UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
December 28, 2001
-------------------------------
(Date of earliest event reported)
Cephalon, Inc.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-19119 23-2484489
- --------------------------------- ------------- -----------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) ID No.)
145 Brandywine Parkway
West Chester, Pennsylvania 19380
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
(610) 344-0200
-----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
ITEM 2. ACQUISITION OF ASSETS
(a) On December 28, 2001 (the "Closing Date"), the Registrant completed its
previously announced acquisition (the "Acquisition") of all of the outstanding
shares of capital stock of Financiere Lafon S.A. and Organisation de Synthese
Mondiale Orsymonde S. A. (collectively, "Group Lafon") held by the controlling
shareholders, Mr. Francois Lafon and Ms. Andree Carpentier (together, the
"Sellers"). The Acquisition was accomplished pursuant to the terms of a Share
Purchase Agreement among the Sellers and the Registrant dated as of December 3,
2001, a copy of which is filed as Exhibit 2.1 to this Form 8-K and is
incorporated herein by reference, as amended by an Amendment to the Share
Purchase Agreement among the Sellers and the Registrant dated as of December 28,
2001, a copy of which is filed as Exhibit 2.2 to this Form 8-K and is
incorporated herein by reference. Prior to the Closing Date, the Registrant's
highest revenue product was sold under a license from Laboratoire L. Lafon, S.A.
The terms of the agreements among the parties were the result of arm's length
negotiations among the parties. The aggregate consideration paid by the
Registrant for the Acquisition was approximately $450 million cash, including
the assumption of certain liabilities of Group Lafon. The purchase price is
subject to adjustment downward following the Closing Date in certain
circumstances. To secure the payment of this possible adjustment and other
post-closing adjustments, including any indemnification claims, to the extent
that such claims exceed $3 million in the aggregate, $45 million of the $450
million purchase price is being held in escrow and will be released to the
Sellers (absent any claims) over an 18-month period following the Closing Date.
A copy of the escrow agreement signed by the parties is filed as Exhibit 2.3 to
this Form 8-K and is incorporated herein by reference. The purchase price of the
Acquisition was funded in part by the proceeds of the Registrant's offering of
2 1/2% convertible subordinated notes, which was completed on December 11, 2001.
(b) The assets acquired pursuant to the Acquisition consist primarily of a
headquarters and research facility, two manufacturing facilities, a packaging
and distribution facility and various warehouses located in France, and are used
by Group Lafon in connection with the development, sale and manufacture of
pharmaceutical products. The Registrant intends to continue the use of these
assets for the development, sale and manufacture of pharmaceutical products.
The Registrant issued a press release announcing the completion of the
Acquisition, which release is filed herewith as Exhibit 99.1 and is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The following financial statements are filed as part of this
Current Report on Form 8-K:
- Lafon Group Consolidated Financial Statements as of September 30,
2000 and 2001; and
- Lafon Group Consolidated Financial Statements as of December 31,
1998, 1999 and 2000.
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma condensed consolidated financial
information is filed as part of this Current Report on Form 8-K:
- Pro forma condensed consolidated balance sheet as of September 30,
2001;
- Pro forma condensed consolidated statement of operations for the
nine months ended September 30, 2001;
- Pro forma condensed consolidated statement of operations for the
year ended December 31, 2000; and
- Notes to pro forma condensed consolidated balance sheet and
statement of operations as of and for the nine months ended
September 30, 2001 and the year ended December 31, 2000.
(c) EXHIBITS.
EXHIBIT NO. DESCRIPTION OF DOCUMENT
----------- -----------------------
2.1* Share Purchase Agreement
2.2* Amendment to Share Purchase Agreement
2.3* Representations and Warranties Agreement
2.4* Escrow Agreement
23.1+ Consent of Befec-Price Waterhouse
99.1* Press Release
--------------
* Previously filed as an exhibit to this Current Report on Form 8-K
filed with the SEC on January 10, 2002 and incorporated herein
by reference.
+ Filed herewith.
<Page>
7(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
LAFON GROUP
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000 AND 2001
<Page>
LAFON GROUP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousand of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
<Table>
<Caption>
September 30, As of September 30,
2001 December 31, 2000
Note (unaudited) 2000 (unaudited)
---- ------------ ------------ -------------
ASSETS
Cash and cash equivalents 10,409 6,394 5,398
Short-term investments 47 172 200
Accounts receivable, net 12,108 17,560 16,490
Other receivables, net 3 12,939 9,855 7,586
Inventories, net 4 22,066 20,989 22,814
Prepaid expenses 1,596 1,079 1,954
Deferred tax assets 1,960 2,575 2,297
------- ------- -------
TOTAL CURRENT ASSETS 61,125 58,624 56,739
Long-term receivables, net 2,249 2,255 2,127
Intangible assets, net 21,638 23,279 23,946
Property, plant and equipment, net 23,081 22,868 23,396
------- ------- -------
TOTAL NON CURRENT ASSETS 46,968 48,402 49,469
------- ------- -------
TOTAL ASSETS 108,093 107,026 106,208
------- ------- -------
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<Page>
LAFON GROUP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousand of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
<Table>
<Caption>
September 30, As of September 30,
2001 December 31, 2000
(unaudited) 2000 (unaudited)
------------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings, including current portion of long-term debt 4,144 2,425 2,075
Trade payables 10,084 10,743 9,630
Other payables 14,898 13,121 18,745
Accrued liabilities 554 493 117
Other current liabilities 1,579 2,542 1,434
Deferred tax liabilities 608 616 620
------- ------- -------
TOTAL CURRENT LIABILITIES 31,867 29,940 32,621
Long-term debt, less current portion of long term debt 5,977 5,348 5,458
------- ------- -------
TOTAL LIABILITIES 37,844 35,288 38,079
MINORITY INTERESTS 10,633 10,505 9,609
Common stock: EURO15.24 face value in 2000, 40 38 38
EURO16,00 in 2001, 2,500 shares authorized, issued
and outstanding
Retained earnings 59,399 61,115 58,411
Cumulative translation adjustment 177 80 71
------- ------- -------
SHAREHOLDERS' EQUITY 59,616 61,233 58,520
------- ------- -------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 108,093 107,026 106,208
------- ------- -------
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<Page>
LAFON GROUP
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
For the nine months
ended September 30,
2001 2000
---- ----
Net sales 91,887 99,524
Cost of Sales (24,837) (22,474)
GROSS MARGIN 67,050 77,050
License fees received 8,985 4,511
Selling expenses (26,175) (24,964)
Research and development expenses (17,318) (16,534)
Administrative expenses (15,658) (14,404)
Other operating income (expense), net 964 (40)
------- -------
OPERATING INCOME 17,848 25,619
Financial result (531) 82
Other income (expense), net (238) 134
------- -------
NON-OPERATING INCOME (LOSS) (769) 216
INCOME BEFORE INCOME TAX,
GOODWILL AMORTIZATION AND MINORITY INTEREST 17,079 25,835
Income tax (6,193) (9,750)
Minority interests (2,360) (3,471)
------- -------
NET INCOME BEFORE GOODWILL AMORTIZATION 8,526 12,614
Goodwill amortization (1,611) (1,554)
------- -------
NET INCOME 6,915 11,060
------- -------
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<Page>
LAFON GROUP
CONSOLIDATED STATEMENTS OF CHANGE IN SHAREHOLDERS' EQUITY
(Amounts in thousand of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Stock issued
------------------------
Number of Cumulative
shares Common Retained translation Shareholder's
outstanding stock earnings adjustment equity
----------- ----- -------- ---------- ------
As of December 31, 1999 2,500 38 50,903 -2 50,939
----- -- ------ --- ------
Dividends paid -3,552 0 -3,552
Foreign currency translation 0 73 73
Net income 11,060 0 11,060
----- -- ------ --- ------
As of September 30, 2000 (unaudited) 2,500 38 58,411 71 58,520
----- -- ------ --- ------
Net income 2,704 9 2,713
----- -- ------ --- ------
As of December 31, 2000 2,500 38 61,115 80 61,233
----- -- ------ --- ------
Capital increase after conversion into EURO 2 -2 0
Dividends paid -8,629 0 -8,629
Foreign currency translation 97 97
Net income 6,915 6,915
----- -- ------ --- ------
As of September 30, 2001 (unaudited) 2,500 40 59,399 177 59,616
----- -- ------ --- ------
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<Page>
LAFON GROUP
CONSOLIDATED STATEMENTS OF CASH-FLOWS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
For the nine months ended
September 30,
2001 2000
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income - group 6,915 11,060
Net income - minority 2,360 3,471
------ ------
NET INCOME 9,275 14,531
ADJUSTMENTS TO RECONCILE INCOME BEFORE MINORITY INTEREST TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Amortization of intangible assets and goodwill 2,193 1,841
Depreciation of property, plant and equipment 4,014 3,865
Other depreciation 186 -1,229
(Decrease) increase in deferred tax, net 607 1,049
Net (gain) loss on disposal of fixed asset and investments 247 33
NET CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (increase) in inventories -1,077 -4,126
Decrease (increase) in accounts and notes receivables 5,452 -4,689
Decrease (increase) in other current assets -3,601 768
Increase (decrease) in accounts payables and other creditors 156 2,100
------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 17,452 14,143
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -5,129 -2,936
Proceeds from disposal of fixed assets 102 42
(Increase) decrease in other long term receivables 102 -26
Impact on cash of changes in consolidation perimeter -37 0
------ ------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -4,962 -2,920
CASH FLOW FROM FINANCING ACTIVITIES:
Decrease in short term debt 1,719 -8,856
Decrease (Increase) in long term debt 629 2,505
Dividends paid
. Group -8,629 -3,552
. Minority -2,337 -2,093
------ ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -8,619 -11,996
Net effect of exchange rate changes 144 73
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,015 -700
Cash and cash equivalent at the beginning of the year 6,394 6,098
CASH AND CASH EQUIVALENT AT THE END OF THE YEAR 10,409 5,398
------ ------
4,015 -700
SUPPLEMENTAL DISCLOSURES
Cash paid for income taxes 9,923 9,808
Interest paid 146 99
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(a) BASIS OF PRESENTATION
The consolidated financial statements of Lafon Group, and its consolidated
subsidiaries ("Lafon" or "the Company") have been prepared in accordance with
generally accepted accounting principles in France and comply with the "New
principles and methodology relative to consolidated financial statements",
Regulation Number 99-02 approved by the decree dated June 22, 1999 of the French
"Comite de la Reglementation Comptable".
