<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 1999
Commission file number 1-14019
SCHEIN PHARMACEUTICAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2726505
- ------------------------------------------------ -------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
100 CAMPUS DRIVE, FLORHAM PARK, NJ 07932
- ------------------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
973-593-5500
-------------------------------
(Registrant's telephone number)
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.......
The number of shares outstanding of the registrant's common stock as of
October 29, 1999 was 32,693,110.
<PAGE>
SCHEIN PHARMACEUTICAL, INC.
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 25, 1999 and December 26, 1998 3
Condensed Consolidated Statements of Operations
for the three and nine months ended September 25,
1999 and September 26, 1998 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 25, 1999 and
September 26, 1998 5
Consolidated Statements of Comprehensive Income (Loss)
for the three and nine months ended September 25, 1999
and September 26, 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 25, DECEMBER 26,
1999 1998
--------- ---------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 986 $ 377
Accounts receivable, less allowance for possible losses of
$2,385 and $2,486 ..................................... 68,411 82,498
Inventories .............................................. 104,152 106,351
Income taxes receivable .................................. -- 15,900
Other current assets ..................................... 24,266 14,884
--------- ---------
Total current assets ................................ 197,815 220,010
Property, plant and equipment, net ............................ 109,638 112,224
Product rights, licenses and regulatory approvals, net ........ 113,368 107,769
Other assets .................................................. 30,458 12,993
--------- ---------
$ 451,279 $ 452,996
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .................... $ 69,863 $ 99,122
Income taxes payable ..................................... 13,554 8,626
Revolving credit and current maturities of long-term debt 116,878 103,975
--------- ---------
Total current liabilities ........................... 200,295 211,723
Long-term debt, less current maturities ....................... 101,077 124,482
Other non-current liabilities ................................. 45,306 38,306
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 100,000 authorized shares;
issued and outstanding 32,655 and 32,499 shares ....... 326 325
Additional paid-in capital ............................... 98,577 97,176
Accumulated deficit ...................................... (7,209) (18,543)
Accumulated other comprehensive income (loss) ............ 12,907 (473)
--------- ---------
Total stockholders' equity .......................... 104,601 78,485
--------- ---------
$ 451,279 $ 452,996
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -------------------------
SEPT. 25, SEPT. 26, SEPT. 25, SEPT. 26,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues.................................................. $ 123,954 $ 116,922 $ 360,721 $ 401,574
Cost of sales................................................. 80,236 78,069 237,111 264,683
--------- --------- --------- ---------
Gross profit......................................... 43,718 38,853 123,610 136,891
Costs and expenses:
Selling, general and administrative.................. 22,828 22,575 66,987 66,394
Research and development............................. 7,098 7,571 18,305 21,772
Amortization of intangibles and goodwill............. 1,709 2,139 4,904 7,287
Restructuring charge................................. - 156,600 - 156,600
--------- --------- --------- ---------
Operating income (loss)....................................... 12,083 (150,032) 33,414 (115,162)
Interest expense, net......................................... 4,968 4,777 14,442 15,824
Other expenses (income), net.................................. 316 (351) 981 (2,493)
--------- --------- --------- ---------
Income (loss) before provision (benefit) for income taxes and
extraordinary item................................... 6,799 (154,458) 17,991 (128,493)
Provision (benefit) for income taxes.......................... 2,516 (23,638) 6,657 (13,238)
--------- --------- --------- ---------
Income (loss) before extraordinary item....................... 4,283 (130,820) 11,334 (115,255)
Extraordinary item: loss on early extinguishment of
debt, net of income tax.............................. - - - (1,660)
--------- --------- --------- ---------
Net income (loss)............................................. $ 4,283 $(130,820) $ 11,334 $(116,915)
========= ========= ========= =========
Earnings (loss) per share, basic and diluted:
Income (loss) before extraordinary item.............. $ 0.13 $ (4.04) $ 0.35 $ (3.72)
Extraordinary item................................... - - - (0.06)
--------- --------- --------- ---------
Net income (loss).................................... $ 0.13 $ (4.04) $ 0.35 $ (3.78)
========= ========= ========= =========
Weighted average common shares and equivalents:
Basic................................................ 32,650 32,401 32,609 30,954
Diluted.............................................. 32,829 32,401 32,694 30,954
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
SEPT. 25, SEPT. 26,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................... $ 11,334 $(116,915)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Depreciation and amortization .................................... 17,410 19,105
Impairment of long lived assets, due to restructuring ............ -- 102,280
Inventory write-off, due to restructuring ........................ -- 30,500
Deferred income taxes ............................................ (1,796) 1,349
Gain on sale of marketable securities ............................ (684) (4,551)
Extraordinary item: loss on early extinguishment of debt, non-cash -- 1,160
Other ............................................................ 2,145 3,743
Changes in operating assets and liabilities:
