SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 8, 1997
ICN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11397 33-0628076
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification Number)
Incorporation)
3300 Hyland Avenue, Costa Mesa, California 92626
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 545-0100
Not Applicable
(Former name or address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) In August 1997, ICN Puerto Rico, Inc. (the "Subsidiary") acquired
the worldwide rights (except India) to seven products: Alloferin,
Ancotil, Glutril, Limbitrol, Mestinon, Prostigmin and Protamin
from F. Hoffmann-La Roche Ltd. ("Roche"). The Subsidiary also
obtained worldwide rights outside of the United States and India
to Efudix and Librium. Registrant received the product rights in
exchange for $90,000,000 payable in a combination of 1,600,000
shares of Registrant's common stock valued at $40,000,000 and
2,000 shares of a new issue of Registrant's convertible preferred
stock valued at $50,000,000. Each share of the Registrant's
convertible preferred stock was convertible into 1,000 shares of
common stock at a conversion price equivalent to $25 per share.
The Registrant guaranteed Roche a price initially at $25.75 per
share of common stock, increasing at a rate of 6% per annum for
three years, with the Registrant being entitled to any proceeds
realized by Roche from the sale of these shares during the
guarantee period in excess of the guaranteed price. Also in
August 1997, the Subsidiary purchased Roche's Humacao, Puerto
Rico manufacturing plant (the "Humacao, Puerto Rico Plant"),
which meets current U.S. Food and Drug Administration Good
Manufacturing Practices for various products, including: Aleve,
Naprosyn, EC Naprosyn, Anaprox and Cytovene, for $55,000,000 in
cash (the source of which was working capital and the proceeds of
a debt offering in August 1997). Simultaneously, Roche leased the
Humacao, Puerto Rico Plant from the Registrant for two years at
$4,000,000 per annum. On December 5, 1997, the Registrant
acquired the worldwide rights to Levo-Dromoran and Tensilon from
subsidiaries of Roche, and pursuant to an option granted by Roche
to the Registrant in connection with the August 1997 transaction,
the Registrant obtained the U.S. rights to Efudix and Librium for
a total aggregate purchase price of approximately $89,000,000,
which was paid utilizing the price appreciation in the common
stock (including those shares of common stock issued on
conversion of the convertible preferred stock) issued to Roche in
August 1997.
The description of the acquisitions is a summary and as such is
not intended to be complete and is subject to and qualified by
reference to the agreements relating to the acquisitions, which
are incorporated by reference herein. Also incorporated by
reference, and attached hereto as an exhibit, is a press release
issued by the Registrant on December 8, 1997 concerning the
Registrant's acquisition of certain products from Roche.
Included in Item 7 of this report are historical financial
statements relating to the acquired products. The acquisition of
the Plant assets did not constitute the acquisition of a
"business" as defined by Regulation S-X promulgated by the
Securities and Exchange Commission and, consequently, historical
financial statements of the Plant are not required to be included
herein.
(b) Roche marketed the pharmaceutical products internationally and
used the Humacao, Puerto Rico Plant for the manufacture and
distribution of pharmaceutical products. Registrant intends to
use the assets for the same purposes.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Special-Purpose Financial Statement of F. Hoffmann-La Roche Ltd.,
Hoffmann-La Roche Inc., and Roche Products Inc.
Report of Independent Accountants
Statement of Net Sales and Direct Expenses for the year
ended December 31, 1996
Notes to the Unaudited Statement of Net Sales and Direct
Expenses
Unaudited Interim Special-Purpose Financial Statements of F.
Hoffmann-La Roche Ltd., Hoffmann-La Roche Inc., and Roche
Products Inc.
Unaudited Interim Statement of Net Sales and Direct Expenses
for the six months ended June 30, 1997
Notes to the Unaudited Statement of Net Sales and Direct
Expenses
Unaudited Interim Special-Purpose Financial Statements of
Hoffmann-La Roche Inc. and Roche Products Inc.
Unaudited Interim Statement of Net Sales and Direct Expenses
for the three months ended September 30, 1997
Notes to the Unaudited Statement of Net Sales and Direct
Expenses
(b) Pro forma financial information.
Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 1997
Unaudited Pro Forma Combined Condensed Statements of Income for
the nine months ended September 30, 1997.
Unaudited Pro Forma Combined Condensed Statements of Income for
the year ended December 31, 1996.
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
(c) Exhibits.
2.1 Asset Purchase Agreement between F. Hoffmann - La Roche
Ltd., ICN Puerto Rico Inc. and ICN Pharmaceuticals,
Inc., dated June 20, 1997, as amended by the Amendment
Agreement dated August 7, 1997, previously filed as
Exhibit 10.1 to Registration Statement No. 333-35241 on
Form S-3, which is incorporated herein by reference, as
amended by the Second Amendment Agreement between F.
Hoffmann - La Roche Ltd., ICN Puerto Rico, Inc., and ICN
Pharmaceuticals, Inc.
2.2 Form of Asset Purchase Agreement by and between
Hoffmann - La Roche Inc., a New Jersey corporation, and
ICN Pharmaceuticals, Inc., a Delaware corporation,
dated as of October 30, 1997, previously filed as
Exhibit 10.1 to Quarterly Report on Form 10-Q for the
three months ended September 30, 1997, dated November
14, 1997, which is incorporated herein by reference.
2.3 Form of Asset Purchase Agreement by and between Roche
Products Inc., a Panamanian corporation, and ICN
Pharmaceuticals, Inc., a Delaware corporation, dated as
of October 30, 1997, previously filed as Exhibit 10.2
to Quarterly Report on Form 10-Q for the three months
ended September 30, 1997, dated November 14, 1997,
which is incorporated herein by reference.
2.4 Form of Asset Purchase Agreement by and between Syntex
(F.P.) Inc., a Delaware corporation, Syntex (U.S.A.)
Inc., a Delaware corporation, ICN Puerto Rico, Inc., a
Puerto Rico corporation, and ICN Pharmaceuticals, Inc.,
a Delaware corporation, dated as of June 13, 1997,
previously filed as Exhibit 10.3 to Quarterly Report on
Form 10-Q for the three months ended September 30,
1997, dated November 14, 1997, which is incorporated
herein by reference.
23.1 Consent of Price Waterhouse LLP.
99. Press Release dated December 8, 1997, previously filed.
EXHIBIT INDEX
2.1 Asset Purchase Agreement between F. Hoffmann - La Roche Ltd., ICN Puerto
Rico Inc. and ICN Pharmaceuticals, Inc., as amended by the Amendment
Agreement dated August 7, 1997, previously filed as Exhibit 10.1 to
Registration Statement No. 333-35241 on Form S-3, which is incorporated
herein by reference, as amended by the Second Amendment Agreement between
F. Hoffmann - La Roche Ltd., ICN Puerto Rico, Inc., and ICN
Pharmaceuticals, Inc.
2.2 Form of Asset Purchase Agreement by and between Hoffmann - La Roche Inc., a
New Jersey corporation, and ICN Pharmaceuticals, Inc., a Delaware
corporation, dated as of October 30, 1997, previously filed as Exhibit 10.1
to Quarterly Report on Form 10-Q for the three months ended September 30,
1997, dated November 14, 1997, which is incorporated herein by reference.
2.3 Form of Asset Purchase Agreement by and between Roche Products Inc., a
Panamanian corporation, and ICN Pharmaceuticals, Inc., a Delaware
corporation, dated as of October 30, 1997, previously filed as Exhibit 10.2
to Quarterly Report on Form 10-Q for the three months ended September 30,
1997, dated November 14, 1997, which is incorporated herein by reference.
2.4 Form of Asset Purchase Agreement by and between Syntex (F.P.) Inc., a
Delaware corporation, Syntex (U.S.A.) Inc., a Delaware corporation, ICN
Puerto Rico, Inc., a Puerto Rico corporation, and ICN Pharmaceuticals,
Inc., a Delaware corporation, dated as of June 13, 1997, previously filed
as Exhibit 10.3 to Quarterly Report on Form 10-Q for the three months ended
September 30, 1997, dated November 14, 1997, which is incorporated herein
by reference.
23.1 Consent of Price Waterhouse LLP.
99. Press Release dated December 8, 1997, previously filed.
<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.
ICN PHARMACEUTICALS, INC.