The interim consolidated financial statements of Lafon Group for each of nine
month period ended September 30, 2000 and 2001 are unaudited. In the opinion of
management, these unaudited interim consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of Lafon Group as of September 30, 2000
and 2001 and the results of its operations and its cash flows for each of the
nine months ended September 30, 2000 and 2001 in accordance with generally
accepted accounting principles in France. Results for the nine months ended
September 30, 2000 and 2001 are not necessarily indicative of the results to be
expected for the entire year or for any other interim period.
(b) NATURE OF BUSINESS
The Company's principal business is producing and commercializing pharmaceutical
products, especially pain killer related drugs and central nervous system drugs.
Group Lafon additionally profits from the distribution of its patent licenses.
The Company also focuses its research and development on four specific areas,
central nervous system, lyophilisation process, oncology, and cardiovascular
system.
(c) CONSOLIDATION METHODS
Subsidiaries in which Lafon's voting rights exceed 50% are consolidated, unless
control is limited due to contractual provisions. Jointly controlled entities
are consolidated using the proportionate consolidation method. All intercompany
balances and transactions between the consolidated companies are eliminated upon
consolidation.
The equity method of accounting is used for investments in which the Company has
the ability to exercise significant influence over the operating and financial
policies of the investee company. In the absence of other evidence, such
influence is presumed to exist for investments in companies in which the
Company's direct or indirect ownership is between 20% and 50%. Under the equity
method, the Company's share of profits and losses of these companies are
included in the consolidated income statement and the carrying value of the
Company's investment is adjusted to reflect its share in the investee's net
equity.
The cost method of accounting is used for investments in which the Company's
ownership is less than 20%.
The list of Lafon's consolidated subsidiaries and the applicable method of
consolidation is provided in Note 2.
7
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
(d) USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in France requires management 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 the revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(e) REVENUE RECOGNITION
Income from research and operating companies (Orsymonde, Laboratoire Lafon,
Genelco) includes three types of revenues:
o Turnover (Orsymonde and Laboratoire Lafon) corresponds to the sales of
materials, active principles and finished goods. Turnover is recorded
when, based upon contractual terms of agreements with customers, risks
and rewards of ownership are transferred.
o Royalties (Genelco and Laboratoire Lafon) are received on patents
and trademarks, and correspond to the percentage of net sales of the
Company's proprietary pharmaceutical products by the customer.
Royalties are calculated and paid semi-annually by contracted
customers in June and December. The Company recognizes these royalties
in the period earned when payment is assured.
o License fees (Laboratoire Lafon) on its pharmaceutical patents are
provided by the Company under license agreements. These agreements are
usually signed for a duration between 5-15 years. Revenues are
recognized on a straight-line basis over the period in the license
agreement.
(f) FOREIGN CURRENCY TRANSLATIONS
Foreign currency transactions are translated into Euros at the rate of exchange
applicable at the translation date. At year-end, monetary assets and liabilities
denominated in foreign currencies are translated into Euros at the rate of
exchange prevailing at that date. The resulting gains or losses are recorded in
the income statement.
(g) TRANSLATION OF STATEMENTS OF FOREIGN SUBSIDIARIES
The income statements of foreign subsidiaries are translated into Euro at the
average rate of exchange prevailing during the year. Balance sheets are
translated at the exchange rate at the balance sheet date. Differences arising
in the translation of financial statements of foreign subsidiaries are recorded
in shareholders' equity as foreign currency translation adjustments.
8
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
(h) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and liquid marketable securities with
an initial maturity of less than three months. Liquid marketable securities are
valued at their acquisition value and depreciated for an amount equal to the
difference between market value and historical value, when their market value is
lower than the historical value.
(i) SHORT-TERM INVESTMENTS
The Company's investments comprise equity securities. All investments have
maturities of less than one year and therefore considered short-term
investments, which are booked at their acquisition value and depreciated for an
amount equal to the difference between fair value and historical value, when the
fair value is lower than the historical value.
(j) ACCOUNTS RECEIVABLE
Receivables and payables are valued at their nominal value. A provision for
doubtful accounts is recorded if receivables are expected to be uncollectibles
based on an analysis of aging schedule. Receivables are written off in the
period-deemed uncollectibles.
(k) OTHER RECEIVABLES
Other receivables are valued at their nominal value and consist of advances to
suppliers, taxes to be refunded, license fees and royalties to be received, and
of short term portion of receivable related to the sale of Ratiopharm.
(l) INVENTORIES
Manufactured products, work-in-progress and semi-finished goods are valued at
their cost of production, without exceeding their net realizable value, which
includes consumable materials, direct and indirect production costs including
the depreciation of assets involved in the production process. Purchased
inventories and raw materials are stated at the lower of purchase cost and of
net realizable value. Provision for potentially obsolete or slow moving
inventory is made based on management's analysis of inventory level and sales
forecasts.
(m) INTANGIBLE ASSETS
Intangible assets consist of goodwill, patents and software, which are amortized
over their estimated useful lives, not to exceed 20 years. The carrying value of
intangible assets is reviewed for impairment whenever events or changes in
circumstances indicate that there may be impairment. If the review indicates
that any of the intangible assets will not be recoverable, the intangible asset
will be reduced to its estimated net realizable value.
9
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
(n) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at their acquisition cost and
depreciated on a straight-line basis over their estimated useful lives as
follows:
o Buildings 10 to 20 years
o Machinery and Equipment 3 to 10 years
o Other tangible assets 3 to 10 years
The carrying value of property, plant and equipment is reviewed for impairment
whenever events or changes in circumstances indicate that there may be
impairment. If the review indicates that any of the tangible assets will not be
recoverable, the tangible asset will be reduced to its estimated net realizable
value.
(o) CAPITAL LEASE
Fixed assets acquired through capital lease arrangements that transfer
substantially all the benefits and risk of ownership to the Company are
capitalized and the related long-term liability is recognized.
(p) PENSION BENEFITS, OTHER RETIREMENT INDEMNITIES AND OTHER
POST-EMPLOYMENT BENEFITS
In France, the Company participates in defined contribution plans as required by
law and applicable regulations and related expenses are recorded when incurred.
In addition, for special termination benefits due to employees at the date of
their retirement, the related liability has been determined using actuarial cost
methods and is disclosed as a contingency.
In certain other countries (Switzerland), the Company participates in defined
contribution plans and defined benefit pension schemes under which liabilities,
prepaid expenses and expenses are recorded in accordance with the prevailing
accounting practices in the applicable country.
(q) DEFERRED TAXATION
Deferred taxes are provided on items recognized in different periods for
financial reporting and tax reporting following the liability method, under
which deferred taxes are computed by utilizing the rate expected to be in effect
when the tax becomes payable.
If the balance leads to deferred taxation, it is accounted for as a liability.
If such balance is an asset, which is more likely than not to be realized in the
future, it is accounted for as a receivable.
10
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
2. SCOPE OF CONSOLIDATION
All consolidating entities have December 31 as their year-end.
