<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(C) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 28, 1997
GENSIA SICOR INC.
(Exact name of registrant as specified in its charter)
Commission file number 0-18549
DELAWARE 33-0176647
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
9360 TOWNE CENTRE DRIVE, SAN DIEGO, CA 92121
(Address of principal executive offices)
(Zip Code)
(619) 546-8300
(Registrant's telephone number, including area code)
<PAGE>
GENSIA SICOR INC.
FORM 8-K/A
CURRENT REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 7. Financial Statements and Exhibits 3
(a) Financial Statements of Businesses Acquired 3
(b) Pro Forma Financial Information 24
Signature 29
Exhibit Index 30
</TABLE>
-2-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
RAKEPOLL HOLDING B.V. CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995 AND FOR
THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Consolidated balance sheets
- --------------------------------------------------------------------------------
Notes December 31
-----------
1996 1995
- --------------------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash 2,578 2,604
Trade accounts receivable, net 3 19,999 19,064
Receivable from related party 17 5,155 -
Other receivables 4,651 2,501
Inventories 4 29,482 18,553
Prepaid expenses and other
current assets 3,057 638
Deferred income taxes 1,612 -
----------------
Total current assets 66,534 43,360
Property, plant and
equipment, net 5 34,655 28,773
Other assets, net 6 2,517 2,874
Deferred income taxes 7 1,032 2,015
----------------
Total assets 104,738 77,022
----------------
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<>
<PAGE>
Consolidated balance sheets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Notes December 31
-----------
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands of United States dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 8 18,428 14,971
Current portion of long-term debt:
Third party 10 6,303 1,137
Affiliate 10 - 2,978
Trade accounts payable 27,307 23,275
Payable to related party 17 1,963 -
Payable to affiliates - 464
Income taxes payable 7 3,260 281
Other current liabilities 9 4,460 3,330
Deferred income taxes 7 2,583 953
-----------------
Total current liabilities 64,304 47,389
Long-term debt, net of current portion:
Third party 10 12,448 12,257
Affiliate 10 18,928 7,719
Severance indemnities 11 1,804 1,742
Other long-term liabilities 12 3,325 2,839
-----------------
Total liabilities 100,809 71,946
Shareholders' equity: 13
Common stock 22 3,201
Additional paid-in capital 7,171 7,182
Retained earnings (223) (3,849)
Cumulative translation
adjustments (3,041) (1,458)
------------------
3,929 5,076
-----------------
Total liabilities and
shareholders' equity 104,738 77,022
-----------------
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
Consolidated statements of operations
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Notes December 31
-----------
1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(in thousands of United States dollars)
Net Sales 17 64,446 60,736 50,516
Net sales to related party 17 13,992 - -
Cost of sales (50,115) (46,198) (35,808)
----------------------------------
Gross margin 28,323 14,538 14,708
Operating expenses:
Selling, general and administrative 12,317 8,761 7,809
Research and development 18 4,875 3,132 1,677
Unusual item:
Provision for contamination
settlement 19 1,621 2,701 -
----------------------------------
Total operating expenses 18,813 14,594 9,486
----------------------------------
Operating income (loss) 9,510 (56) 5,222
Interest expense 14 (3,729) (3,084) (1,456)
Interest income 743 308 111
Foreign exchange gains
(losses), net 16 951 (1,592) (2,958)
Other income, net 15 154 162 346
----------------------------------
Income (loss) before income
taxes and minority interest 7,629 (4,262) 1,265
Income tax benefit (expense) 7 (4,002) 1,727 (1,960)
----------------------------------
Net income (loss) before
minority interest 3,627 (2,535) (695)
Minority interest - 150 -
----------------------------------
Net income (loss) 3,627 (2,385) (695)
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
Consolidated statements of shareholders' equity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Common Stock
-------------------------------------------------------------------------------
Rakepoll Lemery Lemery Immobiliaria Sintesis, Total
Holding S.A. de Desarrollo y Lemery Lerma
B.V. C.V. Control, S.A. S.A. de S.A. de
de C.V. C.V. C.V.
- ------------------------------------------------------------------------------------------------------------
(in thousands of United
States dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 22 1,523 80 120 - 1,745
Net income - - - - - -
Acquisition of indirect
controlling interest in
Lerma - - - - 292 292
Capital increase - - - -
Foreign exchange
translation adjustments - - - - - -
-------------------------------------------------------------------------------
Balance at December 31,
1994 22 1,523 80 120 292 2,037
Net income - - - - -
Capital increase - 940 - - 224 1,164
Foreign exchange
translation adjustments - - - - - -
-------------------------------------------------------------------------------
Balance at December 31,
1995 22 2,463 80 120 516 3,201
Net income - - - - - -
Capital increase - 1,718 - - 232 1,950
Acquisition of direct
interest in Lemery and - (4,181) (80) (120) (748) (5,129)
Lerma
Foreign exchange
translation adjustments - - - - - -
-------------------------------------------------------------------------------
Balance at December 31,
1996 22 - - - - 22
============================================================================================================
- -------------------------------------------------------------------------------------------------------------------
Additional paid-in-capital
-------------------------------------------- Cumulative Total
Rakepoll Lemery Sintesis, Total Retained translation shareholder's
Holding S.A. de Lerma Earnings adjustment equity
B.V. C.V. S.A. de
C.V.
