<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 31, 1998
CHIRON CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-12798 94-2754624
-------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
4560 HORTON STREET, EMERYVILLE, CA 94608
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 655-8730
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 31, 1998, Chiron Corporation ("Chiron") acquired Hoechst AG's 51
percent interest in Chiron Behring GmbH & Co KG ("Chiron Behring") for 204.2
million Deutsche marks (approximately $111.9 million) in cash.
In July 1996, Chiron formed a joint venture with Behringwerke AG (which
subsequently merged into its parent company, Hoechst AG) under which Chiron
purchased a 49 percent interest in the human vaccine business of Behringwerke
AG. The joint venture was organized as a limited partnership under German law
and Chiron and Hoechst AG held interests in both the limited partnership and in
its general partner (which was organized as a GmbH under German law). Under the
Purchase and Assignment Agreement pursuant to which Chiron acquired its initial
49 percent interest, Hoechst AG granted to Chiron an option to purchase Hoechst
AG's 51 percent interest (including Hoechst AG's interests in both the limited
partnership and in the general partner). The purchase price for the 51 percent
interest was established by negotiation at the time of the initial investment.
Chiron Behring has research and development, manufacturing and administrative
facilities in Marburg, Germany. Chiron Behring manufactures and markets in
Germany vaccines for diphtheria, tetanus, pertussis, flu, rabies, tick-borne
encephalitis, tuberculosis, cholera and an oral polio vaccine. Certain of these
products are marketed in other European countries and in the Middle East, the
Far East, Africa and South America, and to international health agencies such as
the World Health Organization. In 1997, Chiron began marketing Chiron Behring's
rabies vaccine in the United States. Chiron Behring also markets in Germany,
under distribution agreements with other manufacturers, traditional vaccines for
hepatitis A, measles, mumps, rubella, typhoid fever, pneumococcal disease,
haemophilus influenzae type b and an inactivated polio vaccine and a recombinant
vaccine for hepatitis B.
The acquisition was financed from Chiron's cash and cash equivalents and
liquidation of certain short-term investments in marketable debt securities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
The audited Balance sheet and Statement of income of Chiron
Behring as of and for the year ended December 31, 1997, prepared
in accordance with German generally accepted accounting
principles, together with the report thereon by C&L Deutsche
Revision, independent accountants for Chiron Behring, are
included in Exhibit 13 and incorporated herein by reference.
Pursuant to Rule 3-05(b)(2)(ii) of Regulation S-X, audited
financial statements of Chiron Behring are required only for the
most recent fiscal year.
2
<PAGE>
(b) Pro forma financial information.
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet
as of March 31, 1998
Unaudited Pro Forma Combined Condensed Consolidated Statement of
Continuing Operations for the Three Months Ended March 31, 1998
Unaudited Pro Forma Combined Condensed Consolidated Statement of
Continuing Operations for the Year Ended December 31, 1997
Notes to Unaudited Pro Forma Combined Condensed Consolidated
Financial Statements
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
13 Financial Statements of Chiron Behring GmbH & Co,
Marburg
23 Consent of C&L Deutsche Revision, Independent
Accountants
</TABLE>
3
<PAGE>
CHIRON CORPORATION AND CHIRON BEHRING GMBH & CO KG
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated financial
statements give effect to Chiron Corporation's acquisition on March 31, 1998 of
Hoechst AG's 51 percent interest in Chiron Behring GmbH & Co KG ("Chiron
Behring") in a transaction accounted for using the purchase method of accounting
(the "Acquisition"). Effective July 1, 1996 and prior to the Acquisition,
Chiron Corporation ("Chiron") accounted for its 49 percent interest in Chiron
Behring under the equity method of accounting. The Unaudited Pro Forma Combined
Condensed Consolidated Balance Sheet at March 31, 1998, and the Unaudited Pro
Forma Combined Condensed Consolidated Statements of Continuing Operations for
the three months ended March 31, 1998 and the year ended December 31, 1997, and
explanatory notes thereto, are presented to show the impact on Chiron's
historical financial position and results of continuing operations assuming the
Acquisition had occurred as of March 31, 1998 and January 1, 1997, respectively.
The aggregate purchase price in the accompanying unaudited pro forma
combined condensed consolidated financial statements has been estimated at
$113,069,000, which consists of cash paid to Hoechst AG of approximately
$111,889,000 and estimated direct transaction costs of $1,180,000. The pro
forma adjustments are based on preliminary estimates, which are derived from
available information and certain assumptions that Chiron's management believes
are reasonable in the circumstances. The aggregate estimated purchase price has
been allocated as follows: $49,960,000 to identifiable intangible assets;
$48,403,000 to tangible net assets acquired; $13,061,000 to goodwill; and
$1,645,000 to in-process research and development. In accordance with generally
accepted accounting principles, the amount allocated to in-process research and
development will be charged to expense in Chiron's second fiscal quarter of
1998. This adjustment has been excluded from the Unaudited Pro Forma Combined
Condensed Consolidated Statements of Continuing Operations as it is a
nonrecurring charge directly attributable to the Acquisition. Although
management believes that the fair values and allocation of the estimated
purchase price are reasonable estimates, final purchase accounting adjustments
may be made on the basis of ongoing evaluations thereof. As a result, the final
allocation of the purchase price may differ significantly from that presented
herein.