Date: February 17, 1998 By: /s/ John E. Giordani
----------------------------------------
John E. Giordani
Executive Vice President
and Chief Financial Officer
<PAGE>
F. HOFFMANN-LA ROCHE LTD,
HOFFMANN-LA ROCHE INC., AND
ROCHE PRODUCTS INC.
SPECIAL-PURPOSE FINANCIAL STATEMENT
DECEMBER 31, 1996
<PAGE>
F. HOFFMANN-LA ROCHE LTD, HOFFMANN-LA ROCHE INC., AND ROCHE PRODUCTS INC.
INDEX TO SPECIAL-PURPOSE FINANCIAL STATEMENT
- --------------------------------------------------------------------------------
Page
----
Report of Independent Accountants 1
Statement of Net Sales and Direct Expenses 2
Notes to Special-Purpose Financial Statement 3-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARDS OF DIRECTORS OF
F. HOFFMANN-LA ROCHE LTD,
HOFFMANN-LA ROCHE INC., AND
ROCHE PRODUCTS INC.
We have audited the accompanying special-purpose statement of net sales and
direct expenses for the year ended December 31, 1996 (the financial statement),
of certain Products (the Products), as described in Note 1, of F. Hoffmann-La
Roche Ltd, Hoffmann-La Roche Inc., and Roche Products Inc. This financial
statement is the responsibility of management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statement of net sales and
direct expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statement. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying financial statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission to
reflect the net sales and direct expenses attributable to the Products described
in Note 1 and are not intended to be a complete presentation of the Products'
expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net sales and direct expenses of the Products as
described in Note 1, for the year ended December 31, 1996 in conformity with
generally accepted accounting principles in the United States.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Morristown, New Jersey
February 13, 1998
<PAGE>
F. HOFFMANN-LA ROCHE LTD, HOFFMANN-LA ROCHE INC., AND ROCHE PRODUCTS INC.
STATEMENT OF NET SALES AND DIRECT EXPENSES
(in thousands)
- -------------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1996
-----------------
Net sales $ 89,941
Cost of goods sold 26,088
-----------
Gross profit 63,853
Direct expenses 3,598
-----------
Product contribution $ 60,255
===========
The accompanying notes are an integral part of this special-purpose
financial statement.
<PAGE>
F. HOFFMANN-LA ROCHE LTD, HOFFMANN-LA ROCHE INC., AND ROCHE PRODUCTS INC.
NOTES TO THE STATEMENT OF NET SALES AND DIRECT EXPENSES
(in thousands)
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
F. Hoffmann-La Roche Ltd, Hoffmann-La Roche Inc., and Roche Products Inc.
(collectively Roche) sold certain assets (the Assets) and the rights to
manufacture and market certain products (the Products) pursuant to Asset
Purchase Agreements (the Agreements).
The Products are sold through wholesalers which in turn distribute to
pharmacies, hospitals, physicians, retailers, and other healthcare
institutions throughout the United States, Europe, Latin America, and Asia.
The Assets, as more specifically described in the Agreements, include
primarily trademarks, registrations, inventories, manufacturing technology
and know-how exclusively used for and dedicated to the Products. The
Assets, other than the related inventories, had no net book value as of
December 31, 1996. The Products include:
Librium Glutril
Efudex Limbitrol
Tensilon Mestinon
Levo-Dromoran Prostigmin
Alloferin Protamine
Ancotil
The accompanying special-purpose financial statement presents only the net
sales, costs of goods sold, and other direct expenses (the Product
contribution) of the Products for the year ended December 31, 1996. This
statement includes all adjustments necessary for a fair presentation of the
Product contribution for the year ended December 31, 1996. This financial
statement has been prepared in accordance with Roche accounting policies
and is in accordance with generally accepted accounting principles in the
United States. However, this financial statement does not purport to
represent all the costs and expenses associated with a stand alone separate
company, or the costs which may be incurred by an unaffiliated company to
achieve similar results.
Net sales includes an allowance for sales returns. Cost of goods sold
includes the corresponding direct production costs and related production
overhead of goods manufactured.
