SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K/A
CURRENT REPORT
(Amendment Number 1)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) June 2, 1999 (March 19, 1999)
K-V PHARMACEUTICAL COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-9601 43-0618919
(Commission File Number) (I.R.S. Employer Identification No.)
2503 South Hanley Road, St. Louis, Missouri 63144
(Address of Principal Executive Offices) (Zip Code)
(314) 645-6600
(Registrant's Telephone Number, Including Area Code)
---------------------
<PAGE>
K-V Pharmaceutical Company ("Registrant") hereby files Amendment Number
1 to its Report on Form 8-K filed on April 5, 1999.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements - See Index to Financial Statements
(b) Pro Forma Financial Information - See Index to Financial
Statements
(c) Exhibits - The following exhibits are filed with this report:
Exhibit No. Document
----------- --------
2.1* Asset Purchase Agreement by and between K-V
Pharmaceutical Company and American Home Products
Corporation, acting through its Wyeth-Ayerst
Laboratories Division, dated as of February 11, 1999.
Pursuant to Item 601(b)(2) of Regulation S-K, the
Exhibits referred to in the Asset Purchase Agreement are
omitted. The Registrant hereby undertakes to furnish
supplementally a copy of any omitted Exhibit to the
Commission upon request.
2.2* First Amendment to Asset Purchase Agreement dated March
19, 1999.
23.1 Consent of Arthur Andersen LLP
99.1* Press Release issued by K-V Pharmaceutical Company dated
March 22, 1999.
- -----------------------
*Filed as an Exhibit to K-V Pharmaceutical Company's Form 8-K, dated March 19,
1999, which Form 8-K is amended hereby.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
MICRO-K(R) PRODUCT LINE (acquired from American Home Products Corporation's
Wyeth-Ayerst Laboratories Division)
Report of Independent Public Accountants
Statements of Net Assets Acquired (Note 1) As of December 31, 1998 and 1997
Statements of Net Revenues In Excess of Direct Expenses (Note 1) For the Years
Ended December 31, 1998 and 1997
Notes to Statements
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
K-V Pharmaceutical Company Unaudited Pro Forma Combined Condensed Statement of
Income for the year ended March 31, 1999, including notes thereto.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To KV Pharmaceutical Company:
We have audited the accompanying statements of net assets acquired of American
Home Products Corporation's Wyeth-Ayerst Laboratories Division - Micro-K(R)
product Line (Micro K) as of December 31, 1998 and 1997, and the related
statements of net revenues in excess of direct expenses for the years ended
December 31, 1998 and 1997. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
These statements have been prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission for inclusion in the
Form 8-K/A of KV Pharmaceutical Company, as described in Note 1, and are not
intended to be a complete presentation of Micro-K's assets and liabilities and
revenues and expenses.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets acquired as of December 31, 1998 and 1997, and net
revenues in excess of direct expenses of the Micro-K(R) Product Line for the
years ended December 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 27, 1999
<PAGE>
MICRO-K(R) PRODUCT LINE
STATEMENTS OF NET ASSETS ACQUIRED (NOTE 1)
AS OF DECEMBER 31, 1998 AND 1997
(in thousands of U.S. dollars)
1998 1997
------------------ -------------------
FINISHED GOODS INVENTORIES $2,639 $3,204
------------------ -------------------
Net assets acquired $2,639 $3,204
================== ===================
The accompanying notes are an integral part of these statements.
<PAGE>
MICRO-K(R) PRODUCT LINE
STATEMENTS OF NET REVENUES IN EXCESS OF DIRECT EXPENSES (NOTE 1)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(in thousands of U.S. dollars)
1998 1997
-------------- --------------
NET REVENUES $18,512 $25,836
DIRECT COSTS AND EXPENSES:
Cost of sales 9,666 10,583
Direct marketing expenses 126 128
Direct selling expenses 88 86
-------------- --------------
Net revenues in excess of direct
expenses $ 8,632 $15,039
============== ==============
The accompanying notes are an integral part of these statements.
