UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): December 30, 2004
CELGENE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-16132 22-2711928
--------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
86 Morris Avenue, Summit, New Jersey 07901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 673-9000
7 Powder Horn Drive, Warren, New Jersey 07059
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note: This Form 8-K/A amends the Form 8-K that we filed on October
26, 2004, with regard to the acquisition of Penn T Limited, which did not
include certain requisite financial information. Specifically, this Form 8-K/A
includes the financial statements of Penn T Limited for the periods specified in
Rule 3-05 of Regulation S-X and unaudited pro forma financial information
specified in Article 11 of Regulation S-X.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Independent Auditors' Report F-2
Profit and loss accounts for the two years ended 31 March 2004 F-3
Balance sheet as at 31 March 2004 and 31 March 2003 F-4
Cash flow statement for the two years ended 31 March 2004 F-5
Accounting policies F-6
Notes to the financial statements for the two years ended 31 March 2004 F-7
(b) Unaudited Pro Forma Financial Information.
Introduction to Pro Forma Financial Statements (Unaudited) F-19
Pro Forma Condensed Balance Sheet as of September 30, 2004 (Unaudited) F-20
Pro Forma Condensed Statement of Operations - Nine Months Ended
September 30, 2003 (Unaudited) F-21
Pro Forma Condensed Statement of Operations - Year Ended
December 31, 2003 (Unaudited) F-22
Notes to Pro Forma Financial Statements (Unaudited) F-23
(c) Exhibits
99.1 Independent Auditors' Consent
2
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CELGENE CORPORATION
Date: January 4, 2005 By: /s/ Robert J. Hugin
----------------------------------------
Name: Robert J. Hugin
Title: Senior Vice President and
Chief Financial Officer
3
CELGENE UK MANUFACTURING II LIMITED
(FORMERLY PENN T LIMITED)
FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED
31 MARCH 2004
F-1
REPORT OF THE INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS OF CELGENE UK
MANUFACTURING II LIMITED
We have audited the accompanying balance sheets of Celgene UK Manufacturing II
Limited (the "Division") as at 31 March 2004 and 2003 and the related profit and
loss accounts, and cash flow statements for each of the years in the two-year
period ended 31 March 2004. These financial statements are the responsibility of
Celgene UK Manufacturing II Limited management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Division as at 31 March
2004 and 2003, the results of its operations and its cash flows, for each of the
years in the two-year period ended 31 March 2004, in conformity with generally
accepted accounting principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States of America. Information relating to the nature and effect of such
differences is presented in note 23 to the financial statements.
KPMG LLP
CHARTERED ACCOUNTANTS
BRISTOL, UNITED KINGDOM
22 DECEMBER 2004
F-2
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
PROFIT AND LOSS ACCOUNTS FOR THE TWO YEARS ENDED 31 MARCH 2004
NOTE 2004 2003
(POUND)'000 (pound)'000
-----------------------------------------------------------------------------------------------------------
TURNOVER - CONTINUING OPERATIONS 1 8,564 6,336
Cost of sales (648) (383)
-----------------------------------------------------------------------------------------------------------
GROSS PROFIT 7,916 5,953
Administrative expenses (1,649) (1,659)
-----------------------------------------------------------------------------------------------------------
OPERATING PROFIT - CONTINUING OPERATIONS 2 6,267 4,294
Interest payable and similar charges 3 (127) -
-----------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 6,140 4,294
Tax on profit on ordinary activities 5 (2,013) (1,460)
-----------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 4,127 2,834
Dividends 6 (6,510) (250)
-----------------------------------------------------------------------------------------------------------
RETAINED (LOSS)/ PROFIT FOR THE FINANCIAL YEAR 14 (2,383) 2,584
-----------------------------------------------------------------------------------------------------------
There were no recognised gains and losses in the years other than the profit for
the years.
There is no difference between the profit on ordinary activities before taxation
and the retained loss/profit for the financial years stated above and their
historical cost equivalents.
