Page 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): May 7, 1998 Alpharma Inc. (Exact Name of Registrant as Specified in Charter) Delaware 1-8593 22-2095212 (State or Other Jurisdiction of (Commission File (I.R.S. Employer Incorporation) Number) Identification Number) One Executive Drive Fort Lee, New Jersey 07024 (Address of Principal Executive Offices) (Zip code) Registrant's telephone number, including area code: (201)947-7774 Not Applicable (Former Name or Former Address, if Changed Since Last Report) Item 2. Acquisition or Disposition of Assets On May 7, 1998, Alpharma Inc. acquired all of the capital stock of Cox Investments Limited and its wholly owned subsidiary, Arthur H. Cox and Co. Ltd. and all of the capital stock of certain related marketing subsidiaries ("Cox") from Hoechst AG for approximately $192 million in cash, the assumption of bank debt which was repaid subsequent to the closing, and a further purchase price adjustment equal to an increase in the net assets of Cox from January 1, 1998 to the date of acquisition. The total purchase price including the purchase price adjustment and direct costs of the acquisition is approximately $198 million. Cox's main operations (which primarily consists of a manufacturing plant, warehousing facilities and a sales organization) are located in the United Kingdom with distribution and sales operations located in Scandinavia, the Netherlands and Belgium. Cox is a generic pharmaceutical manufacturer and marketer of tablets, capsules, suppositories, liquids, ointments and creams. Cox distributes its products to pharmacy retailers and pharmaceutical wholesalers primarily in the United Kingdom. The Company intends to continue the operation of the core UK business of Cox and to achieve benefits from leveraging the Cox business with the existing European pharmaceutical business of Alpharma. The Company also intends to expand the scope of Cox's operations geographically and to add to Cox's UK product base certain other pharmaceutical products of the Company. The Company financed the $198 million purchase price and related debt repayments from borrowings under its existing long- term Revolving Credit Facility and short-term lines of credit. The $180 million Revolving Credit Facility ("RCF")(which includes the names of the banks participating therein) was used to fund the principal portion of the purchase price. At the end of March 1998, the Company repaid approximately $162 million borrowings under the RCF with the proceeds from the issuance of convertible subordinated notes as reported in the Company's current report on Form 8-K dated March 30, 1998. Such repayment created the capacity under the RCF to incur the borrowings used to finance the acquisition of Cox. The RCF has been filed with the Securities and Exchange Commission as Exhibits 10.1, 10.1A and 10.1B to the Company's 1997 Annual Report on Form 10-K and is incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Acquired Companies. i) Report of the Independent Chartered Accountants (F-3 to F-4) ii) Amalgamated Cox Companies Combined Financial Statements for the year ended December 31, 1997 (F-5 to F-23). iii) Amalgamated Cox Companies Unaudited Combined Financial Statements for the periods ended March 31, 1997 and 1998 (F-24 to F-31). (b) Pro Forma Financial Information. i) Alpharma Inc. Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1998 (F-33). ii) Alpharma Inc. Unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 1997 (F-34). iii) Alpharma Inc. Unaudited Pro Forma Condensed Combined Statement of Income for the three months ended March 31, 1998 (F-35). iv) Notes to Unaudited Pro Forma Condensed Combined Financial Statements (F-36 to F-41). (c) Exhibits. 2.1 Agreement for the sale and purchase of the issued share capital of Cox Investments Limited, dated April 30, 1998 between Hoechst AG, Alpharma (U.K.) Limited, and Alpharma Inc. (Filed with Form 8-K on May 7, 1998.) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Alpharma Inc. (Registrant) Date: July 21, 1998 /s/ Jeffrey E. Smith Jeffrey E. Smith Vice President, Finance and Chief Financial Officer AMALGAMATED COX COMPANIES Cox Investments Limited - UK Arthur H Cox & Co Limited - UK Norcox Pharma AB - Sweden Norcox Pharma AS - Norway Nedcox Pharma BV - Netherlands Cox Pharma Belgium NV-SA COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1997 and for the three month period ended 31 March 1998 INDEX Report of independent chartered accountants F-3 to F-4 Profit and loss account F-5 Balance sheet F-6 Cash flow statement F-7 Notes to the financial statements F-8 to F-23 Unaudited combined financial statements for the periods ended 31 March 1997 and 31 March 1998 F-24 to F-31 REPORT OF THE INDEPENDENT CHARTERED ACCOUNTANTS To the directors and shareholder of Amalgamated Cox Companies: We have audited the accompanying combined financial statements of the Amalgamated Cox Companies for the year ended 31 December 1997 as set out on pages 2 to 18. They have been prepared on the basis set out in Note 1 to the combined financial statements. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the UK which do not differ in any material respect from US auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the combined financial statements are free of material misstatement. An audit includes examination, on a test basis, of evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Amalgamated Cox Companies as at 31 December 1997 and the combined results of their operations and their cash flows for the year ended 31 December 1997 in conformity with accounting principles generally accepted in the UK on the basis set out in Note 1 to these financial statements. The financial statements have been prepared in accordance with accounting principles generally accepted in the UK which differ in certain respects from those generally accepted in the US. The effects of the major differences in the determination of net income and shareholders' equity are shown in Note 23 to the financial statements. COOPERS & LYBRAND Chartered Accountants Plymouth July 15, 1998 AMALGAMATED COX COMPANIES PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1997 NOTE 1997 BP000 2. Turnover - continuing operations 55,205 3. Net operating costs - continuing operations 48,326 -------- Operating profit - continuing operations 6,879 4. Interest payable (net) 623 -------- Profit on ordinary activities before taxation 6,256 5. Taxation on profit on ordinary activities 2,030 -------- 10. Profit retained for the financial year 4,226 ===== The Amalgamated Cox Companies have no recognised gains and losses other than the profits above and therefore no separate statement of recognised gains and losses has been presented. There is no difference between the profit on ordinary activities before taxation and the retained profit for the period stated above, and their historical cost equivalents. AMALGAMATED COX COMPANIES BALANCE SHEET AT 31 DECEMBER 1997 NOTE 1997 ASSETS BP000 Fixed assets: 6. Tangible assets 12,815 --------- Current assets: 7. Stocks 11,564 8. Debtors 10,242 Cash at bank and in hand 278 --------- 22,084 --------- 34,899 ===== LIABILITIES Capital and reserves: 9. Called up ordinary shares 2,809 Share premium account 3,201 Other reserves 644 10. Profit and loss account 7,143 -------- 13,797 --------- 11. Provisions for liabilities & charges 1,361 --------- Creditors: 12. Loans & overdrafts 6,679 13. Other creditors 13,062 --------- 19,741 --------- 34,899 ===== AMALGAMATED COX COMPANIES CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 1997 NOTE 1997 1997 BP000 BP000 15. Net cash inflow from operating activities 7,671 Returns on investments and servicing of finance Interest received 40 Interest paid (663) --------- (623) Taxation Corporation tax paid (519) Advance corporation tax paid (500) --------- (1,019) Capital expenditure & financial investment (1,019) Payments to acquire fixed assets (1,786) Receipts from sales of fixed assets 30 --------- (1,756) --------- Net cash inflow before management of liquid resources & financing 4,273 Financing Loan advances 22,997 Loan repaid (28,271) Issue of shares 195 Other reserves 644 --------- (4,435) -------- 16. (Decrease) in cash in the period (162) ===== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1997 1. Accounting Policies The financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom. Because the combined financial statements combine the accounts of companies which at the relevant date did not comprise a group for legal reporting purposes, the financial statements cannot be consolidated in accordance with Financial Reporting Standard FRS 2, Accounting for subsidiary undertakings, and do not constitute statutory accounts. The accounts of Cox Investments Limited and its wholly owned subsidiary Arthur H Cox Limited ("the Cox companies") have been included by combining their balance sheets and profit and loss accounts for the full year. The accounts of Norcox Pharma AB (Sweden), Norcox Pharma AS (Norway), Nedcox Pharma BV (Netherlands) and Cox Pharma Belgium NV (collectively "the affiliates") have been included by combining their balance sheets and profit and loss accounts for the full year. All appropriate intercompany transactions have been eliminated. Such intercompany transactions include the elimination of intercompany sales, debtors and creditors, share capital and investments. On 7 May 1998 the Cox companies and the affiliates were purchased by Alpharma Inc. ("Alpharma") a United States company. Prior to their acquisition by Alpharma, the Cox companies and the affiliates were wholly-owned, but otherwise unrelated subsidiaries of Hoechst AG ("Hoechst"). Under the terms of the purchase agreement, Alpharma paid to Hoechst $192 million in cash and assumed certain bank debt of the Cox companies and the affiliates in exchange for all outstanding stock of each of the Cox companies and the affiliates. The financial position and results of operations of the Cox companies and the affiliates have been combined to reflect the historical information of the companies acquired by Alpharma. The principal accounting policies of the combined accounts are set out below. a) Basis of accounting The financial statements are prepared in accordance with the historical cost convention. b) Turnover Turnover, which excludes value added tax and sales between the Amalgamated Cox companies, represents the invoiced value of goods and services supplied. c) Tangible fixed assets The cost of tangible fixed assets is their purchase cost, together with any incidental expenses of acquisition. Depreciation is calculated to write down the cost of the following tangible fixed assets by equal annual instalments over their expected useful economic lives. The periods generally applicable are:- Long leaseholds 40 years Plant & equipment 5 - 10 years Motor vehicles 4 years d) Government grants Grants that relate to specific capital expenditure are treated as deferred income which is then credited to the profit and loss account over the related assets' useful economic life. AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1997 e) Stocks Stock and work in progress are stated at the lower of cost and net realisable value. In the case of raw materials cost comprises purchase price, calculated on a first in, first out basis. In the case of work in progress and finished goods, cost consists of direct materials, direct labour and attributable production overheads. Attributable overheads have been allocated to production on the basis of normal activity. Net realisable value is the estimated selling price less all further costs to completion and