<Table>
<Caption>
Share capital Consolidation
Company and legal form (in local currency) % Control % Holding method(1) Activity
- ---------------------- -------------------- ------------------- --------- --------
As of September 30 and December 31, 2000
FINANCIERE LAFON S.A FRF 250,000 100.00 100.00 Parent Co. Holding
Orsymonde S.A. FRF 12,000,000 78.67 78.67 Consolidated Pharmaceutical
Laboratoire L.LAFON S.A. FRF 75,822,600 100.00 78.67 Consolidated Pharmaceutical
S.E.M.M. S.A. FRF 4,100,000 97.56 76.75 Consolidated Rent
SCI Martigny SCI FRF 32,000,000 99.70 78.43 Consolidated Rent
Lafon Pharma (Suisse) S.A. CHF 400,000 99.25 78.07 Consolidated Holding
Farmalyoc SNC FRF 500,000 50.00 39.33 Proportionate Patent licensing
Genepharmex SNC FRF 100,000 98.00 77.09 Consolidated Dormant
Genelco (Suisse) S.A. CHF 100,000 100.00 78.07 Consolidated Trademark licensing
CHANGE AS OF SEPTEMBER 30, 2001
Farmalyoc SNC FRF 500,000 100.00 78.67 Consolidated Patent licensing
<Caption>
3. OTHER RECEIVABLES
As of
September 30, December 31, September 30,
2001 2000 2000
---- ---- ----
Value Added Tax to be refunded 4,565 2,154 2,646
Social receivables 77 -- 127
Receivable from Mr. Lafon 366 --
Receivable from sale of assets 1,727
Advances and downpayments on assets invoices 3,227 1,882 1,200
ST portion of receivables related to the sale of Ratiopharm 916 915 59
License fees and royaties to be received 3,682 4,577 1,851
Other receivables 106 327 94
------ ----- -----
12,939 9,855 7,586
------ ----- -----
</Table>
11
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
4. INVENTORIES
<Table>
<Caption>
As of
September 30, December 31, September 30,
2001 2000 2000
---- ---- ----
Raw materials 6,582 6,970 7,797
Finished products 14,588 11,973 13,185
Purchased products 1,905 2,923 2,561
------- ------- -------
23,075 21,866 23,543
Allowance for obsolete inventories -1,009 -877 -729
------- ------- -------
22,066 20,989 22,814
</Table>
5. COMMITMENTS AND CONTINGENCIES
(a) RETIREMENT INDEMNITIES
Retirement indemnities were calculated according to the method of actuarial
calculation of future services provided. The contingency at each year-end
corresponds to the share of the actuarial value attributable to the services
already provided by each employee.
<Table>
<Caption>
As of
September 30, December 31, September 30,
2001 2000 2000
---- ---- ----
Pension plan 10,028 9,615 9,482
Jubilee obligations 57 52 50
Welfare and medical plans 1,252 1,203 1,188
------- ------- -------
LABORATOIRE LAFON 11,337 10,870 10,720
Pension plan 1,315 1,217 1,186
Widows pensions 147 162 166
------- ------- -------
ORSYMONDE 1,462 1,379 1,352
------- ------- -------
12,799 12,249 12,072
------- ------- -------
<Caption>
(b) OTHER COMMITMENTS
As of
September 30, December 31, September 30,
2001 2000 2000
---- ---- ----
Guaranty on real estate and pledges on equipement 2,258 5,994 2,558
------- ------- -------
Total 2,258 5,994 2,558
------- ------- -------
</Table>
12
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
6. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN FRANCE AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF
AMERICA
The accompanying consolidated financial statements have been prepared
in accordance with the accounting principles described in NOTE 2 above ("French
GAAP"), which differ in certain significant respects from those applicable in
the United States of America ("U.S. GAAP"). These differences relate mainly to
the following items, and the necessary adjustments are shown in the tables set
forth in NOTE 7.
(a) PENSION OBLIGATIONS
Under French GAAP, pension and other than pension post employment
benefits are calculated in accordance with the practices prevailing in each
country and are generally disclosed as a contingency.
For the purpose of U.S. GAAP reconciliation, valuation methods and
assumptions have been harmonized and accounting recognition of plans has been
prepared as if U.S. GAAP had been consistently applied.
(b) PRESENT VALUE OF LOANS, ADVANCES AND RECEIVABLES
Under French GAAP, non-interest or low-interest bearing loans and advances were
not discounted whereas under U.S. GAAP (APB No. 21 "Interest on Receivables and
Payables") they should be recorded at their present value.
These concern receivables related to the sale of Ratiopharm and the OCIL loan.
(c) CONSOLIDATION METHOD
Under French GAAP, as at September 30 and December 31, 2000, the 39,33% interest
in Farmalyoc is jointly controlled and therefore consolidated using the
proportional method. Under U.S GAAP, such investment would be accounted for
using the equity method. This difference does not impact net income or
shareholder's equity. In 2001, Farmalyoc is consolidated and did not give raise
to any French/US GAAP difference.
(d) GOODWILL
Under French GAAP, the Company recorded the 1987 reorganization (acquisition of
shares of Orsymonde from Lafon family, sole shareholders' of Financiere Lafon,
parent company of Group Lafon) as an acquisition at fair value and therefore
recorded a gross goodwill of M(EURO) 19,4. Similarly, acquisition in 1996 of
additional shares of Orsymonde from Lafon family and non-related party was
recorded as an acquisition at fair value, generating an additionnal gross
goodwill of M(EURO) 26,9, of which M(EURO) 22,1 were linked to acquisition of
shares from Lafon's family. Under US GAAP, such transactions between entities
under common control would have been accounted for on historical cost basis.
Goodwill and goodwill amortization have been adjusted accordingly.
13
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
(e) EQUITY INVESTMENTS
Under French GAAP, unrealized gains are not recognized and valuation allowances
of marketable equity securities are generally determined based on year-end
quotations.
Under U.S. GAAP (SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities") and except for securities classified as "hold-to-maturity
securities", unrealized holding gains and losses for "trading" and
"available-for-sales" securities should be included in income or reported as an
adjustment to shareholder's equity until realized, respectively.
(f) PRESENTATION OF CONSOLIDATED BALANCE SHEETS
The classification of certain items in and the format of the Company's
consolidated balance sheets vary to some extent from U.S. GAAP.
o Under French GAAP, deferred tax assets, which are not likely to be
realized in the future, are not recorded as an asset in the balance
sheet. Under U.S. GAAP, such deferred tax assets would be recorded and
a valuation allowance would reduce their net value to the portion more
likely than not to be realized in the future.
o Under French GAAP, as at September 30, 2000 and December 31, 2000, the
investment in Farmalyoc is proportionally consolidated while it would
have been reported using the equity method under U.S GAAP. This would
not have a significant effect on consolidated assets and liabilities as
of September 30, 2000 and December 31, 2000.
(g) PRESENTATION OF CONSOLIDATED INCOME STATEMENTS
The classification of certain items in and the format of the Company's
consolidated income statements vary to some extent from U.S. GAAP.
Operating income
Under a U.S. GAAP presentation, amortization of goodwill (amounting to
K(EURO)1,611 and K(EURO)1,554 for each of the nine month periods ended
September 30, 2001 and 2000, respectively, reported in the French GAAP
financial statements) would have been deducted from operating income.
14
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
7. RECONCILIATION TO U.S. GAAP
(a) NET INCOME
The following is a summary of the estimated adjustments to net income for the
nine months ended September 30, 2001 and 2000, which would be required if U.S.
GAAP had been applied instead of French GAAP.
<Table>
<Caption>
For the nine months ended
September September
30, 30,
2001 2000
---- ----
NET INCOME AS REPORTED IN THE CONSOLIDATED INCOME STATEMENTS 6,915 11,060
(a)- Pension plan obligations -550 -479
(d)- Goodwill 1,406 1,406
(b)- Reassessment of the receivables related to the sale of Ratiopharm 63 88
(b)- Reassessment of OCIL loan 21 -19
(e)- Unrealized gains on marketable securities (139) 0
------- -------
TOTAL US GAAP ADJUSTMENTS BEFORE TAX EFFECTS AND MINORITY INTEREST 801 996
Tax effects of the above US GAAP adjustments 157 145
Minority interest 66 57
------- -------
NET INCOME ACCORDING TO U.S. GAAP 7,939 12,258
------- -------
</Table>
(b) SHAREHOLDERS' EQUITY
The reconciliation of U.S. GAAP shareholders' equity as of September 30, 2000
and 2001 and December 31,2000, is as follows:
<Table>
<Caption>
As of September 30, As of December 31, As of September 30,
2001 2000 2000
---- ---- ----
SHAREHOLDER'S EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEETS 59,616 61,233 58,520
(a)- Pension plan obligations (12,799) (12,249) (12,073)
(d)- Goodwill (18,355) (19,761) (20,230)
(b)- Reassessment of the receivables related to the sale of Ratiopharm (65) (129) (158)
(b)- Reassessment of OCIL loan (480) (502) (454)
(e)- Unrealized gains on marketable securities 139 110
------ ------ ------
Total US GAAP adjustements before tax effect (31,699) (32,502) (32,805)
Tax effects of the above adjustements 4,706 4,550 4,482
Minority interest 1,842 1,777 1,750
------ ------ ------
SHAREHOLDER'S EQUITY ACCORDING TO US GAAP 34,465 35,058 31,947
------ ------ ------
</Table>
15
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
The reconciliation of U.S. GAAP shareholders' equity between December 31, 2000
and September 30, 2001, is as follows:
<Table>
<Caption>
For the nine
months ended
September 30,
2001
----
U.S. GAAP SHAREHOLDERS' EQUITY AT DECEMBER 31, 2000 35,058
Net U.S. GAAP income for 2001 7,939
Dividends paid (8,629)
Foreign currency translation adjustment 97
------
U.S. GAAP SHAREHOLDERS' EQUITY AT SEPTEMBER 30, 2001 34,465
------
</Table>
(c) COMPREHENSIVE INCOME
<Table>
<Caption>
For the nine months ended September 30,
2001 2000
---- ----
NET INCOME under U.S. GAAP 7,939 12,257
----- ------
OTHER COMPREHENSIVE INCOME, NET OF TAX
Foreign currency translation adjustments 97 73
Unrealized gains on securities -139
----- ------
COMPREHENSIVE INCOME 7,897 12,330
----- ------
</Table>
8. SUBSEQUENT EVENTS
On December 3, 2001, the shareholders of the Lafon Group signed with Cephalon
Inc. a share purchase agreement. Under such agreement, on the closing date
(December 28, 2001), the sellers shall sell and the purchaser shall purchase all
the Financiere Lafon shares and substantially all the Orsymonde shares not
directly owned by Financiere Lafon.