Accounts receivable .............................................. 14,604 8,754
Inventories ...................................................... (102) (26,901)
Income taxes receivable and other current assets ................. 6,052 (415)
Accounts payable, income taxes payable, accrued expenses
and other liabilities .......................................... (16,532) (14,090)
--------- ---------
Net cash provided by operating activities .............................. 32,431 4,019
--------- ---------
Cash flows from investing activities:
Capital expenditures ................................................. (5,019) (19,612)
Product rights and licenses .......................................... (19,038) (15,811)
International investments ............................................ (2,541) (6,838)
Proceeds from the sale of marketable securities ...................... 2,009 6,607
Other, net ........................................................... 3,757 (950)
--------- ---------
Net cash used in investing activities .................................. (20,832) (36,604)
--------- ---------
Cash flows from financing activities:
Principal payments on, or repayments of, debt ........................ (153,579) (169,890)
Proceeds from issuance of debt ....................................... 141,187 155,000
Net proceeds from initial public offering ............................ -- 52,450
Proceeds from exercise of employee stock options ..................... 148 4,306
Proceeds from employee stock purchase plan ........................... 1,254 544
Increase in other non-current assets ................................. -- (117)
--------- ---------
Net cash provided by (used in) financing activities .................... (10,990) 42,293
--------- ---------
Net increase in cash and cash equivalents .............................. 609 9,708
Cash and cash equivalents, beginning of period ......................... 377 804
--------- ---------
Cash and cash equivalents, end of period ............................... $ 986 $ 10,512
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
SEPT. 25, SEPT. 26, SEPT. 25, SEPT. 26,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) ................................. $ 4,283 $(130,820) $ 11,334 $(116,915)
--------- --------- --------- ---------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment ...... (229) 534 (180) 127
Unrealized holding gains arising
during period ..................... 9,250 114 13,967 662
Less: reclassification adjustment for
gains included in net income (loss) (195) (806) (407) (2,708)
--------- --------- --------- ---------
Other comprehensive income (loss) ................. 8,826 (158) 13,380 (1,919)
--------- --------- --------- ---------
Comprehensive income (loss) ....................... $ 13,109 $(130,978) $ 24,714 $(118,834)
========= ========= ========= =========
</TABLE>
Components of accumulated other comprehensive income (loss), included in the
Company's balance sheets, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 25, DECEMBER 26,
1999 1998
-------- --------
<S> <C> <C>
Unrealized gains on marketable securities ........ $ 13,750 $ 190
Cumulative foreign currency translation adjustment (843) (663)
-------- --------
$ 12,907 $ (473)
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
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 26, 1998 condensed consolidated
balance sheet was derived from the audited consolidated balance sheet which is
included in the Company's 1998 Annual Report on Form10-K. In the opinion of
management, all adjustments (consisting of only normal recurring accruals and
the effects of the 1998 restructuring charge) considered necessary for a fair
presentation have been included. Operating results and cash flows for the
interim periods ended September 25, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 25, 1999. The interim
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1998 Annual
Report on Form 10-K.
NOTE 2--INVENTORIES
Inventories are summarized as follows:
SEPTEMBER 25, DECEMBER 26,
1999 1998
---------- ----------
(In thousands)
Finished products................ $ 29,561 $ 29,207
Work-in-process.................. 29,045 27,574
Raw materials and supplies....... 45,546 49,570
---------- ----------
$ 104,152 $ 106,351
========== ==========
7
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3-- BORROWINGS
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>
SEPTEMBER 25, SEPTEMBER 26,
1999 1998
------------- -------------
(In thousands)
<S> <C> <C>
Current assets:
Inventories ....................................... $ 71,653 $ 82,164
Intercompany receivables .......................... 47,409 63,385
Other current assets .............................. 7,029 3,960
Property, plant and equipment, net ......................... 104,267 101,139
Product rights, licenses and regulatory approvals, goodwill,
net and other assets ............................. 78,500 69,459
Current liabilities ........................................ 158,650 119,591
Deferred income taxes and other liabilities ................ 35,212 38,271
Long-term debt (pushed down) ............................... 101,077 120,000
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 25, SEPTEMBER 26,
1999 1998
------------- -------------
(In thousands)
<S> <C> <C>
Net revenues ............................................... $ 249,939 $ 339,452
Gross profit ............................................... 69,911 102,121
Operating income (loss) .................................... 15,436 (131,605)
Net income (loss) .......................................... 1,100 (123,314)
</TABLE>
NOTE 4-- CONSENT AGREEMENT AND RESTRUCTURING CHARGE
In September 1998, the United States, on behalf of the United States Food and
Drug Administration (FDA), based on actions it filed in federal courts,
initiated seizures of drugs and drug related products manufactured by Steris
Laboratories, Inc. (Steris), a subsidiary of the Company. The actions alleged
certain instances in which the Steris facility was not operating in conformity
with current Good Manufacturing Practices (known as 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 products, including INFeD(R).
