<PAGE> 1
EXHIBIT 99.3
PAGES 3 THROUGH 13 OF SCHEIN'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED MARCH 25, 2000, AS FILED WITH THE SEC ON MAY 9, 2000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
MARCH 25, DECEMBER 25,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS (unaudited)
Current assets:
Cash and cash equivalents ..................................... $ 18,279 $ 3,821
Accounts receivable, less allowance for possible losses of
$1,740 and $2,200 ..................................... 41,560 61,828
Inventories ................................................... 125,392 128,726
Deferred income taxes ......................................... 14,071 9,253
Other current assets .......................................... 11,306 20,567
------------ ------------
Total current assets ................................ 210,608 224,195
Property, plant and equipment, net ............................ 100,138 100,730
Product rights, licenses and regulatory approvals, net ........ 50,278 51,557
Other assets .................................................. 20,860 27,019
------------ ------------
$ 381,884 $ 403,501
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ......................... $ 99,183 $ 104,872
Income taxes payable .......................................... 8,045 7,511
Revolving credit and current maturities of long-term debt ..... 136,142 128,631
------------ ------------
Total current liabilities ........................... 243,370 241,014
Long-term debt, less current maturities ....................... 84,428 92,738
Deferred income taxes ......................................... 4,402 6,780
Other non-current liabilities ................................. 4,601 5,851
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 100,000 authorized shares;
issued and outstanding 32,984 and 32,943 shares ... 329 329
Additional paid-in capital ................................ 101,817 101,357
Accumulated deficit ....................................... (61,853) (52,931)
Accumulated other comprehensive income .................... 7,024 10,597
Subscription receivable ................................... (2,234) (2,234)
------------ ------------
Total stockholders' equity .......................... 45,083 57,118
------------ ------------
$ 381,884 $ 403,501
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
37
<PAGE> 2
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
MARCH 25, MARCH 27,
2000 1999
------------ ------------
<S> <C> <C>
Net revenues .................................................. $ 87,898 $ 105,863
Cost of sales ................................................. 68,782 69,580
------------ ------------
Gross profit ......................................... 19,116 36,283
Costs and expenses:
Selling, general and administrative .................. 16,836 20,905
Research and development ............................. 8,066 5,168
Amortization of goodwill and other intangibles ....... 334 1,591
Severance charge ..................................... 3,500 --
------------ ------------
Operating income (loss) ....................................... (9,620) 8,619
Interest expense, net ......................................... 4,538 4,652
Other expenses, net ........................................... 712 321
------------ ------------
Income (loss) before income taxes ............................. (14,870) 3,646
Provision (benefit) for income taxes .......................... (5,948) 1,422
------------ ------------
Net income (loss) ............................................. $ (8,922) $ 2,224
============ ============
Basic and diluted earnings (loss) per share ................... $ (0.27) $ 0.07
============ ============
Weighted average common shares and equivalents ................ 32,962 32,595
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
38
<PAGE> 3
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
MARCH 25, MARCH 27,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................. $ (8,922) $ 2,224
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Depreciation and amortization .............................. 4,514 5,253
Deferred income tax benefit ................................ (4,818) (597)
Gain on sale of marketable securities ...................... -- (356)
Other ...................................................... 303 1,376
Changes in operating assets and liabilities:
Accounts receivable ........................................ 20,728 13,836
Inventories ................................................ 3,334 (6,391)
Prepaid expenses and other assets .......................... 9,261 1,202
Accounts payable, income taxes, accrued expenses
and other liabilities ................................. (6,405) 3,813
------------ ------------
Net cash provided by operating activities ..................... 17,995 20,360
------------ ------------
Cash flows from investing activities:
Capital expenditures ....................................... (2,834) (1,257)
Product rights and licenses ................................ -- (10,000)
International investments .................................. -- (1,836)
Other, net ................................................. (259) (11)
------------ ------------
Net cash used in investing activities ......................... (3,093) (13,104)
------------ ------------
Cash flows from financing activities:
Principal payments on, or repayments of, debt .............. (25,045) (43,532)
Proceeds from issuance of debt ............................. 24,246 37,337
Proceeds from employee stock purchase plan ................. 355 475
------------ ------------
Net cash used in financing activities ......................... (444) (5,720)
------------ ------------
Net increase in cash and cash equivalents ..................... 14,458 1,536