- -------------------------------------------------------------------------------------------------------------------
(in thousands of United
States dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 7,171 11 - 7,182 (590) (1,767) 6,570
Net income - - - - (695) - (695)
Acquisition of indirect
controlling interest in
Lerma - - - - (179) - 113
Capital increase - - 120 120 - - 120
Foreign exchange
translation adjustments - - - - - 219 219
--------------------------------------------------------------------------------------
Balance at December 31,
1994 7,171 11 120 7,302 (1,464) (1,548) 6,327
Net income - - - - (2,385) - (2,385)
Capital increase - - (120) (120) - - 1,044
Foreign exchange
translation adjustments - - - - - 90 90
--------------------------------------------------------------------------------------
Balance at December 31,
1995 7,171 11 - 7,182 (3,849) (1,458) 5,076
Net income - - - - 3,627 - 3,627
Capital increase - - - - - - 1,950
Acquisition of direct
interest in Lemery and - (11) - (11) - (1,804) (6,944)
Lerma
Foreign exchange
translation adjustments - - - - - 220 220
--------------------------------------------------------------------------------------
Balance at December 31,
1996 7,171 - - 7,171 (222) (3,042) 3,929
===================================================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
-6-
<PAGE>
Consolidated statements of cash flows
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
December 31
-----------
1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands of United States dollars)
Cash flows from operating activities:
Net income (loss) 3,627 (2,385) (695)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 4,816 4,000 2,866
Provision for contamination settlement 1,621 2,781 -
Deferred taxes 1,144 (2,431) 750
Changes in assets and liabilities,
net of effect of acquisitions:
Increase in receivables (6,320) (6,483) (3,709)
Increase in inventories (10,538) (5,486) (4,911)
(Increase) decrease in prepaid expenses
and other current assets (2,450) (336) (724)
Increase in accounts payable 4,048 6,514 4,470
Increase (decrease) in affiliates payable 989 496 (309)
(Decrease) increase in income taxes payable 2,827 (823) 1,023
Increase (decrease) in other current liabilities 1,225 830 190
Net change in other non current assets 490 (1,736) (595)
Net change in other long term liabilities (1,238) - (468)
----------------------------
Net cash provided by (used in)
operating activities 241 (5,059) (2,112)
----------------------------
Cash flows from investing activities: ----------------------------
Capital expenditures (9,521) (9,112) (7,438)
Payment for acquired business - (312) -
----------------------------
Net cash used in investing activities (9,521) (9,424) (7,438)
----------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 5,308 10,653 8,705
Repayments of long-term debt (881) (675) (746)
Change in short term borrowings 2,912 4,386 1,405
Proceeds from issuance of common stock 1,951 1,392 120
----------------------------
Net cash provided by (used in)
financing activities 9,291 15,756 9,484
----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
Consolidated statements of cash flows
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
December 31
-----------
1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands of United States dollars)
Effect of exchange rate changes on cash (36) (171) 160
(Decrease) increase in cash (26) 1,102 94
Cash at beginning of year 2,604 1,502 1,408
------------------------
Cash at end of year 2,578 2,604 1,502
------------------------
Supplemental cash flow information:
Cash paid during the year for:
Interest 2,529 2,658 1,477
------------------------
Income taxes, net of refunds 43 1,026 62
------------------------
Acquisition of assets under capital leases 343 - -
------------------------
Acquisition of businesses:
Fair value of assets acquired - 2,048 -
Liabilities assumed - (1,736) -
------------------------
Cash paid - 312 -
------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE>
Notes to consolidated financial statements
1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
Rakepoll Holding B.V. (Rakepoll) is owned 97.5% by Rakepoll Finance N.V. and
2.5% by O.B. Norden Holding N.V. Rakepoll owns 99.65% of SICOR Societa Italiana
Corticosteriodi S.p.A. (SICOR). SICOR, established in 1983 in Rho, Italy is a
major Italian producer of bulk "active ingredients" which are sold to large and
medium size pharmaceutical companies throughout the world. During January 1995,
SICOR acquired 70% of Zanoni Pharmaceuticals S.p.A. (Zanoni), a manufacturer of
anti-tumor drugs. Proforma disclosures required under APB No. 16 have not been
presented as the results of operations for Zanoni have been included in the
consolidated statement of operations since January 1995. The disclosures for the
preceding period have been omitted as the amounts were not significant. In June
1996, SICOR acquired the remaining 30% of Zanoni. The transaction generated an
excess cost of approximately $234,000 allocated to property, plant and
equipment.
During 1995, the majority shareholder of Rakepoll indirectly owned 80% of
Sintesis, Lerma S.A. de C.V. (Lerma) located in Mexico. The remaining 20% was
owned by two individuals closely related to the Company. Lerma was acquired in
1994 and currently manufactures pharmaceutical and chemical products for export
to SICOR. The net assets of Lerma at the date of acquisition were not
significant. As of September 26, 1996, Rakepoll acquired direct ownership of
99.9% of Lerma.
Since 1989, the majority shareholder of Rakepoll indirectly controlled 51% of
Lemery, S.A. de C.V. (Lemery), Lemery Desarrollo y Control, S.A. de C.V.
(Ledeco) and Immobiliaria Lemery S.A. de C.V. (Immobiliaria). The remaining
interest in these companies (the Lemery group) was controlled by the same
individuals owning the minority interest in Lerma. These companies are all
located in Mexico. Lemery is the operating company and Ledeco and Immobiliaria
provide certain administrative services to Lemery. As of October 1, 1996,
Rakepoll acquired direct ownership of 99.9% of the Lemery group.
As it was determined that the aforementioned companies were under common control
by the majority shareholder of Rakepoll, the accompanying financial statements
with respect to years prior to 1996 have been prepared by combining the
consolidated financial statements of Rakepoll with the financial statements of
Lerma and the combined financial statements of the Lemery group. Following the
acquisition of the direct interests in Lerma and the Lemery group, the financial
statements have been prepared on a consolidated basis in 1996. The net assets
of Lerma and the Lemery group have been included in the consolidated financial
statements at historical values considering the existence of common control of
these entities.
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The consolidated
entities are hereafter referred to as "the Company".
The preparation of financial statements in conformity with generally accepted
accounting principles inherently requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
B. PRINCIPLES OF CONSOLIDATION AND COMBINATION
The consolidated financial statements of Rakepoll include the accounts of SICOR,
Lerma and the Lemery group. All significant intercompany transactions and
balances between the entities have been eliminated. Unrealized intercompany
profits in inventories have been eliminated and cost of sales have been adjusted
for the effects of such eliminations.
-9-
<PAGE>
C. FOREIGN CURRENCIES
Monetary assets and liabilities denominated in currencies other than functional
currencies are translated to functional currencies at rates of exchange
prevailing on the balance sheet date. Exchange gains and losses are recorded in
operating results in the period in which they arise.
The consolidated financial statements have been prepared in United States
dollars. Assets and liabilities of non-U.S. dollar companies are converted to
U.S. dollars at rates of exchange prevailing on the balance sheet date. Income
and expense items of such companies are translated at the average exchange rates
for the year. The resulting translation differences are included in the
cumulative translation adjustment, a separate component of shareholders' equity.
The functional currency of SICOR is the Italian lire. The functional currency
of Lerma is the U.S. dollar. The functional currency of Lemery has been the
Mexican peso. In accordance with SFAS 52, the net assets of Lemery will be
remeasured to the U.S. dollar during the first quarter of 1997 as a result of a
hyper-inflationary economy in Mexico.
D. FINANCIAL INSTRUMENTS
Off-balance sheet financial instruments such as foreign currency forward
contracts are valued at market prices with the resulting gains and losses
recognized in the statement of operations as foreign currency exchange results.