The Unaudited Pro Forma Combined Condensed Consolidated Statements of
Continuing Operations exclude any potential benefits and expenses that might
result from the acquisition due to synergies that may be derived and from the
elimination of any duplicate efforts. The unaudited pro forma combined
condensed consolidated financial statements do not purport to be indicative of
the results that actually would have occurred if the acquisition occurred on the
dates indicated or indicative of results which may be obtained in the future.
The unaudited pro forma combined condensed consolidated financial statements
should be read in conjunction with the historical financial statements, and
accompanying notes thereto, of Chiron and Chiron Behring.
4
<PAGE>
CHIRON CORPORATION AND CHIRON BEHRING GMBH & CO KG
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
March 31, 1998
-------------------------------
Chiron Chiron Behring Pro Forma Pro Forma
Corporation GmbH & Co KG Adjustments Combined
--------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 177,590 $ 57,119 $ (111,889) (a) $ 122,820
Short-term investments in marketable debt securities 149,469 - - 149,469
--------------- -------------- ------------- ------------
Total cash and short-term investments 327,059 57,119 (111,889) 272,289
Accounts receivable 295,532 26,688 - 322,220
Inventories 133,224 30,224 2,945 (b) 166,393
Assets held for sale 40,929 - - 40,929
Other current assets 67,099 562 - 67,661
--------------- -------------- ------------- ------------
Total current assets 863,843 114,593 (108,944) 869,492
Noncurrent investments in marketable debt securities 121,258 - - 121,258
Property, plant, equipment and leasehold improvements, at cost:
Land and buildings 183,394 - - 183,394
Laboratory, production and office equipment 374,661 12,963 - 387,624
Leasehold improvements 108,274 76 - 108,350
Construction in progress 57,925 1,998 - 59,923
--------------- -------------- ------------- ------------
724,254 15,037 - 739,291
Less accumulated depreciation and amortization (256,123) (5,150) - (261,273)
--------------- -------------- ------------- ------------
Net property, plant, equipment and leasehold improvements 468,131 9,887 - 478,018
Purchased technology, net 20,035 - - 20,035
Other intangible assets, net 38,649 259 49,960 (c) 173,620
13,061 (d)
71,691 (e)
Investments in equity securities and affiliated companies 175,642 - (117,157) (e) 58,485
Other assets 67,843 - - 67,843
--------------- -------------- ------------- ------------
$ 1,755,401 $ 124,739 $ (91,389) $ 1,788,751
--------------- -------------- ------------- ------------
--------------- -------------- ------------- ------------
Current liabilities:
Accounts payable $ 65,373 $ 12,309 $ - $ 77,682
Accrued compensation and related expenses 37,071 5,636 - 42,707
Short-term borrowings 40,014 - - 40,014
Current portion of unearned revenue 26,897 - - 26,897
Taxes payable 51,871 3,354 - 55,225
Other current liabilities 144,895 5,167 1,180 (f) 151,242
--------------- -------------- ------------- ------------
Total current liabilities 366,121 26,466 1,180 393,767
Long-term debt 400,072 - - 400,072
Other noncurrent liabilities 23,381 7,349 - 30,730
--------------- -------------- ------------- ------------
Total liabilities 789,574 33,815 1,180 824,569
--------------- -------------- ------------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock 1,771 - - 1,771
Additional paid-in capital 1,887,795 - - 1,887,795
Partners' equity - 90,924 (90,924) (g) -
Accumulated deficit (907,505) - (1,645) (h) (909,150)
Accumulated other comprehensive loss (15,625) - - (15,625)
Notes receivable from stock sales (609) - - (609)
--------------- -------------- ------------ ------------
Total stockholders' equity 965,827 90,924 (92,569) 964,182
--------------- -------------- ------------ ------------
$ 1,755,401 $ 124,739 $ (91,389) $ 1,788,751
--------------- -------------- ------------- ------------
--------------- -------------- ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
CHIRON CORPORATION AND CHIRON BEHRING GMBH & CO KG
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF CONTINUING OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
-------------------------------
Chiron Chiron Behring Pro Forma Pro Forma
Corporation GmbH & Co KG Adjustments Combined
--------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Product sales, net $ 204,472 $ 27,173 $ - $ 231,645
Equity in earnings of unconsolidated joint businesses 12,874 - (2,395) (i) 10,479
Collaborative agreement revenues 24,406 - - 24,406
Other revenues 27,153 9,183 - 36,336
--------------- --------------- ------------- ---------
Total revenues 268,905 36,356 (2,395) 302,866
--------------- --------------- ------------- ---------
EXPENSES:
Cost of sales 88,981 15,281 - 104,262
Research and development 90,846 4,309 - 95,155
Selling, general and administrative 73,678 9,908 2,354 (j) 85,940