Cash and cash equivalents, beginning of period ................ 3,821 377
------------ ------------
Cash and cash equivalents, end of period ...................... $ 18,279 $ 1,913
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
39
<PAGE> 4
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
MARCH 25, MARCH 27,
2000 1999
------------ ------------
<S> <C> <C>
Net income (loss) ............................................. $ (8,922) $ 2,224
------------ ------------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment ..................... (2) 281
Unrealized holding gains (losses) arising during period ..... (3,571) 4,589
Less: reclassification adjustment for gains included in net
income (loss) ............................................. -- (212)
------------ ------------
Other comprehensive income (loss) ............................. (3,573) 4,658
------------ ------------
Comprehensive income (loss) ................................... $ (12,495) $ 6,882
============ ============
</TABLE>
Components of accumulated other comprehensive income, included in the Company's
consolidated balance sheets, are as follows:
<TABLE>
<CAPTION>
MARCH 25, DEC. 25,
2000 1999
------------ ------------
<S> <C> <C>
Unrealized gains on marketable securities ..................... $ 7,656 $ 11,227
Cumulative foreign currency translation adjustment ............ (632) (630)
------------ ------------
$ 7,024 $ 10,597
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
40
<PAGE> 5
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- GENERAL AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. These financial statements do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying December 25, 1999 condensed consolidated
balance sheet was derived from the audited consolidated balance sheet which is
included in the Company's 1999 Annual Report on Form 10-K. In the opinion of
management, all adjustments (consisting of only normal recurring accruals and
the effects of the 1999 restructuring charge and the 2000 severance charge)
considered necessary for a fair presentation have been included. Operating
results and cash flows for the interim period ended March 25, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 30, 2000. The interim financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1999 Annual Report on Form 10-K.
NOTE 2 -- INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
MARCH 25, DECEMBER 25,
2000 1999
------------ ------------
(In thousands)
<S> <C> <C>
Finished products ............................................. $ 50,699 $ 46,421
Work-in-process ............................................... 23,802 31,544
Raw materials and supplies .................................... 50,891 50,761
------------ ------------
$ 125,392 $ 128,726
============ ============
</TABLE>
41
<PAGE> 6
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 -- BORROWINGS
REVOLVING CREDIT AND LOAN AGREEMENT
Due to the 1999 fourth quarter restructuring charge taken at Marsam, the Company
was not in compliance with certain financial covenants contained in its
revolving credit and loan agreement. In February and March 2000, the Company and
the lenders agreed to various amendments to the revolving credit and loan
agreement which modified certain financial covenants, including leverage,
interest expense coverage, fixed charge and working capital ratios through the
end of 2000 and increased the interest rate on the outstanding loans and fees
payable as described below. Under the amended agreement the applicable interest
rate is LIBOR + 3.5% through April 30, 2000; LIBOR + 4.0% from May 1, 2000
through August 31, 2000; LIBOR + 4.25% from September 1, 2000 through December
31, 2000, and LIBOR + 4.5% thereafter. A quarterly fee based on the Company's
outstanding borrowings under the term loan and the revolving credit commitment
of 0.25% was paid on March 31, 2000, and additional fees of 0.25% are payable
September 1, 2000 and December 31, 2000. A fee of 0.5% of the Company's
outstanding borrowings under the term loan and revolving credit commitment was
paid on May 1, 2000.
SENIOR FLOATING RATE NOTES
The Company's senior floating rate notes are fully and unconditionally
guaranteed jointly and severally by each of the Company's domestic subsidiaries,
each of which is wholly-owned by the Company. These subsidiaries sell all of
their products to Schein Pharmaceutical, Inc., the parent company. Summarized
financial information for these wholly-owned subsidiary guarantors (using the
push-down method of accounting) is as follows:
<TABLE>
<CAPTION>
MARCH 25, DECEMBER 25,
2000 1999
------------ ------------
(In thousands)
<S> <C> <C>
Current assets:
Inventories .......................................... $ 74,693 $ 82,306
Intercompany receivables ............................. 27,737 44,022
Other current assets ................................. 8,873 6,866
Property, plant and equipment, net ............................ 95,143 96,851
Product rights, licenses and regulatory approvals
and other assets .................................... 16,985 20,325
Current liabilities ........................................... 166,842 179,477
Deferred income taxes and other liabilities ................... 4,920 6,420
Long-term debt (pushed down) .................................. 84,428 92,738
THREE MONTHS ENDED
------------------
MARCH 25, MARCH 27,
2000 1999
------------ ------------
(In thousands)
Net revenues .................................................. $ 58,662 $ 88,437
Gross profit .................................................. 8,774 28,810
Operating income (loss) ....................................... (2,992) 6,307
Net income (loss) ............................................. (4,495) 1,347
