------- --------
Total assets $368,354 $322,121
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------- ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 19,683 $ 25,215
Income taxes payable 3,560 2,985
Current portion of long-term debt 621 622
-------- --------
Total current liabilities 23,864 28,822
Long-term debt 3,273 3,577
Other liabilities 228 687
-------- --------
Total liabilities 27,365 33,086
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock; no par; 2,500,000 shares
authorized; none outstanding
Common stock; par value of $.0033; 500,000,000
shares authorized; 36,699,609 and 36,368,725
shares issued and outstanding 121 120
Additional paid-in capital 153,916 146,439
Retained earnings 177,662 142,711
Unrealized holding gain on marketable securities 9,645 621
Unearned compensation-stock awards (355) (856)
-------- --------
Total stockholders' equity 340,989 289,035
-------- --------
Total liabilities and stockholders' equity $368,354 $322,121
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended For the three months ende
June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $80,546 $60,625 $40,990 $31,700
Royalty income 12,602 10,493 6,616 5,293
-------- -------- -------- --------
Total revenues 93,148 71,118 47,606 36,993
-------- -------- -------- --------
Operating expenses:
Cost of revenues 37,649 30,174 18,933 15,447
Research and development 8,458 9,690 4,002 4,920
Selling, general and
administrative 8,891 8,511 4,629 4,313
-------- -------- -------- --------
Total operating expenses 54,998 48,375 27,564 24,680
-------- -------- -------- --------
Operating income 38,150 22,743 20,042 12,313
Other income:
Equity in earnings of joint ventures 9,353 10,204 4,709 4,993
Investment and other income 3,568 2,560 1,705 1,473
-------- -------- -------- --------
Total other income 12,921 12,764 6,414 6,466
-------- -------- -------- --------
Income before provision
for income taxes 51,071 35,507 26,456 18,779
Provision for income taxes 16,120 9,803 8,490 5,465
-------- -------- -------- --------
Net income $34,951 $25,704 $17,966 $13,314
======= ======= ======= =======
Per share data:
Earnings per share $0.93 $0.70 $0.48 $0.36
======= ======= ======= =======
Weighted average number of
common and common
equivalent shares outstanding 37,648 36,846 37,670 36,929
======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
WATSON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended
June 30,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,951 $ 25,704
--------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,966 2,477
Provision for doubtful accounts 55 92
Amortization of unearned compensation-stock awards 501 793
Amortization of deferred income (458) (458)
Equity in earnings of joint ventures (7,497) (8,432)
Dividends received from Somerset 6,500 9,000
Decrease in deferred partnership liability (10,493)
Tax benefit related to stock option plan 3,428 1,760
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 859 (2,020)
Decrease in royalty receivable 2,080
(Increase) in inventories (4,325) (3,332)
(Increase) decrease in other current assets (1,222) 418
Decrease in deferred tax assets 7,750 2,668
(Increase) decrease in other assets 163 (5,304)
Increase (decrease) in accounts payable and
accrued expenses (5,531) 4,367
Increase in income taxes payable 575 263
--------- ---------
Total adjustments 5,844 (8,201)
--------- ---------
Net cash provided by operating
activities 40,795 17,503
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,159) (10,536)
Disposal of property and equipment 46
Purchase of marketable securities (358,550) (113,359)
Proceeds from sale of marketable securities 349,714 117,118
Investments in joint ventures (2,460)
--------- ---------
Net cash used in investing
activities (17,409) (6,777)
--------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
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WATSON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended
June 30,
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 4,051 2,376
Principal payments on long-term debt (305) (352)
--------- --------
Net cash provided by
financing activities 3,746 2,024
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 27,132 12,750
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 92,214 71,165
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $119,346 $83,915
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest $165 $189
Income taxes $4,301 $4,290
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 8
WATSON PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
NOTE A - MERGER WITH CIRCA PHARMACEUTICALS, INC. ("CIRCA")
On July 17, 1995, the stockholders of Watson Pharmaceuticals, Inc. (the
"Company") and Circa approved the merger in which Circa became a wholly-owned
subsidiary of the Company. Under the terms of the merger agreement, Circa
stockholders received 0.86 of a share of the Company's common stock for each
Circa share. Accordingly, the Company issued approximately 18.7 million shares
of its common stock for all of the outstanding common shares of Circa. The
merger qualified as a tax-free reorganization and was accounted for as a
pooling-of-interests. The Company's financial statements have been
retroactively restated to include the results of Circa for all periods
presented.