Restructuring and reorganization charges 24,198 - - 24,198
Other operating expenses 632 - - 632
--------------- --------------- ------------- ---------
Total expenses 278,335 29,498 2,354 310,187
--------------- --------------- ------------- ---------
Income (loss) from operations (9,430) 6,858 (4,749) (7,321)
Interest expense (7,046) - - (7,046)
Other income (expense), net 8,435 595 (1,568) (k) 7,462
--------------- --------------- ------------- ---------
Income (loss) from continuing operations before income taxes (8,041) 7,453 (6,317) (6,905)
Provision (benefit) for income taxes 2,810 1,240 (1,215) (l) 2,835
--------------- --------------- ------------- ---------
Income (loss) from continuing operations $ (10,851) $ 6,213 $ (5,102) $ (9,740)
--------------- --------------- ------------- ---------
--------------- --------------- ------------- ---------
Basic earnings per share:
Loss from continuing operations $ (0.06) $ (0.06)
--------------- ---------
--------------- ---------
Number of shares used in calculating basic per share amounts 176,199 176,199
--------------- ---------
--------------- ---------
Diluted earnings per share:
Loss from continuing operations $ (0.06) $ (0.06)
--------------- ---------
--------------- ---------
Number of shares used in calculating diluted per share amounts 176,199 176,199
--------------- ---------
--------------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
6
<PAGE>
CHIRON CORPORATION AND CHIRON BEHRING GMBH & CO KG
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF CONTINUING OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
------------------------------
Chiron Chiron Behring Pro Forma Pro Forma
Corporation GmbH & Co KG Adjustments Combined
-------------- --------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
Product sales, net $ 839,341 $ 133,061 $ - $ 972,402
Equity in earnings of unconsolidated joint businesses 106,356 - (13,757) (i) 92,599
Collaborative agreement revenues 115,058 - - 115,058
Other revenues 101,303 40,393 - 141,696
-------------- --------------- ----------------- ---------
Total revenues 1,162,058 173,454 (13,757) 1,321,755
-------------- --------------- ----------------- ---------
EXPENSES:
Cost of sales 354,643 67,627 - 422,270
Research and development 375,955 18,321 - 394,276
Selling, general and administrative 316,822 47,303 9,719 (j) 373,844
Impairment loss on long-lived assets 31,300 - - 31,300
Restructuring and reorganization charges 3,336 - - 3,336
Other operating expenses 4,795 - - 4,795
-------------- --------------- ----------------- ---------
Total expenses 1,086,851 133,251 9,719 1,229,821
-------------- --------------- ----------------- ---------
Income (loss) from operations 75,207 40,203 (23,476) 91,934
Gain on sale of assets 18,597 - - 18,597
Interest expense (33,257) - - (33,257)
Other income (expense), net 16,348 1,244 (6,272) (k) 11,320
-------------- --------------- ----------------- ---------
Income (loss) from continuing operations before income taxes 76,895 41,447 (29,748) 88,594
Provision (benefit) for income taxes 26,057 5,917 (1,950) (l) 30,024
-------------- --------------- ----------------- ---------
Income (loss) from continuing operations $ 50,838 $ 35,530 $ (27,798) $ 58,570
-------------- --------------- ----------------- ---------
-------------- --------------- ----------------- ---------
Basic earnings per share:
Income from continuing operations $ 0.29 $ 0.34
-------------- ---------
-------------- ---------
Number of shares used in calculating basic per share amounts 173,524 173,524
-------------- ---------
-------------- ---------
Diluted earnings per share:
Income from continuing operations $ 0.29 $ 0.33
-------------- ---------
-------------- ---------
Number of shares used in calculating diluted per share amounts 177,988 177,988
-------------- ---------
-------------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
7
<PAGE>
CHIRON CORPORATION AND CHIRON BEHRING GMBH & CO KG
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Chiron Corporation (the "Company" or "Chiron") has a 52 or 53-week
fiscal year ending on the Sunday nearest the last day in December of each
year. As a result, the first quarter of 1998 represents the thirteen-week
period ended March 29, 1998. The 1997 fiscal year ended on December 28, 1997.
For presentation purposes, dates used in the unaudited pro forma combined
condensed consolidated financial statements refer to the fiscal month end.
The following adjustments and reclassifications have been applied to the
historical financial statements of Chiron and Chiron Behring GmbH & Co KG
("Chiron Behring") to arrive at the unaudited pro forma combined condensed
consolidated financial statements:
(a) Adjustment to reflect the cash payment to Hoechst AG in connection with
Chiron's purchase of Hoechst AG's 51 percent interest in Chiron Behring
(the "Acquisition").