The Company does not hold or issue financial instruments for trading purposes.
The Company values financial instruments as required by FAS No. 107, Disclosures
about Fair Value of Financial Instruments, The carrying amounts of cash,
accounts receivable, short-term debt and long-term, variable-rate debt
approximate fair value. The Company estimates that the carrying value of long-
term fixed rate debt approximates fair value based on the Company's estimated
current borrowing rates for debt with similar maturities.
E. RECEIVABLES
Receivables are stated at cost, less a provision for doubtful accounts.
F. INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined on the
last-in first-out (LIFO) basis for the Company's Italian subsidiaries. Cost is
determined on a first-in first out (FIFO) basis for inventories of Lerma and the
Lemery group.
G. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are valued at historical cost less straight-line
depreciation based on the estimated useful lives of the assets. All expenditures
for additions and improvements that extend the life of the assets are
capitalized.
The applicable rates of depreciation are as follows:
Buildings and building improvements 5%
Machinery and equipment 9% to 17.5%
Office furniture and equipment 10% to 30%
Motor vehicles 20% to 25%
Normal maintenance and repair costs for property, plant and equipment are
charged to expense as incurred.
H. RESEARCH AND DEVELOPMENT EXPENSE
Expenditures relating to the development of new products and processes,
including significant improvements and refinement to existing products are
expensed as incurred.
-10-
<PAGE>
I. INCOME TAXES
The provision for income taxes is computed on the pretax income (loss) of the
entities included in the consolidated financial statements based on the tax law
currently applicable in each taxing jurisdiction. Deferred taxes result from the
future tax consequences associated with temporary differences between the
amounts of assets and liabilities recorded for financial reporting purposes and
those measured under applicable tax laws.
J. IMPAIRMENT OF LONG-LIVED ASSETS
The Company routinely assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets can be recovered through
undiscounted future operating cash flows before interest. If impairment is
indicated, the Company will measure the amount of such impairment by comparing
the carrying value of the asset to the present value of the expected future cash
flows associated with the use of the asset.
K. CONCENTRATIONS OF CREDIT RISK
Lemery's three largest customers are governmental agencies in Mexico and account
for approximately 65% of Lemery's total revenues. Trade receivables related to
the customers in Mexico as of December 31, 1996 and 1995 were $ 20,482,000 and $
1,069,000, respectively.
2 GEOGRAPHIC SEGMENT INFORMATION
Selected geographic information is summarized as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Year ended December 31
----------------------
1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands of United States dollars)
NET SALES (BY ORIGIN)
Italy 59,016 46,603 34,425
Mexico 19,422 14,133 16,091
------------------------
Total 78,438 60,736 50,516
- ----------------------------------------------------------------------
Year ended December 31
----------------------
1996 1995 1994
- ---------------------------------------------------------------------
(in thousands of United States dollars)
OPERATING (LOSS) INCOME
Italy 7,854 (1,394) 2,845
Mexico 1,656 1,338 2,377
-------------------------
Total 9,510 (56) 5,222
-------------------------
IDENTIFIABLE ASSETS
Italy 81,503 64,417 44,054
Mexico 23,235 12,605 11,025
-------------------------
Total 104,738 77,022 55,079
- ----------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
3 ACCOUNTS RECEIVABLE
The trade accounts receivable are reported net of an allowance for doubtful
accounts of $ 848,000 and $ 592,000 at December 31, 1996 and 1995, respectively.
Approximately $ 14,646,000 and $ 12,110,000 of trade accounts receivable at
December 31, 1996 and 1995, respectively, are pledged as security for short-term
borrowings (see note 8).
4 INVENTORIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
December 31
-------------
1996 1995
- -----------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
Raw materials 8,317 4,713
Work in process 8,303 4,156
Finished goods 12,382 9,359
Packaging and supplies 480 325
---------------
29,482 18,553
- -----------------------------------------------------------------
</TABLE>
The excess of current cost over the value of inventories based upon the LIFO
method was $ 835,000 and $ 912,000 at December 31, 1996 and 1995, respectively.
5 PROPERTY, PLANT AND EQUIPMENT
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
-------------------
1996 1995
- ----------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
Land and land improvements 1,006 843
Buildings and building improvements 10,075 8,376
Machinery and equipment 43,870 35,455
Office furniture and equipment 1,511 1,022
Motor vehicles 752 701
Construction in progress 757 275
-------------------
57,971 46,672
Less accumulated depreciation (23,316) (17,899)
-------------------
Property, plant and equipment, net 34,655 28,773
- ----------------------------------------------------------------
</TABLE>
Depreciation expense was $ 4,821,000, $ 3,788,000 and $ 2,865,000 for the years
ended December 31, 1996, 1995 and 1994, respectively and is principally recorded
to cost of sales in the consolidated statement of operations. For the years
ended December 31, 1996, 1995 and 1994, depreciation expense includes $ 150,000,
$ 112,000 and $ 37,000 related to the amortization of capital leases.
Capital leases relate to a manufacturing facility, certain machinery and
equipment and automobiles. Capital lease property included in property, plant
and equipment is as follows:
-12-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
December 31
------------
1996 1995
- ---------------------------------------------------------
<S> <C> <C>
(in thousands of United States dollars)
Building 229 221
Machinery and equipment 299 -
Motor vehicles 423 387
------------
951 608
Accumulated amortization (301) (151)
------------
Net book value 650 457
- ---------------------------------------------------------
</TABLE>
6 OTHER ASSETS, NET
Other assets include the net book value of a payment of $ 1,035,000 for certain
proprietary technology rights which were acquired by SICOR from a third party in
February 1995. Pursuant to the original agreement, $ 500,000 of the purchase
price was to be paid during 1995 and the remaining $ 535,000 was to be paid in
1996. Based on an oral agreement between Company and the third party, only
$250,000 was paid during 1995. The remaining liability has been included in
other current liabilities and is payable during 1997. The deferred charge is
being amortized to cost of sales on a straight-line basis over an estimated
useful life of 5 years.
The agreement requires SICOR to pay a royalty on the net sales of the products
manufactured using the technology acquired under the agreement. The royalty is
to be paid for a period of six years from the date of SICOR's first commercial
sale of such products. The royalty will be calculated as 5% of net sales up to $
20,000,000, 4% of net sales above $ 20,000,000 up to $ 40,000,000 and 3% of net
sales above $ 40,000,000 with a minimum royalty of $ 1,500,000 paid during the
six year period. SICOR commenced the commercial sale of such products during
1995 and for the years ended December 31, 1996 and 1995 recorded approximately $
47,000 and $ 17,000, respectively, of royalty expense under the terms of the
agreement.