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(a) SFAS 133 : ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133). In June 1999, the FASB issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of FASB Statement No. 133. In June 2000, the FASB
issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or a
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative instrument's fair value be
16
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative instrument's
gains and losses to offset related results on the hedged item in the income
statement, to the extent effective, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.
The Company adopted SFAS No. 133 on January 1, 2001, which has no effect on the
Company's financial statements, since it does not hold any derivative
instruments.
(b) SFAS 141 AND 142: GOODWILL AND OTHER INTANGIBLE ASSETS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 141 requires the use of the
purchase method of accounting for all business combinations initiated after June
30, 2001. SFAS No. 141 requires intangible assets to be recognized if they arise
from contractual or legal rights or are "separable", i.e., it is feasible that
they may be sold, transferred, licensed, rented, exchanged or pledged. As a
result, it is likely that more intangible assets will be recognized under SFAS
No. 141 than its predecessor, APB Opinion No.16 although in some instances
previously recognized intangibles will be subsumed into goodwill.
Under SFAS No. 142, goodwill will no longer be amortized on a straight-line
basis over its estimated useful life, but will be tested for impairment on an
annual basis and whenever indicators of impairment arise. The goodwill
impairment test, which is based on fair value, is to be performed on a reporting
unit level. A reporting unit is defined as a SFAS No. 131 operating segment or
one level lower. Goodwill will no longer be allocated to other long-lived assets
for impairment testing under SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. Additionally,
goodwill on equity method investments will no longer be amortized; however, it
will continue to be tested for impairment in accordance with Accounting
Principles Board Opinion No. 18, The Equity Method of Accounting for Investments
in Common Stock. Under SFAS No. 142 intangible assets with indefinite lives will
not be amortized. Instead they will be carried at the lower cost or market value
and tested for impairment at least annually. All other recognized intangible
assets will continue to be amortized over their estimated useful lives.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001
although goodwill on business combinations consummated after July 1, 2001 will
not be amortized. On adoption the company may need to record a cumulative effect
adjustment to reflect the impairment of previously recognized intangible assets.
In addition, goodwill on prior business combinations will cease to be amortized
beginning January 1, 2002. The Company has determined the adoption of these
Statements will not have a material effect on the Company's intangible assets
and there will be no cumulative effect adjustment required upon adoption.
(c) SFAS 143: ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. An entity shall measure changes in the liability for an asset
retirement obligation due to passage of time by applying an interest method of
allocation to the amount of the liability at the beginning of the period. The
interest
17
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
rate used to measure that change shall be the credit-adjusted risk-free rate
that existed when the liability was initially measured. That amount shall be
recognized as an increase in the carrying amount of the liability and as an
expense classified as an operating item in the statement of income. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002. The Company does
not anticipate that adoption of SFAS No. 143 will have a material impact on its
results of operations or its financial position.
(d) SFAS 144: ACCOUNTING FOR IMPAIRMENT OF DISPOSAL OF LONG LIVED
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 establishes a
single accounting model for long-lived assets to be disposed of by sale
consistent with the fundamental provisions of SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
While it supersedes APB Opinion 30 "Reporting the Results of operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" it retains the
presentation of discontinued operations but broadens that presentation to
include a component of an entity (rather than a segment of a business). However,
discontinued operations are no longer recorded at net realizable value and
future operating losses are no longer recognized before they occur. Under SFAS
No. 144 there is no longer a requirement to allocate goodwill to long-lived
assets to be tested for impairment. It also establishes a probability weighted
cash flow estimation approach to deal with situations in which there are a range
of cash flows that may be generated by the asset being tested for impairment.
SFAS No. 144 also establishes criteria for determining when an asset should be
treated as held for sale.
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and
interim periods within those fiscal years, with early application encouraged.
The provisions of the Statement are generally to be applied prospectively. The
Company currently has no plans to dispose of any operations and accordingly,
does not anticipate that adoption of SFAS No. 144 will have a material impact on
its results of operations or its financial position.
18
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousand of euro, except as otherwise stated)
(unaudited)
- --------------------------------------------------------------------------------
10. SUPPLEMENTARY INFORMATION RELATING TO CONSOLIDATED COMPANIES
Name of companies Location
-------- --------
French companies
--------
Financiere LAFON SA 19, rue Francois 1er
75008 PARIS
SIRET No. (company database code):
34010239100018
Orsymonde SA 19, rue Francois 1er
75008 PARIS
SIRET No.: 58207971100021
Societe d'Entrepot de Mitry-Mory ZI de Mitry-Mory rue de Newton Compans
77 290 MITRY-MORY
SIRET No.: 31881157700010
Laboratoire Louis Lafon SA 19 avenue du Professeur Cadiot
94700 MAISONS-ALFORT
SIRET No.: 55206196200015
Societe Civile Immobiliere Martigny 5, rue Charles Martigny
94700 MAISONS-ALFORT
SIRET No.: 33206183700016
SNC Genepharmex 5, avenue C.Martigny
94700 MAISONS-ALFORT
SIRET No.: 39889984900010
SNC Farmalyoc 5, rue C. Martigny
94700 MAISONS-ALFORT
SIRET No.: 34756559000010
Foreign companies
--------
Lafon Pharma SA Certified Public Accountant: Boulevard
de Perolles
55 Case postale 144 CH-1705 FREIBURG
(Switzerland)
Genelco Certified Public Accountant: Boulevard
de Perolles
55 Case postale 144 CH-1705 FREIBURG
(Switzerland)
19
<Page>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of LAFON GROUP
We have audited the accompanying consolidated balance sheets of LAFON GROUP and
its subsidiaries (together, the "Group") as of December 31, 2000 and 1999 and
the related consolidated statements of income, of cash flows and of changes in
shareholders' equity for each of the three years in the period ended December
31, 2000, all expressed in euro. These financial statements are the
responsibility of the Group's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free 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 management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements audited by us present
fairly, in all material respects, the financial position of the Group as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in France.
Accounting principles generally accepted in France vary in certain significant
respects from accounting principles generally accepted in the United States of
America. The application of the latter would have affected the determination of
the consolidated net income expressed in euro for each of the years ended
December 31, 2000 and December 31, 1999 and the determination of consolidated
shareholders' equity, also expressed in euro, at December 31, 2000 and 1999 to
the extent summarized in Note 20 to the consolidated financial statements.
Paris, December 26, 2001
Befec-Price Waterhouse
Member of PricewaterhouseCoopers
Liliane Tellier
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
CONSOLDIATED BALANCE SHEETS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
LAFON
GROUP
CONSOLIDATED
FINANCIAL
STATEMENTS AS
OF DECEMBER 31,
1998, 1999 AND 2000
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
CONSOLDIATED BALANCE SHEETS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
<Table>
<Caption>
As of December 31,
Note 2000 1999
---- ---- ----
ASSETS
Cash and cash equivalents 6,394 6,098
Short-term investments 172 255
Accounts receivable, net 3 17,560 11,800
Other receivables, net 4 9,855 8,442
Inventories, net 5 20,989 18,688
Prepaid expenses 1,079 952
Deferred tax assets 6 2,575 3,376
--------- ---------
TOTAL CURRENT ASSETS 58,624 49,611
Long-term receivables, net 7 2,255 3,015
Intangible assets, net 8 23,279 25,288
Property, plant and equipment, net 9 22,868 24,844
--------- ---------
TOTAL NON CURRENT ASSETS 48,402 53,147
--------- ---------
TOTAL ASSETS 107,026 102,758
--------- ---------
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
CONSOLDIATED BALANCE SHEETS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
<Table>
<Caption>
As of December 31,
Note 2000 1999
----------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings, including current portion of long-term debt 10 2,425 10,932
Trade payables 10,743 10,188
Other payables 13,121 14,544
Accrued liabilities 11 493 1,346
Other current liabilities 2,542 2,975
Deferred tax liabilities 6 616 651
-----------------------
TOTAL CURRENT LIABILITIES 29,940 40,636
Long-term debt, less current portion of long term debt 10 5,348 2,952
-----------------------
TOTAL LIABILITIES 35,288 43,588
MINORITY INTERESTS 10,505 8,231
Common stock: EURO15.24 face value 2,500 shares
authorized, issued and outstanding 38 38
Retained earnings 61,115 50,903
Cumulative translation adjustment 80 -2
-----------------------
SHAREHOLDERS' EQUITY 61,233 50,939
-----------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 107,026 102,758
-----------------------
The accompanying notes are an integral part of these consolidated financial statements.