F-3
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
BALANCE SHEET AS AT 31 MARCH 2004 AND 31 MARCH 2003
NOTE 2004 2003
(POUND)'000 (pound)'000
-----------------------------------------------------------------------------------------------------------
FIXED ASSETS
Goodwill 7 10,093 10,665
-----------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 8 245 233
Debtors 9 1,544 4
-----------------------------------------------------------------------------------------------------------
1,789 237
CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR 10 (6,571) (7,278)
-----------------------------------------------------------------------------------------------------------
NET CURRENT LIABILITIES (4,782) (7,041)
-----------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 5,311 3,624
-----------------------------------------------------------------------------------------------------------
CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN
ONE YEAR 11 (4,125) -
-----------------------------------------------------------------------------------------------------------
NET ASSETS 1,186 3,624
-----------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Called up share capital 13 64 119
Capital redemption reserve 14 55 -
Profit and loss account 14 1,067 3,505
-----------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' FUNDS 15 1,186 3,624
-----------------------------------------------------------------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS 1,127 3,509
NON EQUITY SHAREHOLDERS' FUNDS 59 115
-----------------------------------------------------------------------------------------------------------
1,186 3,624
-----------------------------------------------------------------------------------------------------------
The financial statements on pages 3 to 18 were approved by the board of
directors on 22 December 2004 and were signed on its behalf by:
S JASKO
DIRECTOR
F-4
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
CASH FLOW STATEMENT FOR THE TWO YEARS ENDED 31 MARCH 2004
NOTE 2004 2003
(POUND)'000 (pound)'000
-----------------------------------------------------------------------------------------------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 16 5,231 6,675
-----------------------------------------------------------------------------------------------------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (127) -
Non-equity dividends paid (5) (7)
-----------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND
SERVICING OF FINANCE (132) (7)
-----------------------------------------------------------------------------------------------------------
TAXATION (1,691) (1,147)
-----------------------------------------------------------------------------------------------------------
EQUITY DIVIDENDS PAID (6,243) -
-----------------------------------------------------------------------------------------------------------
FINANCING
Loans received 6,000 -
Bank loan repayments (375) (5,521)
Repayments to intermediate holding company (2,735) -
Redemption of preference shares (55) -
-----------------------------------------------------------------------------------------------------------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 2,835 (5,521)
-----------------------------------------------------------------------------------------------------------
INCREASE IN CASH - -
-----------------------------------------------------------------------------------------------------------
F-5
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable
accounting standards in the United Kingdom. A summary of the more important
accounting policies is set out below.
BASIS OF PREPARATION
These Celgene UK Manufacturing II Limited financial statements have been
prepared under generally accepted accounting principles in the United Kingdom
("UK GAAP"). A reconciliation has been prepared and included within these
financial statements to show the effect of the differences between UK GAAP and
generally accepted accounting principles in the United States ("US GAAP").
The information set out in these accounts does not constitute the company's
statutory accounts for the two years ended 31 March 2004. Those accounts have
been reported on by the company's auditors; their reports were unqualified and
did not contain a statement under section 237(2) or (3) of the United Kingdom
Companies Act 1985. The accounts for the two years ended 31 March 2004 have been
delivered to the United Kingdom registrar of companies.
BASIS OF ACCOUNTING
The financial statements are prepared in accordance with the historical cost
convention.
TURNOVER
Turnover is recorded on the sale of goods at the point of which the possession
of title passes. Royalty income is recorded on a receivable basis in accordance
with sales reported by the licensee.
STOCKS
Stocks and work in progress are valued at the lower of cost and estimated net
realisable value. Cost is determined on a first-in first-out basis. The cost of
work in progress comprises materials, direct labour and attributable production
overheads. Net realisable value is based on the estimated sales price after
allowing for all further costs of completion and disposal. Where necessary,
provision is made for obsolete, slow-moving and defective stocks.
DEFERRED TAXATION
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date, where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date.
A net deferred tax asset is recognised only when, on the basis of all available
evidence, it can be regarded as more likely than not that there will be suitable
taxable profits against which to recover carried forward tax losses and/or from
which the future reversal of underlying timing differences can be deducted.
Deferred tax is measured at the tax rates that are expected to apply in the
periods in which the timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantively enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
GOODWILL
Goodwill arising on acquisition represents the excess of the fair value of the
consideration given over the fair value of the identifiable assets and
liabilities acquired. Goodwill arising on acquisition is eliminated by
amortisation through the profit and loss account over its useful economic life,
which the directors estimate to be 20 years.