all costs to be incurred in marketing, selling and distribution. f) Deferred taxation Deferred taxation is accounted for on all material timing differences to the extent that it is probable that an asset or a liability will crystallise. g) Research and development expenditure Research and development expenditure is charged to the profit and loss account in the year in which it is incurred. h) Contributions to pension funds. Contributions are made for the employees of Arthur H Cox & Co Limited to The Arthur H Cox & Co Limited Retirement Benefit Scheme which is administered by Lambert Fenchurch Financial Services Limited, and the funds are managed by Mercury Asset Management Limited. Pension costs are accounted for on the basis of charging the expected costs of providing pensions over the period during which the company benefits from the employees' services. The effects of variations from regular costs are spread over the expected average remaining service lives of members of the scheme. AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 i) Foreign currencies Assets and liabilities expressed in foreign currencies are stated in sterling at the exchange rates ruling at the year end. Exchange differences relating to foreign currency transactions are taken to the profit and loss account in the year in which they arise. The profit and loss accounts of the affiliates have been translated to sterling using the average exchange rate for the period. j) Operating leases Costs in respect of operating leases are charged on a straight line basis over the lease term. 2. Turnover and profit on ordinary activities before taxation. The turnover and profit before taxation is attributable to one activity, the manufacture and marketing of pharmaceutical products. An analysis of turnover by geographical market is given below: 1997 BP000 United Kingdom 48,571 Overseas 6,634 --------- 55,205 ===== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 3. Net operating costs Net operating costs are made up as follows: 1997 BP000 Change in stocks of finished goods and work in progress (1,871) Cost of materials, supplies and other charges 48,605 Depreciation 1,434 Profit on sale of fixed assets (3) Operating leases - hire of plant and machinery 260 Operating leases - property rental 112 Other operating income (211) ---------- 48,326 ====== 4. Interest Payable: 1997 BP000 On loans from Hoechst group companies 8 On bank loan, overdraft and other loans - repayable within 5 years, otherwise than by instalments 653 Interest on overdue tax 2 --------- 663 Receivable: 40 --------- Net interest payable 623 ===== 5. Taxation on profit on ordinary activities 1997 BP000 United Kingdom corporation tax at 31.5% 1,925 Deferred taxation 50 Overseas taxation 55 -------- 2,030 ===== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 6. Tangible fixed assets Land & long Plant & Total Leaseholds Equipment BP000 BP000 BP000 Cost At 31 December 1997 6,004 15,922 21,926 ===== ===== ===== Depreciation Provided in the year 133 1,301 1,434 ===== ===== ===== At 31 December 1997 1,080 8,031 9,111 ===== ===== ===== Net book value At 31 December 1997 4,924 7,891 12,815 ===== ===== ===== Included in the net book value of land and long leaseholds is freehold land of BP397,000 AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 7. Stocks 1997 BP000 Raw materials 2,436 Work in progress 2,043 Finished goods 7,085 --------- 11,564 ===== 8. Debtors 1997 BP000 Amounts falling due within one year: Trade debtors 9,650 Amounts owed by Hoechst group companies 390 Other debtors 6 Prepayments and accrued income 196 --------- 10,242 ===== Cox Other 9. Share capital Investments Companies Total BP000 BP000 BP000 Allotted called up and fully paid Ordinary shares 2,416 393 2,809 ===== ===== ===== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 10. Profit and loss account Total BP 000 At 1 January 1997 6,892 Combination adjustment (3,975) Retained profit for the year 4,226 ---- 31 December 1997 7,143 ===== The combination adjustment arises on the elimination of share capital and share premium in Arthur H Cox & Co Limited and the investment in subsidiary in Cox Investments Limited. 11. Provision for liabilities & charges 1997 BP000 Deferred taxation: the provision represents the full potential liability Accelerated capital allowances 1,361 -------- Balance at 31 December 1997 1,361 ===== Balance at 1 January 1997 1,311 Transfer from profit & loss account (Note 5) 50 -------- Balance at 31 December 1997 1,361 ===== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 12. Loans and overdrafts Repayable within one year: 1997 BP000 Bank overdraft 369 Amounts owed to Hoechst group companies 6,310 --------- Total loans & overdrafts 6,679 ===== 13. Other creditors Amounts falling due within one year 1997 BP000 Trade creditors 9,322 Amounts owed to Hoechst group companies 188 Social security and other taxation 651 Corporation tax 1,772 Accruals and deferred income 1,129 --------- 13,062 ===== 14. Reconciliation of movements in shareholders' funds 1997 BP000 Profit for the financial year 4,226 Other reserves 644 Increase in share capital 195 Opening shareholders' funds 8,732 ---------- Closing shareholders' funds 13,797 ====== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 15. Net cash flow from operating activities 1997 BP000 Operating profit 6,879 Depreciation 1,434 Gain on sale of tangible assets (3) (Increase) in stocks (1,723) Increase in creditors 649 Decrease in debtors 525 (Decrease) in provisions (90) --------- 7,671 ===== 16. Decrease in cash and cash equivalents Bank Cash at bank Total overdraft and in hand BP000 BP000 BP000 At 1 January 1997 (23) 94 71 Movement (346) 184 (162) -------- -------- -------- At 31 December 1997 (369) 278 (91) ===== ===== ===== 17. Analysis of net debt At 1 At 1 January 1997 Cash