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Page>
LAFON GROUP
CONSOLDIATED STATEMENTS OF INCOME
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
For the year ended December 31,
Note 2000 1999 1998
---- ---- ---- ----
NET SALES 133,960 119,414 108,393
Cost of sales -32,097 -30,894 -27,135
------- ------- -------
GROSS MARGIN 101,863 88,520 81,258
License fees received 14 7,731 3,872 3,921
License fees paid -482 -73 -411
Selling expenses -33,698 -34,453 -33,995
Research and development expenses -22,626 -21,338 -20,481
Administrative expenses -21,349 -19,480 -18,679
Other operating income (expense), net 15 405 -178 -145
------- ------- -------
OPERATING INCOME 31,844 16,870 11,468
Financial result 16 -136 -492 -504
Loss from equity investments 0 -2,064 -1,471
Other income (expense), net 17 -237 7,078 -58
------- ------- -------
NON-OPERATING INCOME (LOSS) -373 4,522 -2,033
------- ------- -------
INCOME BEFORE INCOME TAX, GOODWILL
AMORTIZATION AND MINORITY INTERESTS 31,471 21,392 9,435
Income tax expense 6 -11,289 -8,976 -4,558
Minority interests -4,345 -2,644 -1,343
------- ------- -------
NET INCOME BEFORE GOODWILL AMORTIZATION 15,837 9,772 3,534
======= ======= =======
Goodwill amortization -2,072 -2,072 -2,072
------- ------- -------
NET INCOME 13,765 7,700 1,462
------- ------- -------
The 1998 consolidated financial statements have been prepared in French Francs
and restated in euro using the fixed exchange rate of (EURO)1.00 = FRF 6.55957
applicable since January 1, 1999 (see Note 1).
The accompanying notes are an integral part of these consolidated financial
statements.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
CONSOLDIATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
Number of Cumulative
shares Common Capital Retained translation Shareholder's
outstanding stock earnings earnings adjustment equity
----------- ----- -------- -------- ---------- ------
AS OF DECEMBER 31, 1997 2,500 38 0 41,741 0 41,779
----------- ----- -------- -------- ---------- ------
Foreign currency translation 0 0 0
Net income 1,462 0 1,462
----------- ----- -------- -------- ---------- ------
AS OF DECEMBER 31, 1998 2,500 38 0 43,203 0 43,241
----------- ----- -------- -------- ---------- ------
Foreign currency translation 0 0 -2 -2
Net income 0 7,700 0 7,700
----------- ----- -------- -------- ---------- ------
AS OF DECEMBER 31, 1999 2,500 38 0 50,903 -2 50,939
----------- ----- -------- -------- ---------- ------
Dividends paids 0 -3,553 0 -3,553
Foreign currency translation 0 0 82 82
Net income 0 13,765 0 13,765
----------- ----- -------- -------- ---------- ------
AS OF DECEMBER 31, 2000 2,500 38 0 61,115 80 61,233
----------- ----- -------- -------- ---------- ------
The 1998 consolidated financial statements have been prepared in French Francs
and restated in euro using the fixed exchange rate of (EURO)1.00 = FRF 6.55957
applicable since January 1, 1999 (see Note 1).
The accompanying notes are an integral part of these consolidated financial
statements.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
CONSOLDIATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
For the year ended December 31,
2000 1999 1998
---- ---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income - group 13,765 7,700 1,462
Net income - minority 4,345 2,644 1,343
Ratiopharm results (equity method) 0 2,064 1,471
----------- ---------- -----------
NET INCOME 18,110 12,408 4,276
ADJUSTMENTS TO RECONCILE INCOME BEFORE MINORITY INTEREST
TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Amortization of intangible assets and goodwill 2,692 2,332 2,306
Depreciation of property, plant and equipment 5,242 5,030 4,835
Other depreciation -853 -95 -526
(Decrease) increase in deferred tax, net 766 489 787
Net (gain) loss on disposal of fixed asset and investments 64 -6,129 -8
NET CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (increase) in inventories -2,300 -1,750 -3,553
Decrease (increase) in accounts and notes receivables -5,759 -4,567 2,158
Decrease (increase) in other current assets -1,390 -2,324 164
Increase (decrease) in accounts payables and other creditors -1,303 5,281 2,164
----------- ---------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 15,269 10,675 12,603
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -3,974 -4,276 -5,439
Proceeds from disposal of fixed assets 46 9 32
Proceeds from disposal of investments 762 301 0
(Increase) decrease in other long term receivables -155 2,913 -3,137
----------- ---------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -3,321 -1,053 -8,544
CASH FLOW FROM FINANCING ACTIVITIES:
Decrease in short term debt -8,507 -600 -4,655
Decrease (Increase) in long term debt 2,396 -2,707 -2,187
Dividends paid
. Group -3,552 0 0
. Minority - by Orsymonde -2,071 -1,398 -1,821
. Minority - by Labo Lafon 0 27 -86
----------- ---------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -11,734 -4,678 -8,749
Net effect of exchange rate changes 82 -2 0
----------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 296 4,942 -4,690
Cash and cash equivalent at the beginning of the year 6,098 1,156 5,846
Cash and cash equivalent at the end of the year 6,394 6,098 1,156
----------- ---------- -----------
296 4,942 -4,690
SUPPLEMENTAL DISCLOSURES
Cash paid for income taxes 12,100 2,655 5,256
Interest paid 199 224 324
The 1998 consolidated financial statements have been prepared in French Francs
and restated in euro using the fixed exchange rate of (EURO)1.00 = FRF 6.55957
applicable since January 1, 1999 (see Note 1).
The accompanying notes are an integral part of these consolidated financial
statements.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(a) BASIS OF PRESENTATION
The consolidated financial statements of LAFON Group, and its consolidated
subsidiaries ("Lafon" or "the Company") have been prepared in accordance with
generally accepted accounting principles in France and comply with the "New
principles and methodology relative to consolidated financial statements",
Regulation Number 99-02 approved by the decree dated June 22, 1999 of the French
"Comite de la Reglementation Comptable".
On January 1, 1999, the Euro (EURO) was introduced as the common legal currency
of eleven members states of the European Economic and Monetary Union, including
France. The Company prepares its consolidated financial statements in French
Francs and has adopted the Euro as its reporting currency for the periods after
January 1, 1999. The 1998 consolidated statement of income and statement of cash
flow statements were restated in Euro using the fixed exchange rate for French
Franc to euro of (EURO)1.00 = FRF6.55957. Although these 1998 statements depict
the same trends as would have been shown had they been also presented in French
francs, they may not be directly comparable to the financial statements of other
companies that have also been restated in Euro. Prior to the adoption of the
Euro, the currencies of other countries fluctuated against the French franc, but
because the Euro did not exist prior to January 1, 1999, historical exchange
rates for Euro are not available. A comparison of the Company's financial
statements and those of another company that had historically used a reporting
currency other than the French franc that takes into account actual fluctuation
in exchange rates could give a much different impression than a comparison of
the financials statements and those of another company as translated into Euro.
(b) NATURE OF BUSINESS
The Company's principal business is producing and commercializing pharmaceutical
products, especially pain killer related drugs and central nervous system drugs.
Group Lafon additionally profits from the distribution of its patent licenses.
The Company also focuses its research and development on four specific areas,
central nervous system, lyophilisation process, oncology, and cardiovascular
system.
(c) CONSOLIDATION METHODS
Subsidiaries in which Lafon's voting rights exceed 50% are consolidated, unless
control is limited due to contractual provisions. Jointly controlled entities
are consolidated using the proportionate consolidation method. All intercompany
balances and transactions between the consolidated companies are eliminated upon
consolidation.
