<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
|X| ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED].
For the year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED].
For the transition period from ________________ to ________________
Commission file number 1-14019
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below: Danbury Pharmacal Puerto Rico Profit Sharing Plan
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office: Schein Pharmaceutical, Inc. 100 Campus Dr.
Florham Park, NJ 07932
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
CONTENTS
INDEPENDENT AUDITOR'S REPORT 3
FINANCIAL STATEMENTS:
Statements of assets available for benefits 4
Statements of changes in assets available
for benefits 5
Notes to financial statements 6-10
SUPPLEMENTAL SCHEDULE:
Form 5500 - Item 27a - Schedule of assets
held for investment purposes 11
SIGNATURES 12
EXHIBITS
Page 2
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INDEPENDENT AUDITOR'S REPORT
Investment Committee
Danbury Pharmacal Puerto Rico Profit Sharing Plan
We have audited the accompanying statements of assets available for benefits of
the Danbury Pharmacal Puerto Rico Profit Sharing Plan ("the Plan") as of
December 31, 1999 and 1998, and the related statements of changes in assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Investment Committee for the Danbury Pharmacal Puerto
Rico Profit Sharing Plan. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of 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 the
Investment Committee, 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 assets available for benefits of the Danbury
Pharmacal Puerto Rico Profit Sharing Plan at December 31, 1999 and 1998, and the
changes in assets available for benefits for the years then ended, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment is presented for purposes of complying with the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 and is not a required part of the basic
financial statements. The supplemental schedule has been subjected to the
auditing procedures applied to the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ BDO Seidman, LLP
Woodbridge, New Jersey
May 25, 2000
Page 3
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS (NOTE 5)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
Mutual funds $2,505,699 $1,494,614
Participant's loans 93,344 $2,599,043 41,621 $1,536,235
---------------------------------------------------------------------------------------------------------
Receivables:
Employer contributions 96,284 217,686
Participants' contributions 26,750 123,034 20,064 237,750
---------------------------------------------------------------------------------------------------------
ASSETS AVAILABLE FOR BENEFITS $2,722,077 $1,773,985
=========================================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
Page 4
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS (NOTE 4)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Interest and dividends $ 90,178 $54,951
Net appreciation in fair value of
investments 507,350 $ 597,528 73,243 $128,194
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Contributions:
Employer 189,210 461,526
Participants 271,846 461,056 221,690 683,216
----------------------------------------------------------------------------------------------------------------------
1,058,584 811,410
DEDUCTIONS FROM ASSETS ATTRIBUTED TO:
Benefits paid 110,492 42,042
Administrative expenses - -
----------------------------------------------------------------------------------------------------------------------
NET INCREASE 948,092 769,368
ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 1,773,985 1,004,617
----------------------------------------------------------------------------------------------------------------------
ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $2,722,077 $1,773,985
======================================================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
Page 5
<PAGE>
DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN The following description of the Danbury Pharmacal
Puerto Rico Profit Sharing Plan ("the Plan")
provides only general information, Participants
should refer to the Plan agreement for a more
complete description of the Plan's provisions.
Schein Pharmaceutical, Inc. ("Schein
Pharmaceutical") is the ultimate sponsor of the
Plan. Danbury Pharmacal Puerto Rico is an
indirectly owned subsidiary of Schein
Pharmaceutical.
The Plan is a defined contribution plan subject to
the provisions of the Employee Retirement Income
Security Act of 1974. Eligible employees are those
employees of Danbury Pharmacal Puerto Rico.
Participants' contributions, from 1% to 14% of
salary, and the employers' matching contribution
of 50% of the participants' contributions (up to
6% of the participants' contributions) are fully
vested when made. The Plan also provides for a
discretionary employer contribution which becomes
100% vested upon completion of 5 years of
continuous service and provides for retirement,
termination, death and disability benefits.
The amount of forfeitures arising under this Plan
are first allocated to pay the expenses of the
Plan. The balance, if any, is then allocated to
the accounts of participants entitled to
restoration of their interests in the Plan. The
remaining balance, if any, is then allocated to
the employer contribution account of each
participant.
Upon enrollment in the Plan, a participant may
direct employer and employee contributions in any
of the following investment options. Participants
may change their investment options at any time.
INCOME FUND II - The fund invests
primarily in insurance and bank
investment contracts and stable value
contracts.
PIMCO TOTAL RETURN FUND -
Administrative Class ("PIMCO Fund") -
Funds are invested in corporate bonds,
U.S. government bonds and money market
instruments.
VANGUARD GROWTH & INCOME FUND - Funds
are invested in a broadly diversified
portfolio of stocks designed, in
total, to be similar to the Standard &
Poor's 500 index in terms of dividend
yield, return on equity,
price-earnings ratio and price-book
ratio of large company stocks.