</TABLE>
42
<PAGE> 7
NOTE 4 -- REGULATORY MATTERS AND RESTRUCTURING CHARGES
MARSAM FACILITY
On July 29, 1999, the FDA concluded an inspection of the Company's Marsam
sterile manufacturing facility, located in Cherry Hill, N.J. At the close of the
inspection, Marsam received a Form 483 detailing the FDA's inspectional
observations and noting a number of significant deficiencies in current good
manufacturing practices. During the inspection, Marsam initiated actions to
address a number of the FDA's inspectional observations by voluntarily recalling
all Marsam products within expiry and suspending manufacturing and testing
activities. In September, 1999 Marsam submitted its response to the FDA's
inspectional observations, together with its proposed corrective action plan
(Marsam Corrective Action Plan). A corrective action plan is a systematic
approach to assure that processes, quality assurance and quality control
programs, validation programs, employee training, and management controls comply
with cGMP regulations. The Marsam Corrective Action Plan contemplates resumption
of manufacturing on a product-by-product basis. On March 3, 2000 Marsam received
a Warning Letter from the FDA relating to the observations made during the
inspection. This FDA Warning Letter also acknowledged the commitments the
Company made under the Marsam Corrective Action Plan. The Company has confirmed
with the FDA in meetings with FDA representatives its approach to addressing
current cGMP deficiencies at Marsam on a voluntary basis. The Company does not
expect Marsam will be subject to further regulatory enforcement action related
to the 1999 inspection. Marsam is currently ineligible to receive new product
approvals, and the Company cannot predict when Marsam will resume manufacturing
specific products.
Following its suspension of operations at the Marsam facility, the Company
re-evaluated its sterile business and its assessment of the time and costs
required to reintroduce products. As a result, the Company modified its overall
business plans to more aggressively reduce operating costs. These measures
included, among other things, a reduction in the Company's workforce, and
dividing Marsam's product line into products it will seek to manufacture upon
completion of the Marsam Corrective Action Plan, and those products it has
decided not to manufacture. Marsam contributed approximately seven percent of
the Company's revenues and a smaller percentage of the Company's gross profits
over the four quarters preceding the suspension of shipment of its products.
The Company intends to reactivate its penicillin operations as part of the first
phase of a plan to bring its Marsam facility back to operation. Pending
resumption of manufacturing at Marsam, the Company expects to reintroduce
penicillin G potassium during the second quarter of 2000 supplied by a third
party.
As a result of the actions discussed above, in 1999 the Company recorded a
restructuring charge of approximately $87.0 million, or $52.2 million net of tax
benefit. Costs of restructuring consisted largely of costs incurred at the
Marsam facility and relate to the impairment of intangible assets, product
recalls, inventory write-offs and severance. Recall costs and inventory
write-offs were those costs that the Company incurred related to the Marsam
Corrective Action Plan.
43
<PAGE> 8
STERIS FACILITY
On September 10, 1998, the U.S., on behalf of the FDA, based on actions it filed
in Federal court in the Southern District of New York on September 9, 1998 and
the District of Arizona on September 10, 1998 initiated seizures of drugs and
drug related products manufactured by the Company's Steris facility. The actions
alleged certain instances in which the Steris facility, located in Phoenix,
Arizona, was not operating in conformity with cGMP regulations. The actions
resulted in the seizure of all drugs and drug related products in the Company's
possession manufactured at the Steris facility and halted the manufacture and
distribution of Steris manufactured products.
On October 16, 1998, Steris and certain of its officers, without admitting any
allegations of the complaints and disclaiming any liability in connection
therewith, entered into a consent agreement with the FDA (the Consent
Agreement). Under the terms of the Consent Agreement, Steris is required, among
other things, to demonstrate through independent certification that Steris'
processes, quality assurance and quality control programs, and management
controls comply with cGMP regulations. The Consent Agreement also provides for
independent certification of Steris' management controls, quality assurance and
quality control programs, and employee cGMP training. It further requires that
Steris develop a timeline and corrective action plan for implementing these
actions and for expert certification with respect to matters covered in previous
FDA inspections of the facility. Steris has submitted to the FDA the corrective
action plan provided for under the Consent Agreement (Steris Corrective Action
Plan) and is implementing the Steris Corrective Action Plan.
As a result of the Consent Agreement, Steris has divided its product line into
three categories: products that it will seek to manufacture under expedited
certification procedures under the Consent Agreement, products that it will seek
to manufacture once it satisfies all conditions under the Consent Agreement and
products it has decided not to manufacture in the near term. Expedited
certification procedures apply for certain products that are particularly
important to the medical community because they are primarily or exclusively
available from the Company or that are particularly significant to the Company.