8
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
In October 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. 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.
In 1998 Steris posted a bond in the amount of $6 million to secure certain
obligations under the consent agreement. The consent agreement provided that the
bond would be released once Steris abided by and performed all of the terms and
conditions in the consent agreement relating to the seized products. Steris met
all of the terms and conditions regarding the seized products in accordance with
the consent agreement, and on September 24, 1999, the bond was released and
discharged.
As a result of the actions taken by the FDA and the consent agreement, the
Company recorded a restructuring charge of $135.0 million, net of tax benefit,
in 1998. The Company had restructuring reserves totaling $32.4 million remaining
at December 26, 1998. The following is a summary of activity for the nine months
ended September 25, 1999 (in thousands):
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END
RESTRUCTURING RESERVES OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Inventory and other...................... $ 32,357 - 29,933 $ 2,424
============== ============== ============== ==============
</TABLE>
Steris has submitted to the FDA the corrective action plan provided for under
the consent agreement and is implementing that plan. As the Company previously
announced in April 1999, the FDA has permitted the resumption of INFeD
manufacturing on a regular production basis, subject to an independent
third-party consultant's review and assessment of each lot.
NOTE 5--REGULATORY MATTERS
On July 29, 1999, the FDA concluded an inspection of the Company's subsidiary,
Marsam Pharmaceuticals Inc. (Marsam). 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. As
previously announced, Marsam had itself 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. As a result
of these actions, the Company has included a charge of approximately $17 million
primarily relating to Marsam inventory and product recalls. With its response to
the FDA observations, Marsam submitted its proposed corrective action plan. The
corrective action plan includes schedules for resumption of manufacturing at the
site on a product-by-product basis. Marsam is currently addressing the noted
deficiencies and is seeking FDA comment on its plan. The Company cannot predict
the nature of the FDA response, when Marsam will resume manufacturing specific
products, or the financial implications of such events. Additional enforcement
actions may be forthcoming. Marsam contributed approximately seven percent of
the Company's revenues and a smaller percentage of its gross profits over the
four quarters ended March, 1999.
9
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 6--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 Act of 1933 and as to the
Company and three of the individual defendants, 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 which is currently pending before the court. The Company intends
to defend itself vigorously against this action.
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 attorney's 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.
NOTE 7--PRODUCT RIGHTS REVENUE
In the third quarter 1999, the Company sold the rights to certain otic and
ophthalmic products for $13.5 million. This amount was recorded as revenue and
income for the third quarter.
10
<PAGE>
SCHEIN PHARMACEUTICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 8--SUBSEQUENT EVENT
On October 22, 1999, the Company reached a settlement with Duramed
Pharmaceuticals, Inc. (Duramed) in a litigation pertaining to a 1992 agreement
between the companies relating to development of a conjugated estrogen product.
In conjunction with this settlement, the Company received a $7.5 million payment
on October 22, 1999 and is to receive a second $7.5 million payment on or before
January 20, 2000, or the Company can require Duramed to issue shares of common
stock equal in value to $7.5 million. The Company expects to record a
significant portion of this settlement revenue as income in the fourth quarter
of 1999.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this Form 10-Q constitute "forward looking statements"
within the meaning of The Private Securities Litigation Reform Act of 1995,
including those concerning management's expectations with respect to future
events or results. Such forward looking statements may be identified by such
forward looking terms as expect, believe, may, anticipate, will or similar terms
or variations thereof. These forward looking statements involve certain
significant risks and uncertainties, and actual results may differ materially
from the forward looking statements. Some important factors which may cause
results to differ include: the uncertainty and the difficulty of predicting the
United States Food and Drug Administration (FDA) approvals, uncertainties
associated with the implementation of the terms and conditions of the consent
agreement affecting Steris Laboratories, Inc. (Steris), a subsidiary of the
Company, the uncertainty of the outcome of the proposed corrective action plan
at the Company's subsidiary, Marsam Pharmaceutical's Inc. (Marsam), the
uncertainty of acceptance and demand for the Company's new products, the impact
of competitive products and pricing, the availability of raw materials,
uncertainties associated with litigation and regulatory matters, Year 2000
matters, and fluctuations in operating results. For further details and
discussion of these risks and uncertainties see Schein Pharmaceutical, Inc.'s
SEC filings including, but not limited to, its Annual Report on Form 10-K for
the year ended 1998 and its quarterly reports on Form 10-Q for the quarters
ended March 27, 1999 and June 26, 1999. The Company does not undertake to
publicly update or revise any of its forward looking statements even if
experience or future changes show that the indicated results or events will not
be realized.