Page 6
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
T. ROWE PRICE INTERNATIONAL STOCK FUND
- The fund invests primarily in common
stocks or other equity securities of
companies located principally in
Europe and the Far East.
PBHG GROWTH FUND - The fund normally
invests at least 80% of its' assets in
the common stocks of small and
medium-sized companies.
SCHEIN PHARMACEUTICAL STOCK FUND -
Effective April 9, 1998, Plan
participants could elect to contribute
(up to 10% of the participants'
contributions) to the Schein
Pharmaceutical Stock Fund. This fund
invests in common stock of the Plan
Sponsor.
PARTICIPANT LOANS - Participants may
borrow from their accounts pursuant to
the rules set forth in the Plan
agreement. The loans are secured by
the balance in the participant's
account and bear interest at local
prevailing rates. Principal and
interest are paid ratably through
payroll deductions.
Upon termination of employment, benefits are paid
in the form of a lump-sum amount equal to the
value of the participant's vested interest in his
or her account. Certain participants, pursuant to
the qualifications set forth in the Plan
agreement, may elect to have a portion of their
benefits paid in installments over 5 or 10 years.
The Plan and related trust are designed and
operate under Section 165(e) of the Puerto Rico
Income Tax Act of 1954. In addition, the Internal
Revenue Service has determined and informed the
Plan Sponsor, by letter dated June 29, 1995, that
the Plan and related trust are designed and
operate in accordance with applicable sections of
the Internal Revenue Code. Earnings of the Plan
are therefore exempt from income taxes.
The Plan may be terminated, or contributions may
be discontinued, by the Plan Sponsor at any time.
Upon termination, or discontinuance of
contributions, the amounts credited to
participants shall become fully vested.
Plan investments were maintained by Banco Popular
through March 31, 1998. Effective April 1, 1998,
American Express Trust Company ("American
Express") commenced service as the Plan's
trustee.
Page 7
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF BASIS OF PRESENTATION
ACCOUNTING
POLICIES The financial statements are prepared on the
accrual basis of accounting.
INVESTMENTS
Investments are stated at fair value which is
determined using quoted market prices. Gains and
losses on investment transactions are recognized
when realized based on trade dates. Unrealized
gains and losses are based on the difference
between the beginning of year fair value, or
historical cost if purchased during the current
year, and the year-end fair value. Realized and
unrealized gains and losses have been included in
net appreciation in fair value of investments.
Assets held for investment, by Fund, are
separately disclosed in Note 5.
USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires the Plan Sponsor to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date
of the financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
3. PLAN EXPENSES Certain administrative expenses are charged to the
Plan Sponsor by American Express (and are
substantially offset by payments from the Plan,
itself). In addition, Schein and Danbury Pharmacal
Puerto Rico also incur certain personnel and
administrative costs in the course of servicing
the Plan and its' participants.
Page 8
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
4. CHANGES IN PLAN ASSETS
BY FUND Investments in the various programs offered by the
Plan are directed by the participants. The
following table sets forth the activity for 1999
in each of the investment programs offered by the
Plan.
<TABLE>
<CAPTION>
T ROWE
VANGUARD PRICE
INCOME PIMCO TOTAL GROWTH & INTERNATIONAL
FUND II RETURN FUND INCOME FUND STOCK FUND
=====================================================================================================================
<S> <C> <C> <C> <C>
ADDITIONS TO ASSETS ATTRIBUTED TO:
Interest & dividends $ -- $ 14,126 $ 38,740 $ 7,293
Net appreciation (depreciation) in fair value
of investments 16,616 (15,151) 135,567 28,645
Transfers in from (out to) other funds, net (18,945) (11,863) 116,030 (8,103)
Participant loan repayments 4,159 3,127 11,265 1,275
Contributions:
Employer 29,991 19,456 68,787 12,523
Participants 48,479 37,380 102,241 16,178
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80,300 47,075 472,630 57,811
DEDUCTIONS FROM ASSETS ATTRIBUTED TO:
Participant loan issuances (9,465) (12,041) (30,687) (3,549)
Benefits paid (17,458) (27,894) (38,473) (9,087)
Administrative expenses -- -- -- --
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NET INCREASE (DECREASE) 53,377 7,140 403,470 45,175
Assets available for benefits, beginning of year 289,144 256,605 573,683 105,329
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NET ASSETS - END OF YEAR $ 342,521 $ 263,745 $ 977,153 $ 150,504
=====================================================================================================================
<CAPTION>
SCHEIN
PBHG PHARMA-
GROWTH CEUTICAL PARTICIPANT
FUND STOCK FUND LOANS TOTAL
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<S> <C> <C> <C> <C>
ADDITIONS TO ASSETS ATTRIBUTED TO:
Interest & dividends $ 26,330 $ -- $ 3,689 $ 90,178
Net appreciation (depreciation) in fair value
of investments 350,522 (8,849) -- 507,350
Transfers in from other funds, net (73,521) (3,598) -- --
Participant loan repayments 5,047 59 (24,932) --
Contributions: --
Employer 55,627 2,826 -- 189,210
Participants 64,613 2,955 -- 271,846
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428,618 (6,607) (21,243) 1,058,584
DEDUCTIONS FROM ASSETS ATTRIBUTED TO:
Participant loan issuances (17,114) (1,194) 74,050 --
Benefits paid (12,991) (3,505) (1,084) (110,492)
Administrative expenses -- -- -- --
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NET INCREASE (DECREASE) 398,513 (11,306) 51,723 948,092
Assets available for benefits, beginning of year 451,724 55,879 41,621 1,773,985
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NET ASSETS - END OF YEAR $ 850,237 $ 44,573 $ 93,344 $ 2,722,077
=====================================================================================================================
</TABLE>
Page 9
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
5. ASSETS BY FUND The following table sets forth the assets as of December 31,
1999 in each of the investment programs offered by the Plan.