Flow December 1997 BP000 BP000 BP000 Cash in hand and at bank 94 184 278 Overdraft (23) (346) (369) Debt due within 1 year (11,584) 5,274 (6,310) ---------- ---------- ---------- (11,513) 5,112 (6,401) ====== ====== ====== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 18. Capital commitments 1997 BP000 Future capital expenditure contracted for but not provided for 3,409 ===== 19. Lease commitments 1997 BP000 There are annual commitments under non- cancellable operating leases as follows: Land and buildings Expiring 2 to 5 years inclusive 80 Other Expiring in 1 year 63 Expiring 2 to 5 years inclusive 83 ------ 226 ==== 20. Transactions with directors There is a collateralized loan of BP6,000 made to Mr D J Green, a director of Arthur H Cox & Co. Limited, to enable him to purchase a house following the relocation of the Company's principal place of operations to Barnstaple. The loan carries interest at the rate of 5% per annum and is repayable if Mr Green should leave the service of the company. AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 21. Ultimate parent company At 31 December 1997, the directors regarded Hoechst Aktiengesellschaft, a company incorporated in Germany, to be the ultimate parent company of the Amalgamated Cox Companies, until the sale of those companies to Alpharma Inc. on 7 May 1998. Copies of the financial statements of Hoechst AG can be obtained from Hoechst AG, FRW/Kapitalmarkt, Post Fach 80 03 20, D-65926 Frankfurt am Main, Germany. 22. Related party transactions The Amalgamated Cox Companies have taken advantage of the exemption under Financial Reporting Standard 8 for 90% subsidiaries not to disclose intra group transactions. 23. Summary of differences between UK and US Generally Accepted Accounting Principles (GAAP) The accompanying combined financial statements have been prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP"), which differ in certain material respects from generally accepted accounting principles in the United States ("US GAAP"). The following is a summary of the material adjustments to profit for the financial year and shareholders' funds which would have been required if US GAAP had been applied instead of UK GAAP. Reconciliation of profit for the financial year Year ended 31 December 1997 Notes BP000 Profit for the financial year as reported under UK GAAP 4,226 US GAAP adjustments: Restructuring costs (i) (90) Pensions (ii) 9 Capitalised lease adjustment (iii) 5 Interest capitalisation and related amortisation (iv) (9) Deferred taxation on US GAAP adjustments 26 ______ Net income under US GAAP 4,167 ====== Reconciliation of Shareholders' funds At 31 December Notes 1997 BP000 Shareholders' funds as reported under UK GAAP 13,797 US GAAP adjustments: Restructuring costs (i) - Pensions (ii) 480 Capitalised lease adjustments (iii) (51) Interest capitalisation and related amortisation (iv) 156 Deferred taxation on US GAAP adjustments (181) ______ Shareholders' funds under US GAAP 14,201 ===== AMALGAMATED COX COMPANIES NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 1997 A summary of the principal differences applicable to the financial statements are set out below: (i) Restructuring costs Under UK GAAP, when a decision has been taken to restructure part of the business, provisions are made for redundancy and any other costs. US GAAP requires a number of specific criteria to be met before such costs can be recognised as an expense. Among these is the requirement that all the significant actions arising from the restructuring and their expected completion dates must be identified by the balance sheet date. In addition, US GAAP is more prescriptive than UK GAAP with respect to the nature of items which may be classified as restructuring or exit costs. Costs which do not qualify are recognised as liabilities when an obligation exists to pay cash or otherwise sacrifice assets and are classified as an operating expense of the business. The adjustment reflects costs incurred in the 1996 financial statements that would not have qualified for accrual under U.S. GAAP and therefore would reduce earnings in 1997. (ii) Pensions Under UK GAAP the cost of providing pension benefits is expensed over the average expected service lives of eligible employees in accordance with the provisions of SSAP 24 "Accounting for pensions". SSAP 24 aims to produce an estimate of cost based on long-term actuarial assumptions. Variations from the regular pension cost arising from, for example, deficiencies or surpluses, are charged or credited to the profit and loss account over the expected average remaining service lives of current employees in the schemes. Under US GAAP, Statement of Financial Accountings Standards ("SFAS") No. 87 "Employers Accounting for Pensions" requires the use of the projected unit credit method to determine pension costs. Annual valuations must be carried out. The present value of the pension obligation is determined using a current market discount rate such as that of a high quality, fixed rate debt instrument, and the plan assets are valued on a market to market basis. Actuarial gains and losses that arise within a prescribed corridor do not have to be amortised; those outside the corridor are amortised over the average expected remaining service lives. The corridor is the greater of 10% of the projected benefit obligation or 10% of the market related value of plan assets at the beginning of the year. (iii) Capital leases Under UK GAAP, the company has a lease arrangement that is classified as an operating lease as a result of a substance over form determination that there has been no transfer of the risks of ownership under the agreement. Under US GAAP, the decision as to whether the lease is a capital lease is determined by a series of form driven requirements focused on the legal form