SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): JUNE 24, 1997
IVAX CORPORATION
4400 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33137
305-575-6000
Incorporated under the laws of the Commission File Number I.R.S. Employer Identification Number
STATE OF FLORIDA 1-09623 16-1003559
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 24, 1997, IVAX Corporation ("IVAX") completed the sale of all
of the outstanding shares of the capital stock of its wholly-owned subsidiary,
McGaw, Inc. ("McGaw"), to B. Braun Medical Inc. ("B. Braun"), an indirect
subsidiary of B. Braun Melsungen AG, pursuant to a Stock Purchase Agreement
dated May 30, 1997, as amended by an Assignment and Assumption Agreement and
Amendment No. 1 to Stock Purchase Agreement dated as of June 17, 1997 (the
"Agreement"). The parties agreed to make an election under the Internal Revenue
Code to treat the transaction as a sale of assets for federal income tax
purposes.
McGaw, which constituted IVAX' intravenous products business,
manufactures and markets a broad line of basic and specialty intravenous
solutions, irrigation solutions, intravenous administration sets, infusion
pumps, and other infusion supplies and equipment, primarily to hospitals and
alternate site healthcare locations in the United States and, through
independent distributors, in various foreign markets. Its operations accounted
for approximately 30%, 27% and 30% of IVAX' consolidated net revenues and
approximately 32%, 25% and 29% of IVAX' consolidated gross profits for the years
ended December 31, 1996, 1995 and 1994, respectively.
B. Braun paid $320 million in cash to IVAX at the closing for the
shares of McGaw, which amount is subject to certain post closing adjustments
based on an adjusted statement of net assets of McGaw, as of May 31, 1997.
Pursuant to the Agreement, B. Braun agreed, among other things, to pay IVAX (1)
up to an additional $80 million contingent upon the combined operating income of
McGaw and B. Braun, and (2) royalties and other payments based on McGaw's and B.
Braun's commercialization of McGaw's Duplex(TM) drug delivery system. Presently
under development, the Duplex(TM) system is a multi-compartment intravenous drug
delivery system designed for intravenous drugs which have limited stability
after mixing.
IVAX used the proceeds received at closing to pay off the entire
outstanding balance of its revolving line of credit.
The foregoing description of the Agreement is qualified in its entirety
by the full text of the Agreement which is included as Exhibit 2.1 and Exhibit
2.2 to this Current Report on Form 8-K and incorporated herein by reference.
EXCEPT FOR THE HISTORICAL MATTERS CONTAINED HEREIN, STATEMENTS IN THIS
CURRENT REPORT ON FORM 8-K ARE FORWARD LOOKING AND ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT OF 1995. INVESTORS ARE
CAUTIONED THAT FORWARD LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES WHICH
MAY AFFECT THE COMPANY'S BUSINESS AND PROSPECTS, INCLUDING THE RISK THAT IVAX
MAY NOT RECEIVE FUTURE PAYMENTS RELATING TO THE MCGAW SALE, AND CERTAIN
ECONOMIC, COMPETITIVE, GOVERNMENTAL, TECHNOLOGICAL AND OTHER FACTORS DISCUSSED
IN IVAX' FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. IF THE COMBINED
OPERATING INCOME OF B. BRAUN AND MCGAW DOES NOT EXCEED CERTAIN LEVELS SPECIFIED
IN THE AGREEMENT, IVAX MAY NOT RECEIVE ALL OR A PORTION OF THE $80 MILLION IN
CONTINGENT PAYMENTS DESCRIBED ABOVE. IN ADDITION, THE RECEIPT BY IVAX OF
ROYALTIES AND OTHER PAYMENTS RELATED TO THE COMMERCIALIZATION OF THE DUPLEX(TM)
SYSTEM IS SUBJECT TO THE SUCCESSFUL DEVELOPMENT OF THE PRODUCT BY B. BRAUN,
APPROVAL OF APPLICABLE REGULATORY AUTHORITIES, AND SUCCESSFUL COMMERCIALIZATION
OF THE PRODUCT BY B. BRAUN. NEITHER THE OPERATING RESULTS OF B. BRAUN AND MCGAW
NOR THE SUCCESS OF THE DUPLEX(TM) SYSTEM ARE WITHIN THE CONTROL OF IVAX. THE
POST CLOSING ADJUSTMENT DESCRIBED ABOVE IS SUBJECT TO REVIEW BY B. BRAUN AND ITS
ACCOUNTANTS OF AN AUDITED BALANCE SHEET OF MCGAW AS OF MAY 31, 1997 TO BE
PREPARED BY IVAX' ACCOUNTANTS, AND THE ACTUAL AMOUNT OF THE ADJUSTMENT MAY BE
DIFFERENT THAN THE ESTIMATED AMOUNT SET FORTH IN THIS CURRENT REPORT ON FORM
8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information
1. Introduction to Unaudited Pro Forma Condensed
Financial Statements.