After considering the relative maturity of the Products in their life
cycle, the variability of expenses in different geographic regions, and
other individual product characteristics, management has estimated that
direct operating expenses, primarily distribution related, approximate 4%
of net sales for the year ended December 31, 1996. Roche did not incur any
significant operating expenses during the year ended December 31, 1996
attributable to the marketing, promotion, advertisement, or development of
the Products.
<PAGE>
F. HOFFMANN-LA ROCHE LTD, HOFFMANN-LA ROCHE INC., AND ROCHE PRODUCTS INC.
NOTES TO THE STATEMENT OF NET SALES AND DIRECT EXPENSES
(in thousands)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
In conformity with generally accepted accounting principles, management has
used estimates and assumptions that affect the reported amounts of net
sales and direct expenses and the disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
REVENUE RECOGNITION
Sales are recognized upon shipment of products to customers.
FOREIGN CURRENCY VALUATION
Sales, cost of goods sold, and direct expenses are translated at the
average rates of exchange for the year ended December 31, 1996.
3. COMMITMENTS AND CONTINGENCIES
Various lawsuits, claims and proceedings of a nature considered to be in
the normal course of business are pending with regard to the Products.
Management believes that these lawsuits, claims and proceedings will not
have a material adverse effect on the reported net sales, and Product
contribution.
Concurrent with the sale of the Products, Roche entered into a two year
supply agreement with the buyer. Such agreement provides that Roche will
manufacture the Products on behalf of the buyer, who will purchase the
Products at agreed-upon prices which approximate Roche's direct production
costs and related production overheads of goods manufactured.
<PAGE>
F. HOFFMANN-LA ROCHE LTD
HOFFMANN-LA ROCHE INC.
ROCHE PRODUCTS INC.
UNAUDITED INTERIM STATEMENT OF NET SALES AND DIRECT EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(In thousands)
Net Sales $65,747
Cost of Goods Sold 20,914
-------
Gross Profit 44,833
Direct Expenses 2,630
-------
Product Contribution $42,203
=======
The accompanying note is an integral part of this special-purpose financial
statement.
<PAGE>
F. HOFFMANN-LA ROCHE LTD, HOFFMANN-LA ROCHE INC., AND ROCHE PRODUCTS INC.
NOTES TO THE UNAUDITED INTERIM STATEMENT OF
NET SALES AND DIRECT EXPENSES
For the six months ended June 30, 1997
(in thousands)
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
F. Hoffmann-La Roche Ltd, Hoffmann-La Roche Inc., and Roche Products Inc.
(collectively Roche) sold certain assets (the Assets) and the rights to
manufacture and market certain products (the Products) pursuant to Asset
Purchase Agreements (the Agreements) effective, for certain products, July
1, 1997 and for the remaining products October 1, 1997.
The Products are sold through wholesalers which in turn distribute to
pharmacies, hospitals, physicians, retailers, and other healthcare
institutions throughout the United States, Europe, Latin America, and Asia.
The Assets, as more specifically described in the Agreements, include
primarily trademarks, registrations, inventories, manufacturing technology
and know-how exclusively used for and dedicated to the Products. The
Assets, other than the associated inventories, had no net book values at
the time of sale. The Products include:
Librium Glutril
Efudex Limbitrol
Tensilon Mestinon
Levo-Dromoran Prostigmin
Alloferin Protamine
Ancotil
The accompanying special-purpose financial statement presents only the net
sales, costs of goods sold, and other direct expenses (the Product
contribution) of the Products. This statement includes all adjustments
necessary for a fair statement of the net sales and product contribution
for the period ended as noted. This financial statement has been prepared
in accordance with Roche accounting policies. However, this financial
statement does not purport to represent all the costs and expenses
associated with a stand alone separate company, or the costs which may be
incurred by an unaffiliated company to achieve similar results.
Net sales include allowances for sales returns. Cost of goods sold includes
the corresponding direct production costs and related production overhead
of goods manufactured.
<PAGE>
HOFFMANN-LA ROCHE INC.
ROCHE PRODUCTS INC.
UNAUDITED INTERIM STATEMENT OF NET SALES AND DIRECT EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(In thousands)
Net Sales $ 5,200
Cost of Goods Sold 996
-------
Gross Profit 4,204
Direct Expenses 208
-------
Product Contribution $ 3,996
=======
The accompanying note is an integral part of this special-purpose financial
statement.