(b) Adjustment to reflect the estimated fair value of inventory acquired in the
Acquisition.
(c) Adjustment to reflect the estimated fair value of identifiable intangible
assets acquired in the Acquisition.
(d) Adjustment to reflect goodwill originating in the Acquisition, calculated
as the residual of the estimated purchase price less the estimated fair
market value of the identifiable net assets acquired.
(e) Adjustment to reflect the elimination of Chiron's historical equity
investment in Chiron Behring, and the resulting reclassification of the net
identifiable intangible asset and goodwill balances related thereto of
$41,606,000 (net of accumulated amortization of $5,744,000) and $30,085,000
(net of accumulated amortization of $2,885,000), respectively.
(f) Adjustment to reflect the estimated direct transaction costs to be incurred
by Chiron in connection with the Acquisition.
(g) Adjustment to reflect the elimination of Chiron Behring's historical
partners' equity balance.
(h) Adjustment to reflect the write-off of the estimated fair market value of
acquired in-process research and development. This adjustment is excluded
from the Unaudited Pro Forma Combined Condensed Consolidated Statements of
Continuing Operations as it is a nonrecurring charge directly attributable
to the Acquisition.
(i) Adjustment to reflect the elimination of Chiron's historical equity in
earnings of Chiron Behring.
8
<PAGE>
CHIRON CORPORATION AND CHIRON BEHRING GMBH & CO KG
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(j) Adjustment to reflect the amortization of intangible assets acquired over
estimated useful lives ranging from 4 to 18 years.
(k) Adjustment to reflect a reduction in interest income earned as a result of
the $111,889,000 cash payment to Hoechst AG, assumed for purposes of the
Unaudited Pro Forma Combined Condensed Consolidated Statements of
Continuing Operations to have been made on January 1, 1997.
(l) Adjustment to reflect the net tax effect of the consolidation of Chiron
Behring, and of the pro forma adjustments to the Unaudited Pro Forma
Combined Condensed Consolidated Statements of Continuing Operations. This
net tax effect is comprised principally of (1) a tax benefit attributable
to the pro forma adjustment for reduction in interest income (see Note
(k)), calculated at the U.S. statutory rate in effect during the periods
presented; (2) increased German corporate taxes related to Chiron's 51
percent increase in ownership of Chiron Behring; and (3) a German tax
benefit attributable to the pro forma adjustment to reflect amortization
expense for acquired identifiable intangible assets and goodwill (see Note
(j)).
9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
13 Financial Statements of Chiron Behring GmbH & Co, Marburg
23 Consent of C&L Deutsche Revision, Independent Accountants
</TABLE>
10
<PAGE>
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 hereunto duly authorized.
CHIRON CORPORATION
Date: June 2, 1998 BY: /s/ WILLIAM G. GREEN
--------------- -----------------------------
William G. Green
Senior Vice President,
General Counsel and
Secretary
11
<PAGE>
EXHIBIT 13
Financial statements 1997
of
Chiron Behring GmbH & Co
Marburg
<PAGE>
BALANCE SHEET
<TABLE>
<CAPTION>
NOTE DEC 31, 97 DEC 31, 96
DM'000 DM'000
<S> <C> <C> <C>
ASSETS
Intangible fixed assets 607 1,206
Tangible fixed assets 16,645 15,948
----------- ----------
FIXED ASSETS (1) 17,252 17,154
Inventories (2) 49,603 38,221
Receivables and other assets
Trade receivables (3) 45,739 17,526
Other receivables and other assets (4) 99,863 49,628
----------- ----------
145,602 67,154
Checks, cash on hand and in Deutsche 1 0
Bundesbank, Postbank and other banks
Prepaid expenses and deferred charges 3 5
----------- ----------
CURRENT ASSETS 195,209 105,380
----------- ----------
212,461 122,534
----------- ----------
----------- ----------
PARTNERS' EQUITY AND LIABILITIES
Partners' equity
Limited partner capital 66,756 66,756
----------- ----------
66,756 66,756
Accruals
Accruals for pensions and similar (5) 10,391 8,089
obligations
Accruals other than for pensions (6) 15,640 7,696
----------- ----------
26,031 15,785
Accounts payable (7)
Financial debt 0 2
Trade payables 13,810 5,783
All other payables 105,864 34,208
including retained 1996 and 1997 profits
(KDM 19,333 and KDM 63,761 respectively)
----------- ----------
119,674 39,993
----------- ----------
212,461 122,534
----------- ----------
----------- ----------
</TABLE>
F-2
<PAGE>
STATEMENT OF INCOME
<TABLE>
<CAPTION>
NOTE 1997 JUL 1 TO
DM'000 DEC 31, 96
DM'000
<S> <C> <C> <C>
Sales (8) 301,855 147,808
Cost of sales -156,971 -93,809
----------- ----------
GROSS PROFIT ON SALES 144,884 53,999
Distribution expenses -21,558 -10,997
Research costs -32,156 -16,306
General administrative expenses -18,023 -6,808
Other operating income 756 2,187
Other operating expenses -277 -610
Net interest income (9) 2,355 501
of which received from affiliated
companies KDM 2,356
----------- ----------
PROFIT ON ORDINARY ACTIVITIES 75,981 21,966
Taxes (10) -12,220 -2,633
----------- ----------
NET INCOME 63,761 19,333
----------- ----------
----------- ----------
</TABLE>
F-3
<PAGE>
CHIRON BEHRING GMBH & CO, MARBURG
NOTES TO THE FINANCIAL STATEMENTS 1997
APPLICATION OF THE COMMERCIAL CODE
The Partnership's financial statements have been prepared in conformity with the
provisions of sections 264ff of the German Commercial Code applicable to large
corporations. Advantage has been taken of certain exemptions.