NOTE B - GENERAL
The unaudited, consolidated financial statements as of June 30, 1996 and for
the three and six months ended June 30, 1996 and 1995, as well as related notes
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments), necessary to present fairly the Company's financial position as
of June 30, 1996, and the results of operations for the three and six months
ended June 30, 1996 and 1995 and cash flows for the six months ended June 30,
1996 and 1995. The results of operations and cash flows for the three and six
months ended June 30, 1996 are not necessarily indicative of the results of
operations or cash flows which may be reported for the remainder of 1996. The
accounting policies followed during the three and six months ended June 30,
1996 were the same as those disclosed in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
NOTE C - INVESTMENT IN ANDRX CORPORATION ("ANDRX")
The Company owns 2,091,790 shares of the outstanding common stock of Andrx and
holds warrants to purchase an additional 337,079 shares of Andrx common stock.
Andrx completed its initial public offering in June 1996. Pursuant to Statement
of Financial Accounting Standards No. 115 "Accounting for Certain Investments
in Debt and Equity Securities", the Company considers its investment in Andrx
as an "available-for-sale" security and has recorded an unrealized holding gain
of $9.9 million to adjust the cost of this investment to its fair value at
June 30, 1996.
8
<PAGE> 9
WATSON PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introductory note: The following discussion gives effect to the merger between
the Company and Circa as more fully described in Note A of the Notes to
Consolidated Financial Statements.
The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to have been made in this
Report, or which are otherwise made by or on behalf of the Company. Such
factors include, but are not limited to, changing market conditions; the
availability and cost of raw materials; the timely development, FDA approval
and market acceptance of the Company's products, the products producing
royalties for the Company and the products being developed and marketed by the
Company's joint ventures; and other risks detailed herein or detailed from time
to time in the Company's Securities and Exchange Commission filings. In
addition, the U.S. generic drug industry is highly competitive, with pricing
determined by many factors, including the number and timing of product
introductions. Although the price of a generic product generally declines over
time as competitors introduce additional versions of the product, the actual
degree and timing of price competition is not predictable.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues for the three months ended June 30, 1996 were $47.6 million compared
to $37.0 million for the three months ended June 30, 1995, an increase of $10.6
million or 28.7%. The product sales component of revenues increased $9.3
million or 29.3% in the second quarter of 1996 as compared to the second
quarter of 1995. The royalty income component of revenues increased $1.3
million or 25.0% when compared to the three months ended June 30, 1995. The
increase in product sales was due to a combination of increased sales of the
Company's core products (defined as those products available in the marketplace
for greater than one year) and the successful introduction of seven new
products (defined as those products introduced into the marketplace within the
last twelve months), subsequent to June 30, 1995. Net sales of new products
for the three months ended June 30, 1996 amounted to $12.0 million or 29.3% of
total product sales for that period. The increase in royalty income was due to
increased prescriptions written for Dilacor XR(R) during the three months ended
June 30, 1996, as compared to the three months ended June 30, 1995. The level
of product sales and royalty income during the second quarter may not be
indicative of future sales and royalties during the remainder of 1996.
Cost of revenues increased $3.5 million to $18.9 million for the three months
ended June 30, 1996, as compared to the three months ended June 30, 1995. Gross
profit margins increased to 53.8% in the three months ended June 30, 1996 from
51.3% in the three months ended June 30, 1995. These increases were due
primarily to the increase in sales and to the higher than average gross profit
margins earned on certain new products sold during the second quarter of 1996.
Research and development expenses decreased by $0.9 million or 18.7% to $4.0
million for the second quarter of 1996. The Company continues to integrate the
product research and development activities of Circa and Watson following the
July 1995 merger. The level of research
9
<PAGE> 10
WATSON PHARMACEUTICALS, INC.
and development expenses incurred during the second quarter may not be
indicative of future research and development expenses during the remainder of
1996. Selling, general and administrative expenses increased by 7.3% to $4.6
million when compared to the second quarter of 1995, but decreased as a
percentage of revenues from 11.7% to 9.7%. Although selling, general and
administrative spending has increased in support of the Company's growth, the
growth of revenues has outpaced the growth of these expenses.