<TABLE>
<CAPTION>
T ROWE
VANGUARD PRICE PBHG
INCOME PIMCO TOTAL GROWTH & INTERNATIONAL GROWTH
FUND II RETURN FUND INCOME FUND STOCK FUND FUND
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mutual funds $ 324,598 $ 254,665 $ 932,990 $ 141,670 $ 809,514
Participant loans
Contributions receivable 17,923 9,080 44,163 8,834 40,723
------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $342,521 $ 263,745 $ 977,153 $ 150,504 $850,237
==================================================================================================================
<CAPTION>
SCHEIN
PHARMA-
CEUTICAL PARTICIPANT
STOCK FUND LOANS TOTAL
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mutual funds $ 42,262 $ -- $2,505,699
Participant loans 93,344 93,344
Contributions receivable 2,311 123,034
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NET ASSETS AVAILABLE FOR BENEFITS $ 44,573 $ 93,344 $2,722,077
==========================================================================================
</TABLE>
6. SUBSEQUENT EVENT On May 25, 2000 the Plan Sponsor announced that it
had reached a definitive agreement to be acquired
by Watson Pharmaceutical, Inc ("Watson"), under
which Watson will acquire all the outstanding
stock of Schein Pharmaceutical, Inc through a
two-step transaction comprised of a cash tender
followed by a taxable stock exchange. The tender
offer, which is subject to customary closing
conditions, is expected to close in early July
2000 with the merger expected to close in
September 2000.
If and when the acquisition is consummated, the
plan sponsor believes that this Plan will be
terminated and, following the receipt of a
favorable determination letter from the Internal
Revenue Service, Watson shall permit employees to
elect to rollover their respective amounts to a
retirement plan maintained by Watson.
Page 10
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DANBURY PHARMACAL PUERTO RICO
PROFIT SHARING PLAN
FORM 5500 - ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
EIN: 52-1760757 PLAN NO. 001
<TABLE>
<CAPTION>
===========================================================================================================
DECEMBER 31, 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) (b) (c)
Description of investment,
including maturity date, rate of
interest, collateral, par or
Identity of issuer, borrower or similar party maturity value Fair Value
-----------------------------------------------------------------------------------------------------------
INVESTMENTS (1):
Income Fund II 16,636 shares $324,598
PIMCO Total Return Fund 25,724 shares 254,665
Vanguard Growth & Income Fund 25,162 shares 932,990
T Rowe Price International Stock Fund 7,445 shares 141,670
PBHG Growth Fund 17,086 shares 809,514
Schein Pharmaceutical Stock Fund 5,321 shares 42,262
-----------------------------------------------------------------------------------------------------------
2,505,699
PARTICIPANT LOANS Interest rates range from 5% to
10%, with maturity dates through
2007, participants' account
balances serve as collateral 93,344
-----------------------------------------------------------------------------------------------------------
$2,599,043
===========================================================================================================
</TABLE>
(1) Represents investments in mutual funds; as such there are no maturity
dates, rates of interest, collateral, par values or maturity values.
Page 11
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SIGNATURES
The Plan
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
DANBURY PHARMACAL PUERTO RICO PROFIT SHARING PLAN
By: SCHEIN PHARMACEUTICAL, INC. as plan administrator
Date: June 27, 2000 By: /s/ Whitney K. Stearns, Jr.
----------------------------------
Whitney K. Stearns, Jr.
Senior Vice President
and Chief Financial Officer
INDEX TO EXHIBITS
Exhibit Description
Number
23.1 Consent of BDO Seidman, LLP