The equity method of accounting is used for investments in which the Company has
the ability to exercise significant influence over the operating and financial
policies of the investee company. In the absence of other evidence, such
influence is presumed to exist for investments in companies in which the
Company's direct or indirect ownership is between 20% and 50%. Under the equity
method, the Company's share of profits and losses of these companies are
included in the consolidated income statement and the carrying value of the
Company's investment is adjusted to reflect its share in the investee's net
equity.
The cost method of accounting is used for investments in which the Company's
ownership is less than 20%.
The list of Lafon's consolidated subsidiaries and the applicable method of
consolidation is provided in Note 2.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
(d) USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in France requires management 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 the revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(e) REVENUE RECOGNITION
Income from research and operating companies (Orsymonde, Laboratoire Lafon,
Genelco) includes three types of revenues:
o Turnover (Orsymonde and Laboratoire Lafon) corresponds to the sales of
materials, active principles and finished goods. Turnover is recorded
when, based upon contractual terms of agreements with customers, risks
and rewards of ownership are transferred.
o Royalties (Genelco and Laboratoire Lafon) are received on patents
and trademarks, and correspond to the percentage of net sales of the
Company's proprietary pharmaceutical products by the customer.
Royalties are calculated and paid semi-annually by contracted
customers in June and December. The Company recognizes these
royalties in the period earned when payment is assured.
o License fees (Laboratoire Lafon) on its pharmaceutical patents are
provided by the Company under license agreements. These agreements are
usually signed for a duration between 5-15 years. Revenues are
recognized on a straight-line basis over the period in the license
agreement.
(f) FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are translated into French franc at the rate of
exchange applicable at the transaction date. At year-end, monetary assets and
liabilities denominated in foreign currencies are translated into Euro at the
rate of exchange prevailing at that date. The resulting exchange gains or losses
are recorded in the income statement.
(g) TRANSLATION OF STATEMENTS OF FOREIGN SUBSIDIARIES
The income statements and statements of cash flows of foreign subsidiaries are
translated into Euro at the average rate of exchange prevailing during the year.
Balance sheets are translated at the exchange rate at the balance sheet date.
Differences arising in the translation of financial statements of foreign
subsidiaries are recorded in shareholders' equity as foreign currency
translation adjustments.
(h) CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
Cash and cash equivalents consist of cash and liquid marketable securities with
an initial maturity of less than three months. Liquid marketable securities are
valued at their acquisition value and depreciated for an amount equal to the
difference between market value and historical value, when their market value is
lower than the historical value.
(i) SHORT-TERM INVESTMENTS
The Company's investments comprise equity securities. All investments have
maturities of less than one year and therefore considered short-term
investments, which are booked at their acquisition value and depreciated for an
amount equal to the difference between fair value and historical value, when the
fair value is lower than the historical value.
(j) ACCOUNTS RECEIVABLE
Receivables are valued at their nominal value. A provision for doubtful accounts
is recorded if receivables are expected to be uncollectable based on an analysis
of aging schedule. Uncollectable accounts are written off.
(k) OTHER RECEIVABLES
Other receivables are valued at their nominal value and consist of advances to
suppliers, taxes to be refunded, license fees and royalties to be received, and
of short term portion of receivable related to the sale of Ratiopharm.
(l) INVENTORIES
Manufactured products, work-in-progress and semi-finished goods are valued at
their cost of production, without exceeding their net realizable value, which
includes consumable materials, direct and indirect production costs including
the depreciation of assets involved in the production process. Purchased
inventories and raw materials are stated at the lower of purchase cost and of
net realizable value. Provision for potentially obsolete or slow moving
inventory is made based on management's analysis of inventory level and sales
forecasts.
(m) INTANGIBLE ASSETS
Intangible assets consist of goodwill, patents and software, which are amortized
over their estimated useful lives, not to exceed 20 years. The carrying value of
intangible assets is reviewed for impairment whenever events or changes in
circumstances indicate that there may be impairment. If the review indicates
that any of the intangible assets will not be recoverable, the intangible asset
will be reduced to its estimated net realizable value.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
(n) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at their acquisition cost and are
depreciated on a straight-line basis over their estimated useful lives as
follows:
o Buildings 10 to 20 years
o Machinery and equipment 3 to 10 years
o Other tangible assets 3 to 10 years
The carrying value of property, plant and equipment is reviewed for impairment
whenever events or changes in circumstances indicate that there may be
impairment. If the review indicates that any of the tangible assets will not be
recoverable, the tangible asset will be reduced to its estimated net realizable
value.
(o) CAPITAL LEASE
Fixed assets acquired through capital lease arrangements that transfer
substantially all the benefits and risk of ownership to the Company are
capitalized and the related long-term liability is recognized.
(p) PENSION BENEFITS, OTHER RETIREMENT INDEMNITIES AND OTHER
POST-EMPLOYMENT BENEFITS
In France, the Company participates in defined contribution plans as required by
law and applicable regulations and related expenses are recorded when incurred.
In addition, for special termination benefits due to employees at the date of
their retirement, the related liability has been determined using actuarial cost
methods and is disclosed as a contingency.
In certain other countries (Switzerland), the Company participates in defined
contribution plans and defined benefit pension schemes under which liabilities,
prepaid expenses and expenses are recorded in accordance with the prevailing
accounting practices in the applicable country.
(q) DEFERRED TAXATION
Deferred taxes are provided on items recognized in different periods for
financial reporting and tax reporting following the liability method, under
which deferred taxes are computed by utilizing the rate expected to be in effect
when the tax becomes payable.
If the balance leads to deferred taxation, it is accounted for as a liability.
If such balance is an asset, which is more likely than not to be realized in the
future, it is accounted for as a receivable.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
2. SCOPE OF CONSOLIDATION
All consolidating entities have December 31 as their year-end closing date.
Share capital Consolidation
Company (in local currency) % Control % Interest Method Activity
------- ------------------- --------- ---------- ------ --------
As of December 31, 2000
FINANCIERE LAFON S.A. FRF 250,000 100.00 100.00 Parent Co. Holding
Orsymonde S.A. FRF 12,000,000 78.67 78.67 Consolidated Pharmaceutical
Laboratoire L.LAFON S.A. FRF 75,822,600 100.00 78.67 Consolidated Pharmaceutical
S.E.M.M. S.A. FRF 4,100,000 97.56 76.75 Consolidated Rent
SCI Martigny SCI FRF 32,000,000 99.70 78.43 Consolidated Rent
Lafon Pharma (Suisse) S.A. CHF 400,000 99.25 78.07 Consolidated Holding
Farmalyoc SNC FRF 500,000 50.00 39.33 Proportional Patent Licensing
Genepharmex SNC FRF 100,000 98.00 77.09 Consolidated Dormant
Genelco (Suisse) S.A. CHF 100,000 100.00 78.07 Consolidated Trademark Licensing
Sold in 1999
Laboratoire Ratiopharm S.A. FRF 9,000,000 49.00 38.55 Equity consolidated Patent Licensing
Laboratoire Ratiopharm S.A. was sold on December 14, 1999. The Company accounted
for the effect of this transaction as of December 14, 1999 and recorded a gain
of K(EURO) 6,156 which is included in other non operating income.
3. ACCOUNTS RECEIVABLE, NET
As of December 31,
2000 1999
---------------------
Accounts receivable 17,742 12,180
Advances and downpayments paid by customers 70 0
Allowance for doubtful accounts -252 -380
------- -------
17,560 11,800
------- -------
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
4. OTHER RECEIVABLES, NET
<Table>
<Caption>
As of December 31,
2000 1999
---- ----
Advances and down payments on assets invoices 1,882 369
Receivables related to the sale of Ratiopharm 915 762
Value Added Tax to be refunded 2,154 4,031
License fees and royalties to be received 4,577 966
New special contribution to pharmaceutical companies to be refunded 0 1,310
Other 327 1,004
----- -----
9,855 8,442
----- -----
</Table>
5. INVENTORIES, NET
<Table>
<Caption>
As of December 31,
2000 1999
---- ----
Raw materials 6,970 7,293
Finished products 11,973 10,387
Purchased products 2,923 1,103
------- -------
21,866 18,783
Allowance for obsolete inventories -877 -95
------- -------
20,989 18,688
------- -------
</Table>
6. INCOME TAXES
TAX GROUP FORMATION
Orsymonde and its subsidiary, Laboratoire Lafon, have been included in a tax
consolidation group since January 1, 1995.
The tax consolidation agreement provides that Laboratoire Lafon should pay an
amount equal to the sum of tax which would have been levied on its income and/or
net long-term capital gain for the period if it was liable for tax directly,
after deduction of all the tax allowances which this company would have received
if it was not consolidated for tax purposes.