In October, 1998 the Company resumed commercial distribution of INFeD, its
branded injectable iron product, from existing inventory. In the second quarter
of 1999 the Company began distribution of newly manufactured lots of INFeD under
the Consent Agreement and in the fourth quarter of 1999, the Company resumed the
manufacture of one other product deemed medically necessary under the expedited
certification procedures in the Consent Agreement. On February 11, 2000, the FDA
concluded an inspection at Steris. The Company believes that the results of that
inspection confirm that the Company is complying with the requirements of the
Steris Corrective Action Plan. In March 2000, the Company resumed the
manufacture and commercial distribution of vecuronium bromide under the
expedited certification procedures provided in the Consent Agreement. Newly
manufactured products must undergo certification by independent experts and
review by the FDA prior to commercial distribution. As of April, 2000, the
Company may distribute newly manufactured lots of INFeD following certification
by independent experts but without prior review by the FDA. Steris is currently
ineligible to receive new product approvals, and the Company cannot predict when
Steris will resume manufacturing additional products.
44
<PAGE> 9
RESTRUCTURING RESERVES
As a result of the restructuring charges described above, the Company
established certain restructuring reserves. Current period activity is as
follows (in millions):
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
DEC. 25, MARCH 25,
1999 ADDITIONS DEDUCTIONS 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Inventory and other - Marsam $ 10.5 -- 3.5 $ 7.0
Inventory and other - Steris 0.9 -- 0.9 --
------------ ------------ ------------ ------------
$ 11.4 -- 4.4 $ 7.0
============ ============ ============ ============
</TABLE>
NOTE 5 -- LEGAL PROCEEDINGS
In September and October 1998, following the commencement of the seizure action
by the FDA against Steris on September 10, 1998, a number of substantially
similar class action complaints asserting claims under the federal securities
laws were filed in Federal court in the District of New Jersey against the
Company and certain of its officers and directors. On December 21, 1998, the
court entered an order consolidating the actions, appointing lead plaintiffs and
approving selection of lead and liaison counsel. On or about March 29, 1999,
lead plaintiffs filed a consolidated and amended class action complaint (the
Complaint), naming as defendants the Company, its directors at the time of the
Company's April 9, 1998 initial public offering (the Offering), and three of the
underwriters of the Offering. Plaintiffs purport to sue on behalf of a class of
persons who purchased shares of the Company's common stock pursuant or traceable
to the Offering during the period from April 9, 1998 through September 28, 1998.
They allege that defendants violated the Securities Exchange Act of 1934 and
Rule 10b-5 by making misrepresentations and omissions of material facts in
connection with the Offering and in the registration statement and prospectus
issued pursuant to the Offering and in statements made immediately following the
FDA seizure action on September 10, 1998. Plaintiffs allege, among other things,
that defendants failed to disclose or misrepresented facts concerning the status
of the Company's internal controls and ability to comply with government
regulations relating to its manufacturing activities, including the status of
the Company's corrective actions at the Steris facility and the effect of the
FDA enforcement action on the Company's operations. Plaintiffs on behalf of the
purported class seek damages, recision and/or recisionary damages. In May 1999,
the Company and the other defendants in this action filed a motion to dismiss
the Complaint. In March 2000, and prior to any decision on the motion to
dismiss, plaintiffs and defendants entered into a Memorandum of Understanding
(MOU) to settle the actions. The MOU provides for, among other things, the
certification of the class, for purposes of the settlement, and the taking of
additional discovery by plaintiffs appropriate and necessary to confirm the
fairness and reasonableness of the contemplated settlement. The MOU also
contemplates the execution of an appropriate Stipulation of Settlement and other
related documentation. In addition, the settlement can become effective only
upon notice to the proposed class and a hearing and approval by the Court. The
Company does not believe that, if approved, the contemplated settlement, which
is expected to be funded through insurance proceeds, will have a material
adverse effect upon its results of operations or financial condition.
In one of the Company's patent challenge litigations filed in the U.S. District
Court for the Southern District of New York, the trial judge ruled against the
Company and upheld the validity of the patent at issue. On October 1, 1998, the
Court awarded attorneys fees to the patent holder and its licensee, and on June
22, 1999 the court fixed the fees at $2.0 million. On July 28, 1999, the Company
filed an appeal of this matter which is currently pending before the appeals
court.
In March 1999, an action entitled MARVIN SAMSON V. SCHEIN PHARMACEUTICAL, INC.,
MARTIN SPERBER AND MARSAM PHARMACEUTICALS INC. was commenced in Superior Court
of New Jersey, Camden County, Law Division, alleging, among other things,
breaches of plaintiff's employment agreement with Marsam and misrepresentations
concerning responsibilities that would be given to plaintiff, and seeks, among
other things, damages which plaintiff believes exceed $6 million and a
declaration that the "non-competition restrictions" in his employment agreement
are no longer effective. The Company intends to defend itself vigorously against
this action.