<PAGE>
MICRO-K(R) PRODUCT LINE
NOTES TO STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K/A of KV Pharmaceutical Company (the Company), and are
not intended to be a complete presentation of the American Home Products
Corporation's Wyeth-Ayerst Laboratories Division-Micro-K(R) Product Line
(Micro-K) assets and liabilities and revenues and expenses. Wyeth-Ayerst
Laboratories Division does not prepare financial statements of Micro-K which
would be intended to report a complete presentation of financial position,
results of operations and cash flows in accordance with generally accepted
accounting principles. Accordingly, the accompanying statements do not purpose
to present the full financial position or results of operations of Micro-K that
would have resulted if Wyeth-Ayerst Laboratories Division had operated its
Micro-K product line as an independent company. Pursuant to the Asset Purchase
Agreement between American Home Products Corporation (the Parent), acting
through its Wyeth-Ayerst Laboratories Division (the Division) and KV
Pharmaceutical Company, certain assets were acquired on March 19, 1999, by KV
Pharmaceutical Company for $36,000,000 plus approximately $2,720,000 for
finished goods inventories, as defined in the Asset Purchase Agreement. All
other assets and liabilities of Micro-K have been excluded in accordance with
the Asset Purchase Agreement.
The statements of net assets acquired have been derived from the
financial statements of the Division.
The statements of net revenues in excess of direct expenses exclude
charges which are allocated to Micro-K by the Division or the Parent. These
allocations include, among other things, support services such as research and
development, legal, finance, treasury, tax, pension and group insurance,
insurance, environmental safety, public relations, audit and executive
management advisory functions, as well as quality control, warehousing and
administrative costs. Interest income or expense attributable to borrowings
required to finance Micro-K's operations have also been excluded.
Finished Goods Inventories:
Finished goods inventories of Micro-K products are stated at cost on
the first-in, first-out method.
Net Revenues and Direct Expenses:
Net revenues, cost of sales, marketing and selling direct expenses are
based on the actual amounts incurred by the Division associated with Micro-K.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Risks and Uncertainties
The Micro-K operations and its success is subject to varying degrees of
risks and uncertainties including, among others, its ability to secure a
qualified third party supply of bulk products subsequent to the expiration of
the Bulk Supply Agreement (see Note 2).
(2) COMMITMENTS AND CONTINGENCIES:
As described in the Asset Purchase Agreement, American Home Products
Corporation and its subsidiaries and divisions will be required to supply bulk
products to the buyer for a limited period of time after the closing in
accordance with the Bulk Supply Agreement entered into concurrently with the
Asset Purchase Agreement.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
The following unaudited pro forma combined condensed statement of
income of KV Pharmaceutical Company (the "Company") gives effect to the
acquisition of the Micro-K product line for $36,140,000 applying the purchase
method of accounting as if the acquisition had occurred on April 1, 1998, the
beginning of the earliest period presented.
For pro forma purposes, the Company's consolidated condensed statement
of income for the fiscal year ended March 31, 1999, has been combined with the
audited statement of net revenues in excess of direct expenses of the Micro-K
product line for the year ended December 31, 1998.
The statement of income for the year ended March 31, 1999 includes the
operations of the Micro-K product line from the date of acquisition, March 19,
1999. The Company included in the results of operations for the year ended March
31, 1999, Micro-K product line sales of $1,759,000 and net income before income
taxes of $1,187,000.
The following unaudited pro forma combined condensed statement of
income is based on the historical financial data, and on assumptions and
adjustments described in the notes thereto. All such assumptions and adjustments
are inherently subject to significant uncertainty and contingencies. It can be
expected that some or all of the assumptions on which the following unaudited
pro forma combined condensed statement of income is based will prove to be
inaccurate. In addition, the Company intends to pursue a strategy designed to
increase sales of the Micro-K product line through promotion to physicians. In
connection with the implementation of such strategy, the Company expects to
incur additional selling and administrative costs, which cannot be included as
"pro forma" adjustments under Regulation S-X of the Securities Act because the
amount of these costs are not reliably determinable. As a result, the unaudited
pro forma combined condensed statement of income does not purport to represent
what the Company's results of operations would have been if the acquisition of
the Micro-K product line had occurred on April 1, 1998, and is not intended to
project the Company's results of operations for any future period.