The Company's equity in earnings from joint ventures was generated primarily
from its 50% ownership of Somerset Pharmaceuticals, Inc. ("Somerset"). Total
earnings from joint ventures decreased by $0.3 million or 5.7% to $4.7 million,
as compared to the second quarter of 1995. This decrease was due in part to
increased research and development expenses at both Somerset and ANCIRC, a
50/50 joint venture between the Company and Andrx Corporation ("Andrx"). Prior
to an October 1995 amendment of its joint venture agreement with Andrx, the
Company owned 40% of ANCIRC.
Management anticipates the earnings from joint ventures for the balance of 1996
will be lower than joint venture earnings in the first half of 1996 and also
lower than joint venture earnings achieved in 1995. The Company's joint
venture earnings are generated primarily from Somerset's sales of the product
Eldepryl(R). On August 2, 1996 a competitor received FDA approval to market a
tablet form of the product which will compete with Somerset's capsule form of
Eldepryl(R). The precise effect of the expected competition on Somerset's 1996
net income, and the Company's 1996 joint venture earnings, cannot be determined
at this time.
Investment and other income increased by $0.2 million during the second quarter
of 1996. This increase was primarily due to rising interest rates and a larger
base of invested cash during the three months ended June 30, 1996.
The provision for income taxes increased by $3.0 million in 1996, as compared
to 1995. The Company's effective income tax rate increased from 29.1% in 1995
to 32.1% in 1996, due primarily to reduced federal and state income tax
credits available in 1996.
Net income increased by $4.6 million or 34.9% in the second quarter of 1996 as
compared to 1995. This increase was due primarily to the increased revenues
and gross profit margins the Company experienced in the three months ended June
30, 1996. Earnings per share increased from $0.36 to $0.48 in the second
quarter of 1996 as compared to 1995, on an increase of approximately 0.7
million weighted average common and common equivalent shares outstanding.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues for the six months ended June 30, 1996 were $93.1 million compared to
$71.1 million for the six months ended June 30, 1995, an increase of $22.0
million or 31.0%. The product sales component of revenues increased $19.9
million or 32.9% in the first half of 1996 as compared to the first half of
1995. The royalty income component of revenues increased $2.1 million or 20.1%
when compared to the six months ended June 30, 1995. The increase in
10
<PAGE> 11
WATSON PHARMACEUTICALS, INC.
product sales was due to a combination of increased sales of the Company's core
products and the successful introduction of seven new products subsequent to
June 30, 1995. Net sales of new products for the six months ended June 30,
1996 amounted to $21.7 million or 27.0% of total product sales for that period.
The increase in royalty income was due to increased prescriptions written for
Dilacor XR(R) during the six months ended June 30, 1996, as compared to the six
months ended June 30, 1995. The level of product sales and royalty income
during the first six months may not be indicative of future sales and royalties
during the remainder of 1996.
Cost of revenues increased $7.5 million to $37.6 million for the six months
ended June 30, 1996, as compared to the six months ended June 30, 1995. Gross
profit margins increased to 53.3% in the six months ended June 30, 1996 from
50.2% in the six months ended June 30, 1995. These increases were due
primarily to the increase in sales and to the higher than average gross profit
margins earned on certain new products sold during the first half of 1996.
Research and development expenses decreased by $1.2 million or 12.7% to $8.5
million for the first half of 1996. The Company continues to integrate the
product research and development activities of Circa and Watson following the
July 1995 merger. The level of research and development expenses incurred
during the first six months may not be indicative of future research and
development expenses during the remainder of 1996.
Selling, general and administrative expenses increased by 4.5% to $8.9 million
when compared to the first half of 1995, but decreased as a percentage of
revenues from 12.0% to 9.5%. Although selling, general and administrative
spending has increased in support of the Company's growth, the growth of
revenues has outpaced the growth of these expenses.
The Company's equity in earnings from joint ventures was generated primarily
from its 50% ownership of Somerset Pharmaceuticals, Inc. Total earnings from
joint ventures decreased by $0.9 million or 8.3% to $9.4 million, as compared
to the first half of 1995. This decrease was due in part to increased research
and development expenses at both Somerset and ANCIRC. As previously discussed
in this Form 10-Q, management anticipates the earnings from joint ventures for
the balance of 1996 will be lower than the earnings from joint ventures in the
first half of 1996 and lower than joint venture earnings achieved in 1995.
Investment and other income increased by $1.0 million during the first half of
1996. This increase was primarily due to rising interest rates and a larger
base of invested cash during the six months ended June 30, 1996.
The provision for income taxes increased by $6.3 million in 1996, as compared
to 1995. The Company's effective income tax rate increased from 27.6% in 1995
to 31.6% in 1996, due primarily to reduced federal and state income tax
credits available in 1996.