2. Unaudited Pro Forma Condensed Statement of Operations
for the three months ended March 31, 1997.
3. Unaudited Pro Forma Condensed Statement of Operations
for the year ended December 31, 1996.
4. Unaudited Pro Forma Condensed Statement of Operations
for the year ended December 31, 1995.
5. Unaudited Pro Forma Condensed Statement of Operations
for the year ended December 31, 1994.
6. Notes to Unaudited Pro Forma Condensed Statements of
Operations.
7. Unaudited Pro Forma Condensed Balance Sheet as of
March 31, 1997.
8. Notes to Unaudited Pro Forma Condensed Balance Sheet.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated May 30, 1997, between
IVAX Corporation and B. Braun of America Inc.
(incorporated by reference to IVAX Corporation's
Current Report on Form 8-K dated May 30, 1997).
2.2 Assignment and Assumption Agreement and Amendment No.
1 to Stock Purchase Agreement, dated as of June 17,
1997, by and among IVAX Corporation, B. Braun of
America Inc. and B. Braun Medical Inc.
99.1 Press Release of IVAX Corporation relating to the
sale of McGaw.
Introduction To Unaudited Pro Forma
Condensed Financial Statements
The following unaudited pro forma condensed financial statements
reflect IVAX Corporation ("IVAX") after giving effect to the sale of McGaw, Inc.
("McGaw") as if it had been consummated, with respect to the statement of
operations data, at the beginning of the periods presented, or, with respect to
the balance sheet data, as of the date presented.
The unaudited pro forma condensed financial statements are derived
from, should be read in conjunction with, and are qualified in their entirety by
reference to, the separate financial statements and notes thereto of IVAX
included in its most recent Annual Report on Form 10-K and Quarterly Report on
Form 10-Q, as filed with the Securities and Exchange Commission.
The unaudited pro forma condensed financial data have been included for
comparative purposes only and do not purport to be indicative of the results of
operations or financial position which actually would have been obtained if the
sale of McGaw had occurred at the beginning of the periods presented or as of
the date indicated or of the results of operations or financial position which
may be obtained in the future.
IVAX CORPORATION REFLECTING THE SALE OF MCGAW
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(In thousands, except per share data)
IVAX PRO FORMA PRO FORMA
CORPORATION MCGAW ADJUSTMENTS BALANCE
----------- ---------- --------------- ----------
Net revenues $ 284,550 $ (81,159) $ 575 (P1) $ 202,532
(1,434)(P2)
Cost of sales 182,985 (53,625) 575 (P1) 129,935
----------- ---------- ---------- ----------
Gross profit 101,565 (27,534) (1,434) 72,597
Operating expenses:
Sales & marketing 53,080 (12,842) -- 40,238
General & administrative 36,854 (6,479) -- 30,375
Research & development 16,873 (4,357) -- 12,516
Goodwill amortization 161 (20) -- 141
Amort. - other intangibles 1,845 (643) -- 1,202
Merger expenses 2,095 -- -- 2,095
----------- ---------- ---------- ----------
Total operating expenses 110,908 (24,341) -- 86,567
----------- ---------- ---------- ----------
Income (loss) from operations (9,343) (3,193) (1,434) (13,970)
Other income/(expense):
Net interest (expense)/income (7,151) (276) 5,000 (P3) (2,427)
Intercompany interest -- 252 (252) (P1) --
Other income (expense) 6,806 234 13 (P2) 7,053
----------- ---------- ---------- ----------
Total other income (expense) (345) 210 4,761 4,626
----------- ---------- ---------- ----------
Income (loss) before income taxes
and minority interest (9,688) (2,983) 3,327 (9,344)
Provision for income taxes (3,221) 240 1,164 (P4) (1,817)
----------- ---------- ---------- ----------
Income (loss) before minority interest (6,467) (3,223) 2,163 (7,527)
Minority interest (1,472) -- -- (1,472)
----------- ---------- ---------- ----------
Income (loss) from
continuing operations $ (7,939) $ (3,223) $ 2,163 $ (8,999)
=========== ========== ========== ==========
Income (loss) from continuing
operations per share $ (0.07) $ (0.07)
=========== ==========
Weighted average number