of the agreement that results in the capitalisation of the related leased assets. (iv) Interest capitalisation Under UK GAAP, the capitalisation of interest is optional and interest has not been capitalised on capital construction projects. Under US GAAP, interest incurred on an avoided cost basis during the construction of fixed assets is capitalised and amortised over the life of the asset, following its commissioning. (v) Cash flow information Under UK GAAP, the combined cash flow statement is presented in accordance with UK Financial Reporting Standard No. 1, as revised (FRS 1). The Statements prepared under FRS 1 present substantially the same information as that required under US GAAP as interpreted by SFAS No. 95 "Statement of Cash Flows." Under UK GAAP cash flows are presented for operating activities; return on investments; taxation; acquisitions and disposals; equity dividends paid; and management of liquid resources and financing activities. US GAAP requires the classification of cash flows as resulting from operating, investing, and financing activities. Changes in balances of cash and overdrafts are classified within financing activities. A consolidated statement of cash flows is set out below in accordance with the classification requirements and definition of cash under US GAAP: Year ended 31 December 1997 BP000 Cash provided by operating activities 6,029 Cash used in investing activities (1,756) Cash used in financing activities (4,089) Increase in cash for the period 184 Cash and cash equivalents at the beginning of the year 94 Cash and cash equivalents at the end of the year 278 AMALGAMATED COX COMPANIES UNAUDITED PROFIT AND LOSS ACCOUNT FOR THE PERIODS ENDED 31 MARCH 1998 AND 31 MARCH 1997 3 months to 3 months to 31 March 1998 31 March 1997 BP 000 BP 000 Turnover - continuing operations 13,908 12,440 Net operating costs - continuing operations 12,141 11,150 Operating profit - continuing operations 1,767 1,290 Interest payable (net) 131 152 Profit on ordinary activities before taxation 1,636 1,138 Taxation on ordinary activities 517 372 Profit for the financial year 1,119 766 Retained profit for the year 1,119 766 AMALGAMATED COX COMPANIES UNAUDITED BALANCE SHEET FOR THE PERIODS ENDED 31 MARCH 1998 AND 31 DECEMBER 1997 31 March 31 December 1998 1997 BP 000 BP 000 ASSETS Fixed assets: Tangible assets 13,268 12,815 Current assets: Stocks 11,935 11,564 Debtors 10,196 10,242 Cash at bank and in hand 329 278 22,460 22,084 35,728 34,899 LIABILITIES Capital and reserves: - - Called up ordinary shares 2,785 2,809 Share premium account 3,201 3,201 Other reserves 644 644 Profit and loss account 8,255 7,143 14,885 13,797 Provision for liabilities and charges 1,361 1,361 Creditors: Loans and overdrafts 7,873 6,679 Other creditors 11,609 13,062 19,482 19,741 35,728 34,899 AMALGAMATED COX COMPANIES UNAUDITED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 MARCH 1998 AND 31 MARCH 1997 3 months to 3 months to 31 March 1998 31 March 1997 BP 000 BP 000 Net cash in flow from operating activities (442) 677 Returns on investments and servicing of finance Interest paid (118) (152) Taxation U.K. corporation tax paid 148 - Capital expenditure and financial investment Payments to acquire fixed assets (794) (62) Net cash (outflow)/inflow before management of liquid resources and financing (1,206) 463 Financing Loan repayment - (11,074) Loan advances 1,563 - 1,563 (11,074) Increase in cash in the period 357 (10,611) AMALGAMATED COX COMPANIES NOTES TO THE UNAUDITED FINANCIAL STATEMENTS FOR THE PERIODS ENDED 31 MARCH 1998 AND 31 MARCH 1997 1. Accounting policies The financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom. Because the combined financial statements combine the accounts of companies which at the relevant date did not comprise a group for legal reporting purposes, the financial statements cannot be consolidated in accordance with Financial Reporting Standard FRS 2, Accounting for subsidiary undertakings, and do not constitute statutory accounts. The accounts of Cox Investments Limited and its wholly owned subsidiary Arthur H Cox Limited ("the Cox companies") have been included by combining their balance sheets and profit and loss accounts for the full year. The accounts of Norcox Pharma AB (Sweden), Norcox Pharma AS (Norway), Nedcox Pharma BV (Netherlands) and Cox Pharma Belgium NV (collectively "the affiliates") have been included by combining their balance sheets and profit and loss accounts for the full year. All appropriate intercompany transactions have been eliminated. Such intercompany transactions include the elimination of intercompany sales, debtors and creditors, share capital and investments. These unaudited combined condensed financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Cox companies and affiliates financial position and operating results. Since these financial statements are condensed certain footnotes and other information has been omitted; therefore, these financial statements should be read in conjunction with the combined financial statements of Amalgamated Cox Companies for the year ended 31 December 1997. On 7 May 1998 the Cox companies and the affiliates were purchased by Alpharma Inc. ("Alpharma") a United States company. Prior to their acquisition by Alpharma, the Cox companies and the affiliates were wholly-owned, but otherwise unrelated subsidiaries of Hoechst AG ("Hoechst"). Under the terms of the purchase agreement, Alpharma paid to Hoechst $192 million in cash and assumed certain bank debt of the Cox companies and the affiliates in exchange for all outstanding stock of each of the Cox companies and the affiliates. The financial position and results of operations of the Cox companies and the affiliates have been combined to reflect the historical information of the companies acquired by Alpharma. 