Net income increased by $9.2 million or 36.0% in the first half of 1996 as
compared to 1995. This increase was due primarily to the increased revenues
and gross profit margins the Company
11
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WATSON PHARMACEUTICALS, INC.
experienced in the six months ended June 30, 1996. Earnings per share
increased from $0.70 to $0.93 in the first half of 1996 as compared to 1995, on
an increase of approximately 0.8 million weighted average common and common
equivalent shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996, the Company's cash and marketable
securities increased by $35.0 million to $153.3 million. Cash flows from
operations provided the majority of this increase, supplemented by proceeds
from the exercise of stock options, offset by purchases of property and
equipment and net purchases of marketable securities.
Working capital increased by $34.8 million, from $168.8 million at December 31,
1995 to $203.6 million at June 30, 1996. The increase in working capital can
be attributed to the increase in cash and marketable securities ($35.0
million), the decrease in accounts payable and accrued expenses ($5.5 million),
the increase in inventories ($4.3 million), offset by the decrease in deferred
tax assets ($7.8 million) and the decrease in trade and royalty receivables
($2.9 million). The Company believes that current cash resources, future
operating cash flows and funds available under a bank credit agreement will be
sufficient to fund its current and anticipated working capital needs.
The Company regularly reviews potential opportunities to acquire or invest in
technologies, products or product rights. The Company also regularly reviews
potential acquisitions, investments or combinations involving businesses
compatible with its existing businesses and corporate objectives. The Company
could use sources other than cash, such as the issuance of debt or equity
securities, to finance any such acquisition or investment. If such an
acquisition or investment was completed, the Company's operating results and
financial condition could change materially in future periods.
12
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WATSON PHARMACEUTICALS, INC.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various disputes and litigation matters
which arise in the ordinary course of business. The litigation process is
inherently uncertain and it is possible that the resolution of these disputes
and lawsuits may adversely effect the Company. Management believes, however,
that the ultimate resolution of such matters will not have a material adverse
impact on the Company's financial position or results of operations. There
have been no material developments in any legal matter since the filing of the
Company's 1995 Annual Report on Form 10-K, except as noted below.
In October 1995, a putative class action complaint captioned Jimmy
Jackson v. Circa Pharmaceuticals, Inc., et al., was filed against Circa,
Lawrence Raisfeld and Robert Shulman, former presidents of Circa, and Roger
Jordan, president of Vitarine Pharmaceuticals, in the Circuit Court of
Tallapoosa County, Alabama. See the discussion under Legal Proceedings -
Pending Litigation in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995. On April 26, 1996, the Circuit Court issued an order
dismissing the action as to Messrs. Raisfeld, Shulman and Jordan, but
certifying the action as a class action with regard to Circa. On July 2, 1996
the Supreme Court of Alabama declined to exercise its mandamus jurisdiction
with respect to the Circuit Court's decision. The Company intends to
vigorously defend this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the registrant's annual meeting of stockholders held on May 10, 1996,
several proposals were set before the stockholders for their vote.
PROPOSAL ONE: Election of two directors to hold office until the 1999 Annual
Meeting
<TABLE>
<CAPTION>
Director - Class I VOTE FOR VOTE WITHHELD
------------------ -------- -------------
<S> <C> <C>
Michael Fedida 31,770,567 571,329
Albert F. Hummel 30,299,113 2,042,783
</TABLE>
PROPOSAL TWO: To amend the Articles of Incorporation to increase the number
of authorized shares of common stock from 100,000,000 to
500,000,000
<TABLE>
<S> <C>
For: 19,372,801
Against: 12,833,174
Abstain: 48,421
Broker Non-Votes: 87,500
</TABLE>
13
<PAGE> 14
WATSON PHARMACEUTICALS, INC.
PROPOSAL THREE: To amend the 1991 Stock Option Plan to increase by 1,000,000
the number of shares authorized for issuance
<TABLE>
<S> <C>
For: 31,317,979
Against: 855,550
Abstain: 80,867
Broker Non-Votes: 87,500
</TABLE>
PROPOSAL FOUR: Ratification of the selection of Price Waterhouse LLP as
independent public accountants for the Company for the current
year
<TABLE>
<S> <C>
For: 32,281,099
Against: 32,331
Abstain: 28,466
Broker Non-Votes: None
</TABLE>
ITEM 5. OTHER INFORMATION
On May 10, 1996 Dr. Alec D. Keith retired as Chairman of the Board of Watson
Pharmaceuticals, Inc. Dr. Keith will remain a member of the Board of Directors
and will provide research and development - related consulting services to the
Company.