F-6
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
1 SEGMENTAL REPORTING
The company supplies THALOMID and other thalidomide formulations for the
healthcare market. The company's turnover by destination, all relating to this
principal activity, is set out below:
2004 2003
(POUND)'000 (pound)'000
-------------------------------------------------------------------------------
UK 5,639 6,336
Rest of Europe 2,925 -
-------------------------------------------------------------------------------
8,564 6,336
-------------------------------------------------------------------------------
The company's turnover by sales channel is set out below:
2004 2003
(POUND)'000 (pound)'000
-------------------------------------------------------------------------------
Royalty income 3,417 -
Drug sales 5,147 6,336
-------------------------------------------------------------------------------
8,564 6,336
-------------------------------------------------------------------------------
2 OPERATING PROFIT
Operating profit is stated after charging:
2004 2003
(POUND)'000 (pound)'000
-------------------------------------------------------------------------------
Auditors' remuneration:
Audit of UK statutory accounts 4 4
Other services (tax) 1 1
Goodwill amortisation 572 573
-------------------------------------------------------------------------------
F-7
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
3 INTEREST PAYABLE
2004 2003
(POUND)'000 (pound)'000
-------------------------------------------------------------------------------
On bank loans and overdrafts 127 -
-------------------------------------------------------------------------------
4 DIRECTORS EMOLUMENTS
The directors receive emoluments from Penn Pharmaceutical Services Limited for
their services to that company. The proportion of the emoluments which relates
to Celgene UK Manufacturing II Limited which were recharged by Penn
Pharmaceutical Services Limited amounted to approximately (pound)81,000 (2003:
(pound)60,000) in the period.
5 TAX ON PROFIT ON ORDINARY ACTIVITIES
2004 2003
(POUND)'000 (pound)'000
-----------------------------------------------------------------------------------------------------------
TAXATION ON THE PROFIT FOR THE YEAR
UK corporation tax at 30% 2,009 1,464
Deferred taxation 4 (4)
-----------------------------------------------------------------------------------------------------------
2,013 1,460
-----------------------------------------------------------------------------------------------------------
Factors affecting the tax charge for the year:
-----------------------------------------------------------------------------------------------------------
Profit on ordinary activities at 30% 1,842 1,288
Expenses not deductible for tax purposes 172 171
Accelerated capital allowances and other timing differences (4) 5
Adjustments to tax charge in respect of previous period (1) -
-----------------------------------------------------------------------------------------------------------
2,009 1,464
-----------------------------------------------------------------------------------------------------------
F-8
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
6 DIVIDENDS
2004 2003
(POUND)'000 (pound)'000
-----------------------------------------------------------------------------------------------------------
A Ordinary: (pound)23.65 per share (2003: (pound)0.88) 6,505 243
A Preference 0.18p per share (2003: 0.13p) 5 7
-----------------------------------------------------------------------------------------------------------
6,510 250
-----------------------------------------------------------------------------------------------------------
7 GOODWILL
2004 2003
(POUND)'000 (pound)'000
-------------------------------------------------------------------------------
Cost
At beginning of year 11,453 11,453
-------------------------------------------------------------------------------
Amortisation
At beginning of year (788) (215)
Charge for the year (572) (573)
-------------------------------------------------------------------------------
(1,360) (788)
-------------------------------------------------------------------------------
Net Book amount
At end of year 10,093 10,665
-------------------------------------------------------------------------------
At beginning of year 10,665 11,238
-------------------------------------------------------------------------------
F-9
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
8 STOCKS
2004 2003
(POUND)'000 (pound)'000
------------------------------------------------------------------------------
Raw materials and consumables 123 22
Finished goods and goods for resale 122 211
------------------------------------------------------------------------------
245 233
------------------------------------------------------------------------------
9 DEBTORS
2004 2003
(POUND)'000 (pound)'000
------------------------------------------------------------------------------
Trade debtors 1,543 -
Deferred tax asset 1 4
------------------------------------------------------------------------------
1,544 4
------------------------------------------------------------------------------
10 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR
2004 2003
(POUND)'000 (pound)'000
--------------------------------------------------------------------------------------------------------------
Amounts due to Penn Pharmaceuticals Services Limited (Note 20) 3,258 5,993
Accruals 133 -
Loans 1,500 -
Dividends payable 505 243
Corporation tax 1,124 805
Social security and other taxes 51 237
--------------------------------------------------------------------------------------------------------------
6,571 7,278
--------------------------------------------------------------------------------------------------------------
The loan due to the related party is interest free and repayable on demand.
F-10
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
11 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2004 2003
(POUND)'000 (pound)'000
--------------------------------------------------------------------------------
Bank loan 4,125 -
--------------------------------------------------------------------------------
12 LOANS AND OTHER BORROWINGS
2004 2003
(POUND)'000 (pound)'000
--------------------------------------------------------------------------------
Bank loan 5,625 -
--------------------------------------------------------------------------------
Maturity of bank loan and overdraft
In one year or less, or on demand 1,500 -
In more than one year, but not more than two years 1,500 -
In more than two years, but not more than five years 2,625 -
--------------------------------------------------------------------------------
5,625 -
--------------------------------------------------------------------------------
The bank loans are secured by way of a fixed and floating charge over the assets
of the group.
