CHIRON CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission File Number: 0-12798

CHIRON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-2754624
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4560 Horton Street, Emeryville, California	94608
(Address of principal executive offices)	(Zip code)

(510) 655-8730

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of Class		Outstanding at April 28, 2005
Common Stock, $0.01 par value		187,458,623

Item 1. Financial Statements

CHIRON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)

	March 31, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	198,770			$	209,509
Short-term investments in marketable debt securities	430,668				394,112
Total cash and short-term investments	629,438				603,621
Accounts receivable, net of allowances	378,790				402,094
Inventories, net of reserves	233,257				221,154
Assets held for sale	1,275				—
Current net deferred income tax asset	65,342				71,287
Derivative financial instruments	7,833				4,969
Other current assets	92,709				90,898
Total current assets	1,408,644				1,394,023
Non-current investments in marketable debt securities	402,841				409,421
Property, plant, equipment and leasehold improvements, at cost:
Land and buildings	381,014				379,861
Laboratory, production and office equipment	668,221				637,394
Leasehold improvements	132,850				125,858
Construction-in-progress	206,630				225,482
	1,388,715				1,368,595
Less accumulated depreciation and amortization	(583,698		)		(569,180		)
Property, plant, equipment and leasehold improvements, net	805,017				799,415
Purchased technologies, net	210,960				216,037
Goodwill	845,825				861,394
Other intangible assets, net	432,906				457,707
Investments in equity securities and affiliated companies	76,512				100,951
Non-current notes receivable	7,500				7,500
Other non-current assets	58,368				59,055
	$	4,248,573			$	4,305,503

The accompanying Notes to Condensed Consolidated Financial Statements are integral to this statement.

CHIRON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(In thousands, except share data)

	March 31, 2005		December 31, 2004
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	122,878		$	129,942
Accrued compensation and related expenses	73,889			79,113
Derivative financial instruments	—			10,395
Current portion of long-term debt and capital lease	1,137			2,687
Current portion of unearned revenue	59,745			35,651
Income taxes payable	23,689			16,363
Other current liabilities	169,420			160,293
Total current liabilities	450,758			434,444
Long-term debt	938,112			936,652
Long-term portion of capital lease	156,890			156,952
Non-current derivative financial instruments	—			156
Non-current net deferred income tax liability

	Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at March 31, 2005 and December 31, 2004		3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004		5
Condensed Consolidated Statements of Comprehensive Income (loss) for the three months ended March 31, 2005 and 2004		6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004		7
Notes to Condensed Consolidated Financial Statements		8
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		49
ITEM 4. Controls and Procedures		49
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings		52
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		53
ITEM 3. Defaults Upon Senior Securities		53
ITEM 4. Submission of Matters to a Vote of Security Holders		53
ITEM 5. Other Information		53
ITEM 6. Exhibits		54
SIGNATURES		56