Dr. Allen Chao, a co-founder of the Company and a director since inception,
succeeded Dr. Keith as Chairman. Dr. Chao will continue to serve in his
current role as Chief Executive Officer of Watson Pharmaceuticals, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1(a) Amendment to Articles of Incorporation
10.6(a) Amendment to the 1991 Stock Option Plan
27.1 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K:
None.
14
<PAGE> 15
WATSON PHARMACEUTICALS, INC.
SIGNATURES
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.
WATSON PHARMACEUTICALS, INC.
(Registrant)
By: /s/ ALLEN CHAO, PH.D
-------------------------------------
Allen Chao, Ph.D.
Chairman and Chief Executive Officer
(Principal Executive and Financial Officer)
By: /s/ CHATO ABAD
--------------------------------------
Chato Abad
Vice President - Corporate Controller
(Principal Accounting Officer)
Dated: August 9, 1996
<PAGE> 1
EXHIBIT NO. 3.1(a)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
WATSON PHARMACEUTICALS, INC.
Pursuant to provisions of Nevada Revised Statutes, Title 7, Chapter 78,
the undersigned officers do hereby certify:
FIRST: The name of the Corporation is WATSON PHARMACEUTICALS,
INC.
SECOND: The Board of Directors of the Corporation duly adopted
the following resolution on February 26, 1996.
NOW, THEREFORE, BE IT RESOLVED, that subject to approval of the
stockholders of the Corporation, Article V of the Articles of
Incorporation of the Corporation is amended to be and read as follows:
ARTICLE V
---------
The Corporation is authorized to issue a total of Five Hundred
and Two Million Five Hundred Thousand (502,500,000) shares of stock,
Five Hundred Million (500,000,000) shares of which shall be classified
as common stock, $.0033 par value per share, and Two Million Five
Hundred Thousand (2,500,000) shares of which shall be classified as
preferred stock, no par value per share. The holders of both classes of
stock shall not be entitled to exercise cumulative voting or preemptive
rights.
The voting powers, designations, preferences, limitations,
restrictions, relative rights and distinguishing designation in respect
of the shares of the preferred stock shall be as stated in the
resolution or resolutions providing for the issuance of such preferred
stock adopted or to be adopted by the Board of Directors of the
Corporation pursuant to the authority hereby expressly vested in the
Board of Directors of the Corporation by these Articles of
Incorporation.
THIRD: As of March 15, 1996, the record date of the annual
meeting of stockholders of the Corporation, the total
number of outstanding shares having voting power of the
Corporation is 36,607,903, and the total number of votes
entitled to be cast by the holders of all of said
outstanding shares is 36,607,903.
FOURTH: On May 10, 1996, at the Annual Meeting of stockholders
of the Corporation, notice of which was duly given, the
amendment herein certified was adopted by the holders of
19,372,801 shares of common
<PAGE> 2
stock, $.0033 par value per share, of the Corporation,
which represent 19,372,801 votes, and which constitute
at least a majority of all of the voting power of the
holders of shares having voting power.
Signed: May 10, 1996
WATSON PHARMACEUTICALS, INC.
By: [SIG]
-----------------------------------
Dr. Melvin Sharoky, President
By: [SIG]
-----------------------------------
Michel J. Feldman, Secretary
2
<PAGE> 1
EXHIBIT NO. 10.6(a)
WATSON PHARMACEUTICALS, INC.
1991 Stock Option Plan
Amendment No. 5
Section 25 of the Watson Pharmaceuticals, Inc. 1991 Stock Option Plan
(the "Plan") authorizes the Board of Directors of Watson Pharmaceuticals, Inc.,
a Nevada corporation, to amend the Plan at any time, subject to certain
limitations. Effective when approved by the Board of Directors, the Plan is
amended by substituting the phrase 4,700,000 (determined as of May 10, 1996"
for the phrase 3,700,000 (determined as of May 1, 1995) where it appears in
Paragraph 2 of the Plan.
IN WITNESS WHEREOF, this Amendment is executed this 10th day of May 1996.
WATSON PHARMACEUTICALS, INC.,
a Nevada corporation,
BY: /s/ ALLEN CHAO, PH.D.
------------------------------
Allen Chao, Ph.D.
Chairman and CEO
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
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0
0
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