The other principal items included in this balance are VAT reimbursements
receivable from governmental authorities that are not expected to be collected
within one year.
7 INCOME TAXES
The liability for current income taxes is based on estimated taxable income of
companies included in the consolidated financial statements in accordance with
local fiscal regulations. Details of tax expense for the years ended December
31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Year ended December 31
----------------------
1996 1995 1994
- ----------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C> <C>
Current tax expense (2,946) (704) (1,210)
Deferred tax (expense) benefit (1,056) 2,431 (750)
------ ----- ------
Total tax (expense) benefit (4,002) 1,727 (1,960)
- ----------------------------------------------------------------------
</TABLE>
The table below reconciles the expected corporate income tax (expense) benefit
in Italy, the principal tax jurisdiction, to the effective consolidated income
tax expense:
-13-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Year ended December 31
-------------------------
1996 1995 1994
- ----------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C> <C>
Expected corporate tax
benefit (expense) in Italy (4,057) 2,267 (673)
- - -
Foreign tax rate differential - Mexico 246 (256) (294)
Tax credit on fixed asset investments - 1,060 -
Change in deferred tax
valuation allowance 963 (549) (43)
Provision for fiscal contingencies - (270) (325)
Non-deductible reserves (246) (184) (71)
Effect of tax inflation in Mexico (799) (96) (206)
Expiration of net operating
loss carryforwards - - (179)
Assets tax - (39) (55)
Other (109) (206) (114)
-------------------------
Total tax benefit (expense) (4,002) 1,727 (1,960)
- ----------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
The amounts of deferred taxes included in the consolidated balance sheets relate
to:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
December 31
-----------
1996 1995
- -------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
DEFERRED INCOME TAX ASSETS:
Provision for contamination settlement 1,859 1,477
Capital leases and other leasing 664 926
Net operating loss and asset tax carryforwards 865 1,301
Inventory obsolescence 153 373
Intangible assets 414 223
Allowance for doubtful accounts 162 120
Other 698 142
---------------
Total gross deferred income tax assets 4,815 4,562
Less valuation allowance (548) (1,871)
---------------
Net deferred tax assets 4,267 2,691
DEFERRED INCOME TAX LIABILITIES:
Accelerated deduction for inventories 2,546 1,050
Basis in property and equipment 931 374
Inventory overhead capitalization 96 165
Other assets 633 -
Other - 40
---------------
Total deferred tax liabilities 4,206 1,629
---------------
Net deferred tax asset (liability) 61 1,062
- --------------------------------------------------------------------
</TABLE>
The net deferred tax assets and liabilities relate to the following tax
jurisdictions:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
December 31
--------------
1996 1995
- --------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
NET CURRENT DEFERRED TAX LIABILITY:
Italy - (81)
Mexico (2,583) (872)
---------------
Total (2,583) (953)
- --------------------------------------------------------------------
December 31
-----------
1996 1995
- --------------------------------------------------------------------
(in thousands of United States dollars)
NET NON-CURRENT DEFERRED TAX ASSET (LIABILITY):
Italy 1,165 1,002
Mexico 1,479 1,013
---------------
Total 2,644 2,015
- --------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
At December 31, 1996, the Company's Mexican entities have net operating loss
carryforwards of approximately $ 2,000,000 which are available to offset future
taxable income, if any, through 2006. Additionally, the Mexican companies have
recoverable asset tax carryforwards at December 31, 1996 of $ 231,000 expiring
at various dates through 2005.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. After consideration of the
estimated future taxable income generated in each respective tax jurisdiction,
management was unable to concluded that it is more likely than not that certain
deferred tax assets will be realized and, accordingly, has established a
valuation allowance of $ 548,000, $ 1,871,000 and $ 176,000 for the years ended
December 31, 1996, 1995 and 1994 respectively.
It is the Company's intention to reinvest undistributed earnings of its
subsidiaries; accordingly, no deferred income taxes have been provided thereon.
<TABLE>
<CAPTION>
8 SHORT-TERM BORROWINGS
- -----------------------------------------------------------------------------
December 31
-------------
1996 1995
- -----------------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
Short-term borrowings under credit line
arrangements, repayable in Italian lire 14,971 12,715
Short-term borrowings, repayable in
U.S. dollars 2,040 2,040
Short-term borrowings, repayable
in Italian lire 1,307 -
Short-terms borrowings, repayable
in Mexican pesos 110 216
---------------
Total 18,428 14,971
- -----------------------------------------------------------------------------
</TABLE>
The Company's Italian subsidiaries maintain credit line arrangements with
several banks whereby all receivables denominated in foreign currencies,
principally U.S. dollars, are pledged to the banks in return for short-term
borrowings in Italian lire under the lines of credit. These transactions
effectively eliminate the Company's foreign exchange risk associated with these
transactions. The Company retains all credit risk with respect to the
receivables. Consequently, both the receivables and related borrowings are
included in the accompanying consolidated financial statements.
The weighted average interest rates on these borrowings is approximately 6.2%
and 6.9% at December 31, 1996 and 1995, respectively.
The short-term borrowings from banks, repayable in U.S. dollars and Italian
lire, are unsecured. The terms of the borrowings range from three to six months.
The weighted average fixed interest rate on these borrowings is approximately
7.4% and 7.2% for the years ended December 31, 1996 and 1995, respectively.
The short-term borrowings from banks, repayable in Mexican pesos, are unsecured.
The fixed interest rate on these borrowings is approximately 37% and 65% for the
years ended December 31, 1996 and 1995, respectively.
-16-
<PAGE>
<TABLE>
<CAPTION>
9 OTHER CURRENT LIABILITIES
- ---------------------------------------------------------------------------------------------
December 31
--------------
1996 1995
- ---------------------------------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
Accrued employee compensation and related taxes 1,795 1,057
Accrued payments for proprietary technology (note 6) 868 785
Accrued interest 280 373
Other 1,517 1,115
---------------
Total 4,460 3,330
- ---------------------------------------------------------------------------------------------
10 LONG-TERM DEBT
Long-term debt consists of the following:
- ---------------------------------------------------------------------------------------------
December 31
-----------
1996 1995
- ---------------------------------------------------------------------------------------------
(in thousands of United States dollars)
Mortgage notes payable, repayable in Italian lire 7,459 7,129
Notes payable to bank, repayable in U.S. dollars 1,595 1,595
Note payable to bank, repayable in U.S. dollars 1,000 -
Notes payable to bank, repayable in U.S. dollars 3,080 -
Notes payable to Italian Minister of Industry 1,348 1,292
Mortgage note payable, repayable in ECU 1,029 1,268
Notes payable to suppliers 2,144 766
Note payable to bank, repayable in U.S. dollars 429 716
Capitalized lease obligations 667 628
----------------
Total long-term debt 18,751 13,394
Less: current portion (6,303) (1,137)
----------------
Long-term debt, net of current portion 12,448 12,257
- ---------------------------------------------------------------------------------------------
</TABLE>
The mortgage notes, repayable in Italian lire, are secured by certain production
facilities and are repayable in semi-annual installments of principal and
interest through 2002. The floating interest rate is based on several financial
indicators plus 1.25%. The average effective interest rate on these loans was
9.4%, 11.6% and 10.5% for the years ended December 31, 1996, 1995 and 1994,
respectively.