REGULATORY MATTERS
On July 29, 1999, the FDA concluded an inspection of the Company's subsidiary,
Marsam Pharmaceuticals Inc. (Marsam). 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. As
previously announced, Marsam had itself 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. As a result
of these actions, the Company has included a charge of approximately $17 million
primarily relating to Marsam inventory and product recalls. With its response to
the FDA observations, Marsam submitted its proposed corrective action plan. The
corrective action plan includes schedules for resumption of manufacturing at the
site on a product-by-product basis. Marsam is currently addressing the noted
deficiencies and is seeking FDA comment on its plan. The Company cannot predict
the nature of the FDA response, when Marsam will resume manufacturing specific
products, or the financial implications of such events. Additional enforcement
actions may be forthcoming. Marsam contributed approximately seven percent of
the Company's revenues and a smaller percentage of its gross profits over the
four quarters ended March, 1999.
GENERAL
The following discussion provides information and analysis of the Company's
results of operations for the three month and nine month periods ended September
25, 1999 and September 26, 1998, respectively, and its liquidity and capital
resources. The following discussion and analysis should be read in conjunction
with the Company's condensed consolidated financial statements included
elsewhere herein.
12
<PAGE>
QUARTER ENDED SEPTEMBER 25, 1999 COMPARED TO QUARTER ENDED SEPTEMBER 26, 1998
<TABLE>
<CAPTION>
NET REVENUES AND GROSS PROFIT THREE MONTHS ENDED % OF REVENUES
------------------------- ------------------------
SEPT. 25, SEPT. 26, % SEPT. 25, SEPT. 26,
(In millions) 1999 1998 CHANGE 1999 1998
------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
NET REVENUES
Generic product revenues.......................... $ 73.5 $ 94.9 -22.6% 59.3% 81.2%
Product rights revenues........................... 13.5 - 100.0% 10.9% -
------- ------ ------- -------
Total generic revenues....................... $ 87.0 $ 94.9 -8.3% 70.2% 81.2%
======= ====== ======= =======
Branded product revenues.......................... $ 37.0 $ 22.0 68.1% 29.8% 18.8%
------- ------ ------- -------
Total net revenues........................... $ 124.0 $ 116.9 6.1% 100% 100%
======= ====== ======= =======
GROSS PROFIT...................................... $ 43.7 $ 38.9 12.5% 35.3% 33.2%
======= ====== ======= =======
</TABLE>
Net revenues for the third quarter of 1999 increased $7.1 million, or 6.1%, from
$116.9 million in 1998 to $124.0 million in 1999. This was primarily due to
higher branded product revenues and sale of product rights partially offset by
lower generic product revenues from Steris and Marsam manufactured products.
Product rights revenues included the sale of rights to certain otic and
ophthalmic products from our Steris facility that the Company did not plan to
reintroduce in the short to medium term.
Revenues from generic products decreased $21.4 million or 22.6% from $94.9
million in 1998 to $73.5 million in 1999. This decrease was primarily due to
lower revenues from Steris manufactured products of $14.0 million and Marsam
manufactured products of $7.8 million, while solid dosage revenues increased
slightly.
Net revenues from branded products increased $15.0 million or 68.1% from $22.0
million in 1998 to $37.0 million in 1999, reflecting strong branded product
revenues principally from shipments of INFeD(R) compared to last year when
revenues were impacted by actions taken by the FDA in mid September.
Ferrlecit(R), introduced in June, continues to be favorably accepted by the
medical community and utilization is increasing. The Company continues to work
with the Health Care Financing Administration (HCFA) and HCFA's regional
intermediaries to establish national and interim reimbursement coverage for
Ferrlecit. Under a new HCFA review process, the Company expects to receive
HCFA's national reimbursement coverage decision over the coming months.
Gross profit increased $4.8 million, or 12.5%, from $38.9 million in 1998 to
$43.7 million in 1999. The gross margin increased 2.1% in 1999 to 35.3% compared
to 33.2% in 1998. The increase in gross profit was principally due to higher
branded products volume, the sale of product rights and higher selling prices of
solid dosage products partially offset by idle facility costs in our sterile
plants and $6.6 million of charges related to Marsam inventory and product
recalls.