of common shares 121,479 121,479
=========== ==========
See accompanying notes to unaudited pro forma condensed statements of
operations
IVAX CORPORATION REFLECTING THE SALE OF MCGAW
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share data)
IVAX PRO FORMA PRO FORMA
CORPORATION MCGAW ADJUSTMENTS BALANCE
----------- --------- ------------- -----------
Net revenues $ 1,151,307 $(341,059) $ 1,649 (P1) $ 809,928
(1,969)(P2)
Cost of sales 774,368 (221,003) 1,649 (P1) 555,014
----------- --------- -------- -----------
Gross profit 376,939 (120,056) (1,969) 254,914
Operating expenses:
Sales & marketing 220,536 (54,341) -- 166,195
General & administrative 151,056 (22,291) -- 128,765
Research & development 73,353 (18,762) -- 54,591
Goodwill amortization 2,448 (77) -- 2,371
Amort. - other intangibles 7,668 (3,122) -- 4,546
Restructuring & impairments 117,983 (472) -- 117,511
Merger expenses 557 -- -- 557
----------- --------- -------- -----------
Total operating expenses 573,601 (99,065) -- 474,536
----------- --------- -------- -----------
Income (loss) from operations (196,662) (20,991) (1,969) (219,622)
Other income/(expense):
Net interest (expense)/income (24,451) 2,821 20,000 (P3) (1,630)
Intercompany interest -- 1,094 (1,094) (P1) --
Other income (expense) 5,564 871 304 (P2) 6,739
----------- --------- -------- -----------
Total other income (expense) (18,887) 4,786 19,210 5,109
----------- --------- -------- -----------
Income (loss) before income taxes
and minority interest (215,549) (16,205) 17,241 (214,513)
Provision for income taxes (62,224) 5,754 6,034 (P4) (50,436)
----------- --------- -------- -----------
Income (loss) before minority interest (153,325) (21,959) 11,207 (164,077)
Minority interest (5,354) -- -- (5,354)
----------- --------- -------- -----------
Income (loss) from
continuing operations $ (158,679) $ (21,959) $ 11,207 $ (169,431)
=========== ========= ========= ===========
Income (loss) from continuing
operations per share $ (1.31) $ (1.40)
=========== ===========
Weighted average number
of common shares 120,949 120,949
=========== ===========
See accompanying notes to unaudited pro forma condensed statements of
operations
IVAX CORPORATION REFLECTING THE SALE OF MCGAW
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands, except per share data)
IVAX PRO FORMA PRO FORMA
CORPORATION MCGAW ADJUSTMENTS BALANCE
------------ ------------ --------- ----------
Net revenues $ 1,259,766 $ (339,487) $ 1,006 (P1) $ 920,794
(491) (P2)
Cost of sales 736,036 (206,911) 1,006 (P1) 530,131
------------ ------------ --------- ----------
Gross profit 523,730 (132,576) (491) 390,663
Operating expenses:
Sales & marketing 181,427 (55,050) - 126,377
General & administrative 117,384 (29,846) - 87,538
Research & development 64,602 (16,005) - 48,597
Goodwill amortization 2,305 (70) - 2,235
Amort. - other intangibles 7,193 (4,587) - 2,606
Merger expenses 3,392 - - 3,392
------------ ------------ --------- ----------
Total operating expenses 376,303 (105,558) - 270,745
------------ ------------ --------- ----------
Income from operations 147,427 (27,018) (491) 119,918
Other income/(expense):
Net interest (expense)/income (17,380) 7,440 20,000 (P3) 10,060
Intercompany interest - 132 (132) (P1) --
Other income (expense) 18,394 (7,213) 8,129 (P1) 19,310
------------ ------------ --------- ----------
Total other income (expense) 1,014 359 27,997 29,370
------------ ------------ --------- ----------
Income (loss) before income taxes
and minority interest 148,441 (26,659) 27,506 149,288
Provision for income taxes 28,338 (752) 9,627 (P4) 37,213
------------ ------------ --------- ----------
Income before minority interest 120,103 (25,907) 17,879 112,075
Minority interest (5,302) -- -- (5,302)
------------ ------------ --------- ----------
Income from continuing operations $ 114,801 $ (25,907) $ 17,879 $ 106,773
============ ============ ========= ==========
Income (loss) from continuing
operations per share $ 0.96 $ 0.90
============ ==========
Weighted average number
of common shares 119,253 119,253
============ ==========