ACCOUNTING POLICIES
Certain items in the balance sheet and statement of income have been combined to
make the financial statements easier to read. Details are given in the notes.
Where special depreciation or a special write-down has been provided to write an
asset down to a lower value attributable to it at the balance sheet date, and
the reason for doing so has ceased to exist, such depreciation or write-down is
reversed only if no option to retain the lower value is available. This applies
both to fixed assets and current assets.
Purchased intangible assets are recorded at cost and amortized systematically by
the straight-line method. The amortization period varies between three and five
years.
Tangible fixed assets are recorded at cost. Assets of limited useful life are
depreciated over their expected economic useful life. A remaining useful life of
three years is assumed for tangible fixed assets that were already fully
depreciated, or had a remaining useful life of less than three years, at Hoechst
AG.
F-4
<PAGE>
Purchased additions to tangible fixed assets are normally depreciated by the
declining-balance method. The declining-balance method is used until the
straight-line method produces higher depreciation charges. The purchase or
manufacturing cost of low value fixed assets costing not more than DM 800 each
excluding VAT is written off completely in the year of acquisition and included
under disposals.
Inventories are stated at average purchase or manufacturing cost. Where
replacement or reproduction cost or net realizable values arrived at from
selling prices are lower than such average purchase or manufacturing cost,
inventories are written down to the lowest of these values. Manufacturing cost
includes direct costs, reasonable parts of materials and production overhead and
straight-line depreciation. Interest on borrowings is not included in inventory
valuation. Reproduction cost is arrived at assuming normal levels of facility
utilization. Net realizable values reflect foreseeable losses. Reasonable
valuation allowances are set up to reflect diminutions in value not identifiable
individually.
Trade and other receivables are stated at nominal or face amount less allowances
for specific doubtful accounts and general allowances for credit risks.
Receivables from affiliated companies arising from the supply of goods and
services are included under trade receivables.
Accruals are set up in amounts dictated by prudent business judgment.
Accounts payable are stated at the amounts actually payable.
F-5
<PAGE>
Receivables and payables denominated in a foreign currency are translated at
historical buying or selling rates, respectively. Where the corresponding rates
in operation at the balance sheet date are lower (receivables) or higher
(payables), these rates are used. Receivables and payables are shown without
netting, in contrast to the previous year.
NOTES TO THE BALANCE SHEET AND STATEMENT OF INCOME
The balance sheet and statement of income figures are not fully comparable with
those of the prior year, because 1996 was a short fiscal year.
F-6
<PAGE>
(1) MOVEMENTS IN FIXED ASSETS
<TABLE>
<CAPTION>
PURCHASING OR MANUFACTURING COST
----------------------------------------------
JAN 1, 97 ADDITIONS DISPOSALS DEC 31, 97
DM'000 DM'000 DM'000 DM'000
<S> <C> <C> <C> <C>
INTANGIBLE FIXED ASSETS
Concessions, industrial and similar rights
and assets and licenses in such rights and assets 394 331 115 610
Advance payments 918 0 612 306
----------------------------------------------
1,312 331 727 916
----------------------------------------------
TANGIBLE FIXED ASSETS
Buildings 0 139 0 139
Technical equipment and machinery 10,422 109 46 10,485
Other equipment, factory and office equipment 8,881 4,324 765 12,440
Advance payments and construction in progress 0 2,329 0 2,329
----------------------------------------------
19,303 6,901 811 25,393
----------------------------------------------
20,615 7,232 1,538 26,309
<CAPTION>
AMORTIZATION AND DEPRECIATION
---------------------------------------------- BALANCE BALANCE
JAN 1, 97 ADDITIONS DISPOSALS DEC 31, 97 SHEET SHEET
DEC 31, 97 DEC 31, 96
DM'000 DM'000 DM'000 DM'000 DM'000 DM'000
<S> <C> <C> <C> <C> <C> <C>
INTANGIBLE FIXED ASSETS
Concessions, industrial and similar rights
and assets and licenses in such rights and assets 106 318 115 309 301 288
Advance payments 0 0 0 0 306 918
---------------------------------------------- ----------------------
106 318 115 309 607 1,206
---------------------------------------------- ----------------------
TANGIBLE FIXED ASSETS
Buildings 0 7 0 7 132 0
Technical equipment and machinery 1,672 2,297 13 3,956 6,529 8,750
Other equipment, factory and office equipment 1,683 3,830 728 4,785 7,655 7,198
Advance payments and construction in progress 0 0 0 0 2,329 0
---------------------------------------------- ----------------------
3,355 6,134 741 8,748 16,645 15,948
---------------------------------------------- ----------------------
3,461 6,452 856 9,057 17,252 17,154
</TABLE>
F-7
<PAGE>
(2) INVENTORIES (DM'000)
<TABLE>
<CAPTION>
DEC 31, 97 DEC 31, 96
---------- ----------
<S> <C> <C>
Raw materials, auxiliary materials and 3,693 11,032
consumables
Work in progress 32,451 15,068
Products and merchandise 13,459 12,121
------ ------
TOTAL 49,603 38,221
</TABLE>
The prior year figures have been restated, because inventories of licensed
products previously included under merchandise are now (1997) included
under raw materials, auxiliary materials and consumables (if unprocessed),
work in progress (if partly processed) or products and merchandise (if
ready for sale).