The interest expense is allocated to the profit and loss account over the term
of the loan at a constant rate on the carrying amount.
Interest payable on the loan is at a rate of LIBOR plus 2%.
F-11
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
13 SHARE CAPITAL
2004 2003
(POUND) (pound)
-----------------------------------------------------------------------------------------------------------
AUTHORISED
275,000 A ordinary shares of 0.2p each 550 550
225,000 B ordinary shares of 2p each 4,500 4,500
5,479,000 A 5.6% preference shares of 2p each 109,580 109,580
238,765 B 6.4% preference shares of 2p each 4,775 4,775
-----------------------------------------------------------------------------------------------------------
119,405 119,405
-----------------------------------------------------------------------------------------------------------
ALLOTTED, CALLED UP AND FULLY PAID
275,000 (2003: 275,000) A ordinary shares of 0.2p each 550 550
225,000 (2003, 225,000) B ordinary shares of 2p each 4,500 4,500
2,739,000 (2003: 5,479,000) A 5.6% preference shares of 2p each 54,790 109,580
198,971 (2003: 238,765) B 6.4% preference shares of 2p each 3,979 4,775
-----------------------------------------------------------------------------------------------------------
63,819 119,405
-----------------------------------------------------------------------------------------------------------
F-12
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
A ORDINARY SHARES OF 0.2p EACH
The A ordinary shareholders hold full equity voting rights and are entitled to
receive dividends as follows:
i) For financial years before 31 March 2002, a fixed cumulative preferred
dividend of 80% of the subscription price.
ii) For financial years after 31 March 2002 the dividend will be the
greater of:
a) the fixed cumulative preferred dividend of 80% of the subscription
price; and
b) a cumulative participating dividend of an amount equal to :-
o 5% of the net profit for the financial year ending 31 March 2003
o 7.5% of the net profit for the financial year ending 31 March
2004
o 10% of the net profit for the financial year ending 31 March 2005
o 12.5% of the net profit for the financial year ending 31 March
2006
o 15% of the net profit for any financial year thereafter
On a winding up the A ordinary shareholders rank below all preference
shareholders but above all B ordinary shareholders and are entitled to all
unpaid arrears and accruals of any preferred dividend or participating dividend
and 10 times the subscription price paid for the shares.
B ORDINARY SHARES OF 2p EACH
The B ordinary shareholders hold full equity voting rights and are not entitled
to receive any dividend. On a winding up the B ordinary shareholders rank below
all preferred and A ordinary shareholders and are entitled to the subscription
price paid for the shares.
CONVERSION OF A ORDINARY AND B ORDINARY INTO ORDINARY SHARES
Immediately prior to a listing or a sale, each of the A and B ordinary shares
then in issue shall be converted into one fully paid ordinary share ranking pari
passu in all respects.
A PREFERENCE SHARES OF 2p EACH
The A preference shareholders hold no voting rights and are entitled to a 5.6%
dividend per annum on the subscription price.
On a winding up the A preference shareholders rank above all other preference
and ordinary shares and are entitled to all unpaid arrears and accruals of any
preferred dividend and subscription price paid for the shares.
B PREFERENCE SHARES OF 2p EACH
The B preference shareholders hold no voting rights and are entitled to a 6.4%
dividend per annum on the subscription price.
On a winding up the B preference shareholders rank below the A preference shares
but above all ordinary shares and are entitled to all unpaid arrears and
accruals of any preferred dividend and subscription price paid for the shares.