According to Article 6 of the Tax Consolidation Agreement between Orsymonde and
Laboratoire Lafon, in the event of non-renewal or withdrawal from the scope of
consolidation of Laboratoire Lafon, Laboratoire Lafon will be compensated by
Orsymonde for all of the tax surcharges related to its belonging to the tax
Group and resulting from the loss of:
o The right to carry over tax losses incurred during tax consolidation
that had not been used by Laboratoire Lafon.
o A tax income reference, which could be used in case of dividends
distribution free of equalization tax or for carrying back any
potential future losses.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
RECONCILIATION OF TAX EXPENSE:
<Table>
<Caption>
12/31/2000
----------
Net income 13,765
Minority interests 4,345
Income taxes expense 11,289
-------
Income before tax 29,399
Permanent differences (1) 5,878
Items taxed at reduced rate (19 %) -2,000
Income of foreign companies before tax -2,588
-------
Income before tax subject to the normal rate 30,689
Tax rate 36.67%
Theoretical tax -11,253
Tax at reduced rate (19 %) -380
Tax on foreign companies -229
-------
Total tax -11,862
Allocation of research tax credits and other deductions 946
Surtaxes -373
Tax charge / revenues for the period -11,289
-------
Income tax expense -11,289
-------
The reconciliation of the tax expense is shown for the first time as of December
31, 2000 in accordance with Regulation 99-02 relating to consolidated financial
statements.
(1) Permanent differences correspond to goodwill amortization arising from
Orsymonde amounting to (EURO)2.0 million, non deductible allowance from
Laboratoire Lafon amounting to (EURO)2.5 million, benefit from the tax
situation of LaboratoirE Lafon amounting to (EURO)0.9 million and other
differences amounting to (EURO)0.5 million.
Deferred taxes on previous financial periods were calculated in accordance with
the fixed rate method at the historical corporate income tax rate. This method
is no longer acceptable according to the new regulation in respect to the
preparation of consolidated financial statements. Deferred taxes were calculated
beginning in 1999 in accordance with the variable method rate, i.e., 36.67% and
35.33% as of December 31, 1999 and 2000, respectively. The change in method has
no significant impact on 1999 deferred tax.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
Details by nature and by date of use of deferred taxes recorded is as follows:
As of December 31,
2000 1999
---- ----
Timing differences:
Tax losses undefinitely carried forward 0 305
Special social security compensating tax and paid vacation 177 138
Elimination of intercompany margins on inventories 1,964 2,588
Tax effect of other consolidation entries 434 345
----- -----
DEFERRED TAX ASSETS 2,575 3,376
Capital lease -498 -491
Elimination of provisions booked for local tax purposes -118 -160
----- -----
DEFERRED TAX LIABILITIES -616 -651
NET DEFERRED TAX ASSET 1,959 2,725
----- -----
7. LONG-TERM RECEIVABLES, NET
As of December 31,
2000 1999
---- ----
OCIL loan 1,076 990
Deposits and guarantees 262 152
Long term portion of Ratiopharm receivable 915 1,829
Other 2 44
----- -----
TOTAL 2,255 3,015
----- -----
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
8. INTANGIBLE ASSETS, NET
As of December 31,
2000 1999
---- ----
Other intangibles assets 3,089 2,626
Accumulated amortization -2,614 -2,214
------ ------
475 412
====== ======
As of December 31,
2000 1999
---- ----
Goodwill 43,005 43,005
Accumulated amortization -20,201 -18,129
------- -------
22,804 24,876
------- -------
The acquisition of Orsymonde shares by Financiere Lafon occurred in the
following phases:
o Initial acquisition of shares in 1987 from Louis Lafon (generating a
goodwill amounting to (EURO)19.4 million),
o Additional acquisition in 1996 of 1,200 shares from Francois Lafon for
(EURO)22.1 million (generating a goodwill amounting to (EURO)18.1
million) and 262 shares from Jean Pierre Peyre (EURO)4.8 million
(generating a goodwill amounting to (EURO)3.9 million).
Goodwill is amortized over a 20-year period. Other intangible assets are
amortized over a 1-15 year period.
9. PROPERTY, PLANT AND EQUIPMENT, NET
o PROPERTY, PLANT AND EQUIPMENT, NET
Machinery Other Fixed
and tangible assets in-
Land Buildings equipment assets progress Total
---- --------- --------- ------ -------- -----
Gross value 2,736 30,899 29,978 12,161 319 76,093
Accumulated depreciation -18,182 -25,713 -7,354 0 -51,249
----- ------ ------ ------ --- ------
December 31, 1999 2,736 12,717 4,265 4,807 319 24,844
===== ====== ====== ====== === ======
Gross value 2,862 31,211 31,673 12,473 93 78,311
Accumulated depreciation -19,787 -27,699 -7,958 0 -55,443
----- ------ ------ ------ --- ------
December 31, 2000 2,862 11,424 3,974 4,515 93 22,868
===== ====== ====== ====== === ======
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
o CAPITAL LEASES
The Company leases certain property and equipment under various operating and
capital lease arrangements that expire over the next 7 years. The Company has
entered into certain capital lease obligations requiring the Company to
guarantee the residual value to the lessor at the termination of the lease.
Assets recorded under capitalized lease agreements included in property, plant
and equipment consist of the following:
As of December 31,
2000 1999
---- ----
Land 290 290
Buildings 4,360 4,360
Accumulated depreciation 1,562 1,344
Future minimum lease payments under scheduled capital leases that have initial
or remaining noncancellable terms in excess of one year, as of December 31, 2000
are as follows:
<Table>
<Caption>
Capital Leases
2001 411
2002 364
2003 322
2004 286
2005 252
2006 and thereafter 473
Total minimum payments 2,108
Amount representing interest 607
Obligations under capital leases 1,501
Current portion 62
Long-term obligations 1,439
</Table>
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
10. SHORT AND LONG-TERM DEBT
o ANALYSIS BY NATURE
As of December 31,
2000 1999
---- ----
SHORT-TERM DEBT, INCLUDING CURRENT PORTION OF LONG-TERM DEBT
Bank debt 343 818
Bank overdraft 1,758 4,796
Capital lease obligations 62 318
Payable on Orsymonde share acquisition 0 4,406
Other liabilities 262 594
----- ------
TOTAL SHORT-TERM DEBT 2,425 10,932
LONG-TERM DEBT, LESS CURRENT PORTION
Bank debt 3,376 748
Capital lease obligations 1,439 1,671
Other liabilities 533 533
----- ------
TOTAL LONG-TERM DEBT 5,348 2,952
----- ------
TOTAL DEBT 7,773 13,884
----- ------
</Table>
o ANNUAL MATURITIES OF LONG TERM DEBT
<Table>
As of December 31, 2000
2002 178
2003 0
2004 0
2005 2,581
2006 and after 2,589
---- -----
Total long-term debt 5,348
-----
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
11. ACCRUED LIABILITIES
As of December 31,
2000 1999
---- ----
Provision for legal disputes 76 76
Provision for training 112 0
Provision for non-recurring charges 0 1,270
Accrued employee termination benefits 305 0
--- -----
493 1,346
--- -----
A provision for non-recurring charges was recorded in 1999 for the sale of
pharmaceutical products by Laboratoire Lafon in accordance with the Social
Security Finance Law. This provision was calculated on the basis of the maximum
rate of 1.3% stated in the 2000 Finance Law on the 1999 revenues of K(EURO)
97,696 which totalled K(EURO)1,270. The actual charge paid in 2000 was K(EURO)
1,186.
12. PAYROLL
For the year ended December 31,
2000 1999 1998
---- ---- ----
Salaries and wages 27,303 26,239 25,773
Social charges 12,040 11,512 11,061
------ ------ ------
Total 39,343 37,751 36,834
====== ====== ======
13. WORKFORCE
For the year ended December 31,
2000 1999 1998
---- ---- ----
Executives 238 241 257
Supervisors and technicians 98 95 106
Office workers 91 100 71
Other workers 90 73 98
--- --- ---
517 509 532
--- --- ---
</Table>
The average workforce is calculated on the basis of the employees working in the
company at each month-end. All of these persons are employed in the Group's
subsidiaries.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
14. LICENSE FEES RECEIVED
<Table>
<Caption>
For the year ended December 31,
2000 1999 1998
---- ---- ----
KFRF
MODIODAL 7,638 3,010 3,132
FONZYLANE 0 673 639
DERGOLYOC 8 10 10
ODDIBIL 33 41 38
SPASFON 17 31 25
SPASMOGLUCINOL 11 12 11
PARALYOC 0 55 61
Other 24 40 5
----- ----- -----
Total license fees collected 7,731 3,872 3,921
----- ----- -----
<Caption>
15. OTHER OPERATING INCOME (EXPENSE)
For the year ended December 31,
2000 1999 1998
---- ---- ----
Reversal of provision 144 0 0
Gains & losses on sales of assets 20 0 8
Other 241 -178 -153
--- --- ---
Total other income 405 -178 -145
--- --- ---
Other operating income 405 -178 -145
=== === ===
</Table>
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
16. FINANCIAL RESULT
FOR THE YEAR ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----
Foreign exchange gains 502 96 36
Revenues from the sale of short-term investment securities 254 40 107
Income from other financial fixed assets 40 15 0
Other financial income 10 9 11
Interest and related charges -568 -601 -640
Depreciation, amortization and provisions -28 0 0
Foreign exchange losses -346 -51 -18
---- ---- ----
-136 -492 -504
---- ---- ----
<Caption>
17. OTHER INCOME (EXPENSE)
FOR THE YEAR ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----
Reserve on receivables from Ratiopharm 0 0 -145
Reversal of reserve on receivable from Ratiopharm 0 1,160 0
Gains and losses on sales of investments -55 6,129 0
Other -182 -211 87
---- ----- ---
TOTAL -237 7,078 -58
---- ----- ---
</Table>
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
18. COMMITMENTS AND CONTINGENCIES
(a) RETIREMENT INDEMNITIES
Retirement indemnities were calculated according to the method of actuarial
calculation of future services provided. The contingency at each year-end
corresponds to the share of the actuarial value attributable to the services
already provided by each employee.