The notes payable to a bank, repayable in U.S. dollars, are due in 14 equal
semi-annual installments of $ 114,000 beginning in 1997. The weighted average
fixed interest rate on these notes was 6.1% for the years ended December 31,
1996, 1995 and 1994.
The note payable to a bank, repayable in U.S. dollars, is due in 10 equal semi-
annual installments of $ 100,000 beginning in 1997. The fixed interest rate on
these notes is 10.75%.
The notes payable to a bank, repayable in U.S. dollars, are due in the beginning
1997. These notes bear interest at LIBOR plus 1.25%. The weighted average
interest rate on these notes was 6.8% for the year ended December 31, 1996.
-17-
<PAGE>
The notes payable to The Italian Ministry of Industry are secured by certain
production facilities and are repayable in annual installments of principal and
interest through 2009. The average fixed interest rate on these notes was 7.2.%,
7% and 7.9% for the years ended December 31, 1996, 1995 and 1994, respectively.
The mortgage note, repayable in ECU, are secured by certain production
facilities and are repayable in semi-annual installments of principal and
interest through 2002. The interest rate is based on the European Investment
Bank rate plus 1.25%. The average effective interest rate on these loans was
11.1%, 9.6% and 8% for the years ended December 31, 1996, 1995 and 1994,
respectively.
Notes payable to suppliers are secured by certain machinery and equipment and
are repayable in semi-annual installments of principal and interest through
2001. The average effective interest rate on these notes was 9.9%, 9.9% and 9.3%
for the years ended December 31, 1996, 1995 and 1994, respectively.
The note payable to a bank, repayable in U.S. dollars, is due in semi-annual
installments of principal and interest through 1998. The fixed interest rate on
this note is 10.75%.
The capitalized lease obligations have lease periods expiring at various dates
through 2001 and bear interest at an average of 14.7%.
-18-
<PAGE>
Affiliate debt, all of which is unsecured, consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
December 31
-----------
1996 1995
- --------------------------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C>
Current account, in Dutch guilders, from Rakepoll Finance N.V. 13,497 2,757
Loans payable, in U.S. dollars, from Rakepoll Finance N.V. 4,425 4,425
Loans payable, in Italian lire, from Rakepoll Finance N.V. 1,006 970
Loans payable, in Italian lire, from Rakepoll Finance N.V. - 2,324
Loans payable, in U.S. dollars, from Gallium Investments to Lerma - 4,425
Loans payable, in Italian lire, from Gallium Investments to Lerma - 970
Loan from minority interest in Zanoni - 221
---------------
18,928 10,697
Less: current portion - (2,978)
---------------
18,928 7,719
- --------------------------------------------------------------------------------------
</TABLE>
The current account with Rakepoll Finance N.V. is denominated in Dutch guilders.
Interest on the current account is based on the quarterly 12 month AIBOR rate
plus 1%. The average effective interest rate on this balance was 4.8% and 5.8%
for the years ended December 31, 1996 and 1995, respectively. The current
account was previously covered by an agreement which provided for a maximum loan
of NLG 7,500,000 ($ 4,680,000) and indicated that the amounts were due on
December 31, 1996. In anticipation of the conversion of the current account to
equity in 1997 as described below, the terms of the underlying loan agreement
have been suspended by oral consent of the respective parties.
The loans payable to Rakepoll Finance N.V., are repayable in U.S. dollars at
various dates from 1997 through 2000 and bear interest at 8.75%. These loans
and the related accrued interest were assigned to the Company in connection with
the acquisition of the direct interest in Lerma.
The loans payable to Rakepoll Finance N.V., repayable in Italian lire, are due
at various dates from 1997 through 2000 and bear interest at 11.625%. These
loans and the related accrued interest were assigned to the Company in
connection with the acquisition of the direct interest in Lerma.
The loans payable, in Italian lire, to Rakepoll Finance N.V. were transferred to
the current account with Rakepoll Finance N.V. during 1996. The average
effective interest rate on these notes was 9.6% for the years ended December 31,
1995.
The loans payable to Gallium Investments were assigned to the Company in
connection with the acquisition of the direct interest in Lerma.
All affiliate debt will either be converted to equity in 1997 or is payable in
more than one year after the balance sheet date. Accordingly, all affiliate debt
has been classified as long-term at December 31, 1996.
11 SEVERANCE INDEMNITIES
Severance indemnity is paid in Italy to employees upon termination of their
employment. Each year, the employer accrues, for each employee, an amount partly
based on the employee's remuneration and partly based on the revaluation of
amounts previously accrued. The indemnity is an unfunded, but fully provided,
liability.
12 OTHER LONG-TERM LIABILITIES
Other long-term liabilities include an amount of approximately $ 3.3 million
provided by the Company in connection with certain claims received from its
customers as a result of a shipment of contaminated products (see note 19).
-19-
<PAGE>
13 SHAREHOLDERS' EQUITY
The authorized common stock of Rakepoll consists of 2,000 ordinary shares of NLG
1,000 each of which 40 shares are issued and outstanding at December 31, 1996
and 1995, respectively.
The authorized common stock of Lemery consists of 38,300,000 shares of Ps. 1
each of which 38,300,000 and 9,932,181 shares are issued and outstanding at
December 31, 1996 and 1995, respectively. Prior to October 1996, Lemery issued
an additional 6,715,991 shares at par value to the existing shareholders of the
company based on their respective ownership percentages. In October 1996,
Rakepoll acquired the direct ownership of the common stock of Lemery.
Accordingly, the investment and the common stock have been eliminated in the
consolidated accounts at December 31, 1996.