F-13
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
14 RESERVES
Profit and Capital
loss redemption
account reserve
(pound)'000 (pound)'000
-------------------------------------------------------------------------------
At 1 April 2002 921 -
Retained profit for the year 2,584 -
-------------------------------------------------------------------------------
At 1 April 2003 3,505 -
Retained loss for the year (2,383) -
Redemption of preference shares (55) 55
-------------------------------------------------------------------------------
AT 31 MARCH 2004 1,067 55
-------------------------------------------------------------------------------
15 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2004 2003
(POUND)'000 (pound)'000
-------------------------------------------------------------------------------
Profit for the financial year 4,127 2,834
Dividends (6,510) (250)
Redemption of preference shares (55) -
-------------------------------------------------------------------------------
Net (decrease)/increase in shareholders' funds (2,438) 2,584
Opening shareholders' funds 3,624 1,040
-------------------------------------------------------------------------------
Closing shareholders' funds 1,186 3,624
-------------------------------------------------------------------------------
16 RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
2004 2003
CONTINUING OPERATIONS (POUND)'000 (pound)'000
-------------------------------------------------------------------------------
Operating profit 6,267 4,294
Amortisation of goodwill 572 573
Increase in stocks (12) (61)
(Increase)/decrease in debtors (1,543) 2,638
Decrease in creditors (53) (769)
-------------------------------------------------------------------------------
NET CASH FLOW FROM CONTINUING OPERATIONS 5,231 6,675
-------------------------------------------------------------------------------
F-14
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
17 MOVEMENT IN NET DEBT
2004 2003
(POUND)'000 (pound)'000
--------------------------------------------------------------------------------
Net debt at beginning of year 5,993 11,514
Loans received 6,000 -
Repayments (3,110) (5,521)
--------------------------------------------------------------------------------
NET DEBT AT END OF YEAR 8,883 5,993
--------------------------------------------------------------------------------
18 CAPITAL COMMITMENTS
There were no capital commitments as at 31 March 2004 or 31 March 2003.
19 CONTINGENT LIABILITIES
The company had potential contingent liabilities at 31 March 2004 and 31 March
2003 under the terms of the cross guarantee given in respect of the bank
borrowings of Penn Pharmaceuticals Holdings Limited and its subsidiaries. Any
liability that might arise in the future under the terms of the guarantee would
be limited to the extent that the bankers might be unable to recover the full
amount of the debt due to them out of the assets of Penn Pharmaceuticals
Holdings Limited and its subsidiaries. Subject to Penn Pharmaceuticals Holdings
Limited and its subsidiaries continuing to comply with the bank's terms of
borrowing, no liability will crystallise. As at 31 March 2004, Penn
Pharmaceuticals Holdings Limited and its subsidiaries had net bank borrowings of
(pound)5,725,000.
F-15
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
20 TRANSACTIONS WITH RELATED PARTIES
During the period the company conducted trade transactions with, and had amounts
receivable from / (due to), the following related parties:
2004 2003
(POUND)'000 (pound)'000
--------------------------------------------------------------------------------
PENN PHARMACEUTICAL SERVICES LIMITED
Sales 5,637 6,336
Administration charge (1,079) (997)
Balance payable (3,258) (5,993)
--------------------------------------------------------------------------------
Administration charge relates to the recharge of costs and overheads to Celgene
UK Manufacturing II Limited from Penn Pharmaceutical Services Limited ("PPSL").
The company has no employees and all associated costs are incurred by PPSL and
reallocated based on fair market value.
2004 2003
(POUND)'000 (pound)'000
--------------------------------------------------------------------------------
Manufacturing 154 144
Maintenance 78 68
Quality control 227 172
General management 55 91
Finance 30 75
Site support 450 347
Other 85 100
--------------------------------------------------------------------------------
1,079 997
--------------------------------------------------------------------------------
F-16
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
21 ULTIMATE CONTROLLING PARTY
The directors consider Gresham II Fund to be the controlling party at 31 March
2004. Gresham II Fund is managed by Gresham LLP. See Note 22 for information
concerning post balance sheet date changes in controlling party.
22 POST BALANCE SHEET EVENTS
On 21 October 2004, all of the issued shares of Celgene UK Manufacturing II
Limited (formerly Penn T Limited) - "Celgene UK" were sold to Celgene UK
Manufacturing I Limited, an indirect wholly-owned subsidiary of Celgene
Corporation, for approximately (pound)60.5 million in cash. Prior to the
acquisition, Celgene Corporation, the acquirer and Celgene UK were parties to a
manufacturing agreement pursuant to which Celgene UK manufactured THALOMID(R)
for Celgene Corporation.
In connection with the acquisition, on 21 October, 2004, Celgene Corporation and
its operating subsidiary, Celgene UK, entered into a technical services
agreement with PPSL and Penn Pharmaceutical Holding Limited pursuant to which
PPSL will provide the services and facilities necessary for the manufacture of
Celgene's requirements of THALOMID and other thalidomide formulations.