<TABLE>
<CAPTION>
COSTS AND EXPENSES THREE MONTHS ENDED % OF REVENUES
------------------------- ------------------------
SEPT. 25, SEPT. 26, % SEPT. 25, SEPT. 26,
(In millions) 1999 1998 CHANGE 1999 1998
------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Selling, general and administrative................ $ 22.8 $ 22.6 -1.1% 18.4% 19.3%
Research and development........................... 7.1 7.6 6.2% 5.7% 6.5%
Amortization of intangibles and goodwill........... 1.7 2.1 20.1% 1.4% 1.8%
Restructuring charge............................... - 156.6 100.0% - 134.0%
------- ------ ------- -------
Total costs and expenses.................. $ 31.6 $188.9 83.3% 25.5% 161.6%
======= ====== ======= =======
</TABLE>
13
<PAGE>
Selling, general and administrative expenses increased in the third quarter $0.2
million, or 1.1%, from $22.6 million in 1998 to $22.8 million in 1999. The
increase reflects expenses attributable to the corrective action plans at the
Steris and Marsam facilities of $4.6 million principally offset by cost
reduction and cost containment strategies undertaken.
Research and development expenses decreased in the third quarter $0.5 million or
6.2% primarily due to timing of clinical studies and the efficiencies achieved
from the consolidation of research and development operations.
Amortization of intangibles and goodwill decreased $0.4 million in the third
quarter of 1999 compared to the third quarter in 1998 due to the write-off of
goodwill included in the third quarter 1998 restructuring charge.
The restructuring charge of $156.6 million in the third quarter of 1998 related
to the finalization of the Steris consent agreement with the FDA.
<TABLE>
<CAPTION>
INTEREST EXPENSE, OTHER EXPENSES (INCOME), PROVISION
(BENEFIT) FOR INCOME TAXES AND EXTRAORDINARY ITEM THREE MONTHS ENDED % OF REVENUES
----------- -- ----------- ------------ - -----------
SEPT. 25, SEPT. 26, % SEPT. 25, SEPT. 26,
(In millions) 1999 1998 CHANGE 1999 1998
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Interest expense, net............................. $ 5.0 $ 4.8 -4.0% 4.0% 4.1%
Other expenses (income), net...................... 0.3 (0.4) -190.0% 0.3% -0.3%
Provision (benefit) for income taxes.............. 2.5 (23.6) -110.6% 2.0% -20.2%
</TABLE>
Other expenses (income), net, was $0.3 million expense in 1999 and $0.4 million
income in 1998. The change in other expenses (income), net, was primarily due to
a $1.1 million gain in 1998 on the sale of securities and lower joint venture
losses in 1999.
The Company's effective tax rate of 37.0% in 1999 was compared to a 15.3%
benefit in 1998. The effective tax rate benefit in 1998 was lower than the
statutory rate due to the effect of the non-deductible goodwill amortization
write-off of $95.5 million included in the restructuring charge related to
Steris.
14
<PAGE>
NINE MONTHS ENDED SEPTEMBER 25, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 26, 1998
<TABLE>
<CAPTION>
NET REVENUES AND GROSS PROFIT NINE MONTHS ENDED % OF REVENUES
-------------------------- --------------------------
SEPT. 25, SEPT. 26, % SEPT. 25, SEPT. 26,
(In millions) 1999 1998 CHANGE 1999 1998
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
NET REVENUES
Generic product revenues.......................... $ 247.8 $ 297.2 -16.6% 68.7% 74.0%
Settlement and product rights revenues............ 13.5 30.0 -55.0% 3.7% 7.5%
----------- ----------- ------------ -----------
Total generic revenues....................... 261.3 327.2 -20.1% 72.4% 81.5%
Branded product revenues.......................... 99.4 74.4 33.6% 27.6% 18.5%
----------- ----------- ------------ -----------
Total net revenues........................... $ 360.7 $ 401.6 -10.2% 100.0% 100.0%
=========== =========== ============ ===========
GROSS PROFIT...................................... $ 123.6 $ 136.9 -9.7% 34.3% 34.1%
=========== =========== ============ ===========
</TABLE>
Net revenues for the nine months of 1999 decreased $40.9 million, or 10.2%, from
$401.6 million in 1998 to $360.7 million in 1999. This was primarily due to
lower generic product revenues from Steris and Marsam manufactured products, the
absence of $30.0 million of settlement revenue that was recorded in 1998 offset
by higher revenues of branded and solid dosage generic products and product
rights revenues.