2 Stocks Stock and work in progress are stated at the lower of cost and net realisable value. In the case of raw materials cost comprises purchase price, calculated on a first in, first out basis. In the case of work in progress and finished goods, cost consists of direct materials, direct labour and attributable production overheads. Attributable overheads have been allocated to production on the basis of normal activity. Net realisable value is the estimated selling price less all further costs to completion and all costs to be incurred in marketing, selling and distribution. 31 March 1998 BP 000 Raw materials 2,196 Work in progress 2,315 Finished goods 7,424 11,935 AMALGAMATED COX COMPANIES NOTES TO THE UNAUDITED FINANCIAL STATEMENTS FOR THE PERIODS ENDED 31 MARCH 1998 AND 31 MARCH 1997 3. Summary of differences between UK and US Generally Accepted Accounting Principles ("GAAP") The accompanying unaudited combined financial statements have been prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP"), which differ in certain material respects from generally accepted accounting principles in the United States ("US GAAP"). The following is a summary of the material adjustments to profit for the financial period and shareholders' funds which would have been required if US GAAP had been applied instead of UK GAAP. 31 March 1998 1997 Notes BP 000 BP 000 Profit for the financial period as reported under UK GAAP 1,119 766 US GAAP adjustments: Restructuring (i) - 3 Pensions (ii) (38) 30 Capital lease adjustments (iii) 13 1 Interest capitalisation and related amortisation (iv) (2) (2) Deferred taxation on US GAAP adjustments 8 (10) 1,100 788 Reconciliation of shareholders' funds At 31 March 1998 Notes BP 000 Shareholders' funds as reported under UK GAAP 14,885 US GAAP adjustments: Restructuring (i) - Pensions (ii) 442 Capital lease adjustment (iii) (38) Interest capitalisation and related amortisation (iv) 154 Deferred taxation on US GAAP adjustments (173) Shareholders' funds under US GAAP 15,270 AMALGAMATED COX COMPANIES NOTES TO THE UNAUDITED FINANCIAL STATEMENTS FOR THE PERIODS ENDED 31 MARCH 1998 AND 31 MARCH 1997 A summary of the principal differences applicable to the financial statements is set out below: (i) Restructuring costs Under UK GAAP, when a decision has been taken to restructure part of the Group's business, provisions are made for redundancy and other costs. US GAAP requires a number of specific criteria to be met before such costs can be recognised as an expense. Among these is the requirement that all the significant actions arising from the restructuring and their expected completion dates must be identified by the balance sheet date. In addition, US GAAP is more prescriptive than UK GAAP with respect to the nature of items which may be classified as restructuring or exit costs. Costs which do not qualify are recognised as liabilities when an obligation exists to pay cash or otherwise sacrifice assets and are classified as an operating expense of the business. (ii) Pensions Under UK GAAP the cost of providing pension benefits is expensed over the average expected service lives of eligible employees in accordance with the provisions of SSAP 24 "Accounting for pensions". SSAP 24 aims to produce an estimate of cost based on long-term actuarial assumptions. Variations from the regular pension cost arising from, for example, deficiencies or surpluses, are charged or credited to the profit and loss account over the expected average remaining service lives of current employees in the schemes. Under US GAAP, SFAS 87 "Employers Accounting for Pensions" requires the use of the projected unit credit method to determine pension cost. Annual valuations must be carried out. The present value of the pension obligation is determined using a current market discount rate such as that of a high quality, fixed rate debt instrument, and the plan assets are valued on a market to market basis. Actuarial gains and losses that arise within a prescribed corridor do not have to be amortised; those outside the corridor are amortised over the average expected remaining service lives. The corridor is the greater of 10% of the projected benefit obligation or 10% of the market related value of plan assets at the beginning of the year. (iii) Capital leases Under UK GAAP the company has a lease arrangement that is classified as an operating lease as a result of a substance over form determination that there has been no transfer of the risks of ownership under the agreement. Under US GAAP the decision as to whether the lease is a capital lease is determined by a series of form driven requirements focused on the legal form of the agreement that results in the capitalisation of the related assets. (iv) Interest capitalisation Under UK GAAP, the capitalisation of interest is optional and the Amalgamated Cox Companies have not capitalised any interest on capital construction projects. Under US GAAP, interest incurred on an avoided cost basis during the construction of fixed assets is capitalised and amortised over the life of the asset, following its commissioning. (v) Cash flow information Under UK GAAP, the Combined Cash Flow Statement is presented in accordance with UK Financial Reporting Standard No 1, as revised (FRS 1). The Statements prepared under FRS 1 present substantially the same information as that required under US GAAP as interpreted by SFAS 95. Under UK GAAP cash flows are presented for operating activities; return on investments; taxation; acquisitions and disposals; equity dividends paid; and management of liquid resources and financing activities. US GAAP requires the classification of cash flows as resulting from operating, investing, and financing activities. Changes in balances of cash overdrafts are classified within financing activities. Alpharma