(3) TRADE RECEIVABLES (DM'000)
<TABLE>
<CAPTION>
DEC 31, 97 DEC 31, 96
---------- ----------
<S> <C> <C>
Receivable from customers 25,867 12,485
Receivable from affiliated companies 19,872 5,041
------ -----
TOTAL 45,739 17,526
</TABLE>
(4) OTHER RECEIVABLES AND OTHER ASSETS (DM'000)
<TABLE>
<CAPTION>
DEC 31, 97 DEC 31, 96
---------- ----------
<S> <C> <C>
Other receivables from affiliated 98,727 44,664
companies
Other assets 1,136 4,964
----- -----
TOTAL 99,863 49,628
</TABLE>
The receivables and other assets mature in less than one year.
F-8
<PAGE>
(5) ACCRUALS FOR PENSIONS AND SIMILAR OBLIGATIONS
Accruals for pensions and similar obligations are set up for pension
entitlements and current pensions. The amounts of the accruals are arrived
at by the "Teilwert" method described in section 6a of the German Income
Tax Law (roughly equivalent to the "entry-age normal" method) using
actuarial methods and applying the discount rate of 6% required by that
statute. Valuation of the obligations is based on the "PK-Chemie 1996 R"
mortality tables. The increase in pension accruals is due principally to
the substitution of these tables for the mortality tables used the year
before (those of Dr. Klaus Heubeck).
(6) ACCRUALS OTHER THAN FOR PENSIONS (DM'000)
<TABLE>
<CAPTION>
DEC 31, 97 DEC 31, 96
---------- ----------
<S> <C> <C>
Taxes 1,359 261
Risks associated with uncompleted
transactions 3,168 1,500
Employee-related obligations 1,705 1,089
Uncertain liabilities 9,408 4,846
----- -----
TOTAL 15,640 7,696
</TABLE>
F-9
<PAGE>
(7) ACCOUNTS PAYABLE (DM'000)
<TABLE>
<CAPTION>
FINANCIAL DEBT TRADE PAYABLES ALL OTHER
PAYABLES
DEC 31, 97 DEC 31, 96 DEC 31, 97 DEC 31, 96 DEC 31, 97 DEC 31, 96
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Amounts owed to banks 0 2 0 0 0 0
Trade payables 0 0 13,810 5,783 0 0
Amounts owed to partners 0 0 0 0 83,116 24,831
Amounts owed to affiliated 0 0 0 0 6,117 99
companies
Other payables 0 0 0 0 16,631 9,278
-- -- ------ ------ ------ -----
TOTAL 0 2 13,810 5,783 105,864 34,208
-- -- ------ ------ ------ -----
-- -- ------ ------ ------ -----
</TABLE>
The payables all mature in less than one year from the balance sheet date.
Other payables include KDM 448 relating to social security and KDM 5,063
relating to taxes.
Amounts owed to partners include the retained net income of KDM 63,761
attributable to the two partners.
(8) SALES
In the short fiscal year 1996, KDM 1,106 of the sales revenue was generated
during the period April 1 through June 30, 1996. The Partnership did not
commence operations until July 1, 1996, because of outstanding approvals;
Behringwerke AG therefore used the facility from April 1 through June 30,
1996, under an operating lease. The rentals were included under sales.
F-10
<PAGE>
<TABLE>
<CAPTION>
1997 JUL 1 TO DEC 31, 96
---- -------------------
DM'000 % DM'000 %
------ - ------ -
<S> <C> <C> <C> <C>
a) BY ACTIVITY
Vaccines (products and merchandise) 231,945 77 114,758 78
Other 69,910 23 33,050 22
------- -------
TOTAL 301,855 100 147,808 100
b) BY REGION
Germany 244,502 81 114,140 77
Other countries 57,353 19 33,668 23
------- -------
TOTAL 301,855 100 147,808 100
</TABLE>
"Other" includes revenue from services and commission income on commission
business.