F-17
CELGENE UK MANUFACTURING II LIMITED (FORMERLY PENN T LIMITED)
NOTES TO THE FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 MARCH 2004
23 SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The financial statements are prepared in accordance with UK GAAP, which differs
in certain respects from US GAAP. Differences which have an effect on the profit
and loss account and balance sheet are set out below:
EFFECT ON PROFIT AND LOSS ACCOUNT 2004 2003
(POUND)'000 (pound)'000
---------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation (under UK 4,127 2,834
GAAP)
Adjustment for:
Amortisation of goodwill 572 573
---------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAX AS ADJUSTED FOR
US GAAP 4,699 3,407
---------------------------------------------------------------------------------------------------------
EFFECT ON BALANCE SHEET 2004 2003
(POUND)'000 (pound)'000
---------------------------------------------------------------------------------------------------------
Total shareholders' funds under UK GAAP 1,186 3,624
Adjustment for:
Goodwill (10,093) (10,665)
Dividends accrued not declared 505 243
---------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' FUNDS UNDER US GAAP (8,402) (6,798)
---------------------------------------------------------------------------------------------------------
EFFECT ON CASH FLOW STATEMENT 2004 2003
(POUND)'000 (pound)'000
---------------------------------------------------------------------------------------------------------
Cash flows from operating activities 3,413 3,583
Cash flows from investing activities - -
Cash flows from financing activities (3,413) (3,583)
---------------------------------------------------------------------------------------------------------
NET CASH FLOW - -
---------------------------------------------------------------------------------------------------------
Under UK GAAP, goodwill arising on acquisition and representing the excess of
the fair value of the consideration given over the fair value of the
identifiable assets and liabilities acquired is amortised through the profit and
loss account over its useful economic life. Under US GAAP the transaction to set
up the company was a transaction among entities under common control and assets
and liabilities are reported at the historical cost of the transferor. The
company was created as the result of a demerger of a business previously
controlled by an associated company. Therefore, the assets are reported at
historical cost for US GAAP purposes and goodwill would not be recorded.
F-18
CELGENE CORPORATION
INTRODUCTION TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
On October 21, 2004, Celgene Corporation, through an indirect wholly-owned
subsidiary, acquired all of the outstanding shares of Penn T Limited ("Penn T"),
from a consortium of private investors (the "Acquisition") for approximately
$114.6 million, including estimated acquisition related costs of approximately
$2.3 million and estimated working capital adjustments of approximately $3.2
million, which are expected to be paid upon final completion and agreement of
the net working capital amounts. The Company did not assume existing debt
(consisting of a bank loan and related party debt) of approximately $14.2
million, which was retained by the existing shareholders.
The accompanying unaudited pro forma condensed Balance Sheet as of September 30,
2004 gives effect to the Acquisition as if the Acquisition occurred on that
date. The accompanying unaudited pro forma condensed statements of operations
for the nine months ended September 30, 2004 and for the year ended December 31,
2003, combine the historical consolidated statements of operations of the
Company and Penn T, giving effect to the acquisition of Penn T as if the
transaction had occurred on January 1, 2003. The Company made pro forma
adjustments to the historical consolidated financial information to give effect
to events that are (i) directly attributable to the acquisition, (ii) expected
to have a continuing impact on the combined results, and (iii) factually
supportable.
The fiscal year end of Penn T is March 31, whereas the fiscal year end of the
Company is December 31. The pro forma condensed unaudited statement of
operations for the fiscal year ended December 31, 2003 is derived from Penn T's
statement of operations for the year ended March 31, 2004 and the Company's
statement of operations for the year ended December 31, 2003. The pro forma
condensed unaudited statement of operations for the nine months ended September
30, 2004 is derived from Penn T's Unaudited statement of operations for the nine
months ended September 30, 2004 and the Company's unaudited statement of
operations for the nine months ended September 30, 2004.
The unaudited pro forma condensed financial information is not necessarily
indicative of the results that would have occurred if the Acquisition had
occurred on January 1, 2003 and should not be construed as being representative
of future operating results or financial position. The unaudited pro forma
condensed financial information should be read in conjunction with the:
o Accompanying Notes to Unaudited Pro Forma Condensed Financial
Information;
o Company's historical consolidated financial statements and notes
included in the Company's annual report on Form 10-K for the fiscal
year ended December 31, 2003;
o Company's Quarterly Reports on Form 10-Q for the quarterly period
ended September 30, 2004, and the quarterly period ended June 30,
2004; and
o Celgene UK Manufacturing II, Limited (formerly Penn T Limited)
historical financial statements and notes for the fiscal year ended
March 31, 2004 (included in this 8-K/A filing).