The authorized common stock of Immobiliaria consists of 1,500 shares of Ps. 1
all of which were issued and outstanding at December 31, 1996 and 1995. In
October 1996, Rakepoll acquired the direct ownership of the common stock of
Immobiliaria. Accordingly, the investment and the common stock have been
eliminated in the consolidated accounts at December 31, 1996.
The authorized common stock of Ledeco consists of 1,000 shares of Ps. 1 all of
which were issued and outstanding at December 31, 1996 and 1995. In October
1996, the Company acquired the direct ownership of the common stock of Ledeco.
Accordingly, the investment and the common stock have been eliminated in the
consolidated accounts at December 31, 1996.
The authorized common stock of Lerma consists of 315,960 shares of Ps. 10 each
of which 315,960 and 111,800 are issued and outstanding at December 31, 1996 and
1995, respectively. During 1994, the shareholders made capital contributions to
the company of $ 120,000 for which no shares were issued. Accordingly, this
amount has been recorded as increase to additional paid-in capital in 1994.
During 1995, 101,800 new shares were issued at par value to the existing
shareholders. Of the total $ 224,000 increase in common stock, the company
received cash of $ 104,000 and the remaining $ 120,000 was transferred from
additional paid-in capital to common stock. Prior to October 1996, Lerma issued
an additional 204,160 shares at par value to the existing shareholders of the
company based on their respective ownership percentages. In October 1996, the
Company acquired the direct ownership of the common stock of Lemery.
Accordingly, the investment and the common stock have been eliminated in the
consolidated accounts at December 31, 1996.
14 INTEREST EXPENSE
Interest expense for the years ended December 31, 1996, 1995 and 1994 relates to
the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year ended December 31
----------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C> <C>
Interest expense on loans from banks 2,913 2,373 1,294
Interest charged by related parties 816 711 162
----- ----- -----
3,729 3,084 1,456
- ------------------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
15 OTHER INCOME, NET
Other income, net for the years ended December 31, 1996, 1995 and 1994 relates to the following:
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31
----------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
(in thousands of United States dollars)
<S> <C> <C> <C>
Insurance recovery - 88 -
Gain on sale of production rights - - 343
Other, net 154 74 3
---------------------
154 162 346
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
16 FOREIGN CURRENCY EXCHANGE GAINS (LOSSES)
During the years ended December 31, 1996, 1995 and 1994, the Company entered
into foreign currency forward contracts, primarily to sell U.S. dollars. These
forward contracts do not qualify as hedges for financial reporting purposes;
therefore, gains and losses on these contracts are included in operations. As of
December 31, 1996, there were no contracts outstanding. For the years ended
December 31, 1996, 1995 and 1994, $ 1,366,000, $ 351,000 and $ 542,000 of net
gains on these contracts are included in foreign currency exchange gains
(losses) in the consolidated statements of operations.
17 RELATED PARTY
The Company has agency and distribution agreements with Alco Chemicals (Alco).
In September 1996, the majority shareholder of Alco acquired a majority of the
outstanding shares of Rakepoll Finance N.V., the Company's parent company.
During 1996 the Company sold to Alco approximately $ 13,992,000 and the
outstanding receivable at year end amounts to $ 5,155,000. Collection terms are
set at 90 days, which corresponds to normal trade conditions.
Under the terms of these agreements, Alco has received commissions of 3.5% for
the year ended December 31, 1996, acting as an agent for SICOR's sales related
to non-Italian customers. The agency agreement also stipulates that Alco
guarantees minimum sales of $ 20,000 of SICOR's products on a yearly basis
through December 31, 1997. The agreement continues beyond December 31, 1997, on
a year to year basis unless notice is provided by either party. In the event the
minimum sales level is not met by Alco, the agreement can be terminated by
SICOR. The agreement permits SICOR to sell its products directly or through
other agents. If SICOR pays commissions less than the contractual commission
percentage to such agents, SICOR must pay the differential between the
commissions paid and the contractual percentage to Alco.
SICOR also had agreements with Alco which granted exclusive distribution rights
on three products in certain countries expiring at various dates through 2005.
These agreements have been cancelled effective January 1, 1997. These agreements
required that Alco purchase minimum quantities of such products each year during
the term of the contracts. The agreements also fixed the price at which the
products must be purchased from SICOR.
Commissions paid to Alco were $ 995,000 for the year ended December 31, 1996.
The residual balance of $ 1,482,000, due to Alco for commissions, is included in
Trade accounts payable -related party. This caption also includes a residual
balance of $ 481,000 for costs recharged by Alco mainly in relation to returns
of goods and amounting for the year 1996 to $ 957,000.
-21-
<PAGE>
18 RESEARCH AND DEVELOPMENT ARRANGEMENTS
During July 1994, SICOR entered into a research and development arrangement with
ZETESIS S.p.A. to develop an anti-tumor drug. The arrangement is renewable at
SICOR's discretion every two years. Under the terms of the contract, SICOR is
obligated to fund the scientific and clinical research related to the drug.
During each two year period, SICOR is obligated to fund a maximum of Lit.
2,000,000,000 (U.S. $ 1,262,000) for scientific research. There is no maximum
obligation for clinical research funding. Upon successful patent application and
regulatory approval, SICOR will receive the exclusive manufacturing and
commercial rights to the product and will pay a 5% royalty on commercial sales
to ZETESIS S.p.A.. For the years ended December 31, 1996, 1995 and 1994,
approximately $ 2,990,000, $ 1,934,000 and $ 1,079,000, respectively, has been
recorded as research and development expense in relation to this contract.
Beginning in 1994, SICOR entered into a long-term consulting contract with the
inventor of an anti-tumor drug. The contract expires upon termination of the
aforementioned development arrangement or commercial sale of the drug. SICOR is
obligated to pay Lit. 500,000,000 (U.S. $ 307,000) plus certain expenses each
year for consulting services under the contract. If commercial sales of the drug
are realized, SICOR will be obligated to pay royalties in various percentages on
the sales and any subsequent licensing of the product. For the years ended
December 31, 1996, 1995 and 1994, approximately $ 350,000, $ 322,000 and $
154,000, respectively, has recorded to research and development expense in
relation to this contract.
19 COMMITMENTS AND CONTINGENCIES
During 1995, the Company received claims from certain of its customers in
connection with shipments of contaminated product. While no lawsuits have been
filed against the Company with respect to this matter, the Company has recorded
a provision of approximately $ 1.6 and $ 2.7 million, respectively, during the
years ended December 31, 1996 and 1995 which represents management's best
estimate of product rework costs, attorney's costs and other settlement costs.