F-11
<PAGE>
(9) NET INTEREST INCOME
<TABLE>
<CAPTION>
1997 JUL 1 TO
---- --------
DEC 31, 96
----------
DM'000 DM'000
------ ------
<S> <C> <C>
Other interest and similar income 2,372 541
of which received from affiliated companies 2,372 541
Interest and similar expense -17 -40
of which paid to affiliated companies -16 -40
----- ---
TOTAL 2,355 501
</TABLE>
(10) TAXES
<TABLE>
<CAPTION>
1997 JUL 1 TO
---- --------
DEC 31, 96
----------
DM'000 DM'000
------ ------
<S> <C> <C>
Municipal trade tax on income 9,982 2,372
Addition to general accrual for tax risks 1,098 261
Municipal trade tax on capital 1,139 0
Motor vehicle tax 1 0
------ -----
TOTAL 12,220 2,633
</TABLE>
OTHER PARTICULARS
(11) COST OF MATERIALS
<TABLE>
<CAPTION>
1997 JUL 1 TO
---- --------
DEC 31, 96
----------
DM'000 DM'000
------ ------
<S> <C> <C>
Cost of raw materials, auxiliary 48,307 20,990
materials, consumables and merchandise
Cost of purchased services 41,205 18,083
------ ------
TOTAL 89,512 39,073
</TABLE>
Cost of purchased services includes energy and contract processing.
F-12
<PAGE>
(12) PERSONNEL EXPENSES
<TABLE>
<CAPTION>
1997 JUL 1 TO
---- --------
DEC 31, 96
----------
DM'000 DM'000
------ ------
<S> <C> <C>
Wages and salaries 56,026 21,905
Social security, pension and other 12,008 4,108
benefits
of which for pensions (2,780) (648)
------ ------
TOTAL 68,034 26,013
</TABLE>
EMPLOYEES, ANNUAL AVERAGES
<TABLE>
<CAPTION>
1997 JUL 1 TO
---- --------
DEC 31, 96
----------
<S> <C> <C>
Production and auxiliary plant 193 187
Distribution 188 179
Research 102 93
Administration, other activities 40 2
--- ---
TOTAL 523 461
</TABLE>
In 1997, the administrative work was done by the Partnership's own newly
established administrative function, as planned.
OTHER FINANCIAL COMMITMENTS
The Partnership operates in buildings belonging to InfraServ GmbH & Co.
Marburg KG, which it has taken on long-term lease. Annual rentals amount to
DM 13.97 million (rounded).
(13) EMOLUMENTS OF THE GENERAL MANAGER
The Partnership chose not to disclose this information, as permitted by
section 286(4) of the Commercial Code.
F-13
<PAGE>
(14) SIGNIFICANT DIFFERENCES BETWEEN GERMAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The Financial Statements of Chiron Behring GmbH & Co ("Chiron Behring") for
the year ended December 31, 1997 comply with German GAAP, which differs in
certain significant respects from U.S. GAAP. Since under German tax law a
company's financial statements prepared under commercial law (HGB) are also
the basis of its tax balance sheet, tax considerations influence their
preparation.
The significant differences with respect to the Financial Statements of
Chiron Behring for the year ended December 31, 1997 are set out below:
TANGIBLE FIXED ASSETS
Chiron Behring depreciates tangible fixed assets partly based upon higher
depreciation rates permitted by German tax law. Under U.S. GAAP, tangible
assets are generally depreciated on a straight-line basis through the
income statement over their estimated useful life.
INVENTORIES
Inventory valuation methods according to German GAAP generally tend to be
more conservative than under U.S. GAAP. Manufacturing cost under German
GAAP includes at least all direct costs. The capitalization of appropriate
portions of indirect costs is optional, while manufacturing cost under U.S.
GAAP includes all direct and indirect costs related to the production of an
asset.
F-14
<PAGE>
TRADE RECEIVABLES
The calculation of the allowance for doubtful accounts is more restrictive
under U.S. GAAP than under German GAAP as German GAAP permits the recording
of a general allowance in addition to an allowance for specific risks.
ACCRUALS FOR PENSIONS AND SIMILAR OBLIGATIONS
Chiron Behring provides for pension costs and similar obligations,
including postretirement benefits, based upon actuarial valuations using
the entry age method as defined in the German tax code (Section 6a EStG).
U.S. GAAP is more prescriptive particularly as to the use of actuarial
assumptions and requires a different actuarial method (the projected unit
credit method) be used. Under U.S. GAAP, pension costs and similar
obligations are accounted for in accordance with SFAS No. 87, "Employers'
Accounting for Pensions", while postretirement benefits are accounted for
in accordance with SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions".