F-19
CELGENE CORPORATION
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
As of September 30, 2004
(Amounts in thousands)
HISTORICAL
CELGENE HISTORICAL PRO FORMA PRO FORMA
CORPORATION PENN T LIMITED ADJUSTMENTS NOTE CELGENE
----------- --------------- ----------- ---- ---------
ASSETS (A)
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 268,997 $ -- $(109,094) (D) $ 159,903
Marketable securities available for sale $ 529,834 529,834
Accounts receivable, net $ 44,476 $ 4,686 1,205 (D) 50,367
Inventory $ 21,566 $ 421 3,121 (D) 25,108
Other current assets $ 20,961 20,961
---------- ---------- --------- ----------
Total current assets $ 885,834 $ 5,107 (104,768) 786,173
Plant and equipment, net $ 22,668 22,668
Intangible assets, net $ 2,461 104,510 (D) 106,971
Goodwill $ 3,268 $ 17,640 17,290 (B)(D) 38,198
Other assets $ 27,317 27,317
---------- ---------- --------- ----------
Total assets $ 941,548 $ 22,747 $ 17,032 $ 981,327
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,644 $ 354 $ 99 (D) $ 23,097
Accrued expenses $ 56,410 5,478 (D) 61,888
Other current liabilities $ 4,256 $ 9,758 (7,263) (B)(C)(D) 6,751
---------- ---------- --------- ----------
Total current liabilities $ 83,310 $ 10,112 (1,686) 91,736
---------- ---------- --------- ----------
Long-term debt $ 400,000 $ 6,071 (6,071) (C) 400,000
Other non-current liabilities $ 14,619 31,353 (D) 45,972
---------- ---------- --------- ----------
Total liabilities $ 497,929 $ 16,183 23,596 537,708
---------- ---------- --------- ----------
Stockholders' equity:
Preferred stock $ -- $ 106 (106) (E) --
Common stock $ 822 $ 9 (9) (E) 822
Common stock in treasury $ (306) $ -- (306)
Additional paid-in capital $ 623,032 $ -- 623,032
Accumulated (deficit) earnings $ (266,537) $ 6,449 (6,449) (B)(C)(E) (266,537)
Accumulated other comprehensive income $ 86,608 $ -- 86,608
---------- ---------- --------- ----------
Total stockholders' equity $ 443,619 $ 6,564 (6,564) 443,619
---------- ---------- --------- ----------
Total liabilities and stockholders' Equity $ 941,548 $ 22,747 $ 17,032 $ 981,327
========== ========== ========= ==========
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS,
WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-20
CELGENE CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the nine months ended September 30, 2004
(Thousands of dollars, except per share amounts)
HISTORICAL
CELGENE HISTORICAL PRO FORMA PRO FORMA
CORPORATION PENN T LIMITED ADJUSTMENTS NOTE CELGENE
----------- -------------- ----------- ---- ----------
(A)
REVENUE:
NET PRODUCT SALES $ 238,933 $ 13,991 $ (1,478) (G) $ 251,446
Collaborative agreements and other revenue 15,420 $ - 15,420
Royalty revenue 17,741 $ - 17,741
------------- ------------- ------------- -------------
Total revenue 272,094 $ 13,991 (1,478) 284,607
------------- ------------- ------------- -------------
Expenses:
Cost of goods sold 43,655 $ 2,135 (192) (G) 45,598
Research and development 116,520 116,520
Selling, general and administrative 79,408 $ 781 5,283 (B) (F) 85,472
------------- ------------- ------------- -------------
Total expenses 239,583 $ 2,916 5,091 247,590
------------- ------------- ------------- -------------
Operating income (loss) 32,511 $ 11,075 (6,569) 37,017
Other income and expense:
Interest and other income (expense) 20,902 (2,233) (H) 18,669
Interest expense 7,164 $ 599 (599) (C) 7,164
------------- ------------- ------------- -------------
Income (loss) before taxes 46,249 $ 10,476 (8,203) 48,522
Income tax provision (benefit) 3,931 $ 3,506 (2,461) (I) 4,976
------------- ------------- ------------- -------------
Net income (loss) $ 42,318 $ 6,970 $ (5,742) $ 43,546
============= ============= ============= =============
Net income per common share:
Basic $ 0.26 $ 0.27
============= =============
Diluted $ 0.24 $ 0.25
============= =============
Weighted average number of shares of
common stock utilized to calculate net
income per common share:
Basic 163,574,000 163,574,000
============= =============
Diluted 176,273,000 176,273,000
============= =============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS,
WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-21
CELGENE CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(Thousands of dollars, except per share amounts)
HISTORICAL
CELGENE HISTORICAL PRO FORMA PRO FORMA
CORPORATION PENN T LIMITED ADJUSTMENTS NOTE CELGENE
----------- -------------- ----------- ---- ----------
(A)
REVENUE:
NET PRODUCT SALES $ 244,453 $ 14,450 $ (2,763) (G) $ 256,140
Collaborative agreements and other revenue 15,174 15,174
Royalty revenue 11,848 11,848
------------- ------------- ------------- -------------
Total revenue 271,475 14,450 (2,763) 283,162