Inc. Index to Unaudited Pro Forma Condensed Combined Financial Statements Balance Sheet as of March 31, 1998 F-33 Statement of Income for the Year Ended December 31, 1997 F-34 Statement of Income for the Three Months Ended March 31, 1998 F-35 Notes to the Unaudited Pro Forma Condensed Combined Financial Statements F-36 to F-41 Alpharma Inc. Unaudited Pro Forma Condensed Combined Balance Sheet As of March 31, 1998 (In thousands) Pro Forma Pro Alpharma Cox Adjust- Forma Historical Actual ments Combined Assets Current assets: Cash and cash $ 10,499 $550 $ - $11,049 equivalents Accounts receivable, net 113,429 17,041 - 130,470 Inventories 124,606 19,947 1,300(b) 145,853 Prepaid expenses and other current assets 12,942 738 - 13,680 Total current assets 261,476 38,276 1,300 301,052 Property, plant and equipment, net 195,943 22,369 12,100(b) 230,412 Intangible assets, net 146,255 - 161,100(b) 307,355 Other assets and deferred charges 12,776 - - 12,776 Total assets $616,450 $60,645 $174,500 $851,595 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 6,616 $ - $ - $ 6,616 Short-term debt 8,600 - 31,158(a) 39,758 Accounts payable and accrued expenses 71,355 19,423 - 90,778 Accrued and deferred income taxes 5,529 2,564 400(b) 8,493 Total current liabilities 92,100 21,987 31,558 145,645 Long-term debt 252,349 13,158 166,842(a) 432,349 Deferred income taxes 25,926 - 3,700(b) 29,626 Other non-current liabilities 8,227 - - 8,227 Stockholders' equity 237,848 25,500 (27,600)(c) 235,748 Total liabilities and stockholders' equity $616,450 $60,645 $174,500 $851,595 See accompanying notes to the unaudited pro forma condensed combined financial statements. Alpharma Inc. Unaudited Pro Forma Condensed Combined Statement of Income For the year ended December 31, 1997 (In thousands, except per share data) Pro Forma Pro Alpharma Cox Adjust- Forma Historical Actual ments Combined Total revenue $500,288 $91,370 $ - $591,658 Cost of sales 289,235 68,162 - 357,397 Gross profit 211,053 23,208 - 234,261 Selling, general and administrative 164,155 11,948 5,200(d) 181,303 expenses Operating income 46,898 11,260 (5,200) 52,958 Interest expense (18,581) (1,046) (11,900)(e) (31,527) Other income (expense), (567) - - (567) net Income before provision for 27,750 10,214 (17,100) 20,864 income taxes Provision for income 10,342 3,317 (4,946)(f) 8,713 taxes Net income $ 17,408 $ 6,897 $(12,154) $12,151 Average common share outstanding: Basic 22,695 22,695 Diluted 22,780 22,780 Earnings per share: Basic $0.77 $0.54 Diluted $0.76 $0.53 See accompanying notes to the unaudited pro forma condensed combined financial statements. Alpharma Inc. Unaudited Pro Forma Condensed Combined Statement of Income For the three months ended March 31, 1998 (In thousands, except per share data) Pro Forma Alpharma Cox Adjust- Pro Historical Actual ments Forma Combined Total revenue $126,562 $ 22,948 $ - $149,510 Cost of sales 73,145 17,119 - 90,264 Gross profit 53,417 5,829 - 59,246 Selling, general and administrative 40,007 2,955 1,300(d) 44,262 expenses Operating income 13,410 2,874 (1,300) 14,984 Interest expense (4,490) (219) (2,975)(e) (7,684) Other income (expense), (201) - - (201) net Income before provision for 8,719 2,655 (4,275) 7,099 income taxes Provision for income 3,317 840 (1,237)(f) 2,920 taxes Net income $ 5,402 $ 1,815 $ (3,038) $ 4,179 Average common share outstanding: Basic 25,350 25,350 Diluted 25,713 25,713 Earnings per share: Basic $0.21 $0.16 Diluted $0.21 $0.16 See accompanying notes to the unaudited pro forma condensed combined financial statements. Alpharma Inc. Notes to Unaudited Pro Forma Condensed Combined Financial Statements (In thousands of dollars) 1. Basis of Presentation The unaudited pro forma condensed combined financial statements (pro forma financials) are presented for illustrative purposes only, giving effect to the acquisition, as described and therefore are not necessarily indicative of the operating results and financial position that might have been achieved had the combination occurred as of an earlier date, nor are they necessarily indicative of operating results and financial position which may occur in the future. On May 7, 1998, Alpharma Inc. acquired all of the capital stock of Cox Investments Limited and its wholly owned subsidiary, Arthur H. Cox and Co., Ltd. and all of the capital stock of certain related marketing subsidiaries ("Cox") from Hoechst AG for approximately $192 million in cash, the assumption of bank debt which was repaid subsequent to the closing, and a further purchase price adjustment equal to an increase in the net assets of Cox from January 1, 1998 to the date of acquisition. The total purchase price including the purchase price adjustment and direct costs of the acquisition is approximately $198 million. Cox's main operations (which primarily consists of a manufacturing plant, warehousing facilities and a sales organization) are located in the United Kingdom with distribution and sales operations located in Scandinavia, the Netherlands and Belgium. Cox is a generic pharmaceutical manufacturer and marketer of tablets, capsules, suppositories, liquids, ointments and creams. Cox distributes its products to pharmacy retailers and pharmaceutical wholesalers primarily in the United Kingdom. The Company intends to operate Cox by continuing its core U.K. operations with the addition of certain efficiencies resulting from the leveraging of the Cox business with the historic European pharmaceutical business of Alpharma while expanding the scope of Cox's operations geographically and adding to Cox's U.K. sales base certain other pharmaceuticals products of the Company. The acquisition will be accounted for in accordance with the purchase method. The accompanying unaudited pro forma condensed combined financial statements reflect the acquisition as if it occurred as of the beginning of the periods presented for the income statements and as of March 31, 1998 for the balance sheet. The financial statements of Cox which were originally prepared on a U.K. basis have been adjusted to U.S. GAAP for pro forma purposes. The actual results of Cox will be consolidated with the Company from the date of acquisition (May 7, 1998). The pro forma balance sheet includes a preliminary allocation of the purchase price which will be adjusted during the allocation period based on a detail review of the assets and liabilities acquired. 