<PAGE>
HOFFMANN-LA ROCHE INC. AND ROCHE PRODUCTS INC.
NOTES TO THE UNAUDITED INTERIM STATEMENT OF
NET SALES AND DIRECT EXPENSES
For the three months ended September 30, 1997
(in thousands)
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Hoffmann-La Roche Inc. and Roche Products Inc. (collectively Roche) sold
certain assets (the Assets) and the rights to manufacture and market
certain products (the Products) pursuant to Asset Purchase Agreements (the
Agreements), effective October 1, 1997.
The Products are sold through wholesalers which in turn distribute to
pharmacies, hospitals, physicians, retailers, and other healthcare
institutions throughout the United States, Europe, Latin America, and Asia.
The Assets, as more specifically described in the Agreements, include
primarily trademarks, registrations, inventories, manufacturing technology
and know-how exclusively used for and dedicated to the Products. The
Assets, other than the associated inventories, had no net book values at
the time of sale. The Products include:
Librium
Efudex
Levo-Dromoran
The accompanying special-purpose financial statement presents only the net
sales, costs of goods sold, and other direct expenses (the Product
contribution) of the Products. This statement includes all adjustments
necessary for a fair statement of the net sales and product contribution
for the period ended as noted. This financial statement has been prepared
in accordance with Roche accounting policies. However, this financial
statement does not purport to represent all the costs and expenses
associated with a stand alone separate company, or the costs which may be
incurred by an unaffiliated company to achieve similar results.
Net sales include allowances for sales returns. Cost of goods sold includes
the corresponding direct production costs and related production overhead
of goods manufactured.
<PAGE>
ICN PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Condensed Financial Statements of ICN
Pharmaceuticals, Inc. and Subsidiaries (the "Company") as of September 30, 1997
and for the year ended December 31, 1996 and the nine months ended September 30,
1997 give effect to the 1997 acquisition of the rights to certain products (the
"Acquired Products") and a manufacturing plant (not currently manufacturing the
Acquired Products) from Roche, as if each of the acquisitions had taken place as
of January 1, 1996. The Acquired Products had no historical book value as of
January 1, 1996 or for any period thereafter.
Acquisition of Product Rights
In August 1997, the Company acquired the worldwide rights to seven products and
the non-U.S. rights to two other products, all effective July 1, 1997 (the
"Initial Product Rights"). Under the agreement with Roche, the Company received
the product rights in exchange for $90 million payable in a combination of 1.6
million shares of the Company's common stock (valued at $40 million) and 2,000
shares of the Company's Series C convertible preferred stock (valued at $50
million). Each share of the Company's Series C convertible preferred stock was
convertible into 1,000 shares of the Company's common stock at a conversion
price equivalent to $25 per share.
In December 1997, the Company acquired the worldwide rights to two additional
products, and the U.S. rights to two products covered by the Initial Product
Rights (the "Additional Product Rights"), all effective as of October 1, 1997.
The $89 million consideration for the Additional Product Rights was paid
utilizing the price appreciation of the common stock (including those shares of
common stock issued on conversion of the convertible preferred stock) issued in
August 1997 for the Initial Product Rights.
The Unaudited Pro Forma Combined Condensed Statements of Income for the nine
months ended September 30, 1997 include the historical results of operations for
the Company, which reflect the net sales and expenses of products covered by the
Initial Product Rights from the effective date of acquisition, July 1, 1997. The
historical Acquired Products financial statements include the net sales and
direct expenses of products covered by the Initial Product Rights for the period
from January 1, 1997 through June 30, 1997 and the net sales and direct expenses
of the products covered by the Additional Product Rights for the periods from
January 1, 1997 through September 30, 1997. The Unaudited Pro Forma Combined
Condensed Statements of Income for the year ended December 31, 1996 include the
historical results of operations for the Company. The historical Acquired
Products financial statements include the net sales and direct expenses of all
of the Acquired Products for the period from January 1, 1996 through December
31, 1996. These amounts, when combined with the pro forma adjustments, give
effect to the acquisitions as if these transactions had taken place as of
January 1, 1996.