Actual costs to be incurred in relation to the ultimate settlement may vary from
the amount estimated.
-22-
<PAGE>
Independent auditor's report
To the Board of
Directors of Rakepoll Holding B.V.
We have audited the accompanying consolidated balance sheets of Rakepoll Holding
B.V. and subsidiaries ("Rakepoll") as of December 31, 1996 and 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financials statements are the responsibility of Rakepoll's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. 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 overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rakepoll as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles in the United States of
America.
Rotterdam, April 28, 1997
/s/ KPMG Accountants NV
KPMG Accountants NV
-23-
<PAGE>
(b) Pro Forma Financial Information
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed balance sheet as
of December 31, 1996 and the unaudited pro forma consolidated condensed
statement of operations for the year ended December 31, 1996 give effect to the
Stock Exchange as of January 1, 1996 for the pro forma consolidated condensed
statement of operations.
The pro forma consolidated condensed financial statements are based on
historical financial statements of Gensia Sicor Inc. and Rakepoll Holding B.V.,
giving effect to the Stock Exchange applying the purchase method of accounting
and the assumptions and adjustments as discussed in the accompanying notes to
the pro forma consolidated condensed financial statements. These pro forma
consolidated condensed financial statements have been prepared by the management
of Gensia Sicor based upon the audited consolidated financial statements of
Gensia Sicor and Rakepoll Holding, as of December 31, 1996 and for the year then
ended. The unaudited pro forma consolidated condensed financial statements
should be read in conjunction with the historical financial statements and notes
thereto and narrative sections incorporated by reference herein. The pro forma
consolidated condensed financial statements are not necessarily indicative of
what actual results of operations would have been for the periods had the Stock
Exchange occurred on the dates indicated and do not purport to indicate the
results of future operations.
-24-
<PAGE>
Pro Forma Consolidated Condensed Balance Sheet
December 31, 1996
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
Rakepoll
Gensia Holding Pro-Forma Pro-Forma
Historical Historical Adjustments Consolidated
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $ 21,367 $ 2,578 $ (100) (c) $ 23,845
Trade accounts receivable 5,038 25,154 30,192
Inventories 16,999 29,482 4,936 (e) 51,417
Other current assets 2,316 9,320 11,636
--------- -------- -------- ---------
Total current assets 45,720 66,534 4,836 117,090
Property, plant and equipment, net 33,657 34,655 5,000 (e) 73,312
Developed technology 45,000 (e) 45,000
Other intangibles 6,870 (e) 6,870
Goodwill - - 43,852 (g) 43,852
Other noncurrent assets 10,173 3,549 13,722
--------- -------- -------- ---------
Total assets $ 89,550 $104,738 $105,558 $ 299,846
========= ======== ======== =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term borrowings $ - $ 18,428 $ 18,428
Current portion of long-term obligations 76 6,303 6,379
Trade accounts payable 11,138 29,270 40,408
Other current liabilities 7,981 7,720 11,000 (d) 26,701
Current portion of deferred credits 1,771 2,583 4,354
--------- -------- -------- ---------
Total current liabilities 20,966 64,304 11,000 96,270
Long-term obligations, net of current portion 85 31,376 (18,928) (a) 12,533
Other long-term liabilities - 5,129 5,129
Deferred credits, less current portion 500 - 500
Stockholders' equity:
Preferred stock 16 - 16
Common stock 396 22 (22) (b) 691
295 (c)
Additional paid-in capital 332,778 7,171 18,928 (a) 479,098
(26,099) (b)
146,320 (c)
Accumulated deficit (265,136) (223) 223 (b) (294,336)
(29,200) (f)
Unearned compensation (55) - (55)
Cumulative translation adjustments - (3,041) 3,041 (b) -
--------- -------- -------- ---------
Total stockholders' equity 67,999 3,929 113,486 185,414
--------- -------- -------- ---------
$ 89,550 $104,738 $105,558 $ 299,846
========= ======== ======== =========
</TABLE>
See accompanying notes to Pro Forma Consolidated Condensed Financial Statements.
-25-
<PAGE>
Pro Forma Consolidated Condensed Statement of Operations (1)
For the year ended December 31, 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Rakepoll
Gensia Holding Pro-Forma Pro-Forma
Historical Historical Adjustments Consolidated
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 54,636 $78,438 (2,934) (a) $ 130,140
Contract research and license fees 3,666 - 3,666
Interest and other income, net 2,122 897 3,019
Foreign exchange gains, net 951 951
----------- ------- -------- -----------
Total revenues $ 60,424 $80,286 $ (2,934) $ 137,776
----------- ------- -------- -----------
Costs and Expenses:
Cost of sales 40,654 50,115 (2,934) (a) 88,335
500 (d)
Research and development 31,081 4,875 (10,226) (c) 25,730
Selling, general & administrative 32,839 12,317 1,000 (f) 46,156
Amortization expense 4,716 (e) 4,716
Interest and other 1,649 3,729 (816) (b) 4,562
Provision for contamination settlement 1,621 1,621
----------- ------- -------- -----------
Total costs and expenses $ 106,223 $72,657 $ (7,760) $ 171,120
----------- ------- -------- -----------
Income (loss) before taxes and dividends
on preferred stock (45,799) 7,629 4,826 (33,344)
Income tax expense - 4,002 - 4,002
----------- ------- -------- -----------
Income (loss) before dividends on
preferred stock (45,799) 3,627 4,826 (37,346)
Dividends on preferred stock (6,000) - - (6,000)
----------- ------- --------- -----------
Net income (loss) applicable to common stock $ (51,799) $ 3,627 $ 4,826 $ (43,346)
=========== ======= ========= ===========
Net income (loss) per common share $ (1.41) $90,675 $(0.66) (g)
=========== ======= ===========
Shares used in computing per share
amounts 36,624,000 40 66,124,000 (g)
=========== == ==========
</TABLE>
(1) The above Pro Forma Consolidated Condensed Statement of Operations does not
include a $29.2 million charge for the fair value of acquired in-process
technology of Rakepoll Holding or a $4.9 million charge to cost of
sales related to the purchase accounting adjustment made to inventory as
they are nonrecurring charges.
See accompanying notes to Pro Forma Consolidated Condensed Financial Statements.
-26-
<PAGE>
Notes to Pro Forma Consolidated Condensed Financial Statements
(Unaudited)
1. HISTORICAL
The historical balances represent the financial position and results
of operations for each company and were derived from the respective
financial statements for the indicated periods.