In November, 1999, the Company was informed by the U.S. Department of Justice
that it, along with several other pharmaceutical companies, is a defendant in a
QUI TAM action brought in 1995 under the U.S. False Claims Act currently pending
in the Federal District Court for the Southern District of Florida. As of May 8,
2000, the Company has not been served in this action. A QUI TAM action is a
lawsuit brought by an individual for an alleged violation of a federal statute,
in which the Department of Justice has the right to intervene and take over the
prosecution of the lawsuit at its option. The Department of Justice has not yet
decided whether to intervene in the matter. Pursuant to applicable federal law,
the QUI TAM action is under seal and no details are available concerning the
name of the plaintiff, the various theories of liability or the amount of
damages sought from any of the defendants. Based on industry information, the
Company believes that the matter relates to pharmaceutical pricing issues and
whether allegedly improper efforts by pharmaceutical manufacturers led to
increased payments by Medicare and/or Medicaid. Because detailed allegations
have not been revealed to the Company by the Justice Department, management does
not have any basis on which to determine the Company's liability, if any, in
connection with the lawsuit or the likely amount of any such liability, or
whether any resolution of the lawsuit would be likely to have a material adverse
affect on the Company's financial position, results of operations or liquidity.
On April 25, 2000, the Company was served with a Civil Investigative Demand
(CID) from the Office of the Attorney General of Texas in connection with a
state investigation of possible false reporting of information regarding the
marketing of and prices for drugs used by the Vendor Drug Program administered
by the Texas Department of Health, which establishes the reimbursement rates for
pharmaceuticals dispensed to Texas Medicaid recipients. The CID seeks
information about a single drug included in the Vendor Drug Program. The Company
has not been provided any details concerning the conduct under investigation. At
the present time, management does not have any basis on which to determine the
Company's liability, if any, upon conclusion of the investigation or whether the
resolution of the investigation is likely to have a material adverse effect on
the Company's financial position, results of operations, or liquidity.
45
<PAGE> 10
On April 24, 2000, certain stockholders of the Company (the Marvin Schein/Irving
Shafran Group) filed an action in Delaware seeking, among other things, an order
that would (a) in effect, allow the Marvin Schein/Irving Shafran Group to
present a by-law amendment at the Company's Annual Stockholder Meeting that
would increase the number of directors from seven to nine, (b) prevent the Board
of Directors from re-electing two incumbent directors, as described in the
Company's Proxy Statement for the meeting and (c) rescind certain previously
reported stock and employment arrangements for the three senior executives of
the Company. On May 2, 2000 the action was dismissed with prejudice in
accordance with a Settlement Agreement entered into on May 1, 2000 between the
Company and the Marvin Schein/Irving Shafran Group. The Company added Marvin H.
Schein and Irving Shafran to the Board of Directors, bringing its members to a
total of nine. The Company will include two additional designees of the Marvin
Schein/Irving Shafran Group as nominees for directorships at its Annual
Stockholder Meeting which will be adjourned from its presently scheduled date of
May 16, 2000. The Company also modified a provision of the General Shareholders
Agreement dated September 30, 1994 to permit discussion between Bayer
Corporation and certain other parties thereto, including members of the Marvin
Schein/Irving Shafran Group.
In addition, the Company is a defendant in several product liability cases.
These cases are typical for a company in the pharmaceutical industry. The
Company also is involved in other proceedings and claims of various types.
Management presently believes that the disposition of all such known product
liability and other proceedings and claims (except for the matter set forth
immediately above for which it is too early to assess liability), individually
or in the aggregate, will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.
NOTE 6 - SEVERANCE CHARGE
In February 2000, the Company reduced its workforce by approximately 16% as part
of an evaluation of its sterile business plan and to reduce operating costs. As
a result, the Company incurred a pre-tax severance charge of $3.5 million in the
first quarter of 2000.
NOTE 7 - STRATEGIC ALTERNATIVES
In January 2000, the Company announced that it had retained financial advisors
to explore strategic alternatives to maximize shareholder value, which is
currently focusing on the possible sale of the Company and is moving ahead. The
Marvin Schein/Irving Shafran Group, representing approximately 50 percent of the
outstanding shares of the Company, has stated that they "fully endorse the
pursuit of a strategic transaction that will lead to the sale of the Company."
Through April 2000, this process is continuing, and the Company cannot predict
the timing or the outcome of this process.
46