Acquisition of Plant Assets
Effective August 1, 1997 the Company purchased from Roche a GMP-standard
manufacturing plant (the "Plant") in Humacao, Puerto Rico. The consideration for
the purchase of the Plant was cash in the amount of $55 million, which was
funded from working capital and a portion of the proceeds of the Company's
August, 1997 offering of $275 million of 9.25% Senior Notes. The purchase of the
Plant is under a sale/leaseback arrangement whereby Roche will lease the Plant
from the Company under a two year lease with lease payments totaling $4 million
annually. During the lease term, all of the manufacturing effort of the Plant
remains with Roche. The Unaudited Pro Forma Combined Condensed Financial
Statements give effect to the sale/leaseback arrangement as if it had taken
place as of January 1, 1996 and, with respect to the Plant, the Unaudited Pro
Forma Combined Condensed Statements of Income reflect only the impact of the
sale/leaseback arrangement with Roche.
The Unaudited Pro Forma Combined Condensed Financial Statements are based on the
historical operating results of the Company and the historical net sales and
direct expenses of the Acquired Products, under the assumptions and adjustments
set forth in the accompanying notes thereto. The Unaudited Pro Forma Combined
Condensed Financial Statements may not be indicative of the results that
actually would have occurred if the acquisitions had been consummated at the
foregoing dates, or of the results which may result in the future.
<PAGE>
ICN PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(in thousands, except per share information)
<TABLE>
<CAPTION>
HISTORICAL ACQUIRED PRO FORMA PRO FORMA
ICN PRODUCTS(1) ADJUSTMENTS ICN
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 496,594 $ 70,947 $ -- $ 567,541
Cost of sales 228,070 21,910 (3,000) (2) 246,980
-------- ------- -------- --------
Gross profit 268,524 49,037 3,000 320,561
Selling, general and
administrative expenses 165,369 2,838 11,351 (3) 188,066
2,020 (4)
150 (4)
6,338 (5)
Lease revenue -- -- (2,333)(4) (2,333)
Research and development costs 13,210 -- -- 13,210
-------- ------- -------- --------
Income from operations 89,945 46,199 (14,526) 121,618
Translation and exchange loss, net 7,204 -- -- 7,204
Interest income (9,855) -- -- (9,855)
Interest expense 13,332 -- -- 13,332
-------- ------- -------- --------
Income before minority interest
and income taxes 79,264 46,199 (14,526) 110,937
Provision(benefit) for income taxes (12,311) -- 12,669 (6) 358
Minority interest 13,438 -- -- 13,438
-------- ------- -------- --------
Net income $ 78,137 $ 46,199 $ (27,195) $ 97,141
======== ======= ======== ========
Per share information:
Primary:
Net income per share $ 1.79 $ 2.13 (7)
======== ========
Shares used in per share computation 40,403 42,803
======== ========
Fully diluted:
Net income per share $ 1.66 $ 1.97 (7)
======== ========
Shares used in per share computation 46,864 49,264
======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
<PAGE>
ICN PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands, except per share information)
<TABLE>
<CAPTION>
HISTORICAL ACQUIRED PRO FORMA PRO FORMA
ICN PRODUCTS(1) ADJUSTMENTS ICN
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 614,080 $ 89,941 $ -- $ 704,021
Cost of sales 291,807 26,088 (4,000)(2) 313,895
-------- ------- -------- --------
Gross profit 322,273 63,853 4,000 390,126
Selling, general and
administrative expenses 192,441 3,598 14,390 (3) 224,269
3,462 (4)
200 (4)
10,178 (5)
Lease revenue -- -- (4,000)(4) (4,000)
Research and development costs 15,719 -- -- 15,719
-------- ------- -------- --------
Income from operations 114,113 60,255 (20,230) 154,138
Translation and exchange loss, net 2,282 -- -- 2,282
Interest income (3,001) -- -- (3,001)
Interest expense 15,780 -- -- 15,780
-------- ------- -------- --------
Income before minority interest
and income taxes 99,052 60,255 (20,230) 139,077
Provision(benefit) for income taxes (6,815) -- 16,010 (6) 9,195
Minority interest 18,939 -- -- 18,939
-------- ------- -------- --------
Net income $ 86,928 $ 60,255 $ (36,240) $ 110,943
======== ======= ======== ========
Per share information:
Primary:
Net income per share $ 2.40 $ 2.80 (7)
======== ========
Shares used in per share computation 34,919 38,519
======== ========
Fully diluted:
Net income per share $ 2.27 $ 2.63 (7)
======== ========
Shares used in per share computation 40,138 43,738
======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
<PAGE>
ICN PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997
(in thousands, except per share information)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