Revenues from generic products decreased $49.4 million or 16.6% from $297.2
million in 1998 to $247.8 million in 1999. This decrease was due to lower
revenues from Steris manufactured products of $69.3 million and Marsam
manufactured products of $15.3 million, offset by $24.4 million of price
increases and unit growth from solid dosage products and $10.8 million of new
product introductions.
Net revenues from branded products increased $25.0 million or 33.6% from $74.4
million in 1998 to $99.4 million in 1999 largely due to increased unit volume of
INFeD compared to last year when revenues were negatively impacted by actions
taken by the FDA in mid September. Ferrlecit, introduced in June, continues to
be favorably accepted by the medical community and utilization is increasing.
The Company continues to work with the Health Care Financing Administration
(HCFA) and HCFA's regional intermediaries to establish national and interim
reimbursement coverage for Ferrlecit. Under a new HCFA review process, the
Company expects to receive HCFA's national reimbursement coverage decision over
the coming months.
Gross profit decreased $13.3 million, or 9.7%, from $136.9 million in 1998 to
$123.6 million in 1999. The gross margin increased 0.2% in 1999 to 34.3%
compared to 34.1% in 1998. The increase in gross profit was principally due to
higher branded products volume, the sale of product rights and higher selling
prices of solid dosage products offset by idle facility costs in our sterile
plants, $16.6 million of charges related to Marsam inventory and product recalls
and the impact of the $15.0 million of gross profit contribution associated with
the $30.0 million settlement revenue received in the first quarter of 1998.
<TABLE>
<CAPTION>
COSTS AND EXPENSES NINE MONTHS ENDED % OF REVENUES
--------------------------- -------------------------
SEPT. 25, SEPT. 26, % SEPT. 25, SEPT. 26,
(In millions) 1999 1998 CHANGE 1999 1998
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Selling, general and administrative................ $ 67.0 $ 66.4 -0.9% 18.6% 16.5%
Research and development........................... 18.3 21.8 15.9% 5.1% 5.4%
Amortization of intangibles and goodwill........... 4.9 7.3 32.7% 1.4% 1.8%
Restructuring charge............................... - 156.6 100.0% - 39.0%
----------- ----------- ------------ -----------
Total costs and expenses.................. $ 90.2 $ 252.1 64.2% 25.1% 62.7%
=========== =========== ============ ===========
</TABLE>
15
<PAGE>
Selling, general and administrative expenses increased in the nine months $0.6
million, or 0.9%, from $66.4 million in 1998 to $67.0 million in 1999. The
increase reflects sales and marketing activities in support of branded products
and $13.1 million of expenses attributable to the implementation of the
corrective action plans at the Steris and Marsam facilities offset by cost
reduction and cost containment strategies.
Research and development expenses decreased in the nine months $3.5 million or
15.9% primarily due to timing of clinical studies and the efficiencies achieved
from the consolidation of research and development operations.
Amortization of intangibles and goodwill decreased $2.4 million in the nine
months of 1999 compared to the first nine months in 1998 due to the write-off of
goodwill included in the third quarter 1998 restructuring charge.
The restructuring charge of $156.6 million in the third quarter of 1998 related
to the finalization of the Steris consent agreement with the FDA.
<TABLE>
<CAPTION>
INTEREST EXPENSE, OTHER EXPENSES (INCOME), PROVISION
(BENEFIT) FOR INCOME TAXES AND EXTRAORDINARY ITEM NINE MONTHS ENDED % OF REVENUES
-------------------------- --------------------------
SEPT. 25, SEPT. 26, % SEPT. 25, SEPT. 26,
(In millions) 1999 1998 CHANGE 1999 1998
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Interest expense, net............................. $ 14.4 $ 15.8 8.7% 4.0% 3.9%
Other expenses (income), net...................... 1.0 (2.5) -139.4% 0.3% -0.6%
Provision (benefit) for income taxes.............. 6.7 (13.2) -150.3% 1.8% -3.3%
Extraordinary item, net........................... - (1.7) 100.0% - -0.4%
</TABLE>
Interest expense decreased $1.4 million, or 8.7%, from $15.8 million in 1998 to
$14.4 million in 1999. The decline in interest expense was principally due to
lower debt levels as the proceeds from the initial public offering in April 1998
were used to retire senior floating rate notes.
Other expenses (income), net, was $1.0 million expense in 1999 and $2.5 million
income in 1998. The change in other expenses (income), net, was primarily due to
gains on the sale of marketable securities declining from $4.8 million in 1998
to $0.7 million in 1999 offset by losses from international operations of $0.4
million.
The Company's effective tax rate was 37% in 1999 and a 10% benefit in 1998. The
effective tax rate benefit in 1998 was lower than the statutory rate due to the
effect of the non-deductible goodwill amortization write-off of $95.5 million
included in the restructuring charge related to Steris.