See accompanying notes to unaudited pro forma condensed statements of
operations
IVAX CORPORATION REFLECTING THE SALE OF MCGAW
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share data)
IVAX PRO FORMA PRO FORMA
CORPORATION MCGAW ADJUSTMENTS BALANCE
------------ ----------- ------------ ---------
Net revenues $ 1,134,806 $ (337,884) $ 35 (P1) $ 796,957
Cost of sales 653,361 (197,953) 35 (P1) 455,443
------------ ----------- --------- ---------
Gross profit 481,445 (139,931) -- 341,514
Operating expenses:
Sales & marketing 167,782 (56,697) -- 111,085
General & administrative 99,242 (22,493) -- 76,749
Research & development 48,661 (12,779) -- 35,882
Goodwill amortization 3,673 (64) -- 3,609
Amort. - other intangibles 8,212 (5,771) -- 2,441
Merger expenses 13,049 -- -- 13,049
------------ ----------- --------- ---------
Total operating expenses 340,619 (97,804) -- 242,815
------------ ----------- --------- ---------
Income from operations 140,826 (42,127) -- 98,699
Other income/(expense):
Net interest (expense)/income (19,425) 10,714 20,000 (P3) 11,289
Intercompany interest -- 108 (108) (P1) --
Other income (expense) 948 1,866 -- 2,814
------------ ----------- --------- ---------
Total other income (expense) (18,477) 12,688 19,892 14,103
------------ ----------- --------- ---------
Income (loss) before income taxes
and minority interest 122,349 (29,439) 19,892 112,802
Provision for income taxes 30,322 1,768 6,962 (P4) 39,052
------------ ----------- --------- ---------
Income before minority interest 92,027 (31,207) 12,930 73,750
Minority interest (2,155) -- -- (2,155)
------------ ----------- --------- ---------
Income from continuing operations $ 89,872 $ (31,207) $ 12,930 $ 71,595
============ =========== ========= =========
Income (loss) from continuing
operations per share $ 0.77 $ 0.62
============ =========
Weighted average number
of common shares 116,339 116,339
============ =========
See accompanying notes to unaudited pro forma condensed statements of
operations
NOTES TO UNAUDITED PRO FORMA
CONDENSED STATEMENTS OF OPERATIONS
1. The unaudited pro forma condensed statements of operations have been
prepared under the assumptions set forth in the following notes.
2. The pro forma results have been prepared for comparative purposes only
and do not purport to indicate what necessarily would have occurred had
McGaw been sold at the beginning of the periods presented, or what
results may be in the future.
3. IVAX figures have been restated to reflect the 1994 acquisitions of
Zenith Laboratories, Inc. and McGaw, each of which was accounted for
under the pooling of interests method of accounting. The March 1, 1996
acquisition of Elvetium S.A. (Argentina), Alet Laboratories S.A.E.C.I.
y E. and Elvetium S.A. (Uruguay), (collectively "Elvetium"), and the
September 30, 1995 acquisition of Pharmatop Limited which were
accounted for under the pooling of interests method of accounting, were
recorded as of January 1, 1996 and 1995, respectively. Historical
figures have not been restated to give retroactive effect to the
Elvetium and Pharmatop Limited acquisitions due to the immateriality of
the related amounts. IVAX figures include the results of the following
businesses acquired by purchase since the respective acquisition dates:
ImmunoVision, Inc. on July 17, 1995 and 60% of the shares of Galena
a.s., on July 25, 1994 (subsequently increased through open market
purchases to 74%.)
4. It is anticipated that nonrecurring transaction costs in the amount of
$3 million will be expensed as incurred in connection with the sale of
McGaw.
5. The following adjustments have been made to give pro forma effect for
the sale of McGaw:
(P1) To adjust for certain intercompany transactions included in
McGaw's results of operations.
(P2) To adjust for certain other transactions associated with the
intravenous division which will not continue as a result of
the sale of McGaw.
(P3) To reflect reduced interest expense incurred and increased
interest income earned from the proceeds from the sale of
McGaw.
(P4) To reflect the tax expense related to the above adjustments.