ICN ADJUSTMENTS ICN
---------- ----------- ----------
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 269,861 $ $ 269,861
Restricted cash 552 -- 552
Marketable securities 4,327 -- 4,327
Receivables, net 202,694 -- 202,694
Notes Receivable 130,000 -- 130,000
Inventories, net 123,471 -- 123,471
Prepaid expenses and other current assets 21,238 -- 21,238
---------- ---------- ----------
Total current assets 752,143 -- 752,143
Property, plant and equipment, net 300,902 -- 300,902
Deferred taxes, net 60,188 -- 60,188
Other assets 56,565 -- 56,565
Goodwill and intangibles, net 122,954 89,008 (8) 211,962
---------- ---------- ----------
Total assets $1,292,752 $ 89,008 $1,381,760
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $ 52,552 -- $ 52,552
Accrued liabilities 55,136 -- 55,136
Notes payable 9,745 -- 9,745
Current portion of long-term debt 176,674 -- 176,674
Income taxes payable 3,926 -- 3,926
---------- ---------- ----------
Total current liabilities 298,033 -- 298,033
Long-term debt less current portion:
Convertible into common stock 5,381 -- 5,381
Other long-term debt 320,321 -- 320,321
Deferred license and royalty income 12,885 -- 12,885
Other liabilities 22,174 -- 22,174
Minority interest 119,742 -- 119,742
Commitments and contingencies
Stockholders' equity:
Preferred stock, $ .01 par value; 10,000
shares authorized; 4 shares of Series B
issued and outstanding ($4,000
liquidation preference) 1 -- 1
Common stock, $ .01 par value; 100,000
shares authorized; 38,734 shares
outstanding) 387 -- 387
Additional capital 514,745 89,008 (8) 603,753
Retained earnings 38,277 -- 38,277
Foreign currency translation adjustments (39,194) -- (39,194)
---------- ---------- ----------
Total stockholders' equity 514,216 89,008 603,224
---------- ---------- ----------
Total liabilities and
stockholders' equity $1,292,752 $ 89,008 $1,381,760
========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
<PAGE>
ICN PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(in thousands)
The following is a summary of items and adjustments reflected in the Unaudited
Pro Forma Combined Condensed Financial Statements:
(1) Revenues and expenses related to the sale of products covered by the
Initial Product Rights are included in the Company's historical financial
statements since July 1, 1997 and accordingly the Acquired Products historical
financial statements include the revenues and direct expenses associated with
these products prior to that date. No revenues or expenses related to the sale
of the products covered by the Additional Product Rights are included in the
Company's historical financial statements. Accordingly, the Acquired Products
historical financial statements also include the revenues and direct expenses
associated with these products for all periods presented. Sales and cost of
goods sold do not include the results of operations related to the historical
manufacturing operations of the Plant as such operations remain with Roche
subsequent to the acquisition, and through the term of the lease. The Acquired
Products are not currently manufactured at the Plant.
(2) In connection with the Asset Purchase Agreement, Roche granted to the
Company credits against future purchases of products totaling $4,000 per year
for a two-year period. Accordingly, the pro forma adjustments include a
reduction of cost of sales of $3,000 and $4,000 for the nine months ended
September 30, 1997 and the year ended December 31, 1996, respectively.
(3) The historical selling, general and administrative expenses of the
Acquired Products for each of the periods presented are based upon the
Special-Purpose Financial Statements of F. Hoffman-La Roche Ltd., Hoffman-La
Roche Inc., and Roche Products Inc. included elsewhere herein. Such historical
amounts are the product of allocation methods used by management of Roche to
approximate the actual amounts of such direct expenses that might have been
incurred, were such information available on a product basis. Such amounts do
not include any allocations of indirect or nonoperating expenses related to the
Acquired Products, and the historical amounts of these costs are not indicative
of the costs that might be incurred by the Company in the future. The pro forma
adjustments related to selling, general and administrative expenses of $11,351
and $14,390 for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively, are based upon estimates obtained from Roche as
to the amount of indirect selling, general and administrative expenses that
might have been incurred had such information been available on a product basis.