2. Translation of Cox's financial statements. The British pound is the functional currency for Cox's operations. The exchange rate of the British pound into United States dollars as of March 31, 1998 was GBP 1.6713 to $1.00. The average exchange rates for the year ended December 31, 1997 and the three month period ended March 31, 1998 were GBP 1.6551 to $1.00 and GBP 1.6500 to $1.00, respectively. 3. Pro Forma Adjustments - Balance Sheet at March 31, 1998 The unaudited pro forma balance sheet gives effect to the acquisition as if it had been consummated on March 31, 1998. To record the purchase of Cox and record a preliminary purchase price allocation: Purchase price: Paid in cash (including required purchase price adjustment and direct costs of $198,000(a) acquisition) Cox equity at 3/31/98 25,500(c) Amount to be allocated $172,500 Allocated as follows: Inventory $ 1,300(b) Property, plant and equipment 12,100(b) In-process research and development costs 2,100(c) (R&D) Deferred taxes (4,100)(b) Intangible assets and goodwill 161,100(b) $172,500 (a) Purchase price financed with: Short term debt $ 31,158 Long term debt - Revolving credit agreement 180,000 Long term debt - Cox (repaid) (13,158) $198,000 (b) Allocation of purchase price in excess of Cox net book value: Inventory write up $1,300 Property, plant and equipment (PP&E) write up $12,100 Deferred taxes on write-up of inventory and PP&E $(4,100) Intangible assets and goodwill $161,100 (c) Elimination of Cox Equity $25,500 Allocated in process R&D which is written off immediately after acquisition 2,100 $27,600 4. Pro forma adjustments - Statements of Income for the year ended December 31, 1997 and three months ended March 31, 1998 The unaudited pro forma income statements assume the purchase as of the beginning of each period presented. The adjustments are as follows: For the Year For the Ended three months December 31, ended March 1997 31, 1998 (d) Depreciation expense $600 $150 (f) Tax benefit @ 31% $186 $47 To record depreciation on an estimated fixed asset write up based on an approximate composite 20 year life. (d) Amortization of intangibles $4,600 $1,150 To record amortization of intangibles based on a 35 year life. (Both are included in selling, general and administrative expenses.) (e) Interest expense @ 6.0% $11,900 $2,975 (f) Tax benefit @ 40% $4,760 $1,190 To record interest expense on assumed average borrowings of $198,000 and related tax benefit. For each 1/4% change in interest rates interest expense would increase/decrease by approximately $500. The interest rate of 6% used for the pro forma condensed combined statements of income is supported by the fact that the purchase was made possible from the Company's issuance of convertible subordinated debt. The purchase price of Cox of approximately $198,000 was in effect financed primarily through $192,850 from the convertible subordinated notes with the remainder through short-term borrowings. 5. Items excluded from pro forma combined statements of income The impact on cost of sales of the write up of inventory to net realizable value pursuant to Accounting Principles Board Opinion No. 16 "Business Combinations" ("APB16") is not reflected in the pro forma statements of income. This non-recurring charge of $1,300 will be reflected in cost of sales during the second quarter. Also, in accordance with APB16, in process research and development ("R&D") costs were valued in the purchase price allocation ($2,100) and will be written off immediately after acquisition. The valuation and write off of in process R&D is not tax effected. In addition, certain employees of IPD have been severed as a result of the acquisition. This will result in an approximate $200 charge in the second quarter. If further savings are identified, additional employees may be severed in the second half of 1998. The non-recurring charges related to the acquisition of Cox to be included in the second quarter of 1998 are summarized as follows: Inventory write-up $1,300 In process R&D 2,100 Severance 200 3,600 Tax benefit (470) $3,130 ($.12 per share) 6. Cost savings and synergies The Company, in its evaluation of the Cox acquisition, identified various cost savings which could be achieved through the elimination of duplicate positions (both within Cox and the IPD division) and combining certain functional organizations (e.g. purchasing and selling) for greater efficiencies and leveraging purchasing power to obtain lower costs for raw materials and supplies. In addition, the cross marketing of Cox and IPD products by the respective companies in their respective markets is expected to increase overall sales and related production volume. While the amount of savings and synergies cannot be assured, it is expected, when combined with the projected growth of Cox, to offset the dilutive effect of the acquisition by the second half of 1999. ___________________ Statements made in this Form 8-K/A, are forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Information on other significant potential risks and uncertainties not discussed herein may be found in the Company's filings with the Securities and Exchange Commission including under the caption "Risk Factors" its Form 10-K for the year ended December 31, 1997.