The extraordinary item of $1.7 million (net of income tax benefit) in the second
quarter of 1998 related to the write-off of deferred financing fees in
connection with the retirement of $50 million of the Company's senior floating
rate notes with proceeds the Company received from its April 1998 initial public
offering.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $32.4 million for the nine months
ended September 1999. The net cash provided by operating activities was
attributable to net income of $11.3 million as adjusted for the effects of
non-cash items of $17.1 million and changes in operating assets and liabilities
totaling $4.0 million. The decrease in accounts receivable of $14.6 million was
primarily the result of declines in revenues from Steris and Marsam manufactured
products and efforts by the Company to accelerate customer collections.
Inventory levels continue to increase in anticipation of higher demand by
customers with Year 2000 related supply concerns offset by reserves established
for Marsam related inventories. Income taxes receivable and other current assets
16
<PAGE>
decreased $6.1 million due to collection of tax refunds of $15.3 million
primarily offset by increases in prepaid expenses of $6.4 million. Accounts
payable, income taxes payable, accrued expenses and other liabilities decreased
by $16.5 million largely due to payments for product rights of $11.9 million.
Net cash used in investing activities for the nine months ended September 1999
was $20.8 million, consisting principally of capital expenditures of $5.0
million and the acquisition of product rights and licenses of $19.0 million.
Product rights and licenses consisted of $12.0 million paid in connection with a
product development agreement with Elan Corporation plc, $5.0 million under the
trademark and distribution agreement related to Ferrlecit(R) and $2.0 million
paid in relation to an acquisition of a United Kingdom company. International
investments increased $2.5 million primarily offset by proceeds received from
the sale of marketable securities of $2.0 million and receipt of other assets of
$3.7 million.
Net cash of $11.0 million used in financing activities for the nine months ended
September 1999 was comprised of net repayments of debt of $12.4 million offset
by proceeds from the employee stock option plan and stock purchase plan of $1.4
million. In addition, in June 1999 the remaining 50% interest in a United
Kingdom joint venture was acquired for a $1.2 million obligation to the seller
and the assumption of current liabilities including $2.2 million of bank debt.
YEAR 2000 COMPLIANCE
The Company is devoting significant resources throughout its business operations
to minimize the risk of potential disruption from the Year 2000 (Y2K) problem.
In 1997, a Y2K Compliance Initiative was established within the Company to
address the following areas that are impacted by Y2K issues.
o Business Transaction Systems
o Plant/Floor/Laboratory Applications & Devices
o Computer Network
o Supply-Chain Partner Compliance Readiness
o Contingency Planning
Business Transaction Systems - These applications process and handle the
Company's day-to-day business transactions and encompass customer order/billing,
finished goods inventory, distribution, manufacturing and laboratory support,
electronic data interchange (EDI), contract processing, forecasting and vendor
managed inventory. Thirteen of the nineteen applications were assessed as Y2K
non-compliant; twelve of the non-compliant systems have been remediated and
deployed and one system retired. In addition, nine system services are provided
by third parties (e.g., payroll, employee savings and investment recordkeeping);
three of these applications were assessed as Y2K non-compliant and all have been
updated to Y2K compliant systems.
Plant Floor/Laboratory Applications & Devices - From an internal inventory and
subsequent audit by outside Y2K consultants, over 3,400 applications and devices
installed at the Company's manufacturing, laboratory, distribution and office
facilities were identified as possibly having date capabilities or containing
embedded systems. The assessment of the inventoried applications/devices has
been completed. Of the 187 identified non-compliant applications/devices
required for Year 2000 operations, 148 have been remediated and deployed with
the remaining 39 non-compliant applications/devices scheduled to be completed or
replacement procedures (contingency plans) installed during the fourth quarter
of 1999. Of the 39 non-compliant applications/devices, 16 are identical
applications/devices at different locations.
Computer Network - The Computer Network includes 1,400 PC hardware devices,
software, applications and files installed on the Company's network devices and
standalone PCs. The inventory and assessment of the computer network has been
completed. All of the 556 non-compliant PCs have been remediated and deployed.
17
<PAGE>
Supply-Chain Partner Compliance Readiness - To continue business activities with
the Company's trading partners (i.e., customers, suppliers, payers, financial
institutions, etc.), all entities that comprise the Company's supply-chain must
be Y2K compliant. The Company has contacted its suppliers, customers and other
parties to determine their "state of readiness" for Y2K compliance. To date, the
Company has received compliance readiness statements from all of the Company's
top twenty customers (representing approximately 75% of the Company's net
revenues) and an additional 445 customers indicating that they are or will be
Y2K compliant by year-end 1999. Also, all of the Company's 72 critical suppliers
of active pharmaceutical ingredients used to manufacture products representing
over 85% of the Company's gross profit, have likewise provided statements that
they are or will be Y2K compliant by the year-end 1999.