However, there can be no assurance that the Company will achieve these levels of
selling, general and administrative costs in the future.
(4) During the Company's first two years of ownership of the Plant it will
lease the Plant to Roche. In the third year, upon assuming operating control of
the Plant, the Company will provide limited contract manufacturing services to
Roche. After that period, the capacity of the Plant will be utilized by the
Company for internal production requirements and third party manufacturing
services. However, there can be no guarantee that the Company will be successful
in providing third party manufacturing services. Under the terms of the lease,
Roche shall pay the Company an annual rental fee totaling $4,000; the first
year's rent is payable in the form of a credit against the purchase price for
the Plant and thereafter rent is payable in cash.
<PAGE>
ICN PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(in thousands)
The pro forma adjustments include rental income to be received under the
lease of $2,333 and $4,000 for the nine months ended September 30, 1997 and the
year ended December 31, 1996, respectively, representing the pro forma rental
income in excess of the amounts included in the Company's historical financial
statements since the date of acquisition of the Plant. The Company will be
responsible for paying property taxes on the Plant which total approximately
$200 annually and the pro forma adjustments include property taxes expenses of
$150 and $200 for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively. Depreciation on the Plant will be approximately
$3,462 annually, based upon the Company's basis in the Plant. The pro forma
adjustments of $2,020 and $3,462 for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively, represent the pro forma
depreciation in excess of the amounts included in the Company's historical
financial statements since the date of acquisition of the Plant, as if the
purchase and leaseback was consummated on January 1, 1996. During the term of
the lease, Roche will be responsible for all other operating costs.
(5) The Company will record amortization of the intangible assets related
to the product rights purchased from Roche, over an 18-year period, totaling
approximately $10,178 per year. The amortization is based upon a preliminary
valuation of approximately $183,200 for the Acquired Products. The pro forma
adjustments reflect amortization expense of $6,338 and $10,178 for the nine
months ended September 30, 1997 and the year ended December 31, 1996,
respectively, representing the pro forma amortization expense in excess of the
amounts included in the Company's historical financial statements since the date
of acquisition of the Initial Product Rights, as if the purchase of all of the
Product Rights had been consummated on January 1, 1996.
(6) Represents the tax effect of the acquisitions earnings and the pro
forma adjustments to earnings before taxes based on the estimated federal,
Puerto Rican and state statutory rates, which when combined are approximately
40%.
(7) The consideration for the Acquired Products consisted of 2 shares of
the Company's Series C Preferred Stock (convertible into 2,000 shares of the
Company's Common Stock) and 1,600 shares of the Company's Common Stock. These
shares have all been included in the determination of the Company's historical
net income from July 1, 1997. The weighted-average number of shares outstanding
used in the determination of the pro forma primary and fully diluted earnings
per share have been adjusted to reflect an additional 3,600 and 2,400 shares for
the year ended December 31, 1996 and the nine months ended September 30, 1997,
respectively. All of the Series C Preferred Stock was converted into shares of
the Company's common stock subsequent to September 30, 1997.
(8) The acquisition of the Additional Product Rights was consummated
subsequent to September 30, 1997. The $89,008 purchase price for the Additional
Product Rights was paid utilizing the price appreciation of the common stock
issued in August 1997 as consideration for the Initial Product Rights. The pro
forma adjustments reflect the additional intangible assets and the additional
capital which arise from the completion of this transaction.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-10661, 333-16409, 333-35167, 333-35241,
333-38901), and on Form S-8 (No. 33-56971) of ICN Pharmaceuticals, Inc. of our
report dated February 13, 1998 relating to the special-purpose financial
statement of F. Hoffmann-La Roche Ltd, Hoffmann-La Roche Inc., and Roche
Products Inc., which appears in the Current Report on Form 8-K/A of ICN
Pharmaceuticals, Inc. dated December 8, 1997.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
February 13, 1998