IVAX CORPORATION REFLECTING THE SALE OF MCGAW
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF MARCH 31, 1997
(In thousands, except per share data)
IVAX PRO FORMA PRO FORMA
CORPORATION MCGAW ADJUSTMENTS BALANCE
------------ ---------- ---------- ----------
Cash $ 74,812 $ (4,019) $ 320,000 (B1) $ 70,793
(5,553) (B2)
(3,000) (B3)
(311,447) (B4)
Net accounts receivable 207,912 (38,341) -- 169,571
Inventory 271,124 (54,276) -- 216,848
Other current assets 136,579 (22,216) -- 114,363
------------ ---------- ---------- ----------
Total current assets 690,427 (118,852) -- 571,575
Property, plant and equipment, net 423,538 (192,054) 17,220 (B5) 248,704
Intangibles 98,523 (14,535) -- 83,988
Other assets 125,945 (41,367) (2,145) (B6) 82,433
------------ ---------- ---------- ----------
Total assets $ 1,338,433 $ (366,808) $ 15,075 $ 986,700
------------ ---------- ---------- ----------
Loans payable & current
long term debt $ 12,186 $ (261) $ -- $ 11,925
Accounts payable 77,556 (20,713) -- 56,843
(788) (B5)
Accrued expenses 127,435 (23,295) 2,000 (B7) 105,352
------------ ---------- ---------- ----------
Total current liabilities 217,177 (44,269) 1,212 174,120
Due to affiliates -- (7,440) 7,440 (B5) --
Long-term debt, net of
current portion 411,982 (541) (311,447) (B4) 99,994
Other long-term liabilities 17,073 (17,984) 17,949 (B5) 17,038
Minority interest 14,971 -- -- 14,971
3,347 (B8)
Total shareholders' equity 677,230 (296,574) 296,574 (B8) 680,577
------------ ---------- ---------- ----------
Total liabilities and
shareholders' equity $ 1,338,433 $ (366,808) $ 15,075 $ 986,700
============ ========== ========== ==========
Shares outstanding 121,483 121,483
============ ==========
Book value per share $ 5.57 $ 5.60
============ ==========
See accompanying notes to unaudited pro forma condensed balance sheet
NOTES TO UNAUDITED PRO FORMA
CONDENSED BALANCE SHEET
1. The unaudited pro forma condensed balance sheet has been prepared under
the assumptions set forth in the following notes.
2. The pro forma balance sheet has been prepared for comparative purposes
only and does not purport to indicate what necessarily would have
occurred had McGaw been sold as of the date presented, or what
financial position may be obtained in the future.
3. The following adjustments give pro forma effect for the sale of McGaw:
(B1) To reflect gross proceeds received from the sale of McGaw.
(B2) To reduce gross proceeds for anticipated post closing
adjustments.
(B3) To reflect payment of estimated transaction costs associated
with the sale.
(B4) To reflect the pay down of debt with the net proceeds
received.
(B5) To adjust for items included in McGaw's balance sheet that are
excluded from the sale based on the Agreement.
(B6) To write-off certain deferred tax assets related to assets
transferred to B. Braun Medical Inc.
(B7) To establish general reserves associated with transaction
related items.
(B8) To record the sale of McGaw and the resulting gain, assuming
that the closing had occurred on March 31, 1997, computed as
follows (in thousands):
Gross proceeds $320,000
Reduction in proceeds for post closing adjustments (5,553)
Estimated transaction costs (3,000)
----------
Net proceeds 311,447
McGaw's net book value at March 31, 1997 296,574
Adjusted for items excluded per the Agreement (21,273)
----------
McGaw's adjusted net book value 275,301
General reserves associated with transaction
related items 2,000
----------
Gain 34,146
Estimated taxes (30,799)
----------
Net gain $ 3,347
==========
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.
IVAX CORPORATION
/s/ MICHAEL W. FIPPS
--------------------------------
Michael W. Fipps
Senior Vice President -- Finance
and Chief Financial Officer
Date: July 8, 1997
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Stock Purchase Agreement, dated May 30, 1997, between IVAX
Corporation and B. Braun of America Inc. (incorporated by
reference to IVAX Corporation's Current Report on Form 8-K
dated May 30, 1997).
2.2 Assignment and Assumption Agreement and Amendment No. 1 to
Stock Purchase Agreement, dated as of June 17, 1997, by and
among IVAX Corporation, B. Braun of America Inc. and B. Braun
Medical Inc.
99.1 Press Release of IVAX Corporation relating to the sale of
McGaw.