ACCRUALS OTHER THAN FOR PENSIONS
German GAAP permits the recognition of accruals or provisions for uncertain
liabilities and loss contingencies. The amount of such accruals or
provisions represents the anticipated expenses of the company. Under U.S.
GAAP, an accrual for a loss contingency is recorded by a charge to income
if it is both probable that an asset has been impaired or a liability has
been incurred and the amount of the loss can be reasonably estimated. Less
precisely determinable reserves for future losses, costs or risks do not
meet the criteria for accrual under U.S. GAAP, but do for German GAAP.
As required by German GAAP, accruals must be set up for necessary repairs
and maintenance expense incurred not in the financial year but within the
first three months of the following year. Under U.S. GAAP, these costs are
recognized in the periods incurred.
DEFERRED TAXES
Under German GAAP, deferred tax assets and liabilities are not generally
recognized for all differences between the book carrying values and tax
bases of the assets and liabilities. Deferred taxes are not provided for
differences that are not expected to reverse in the foreseeable future.
Furthermore, deferred tax liabilities are required to be recorded, while
recording deferred tax assets is optional.
Under U.S. GAAP, with some exceptions deferred tax assets and liabilities
are recognized for all temporary differences between the book carrying
values and tax bases of the assets and liabilities using the enacted tax
rate for the periods in which the temporary differences are expected to
reverse. In addition, a valuation allowance is established when it is more
likely than not deferred tax assets will not be realized.
F-15
<PAGE>
STATEMENT OF INCOME
Reclassifications with the Statement of income are made between German and
U.S. GAAP affecting amounts reported under cost of sales and distribution
expenses.
IMMATERIAL OTHER DIFFERENCES
There are other differences between German and U.S. GAAP that are not
material to the 1997 financial statements of Chiron Behring.
F-16
<PAGE>
ADVISORY BOARD
Prof. Dr. Dr. Uwe Bicker, Chairman
Dr. Bernd Neuefeind (until July 24, 1997)
Dr. William J. Rutter
Magnus Lundberg
MANAGEMENT
General Manager of the Partnership is the General Manager (Chief Executive
Officer) of the general partner. The sole General Manager of Chiron Behring GmbH
Verwaltungsgesellschaft is
- - Heinz von Prondzynski
who is entered as such in the Commercial Register.
The Partnership is included in the consolidated financial statements prepared by
Hoechst Aktiengesellschaft, Frankfurt/Main. The consolidated financial
statements are filed with the Frankfurt/Main Commercial Register.
Marburg, January 26, 1998
Chiron Behring GmbH & Co
Heinz von Prondzynski
F-17
<PAGE>
AUDIT OPINION
We have audited the accompanying financial statements of Chiron Behring GmbH
& Co (Chiron Behring) as of and for the period ended December 31, 1997.
These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Germany which, as applied by us, are substantially the same as
those followed in the United States. 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
audit provides a reasonable basis for our opinion.
We have expressed the following unqualified opinion on the 1997 German
financial statements of Chiron Behring:
"The accounting and the annual financial statements, which we have audited in
accordance with professional standards, comply with the German legal
provisions and the supplementary provisions of the Partnership Agreement, the
Purchase and Assignment Agreement between 31. Corsa Verwaltungsgesellschaft
mbH and Hoechst AG (as successor to Behringwerke AG), the Contribution
Agreement between Hoechst AG and Chiron Behring GmbH & Co and other
agreements supplementing those agreements. With due regard to the generally
accepted accounting principles the annual financial statements give a true
and fair view of the assets, liabilities, financial position and profit of
Chiron Behring GmbH & Co."
The Chiron Behring GmbH & Co 1997 Financial Statements comply with Generally
Accepted Accounting Principles in Germany (German GAAP). German GAAP differs
in certain significant respects from Generally Accepted Accounting Principles
in the United States of America (U.S. GAAP). Such differences include those
qualitatively described in footnote 14 which does not form a part of the
company's 1997 German GAAP Financial Statements but rather is provided to
satisfy the requirements of the United States Securities and Exchange
Commission (SEC).
Frankfurt am Main, January 26, 1998
except for Note 14, which is dated May 27, 1998
C&L DEUTSCHE REVISION
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
F-18
<PAGE>
EXHIBIT 23
CONSENT OF C&L DEUTSCHE REVISION, INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Chiron Corporation (File Nos. 333-49229, 33-20181, 33-35182, 2-90595,
33-23899, 33-58305, 33-44477, 33-65024, 33-65177, 333-10419, 333-28257,
333-42469, 33-45822 and 33-63297 on Form S-8 and File No. 33-43574 on Form
S-3) of our report on our audit of the German GAAP Financial Statements of
Chiron Behring GmbH & Co as of December 31, 1997 dated January 26, 1998
except for Note 14, dated May 27, 1998 which report is included in this Form
8-K.
Frankfurt am Main, June 3, 1998
C&L DEUTSCHE REVISION
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