------------- ------------- ------------- -------------
Expenses:
Cost of goods sold 49,085 2,911 (359) (G) 51,637
Research and development 122,700 122,700
Selling, general and administrative 102,339 965 7,121 (B) (F) 110,425
------------- ------------- ------------- -------------
Total expenses 274,124 3,876 6,762 284,762
------------- ------------- ------------- -------------
Operating income (loss) (2,649) 10,574 (9,525) (1,600)
Other income and expense:
Interest and other income (expense) 21,795 (2,978) (H) 18,817
Interest expense 5,667 214 (214) (C) 5,667
------------- ------------- ------------- -------------
Income (loss) before taxes 13,479 10,360 (12,289) 11,550
Income tax provision (benefit) 718 3,396 (3,687) (I) 427
------------- ------------- ------------- -------------
Income (loss) from continuing operations $ 12,761 $ 6,964 $ (8,602) $ 11,123
============= ============= ============= =============
Income from continuing operations per common share:
Basic $ 0.08 $ 0.07
============= =============
Diluted $ 0.07 $ 0.07
============= =============
Weighted average number of shares of common
stock utilized to calculate per share amounts:
Basic 161,774,000 161,774,000
============= =============
Diluted 170,796,000 170,796,000
============= =============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS,
WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-22
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
Penn T's fiscal year ends on March 31. The Unaudited Pro Forma Condensed
Statement of Operations for the year ended December 31, 2003 includes Penn T's
results for their fiscal year ended March 31, 2004. The Unaudited Pro Forma
Condensed Statement of Operations for the nine-months ended September 30, 2004
includes Penn T's results for the same nine-months. Penn T's results for the
quarter ended March 31, 2004 were included in both Unaudited Pro Forma Condensed
Statement of Operations. For the quarter ended March 31, 2004, Penn T's revenue
was approximately $4.2 million and net income was approximately $1.9 million.
(A) Historical Penn T's financial statements are presented in British Pounds.
The historical financial statements were converted to U.S. dollars using an
exchange rate of 1GBP to $1.80 as of September 30, 2004, 1 GBP to $1.82 for
the nine months ended September 30, 2004 and 1 GBP to $1.69 for the year
ended December 31, 2003. The Penn T financials have been reclassified to
conform to Celgene's presentation.
(B) Penn T financial statements have been prepared under UK generally accepted
accounting principles ("GAAP"). These adjustments show the effect of the
differences between UK GAAP and US GAAP. The primary difference relates to
eliminating goodwill of approximately $17.6 million, which would not have
been recognized under U.S. GAAP and eliminating the related amortization
expense of approximately $0.8 million for the nine-months ended September
30, 2004 and approximately $1.0 million for the year ended December 31,
2003.
(C) To eliminate approximately $8.9 million of current liabilities and
approximately $6.1 million of long-term debt and related interest expense
from historical Penn T liabilities that were not assumed in the
acquisition.
(D) To record the estimated purchase accounting effects as if the acquisition
had occurred on either the pro forma balance sheet date or on January 1 of
the appropriate pro forma statement of operations. The Company's
preliminary estimate for the purchase price allocation is as follows (in
thousands of $):
Accounts receivable $5,891
Inventory 3,542
Intangibles:
Amortizable intangibles 104,510
Goodwill 34,929
Accounts payable (453)
Accrued expenses (acquisition related costs) (2,283)
Accrued expenses (additional purchase price
due to estimated working
capital adjustment) (3,194)
Other current liabilities (1,530)
Deferred tax liabilities (32,318)
--------
$109,094
========
Amortizable intangibles include supply contracts.
(E) To eliminate the historical Penn T stockholders' equity accounts.
(F) To record amortization expense for the estimated intangible assets which
will be recorded as a result of the Acquisition over their estimated useful
life of 13 years based on the preliminary valuation report.
(G) To eliminate inter-company sales and profit recognition on inter-company
sales from Penn T to Celgene which have not yet been sold to an unrelated
third party. (Prior to the acquisition the Company purchased product from
Penn T under a supply agreement. Penn T also sold product to other
unrelated third parties).
(H) To pro forma the effects of interest income that may have been generated
with the internal funds used to make the acquisition
(I) To reflect tax impact of pro forma adjustments
F-23