The unaudited pro forma information should be read in conjunction with
the Company's consolidated financial statements and the related notes appearing
in the Company's Annual Report on Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
KV Pharmaceutical Company
Unaudited Pro Forma Combined Condensed Statement of Income
(dollars in thousands except per share amounts)
KV Micro-K Pro forma
12 Mos ended 12 Mos ended Adjustments Reference Pro forma
3/31/99 12/31/98 (Note 1) (Note 1) Combined
------------ ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues $ 114,860 $ 18,512 $ - $ 133,372
Costs and Expenses
Manufacturing costs 61,415 9,666 - 71,081
Research and development 6,884 - - 6,884
Selling and administrative 22,201 214 - 22,415
Amortization 243 - 1,725 (A) 1,968
--------- -------- ------- --------
Total costs and expenses 90,743 9,880 1,725 102,348
--------- -------- ------- --------
Operating income 24,117 8,632 (1,725) 31,024
Other income, net (expense)
Interest and other income, net 14,014 - - 14,014
Interest expense (498) - (1,678) (B) (2,176)
-------- -------- ------- --------
Total other income (expense) 13,516 - (1,678) 11,838
-------- -------- ------- --------
Income before taxes 37,633 8,632 (3,403) 42,862
Provision for income taxes 14,293 - 1,978 (C) 16,271
-------- -------- ------- --------
Net income $ 23,340 $ 8,632 $ (5,381) $ 26,591
-------- ======== ======= --------
Dividend on preferred stock ( 422) ( 422)
Net Income available to
common shareholders $ 22,918 $ 26,169
======== ========
Net income per share
-basic $ 1.26 $ 1.44
-diluted $ 1.17 $ 1.33
Weighted Average Shares
Outstanding
-basic 18,201 18,201
-diluted 19,972 19,972
</TABLE>
The accompanying Note to the Unaudited Pro Forma Combined Condensed Statement of
Income is an integral part of this Statement.
NOTE TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Note 1
Adjustments included in the pro forma combined condensed statement of income
for the year ended March 31, 1999 are summarized as follows (in thousands):
(A) Amortization of the $36 million acquired intangible asset over 20 years of
$1,800 less one-half month's ($75) amortization ($36 million divided by 20 years
multiplied by eleven and one-half months) included in the Company's Statement of
Income for the year ended March 31, 1999.
(B) Interest expense of $1,735 less interest incurred from the acquisition date
to March 31, 1999 based on $25 million of borrowings incurred against the
Company's credit facility to finance the purchase of the Micro-K product line.
Interest was computed assuming the $25 million principal balance was outstanding
for the entire year at an interest rate of 6.94% based on the prevailing rate at
the Company's March 31, 1999 year end.
(C) Income tax expense is provided at the Company's effective tax rate of
37.98%, computed based upon results at March 31, 1999.
<PAGE>
SIGNATURE
---------
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.
Date: June 2, 1999
K-V PHARMACEUTICAL COMPANY
By: /s/ Gerald R. Mitchell
------------------------------------------
Gerald R. Mitchell, Vice President Finance
(chief financial and accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
2.1* Asset Purchase Agreement by and between K-V
Pharmaceutical Company and American Home
Products Corporation, acting through its
Wyeth-Ayerst Laboratories division, dated as
of February 11, 1999. Pursuant to Item
601(b)(2) of Regulation S-K, the Exhibits
referred to in the Asset Purchase Agreement
are omitted. The Registrant hereby
undertakes to furnish supplementally a copy
of any omitted Exhibit to the Commission
upon request.
2.2* First Amendment to Asset Purchase Agreement dated
March 19, 1999.
23.1 Consent of Arthur Andersen LLP
99.1* Press Release issued by K-V Pharmaceutical Company
dated March 22, 1999.
- -----------------------
*Filed as an Exhibit to K-V Pharmaceutical Company's Form 8-K, dated March 19,
1999, which Form 8-K is amended hereby.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To KV Pharmaceutical Company:
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K/A, into the Company's previously filed
Registration Statements on Form S-8 File Nos. 2-56793, 2-76173, 33-46400,
33-41927 and 333-199.
/s/ ARTHUR ANDERSEN LLP
June 1, 1999
Roseland, New Jersey