Contingency Planning - The Company's plan includes the assessment of Y2K related
risks/threats and the preparation of alternative work procedures in the event of
possible Y2K disruptions. The sources of risk could include information
technology (IT) systems, embedded devices, EDI and external dependencies,
potential failures related to the occurrence of these risks can include
operational disruptions, financial losses, damage to assets, personal safety and
legal liabilities. The Company has completed the assessment of identifying
risks/threats covering individual business processes and is currently finalizing
the resultant contingency plans that are scheduled for implementation in the
fourth quarter 1999.
The estimated $4.0 million of costs incurred inception to date associated with
Y2K compliance have been expensed as incurred and future costs are not expected
to have a material adverse effect on the Company's business, financial condition
and results of operations. Nevertheless, there is uncertainty concerning the
potential costs and effects associated with Y2K compliance. Thus, if the Company
is unsuccessful in identifying or remediating all Y2K problems in its critical
operations, or if it is affected by the inability of suppliers or major
customers to continue operations due to such a problem, its results of
operations or financial condition could be materially adversely impacted.
Based upon its efforts to date, the Company believes that all critical and
important systems will remain up and running after January 1, 2000. Accordingly,
the Company does not currently anticipate that internal systems failures will
result in any material adverse affect to its operations or financial condition.
At this time, the Company believes that the most likely "worst-case" scenario
involves potential disruptions in areas in which the Company's operations must
rely on such third parties whose systems may not work properly after January 1,
2000. While such failures could affect important operations of the Company,
either directly or indirectly, in a significant manner, the Company cannot at
present estimate either the likelihood or the potential cost of such failures.
The nature and focus of the Company's efforts to address the Y2K problem may be
revised periodically as interim goals are achieved or new issues are identified.
In addition, it is important to note that the description of the Company's
efforts necessarily involves estimates and projections with respect to
activities required in the future.
This Y2K Statement is designated a Year 2000 Readiness Disclosure under the Year
2000 Information and Readiness Disclosure Act and is subject to all protections
and exemptions of that Act.
18
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of the current nature of these instruments. The
carrying amounts reported for revolving credit and long-term debt approximate
fair value because the interest rates on these instruments are subject to
changes with market interest rates.
In order to manage interest rate exposure, the Company has entered into interest
rate swap agreements to exchange variable rate debt into fixed rate debt without
the exchange of the underlying principal amounts. Net payments or receipts under
the agreements are recorded as adjustments to interest expense.
As of September 25, 1999, the Company had $100 million notional amount
outstanding in interest rate swaps. These swaps are used to convert floating
rate debt to fixed rate debt to reduce the Company's exposure to interest rate
fluctuations. The net result was to substitute a weighted average fixed interest
rate of 5.41% for the weighted average variable LIBOR rate of 5.48% on the
Company's debt. The swaps expire in February 2001.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. 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 Act of 1933 and as to the
Company and three of the individual defendants, 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 which is currently pending before the court. The Company intends
to defend itself vigorously against this action.
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 attorney's 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
20
<PAGE>
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.
Schein Pharmaceutical, Inc.
(Registrant)
By: /s/
------------------------------------
Martin Sperber
Chairman of the Board,
Chief Executive Officer and
President
(Principal Executive Officer)
By: /s/
------------------------------------
Dariush Ashrafi
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: November 8, 1999
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contain summary financial information extracted from the Company's
condensed consolidated balance sheet at September 25, 1999 and the condensed
consolidated statement of operations for the nine months ended September 25,
1999 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> SEP-25-1999
<CASH> 986
<SECURITIES> 0
<RECEIVABLES> 70,796
<ALLOWANCES> 2,385
<INVENTORY> 104,152
<CURRENT-ASSETS> 197,815
<PP&E> 196,236
<DEPRECIATION> 86,598
<TOTAL-ASSETS> 451,279
<CURRENT-LIABILITIES> 200,295
<BONDS> 101,077
0
0
<COMMON> 326
<OTHER-SE> 104,275
<TOTAL-LIABILITY-AND-EQUITY> 451,279
<SALES> 360,721
<TOTAL-REVENUES> 360,721
<CGS> 237,111
<TOTAL-COSTS> 237,111
<OTHER-EXPENSES> 91,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,442
<INCOME-PRETAX> 17,991
<INCOME-TAX> 6,657
<INCOME-CONTINUING> 11,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,334
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.35
</TABLE>