2. PRO FORMA
Pursuant to the Stock Exchange, Gensia Sicor acquired all of the
outstanding shares of Rakepoll Holding, and Rakepoll Holding became a
wholly owned subsidiary of Gensia Sicor. The approximate purchase price for
Rakepoll Holding of $157,715,000 consists of the following: (i) the
$146,615,000 market value of shares of Gensia Sicor Common Stock which has
been issued to Rakepoll Finance N.V. (29,500,000 shares of Gensia Sicor
Common Stock at $4.97 per share), (ii) cash payment of $100,000 to Rakepoll
Finance N.V., and (iii) estimated transaction costs of $11,000,000. Gensia
is in the process of completing the valuation of the tangible and
intangible assets, as well as in-process technology, in order to properly
allocate the estimated total purchase price to all of the assets acquired
and liabilities assumed as required by Accounting Principles Board Opinion
No. 16. Upon preliminary valuation analysis, allocation of the total
Acquisition cost is as follows:
Market value of Gensia Common Stock $ 146,615
Cash 100
Estimated transaction costs 11,000
---------
Total consideration paid $ 157,715
=========
Book value of net assets acquired $ 22,857
Inventory write-up to fair value $ 4,936
Property and equipment 5,000
Developed technology 45,000
Other intangibles 6,870
In-process technology 29,200
Goodwill 43,852
---------
Total $ 157,715
=========
The final purchase price will depend upon Rakepoll Holding's closing
balance sheet and the completion of the valuation of tangible and
intangible assets including in-process technology. Accordingly, goodwill
and related amortization reflected in the pro forma financial statements
may change based on the final accounting.
The unaudited pro forma consolidated condensed balance sheet has been
prepared to reflect the Stock Exchange as if it occurred on December 31,
1996. The unaudited pro forma consolidated condensed statement of
operations has been prepared to reflect the Stock Exchange as if it
occurred on January 1, 1996. The acquisition has been accounted for under
the purchase method of accounting. The following pro forma adjustments are
reflected in the unaudited pro forma consolidated condensed financial
statements.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(a) Conversion of Rakepoll Holding affiliate debt as of December 31,
1996 into Rakepoll equity as specified in the Stock Exchange
Agreement.
(b) Elimination of Rakepoll Holding's equity accounts as required by
generally accepted accounting principles.
(c) Issuance of 29,500,000 shares of Gensia Sicor Common Stock at a
fair market value of $4.97 per share and the payment of $100,000
to Rakepoll Holding shareholders.
(d) Accrual of certain costs associated with the Stock Exchange.
(e) Adjustment of Rakepoll Holding's assets and liabilities to the
estimated fair values thereof at the date of the Stock Exchange.
This amount is only an estimate and may change upon completion of
the valuation of such assets and will depend on the closing
balance sheet of Rakepoll Holding.
(f) Write-off of the portion of the purchase price allocated to
estimated acquired in-process technology of Rakepoll Holding,
which will be charged to the statement of operations upon
consummation of the Stock Exchange. This amount is not included
in the Pro Forma Consolidated Condensed Statement of Operations
as it represents a nonrecurring charge.
(g) Recognition of goodwill for the excess of the estimated purchase
price over the estimated net fair value of assets acquired and
liabilities assumed. This amount is only an estimate and may
change upon completion of the valuation of tangible and
intangible assets including in-process technology, as well as
other factors.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(a) Elimination of intercompany product sales and cost of sales
between Gensia and Rakepoll Holding.
-27-
<PAGE>
(b) Reduction in interest expense upon the conversion of Rakepoll
Holding affiliate debt into Rakepoll Holding equity as specified
in the Stock Exchange Agreement. The weighted average annual
interest rate for the affiliate debt is approximately 6.1%.
(c) Adjustment to research and development expenses for cost
reductions required by the Stock Exchange Agreement and
amendments thereto. Under such agreement, as amended, Gensia must
either reduce its research activities to the level at which third
party funding for such activities has been obtained or terminate
any such unfunded research activities no later than April 22,
1997. The adjusted amount reflects spending on research
activities at the level for which funding has already been
obtained and does not assume any additional funding for research
activities.
(d) Increase in depreciation resulting from the estimated adjustment
of property and equipment to the estimated net fair value,
assuming a useful life of ten years.
(e) Amortization over 5 to 17 years for identified intangibles and
over 30 years for goodwill resulting from the excess purchase
price over the estimated net fair value of assets acquired and
liabilities assumed. This amount is only an estimate and may
change upon final determination of the identified intangibles and
goodwill amounts and amortization periods.
(f) Adjustment to reflect estimated increase in general and
administrative expenses for operations of a multinational public
company.
(g) The net loss per share and the shares used in computing the net
loss per share are based upon the historical weighted average
common shares outstanding for the respective periods, adjusted to
reflect the issuance of 29,500,000 shares of Gensia Common Stock
to Rakepoll Holding stockholders as of January 1, 1996.
-28-
<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 hereunto duly authorized.
GENSIA SICOR INC.
Date: May 14, 1997 /s/ John W. Sayward
-------------------------------
John W. Sayward
Vice President, Finance
and Chief Financial Officer
-29-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------ -----------
23.1 Consent of KPMG Accountants N.V., Independent Auditors.
27.1 Financial Data Schedule.
<PAGE>
EXHIBIT 23.1
------------
The Board of Directors
Gensia Sicor Inc.
We consent to the inclusion of our report dated April 28, 1997, with respect to
the consolidated balance sheets of Rakepoll Holding B.V. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996, which report is included in the Form
8-K/A of Gensia Sicor Inc. dated February 28, 1997.
Rotterdam, May 13, 1997
/s/ KPMG Accountants N.V.
Ref: A. Vermaas
-32-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,578
<SECURITIES> 0
<RECEIVABLES> 26,002
<ALLOWANCES> 848
<INVENTORY> 29,482
<CURRENT-ASSETS> 9,320
<PP&E> 57,971
<DEPRECIATION> 23,316
<TOTAL-ASSETS> 104,738
<CURRENT-LIABILITIES> 64,304
<BONDS> 0
0
0
<COMMON> 22
<OTHER-SE> 3,041
<TOTAL-LIABILITY-AND-EQUITY> 104,738
<SALES> 78,438
<TOTAL-REVENUES> 78,438
<CGS> 50,115
<TOTAL-COSTS> 50,115
<OTHER-EXPENSES> 15,344
<LOSS-PROVISION> 1,621
<INTEREST-EXPENSE> 3,729
<INCOME-PRETAX> 7,629
<INCOME-TAX> 4,002
<INCOME-CONTINUING> 3,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,627
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