<Table>
<Caption>
AS OF DECEMBER 31,
2000 1999
---- ----
Pension plan 9,615 9,132
Jubilee obligations 52 46
Welfare and medical plans 1,203 1,140
------- -------
LABORATOIRE LAFON 10,870 10,318
Pension plan 1,217 1,095
Widows pensions 162 180
------- -------
ORSYMONDE 1,379 1,275
------- -------
12,249 11,593
------- -------
<Caption>
(b) OTHER COMMITMENTS
AS OF DECEMBER 31,
2000 1999 1998
---- ---- ----
Guaranty on real estate and pledges on equipment 5,994 4,263 5,935
----- ----- -----
TOTAL 5,994 4,263 5,935
----- ----- -----
</Table>
(c) LITIGATION
The Company is subject to various legal proceedings and claims arising in the
normal course of its business. It concerns the conditions for the selling of
drugs in each country and more especially the negotiated selling price. In the
opinion of the management, the probable outcome of these actions will not
materially affect the consolidated financial position or the result of
operations of the company.
(d) ENVIRONMENTAL MATTERS
The Company is subject to various laws and regulations relating to environmental
matters in countries in which it operates.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
(e) EURO
The Company implemented a transition plan to Euro in 1998. No provision has been
recorded in the consolidated statements to cover the costs of making the
necessary modifications to the Lafon's software programs. The management
believes that this plan is successfully completed in time and within the
allocated budget, which is non-significant.
19. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE
COMPANY AND U.S. GAAP
The accompanying consolidated financial statements have been prepared in
accordance with the accounting principles described in NOTE 2 above ("French
GAAP"), which differ in certain significant respects from those applicable in
the United States of America ("U.S. GAAP"). These differences relate mainly to
the following items, and the necessary adjustments are shown in the tables set
forth in NOTE 20.
(a) PENSION OBLIGATIONS
Under French GAAP, pension and other than pension post employment benefits are
calculated in accordance with the practices prevailing in each country and are
generally disclosed as a contingency.
For the purpose of U.S. GAAP reconciliation, valuation methods and assumptions
have been harmonized and accounting recognition of plans has been prepared as if
U.S. GAAP had been consistently applied.
(b) PRESENT VALUE OF LOANS, ADVANCES AND RECEIVABLES
Under French GAAP, non-interest or low-interest bearing loans and advances were
not discounted whereas under U.S. GAAP (APB No. 21 "Interest on Receivables and
Payables") they should be recorded at their present value.
These concern receivables related to the sale of Ratiopharm and the OCIL loan-
see Notes 4 and 7.
(c) CONSOLIDATION METHOD
Under French GAAP, the 39.33% interest in Farmalyoc is jointly controlled and
therefore consolidated using the proportional method. Under U.S GAAP, such
investment would be accounted for using the equity method. This difference does
not impact net income or shareholder's equity.
(d) GOODWILL
Under french GAAP, the Company recorded the 1987 reorganization (acquisition of
shares of Orsymonde from Lafon family, sole shareholders' of Financiere Lafon,
parent company of Group Lafon) as an acquisition at fair value and therefore
recorded a gross goodwill of MEURO 19,4. Similarly, acquisition in 1996 of
additional shares of Orsymonde from Lafon family and non-related party was
recorded as an acquisition at fair value, generating an additionnal gross
goodwill of MEURO 26,9, of which MEURO 22,1 were linked to acquisition of
shares from Lafon's family. Under US GAAP, such transactions between entities
under common control would have been accounted for on historical cost basis.
Goodwill and goodwill amortization have been adjusted accordingly.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
(e) EQUITY INVESTMENTS
Under French GAAP, unrealized gains are not recognized and valuation allowances
of marketable equity securities are generally determines based on year-end
quotations.
Under U.S. GAAP (SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities") and except for securities classified as "hold-to-maturity
securities", unrealized holding gains and losses for "trading" and
"available-for-sales" securities should be included in income or reported as an
adjustment to shareholder's equity until realized, respectively.
(f) INCOME TAXES
As described in Note 10, the Company changed its method to account for deferred
taxes in 1999. Under US GAAP, the liability method should have been used for all
periods presented.
(g) PRESENTATION OF CONSOLIDATED BALANCE SHEETS
The classification of certain items in and the format of the Company's
consolidated balance sheets vary to some extent from U.S. GAAP.
o Under French GAAP, deferred tax assets, which are not likely to be
realized in the future, are not recorded as an asset in the balance
sheet. Under U.S. GAAP, such deferred tax assets would be recorded and
a valuation allowance would reduce their net value to the portion more
likely than not to be realized in the future.
o Under French GAAP, the investment in is proportionally consolidated
while it would have been reported using the equity method under U.S
GAAP. This would reduce consolidated assets and liabilities by KEURO 10
and K EURO (20) as of December 31, 2000, 1999, respectively.
(h) PRESENTATION OF CONSOLIDATED INCOME STATEMENTS
The classification of certain items in and the format of the Company's
consolidated income statements vary to some extent from U.S. GAAP.
Operating income
Under a U.S. GAAP presentation, amortization of goodwill (amounting to
KEURO2,072 for each of the years ended December 31, 2000, 1999 and 1998 in
French GAAP financial statements) would have been deducted from operating
income.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
20. RECONCILIATION TO U.S. GAAP
The following is a summary of the estimated adjustments to net income and
shareholders' equity for the years ended December 31, 2000 and 1999 which would
be required if U.S. GAAP had been applied instead of French GAAP.
(a) NET INCOME
<Table>
<Caption>
For the year
ended December 31,
2000 1999
---- ----
NET INCOME AS REPORTED IN THE CONSOLIDATED INCOME STATEMENTS 13,765 7,700
(a) -- Pension plan obligations -656 -1,973
(e) -- Goodwill 1,875 1,875
(b) -- Reassessment of the OCIL loan -28 -29
(b) -- Reassessment of the receivables due to the sale of Ratiopharm 117 -246
(g)-- Deferred tax under historical rate method 0 274
------ -----
TOTAL US GAAP ADJUSTMENTS BEFORE TAX EFFECTS AND MINORITY INTEREST 1,308 -99
Tax effects of the above US GAAP adjustments 200 824
Minority interest 78 245
------ -----
NET INCOME ACCORDING TO US GAAP 15,351 8,670
------ -----
<Caption>
(b) SHAREHOLDERS' EQUITY
AS OF DECEMBER 31,
2000 1999
---- ----
SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEETS 61,233 50,939
(a) -- Pension plan obligations -12,249 -11,593
(e) -- Goodwill -19,761 -21,636
(b) -- Reassessment of the OCIL loan -502 -474
(b) -- Reassessment of the receivables due to the sale of Ratiopharm -129 -246
(f) -- Unrealized gains on marketable securities 139 0
------ ------
TOTAL U.S. GAAP ADJUSTMENTS BEFORE TAX EFFECT -32,502 -33,949
Tax effects of the above adjustments 4,550 4,350
Minority interest 1,777 1,698
------ ------
SHAREHOLDERS' EQUITY ACCORDING TO U.S. GAAP 35,058 23,038
------ ------
</Table>
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
The reconciliation of U.S. GAAP shareholders' equity for each of the two years
ending December 31, 2000 and 1999, is as follows:
<Table>
------
U.S. GAAP SHAREHOLDERS' EQUITY AT DECEMBER 31, 1998 14,370
======
Net U.S. GAAP income for 1999 8,670
Dividends paid 0
Foreign currency translation adjustment -2
------
U.S. GAAP SHAREHOLDERS' EQUITY AS OF DECEMBER 31, 1999 23,038
======
Net U.S. GAAP income for 2000 15,351
Dividends paid -3,553
Unrealized gains on marketable securities 139
Foreign currency translation adjustment 82
------
U.S. GAAP SHAREHOLDERS' EQUITY AS OF DECEMBER 31, 2000 35,058
------
<Caption>
(c) COMPREHENSIVE INCOME
FOR THE YEAR
ENDED DECEMBER 31,
2000 1999
---- ----
NET INCOME UNDER US GAAP 15,351 8,670
OTHER COMPREHENSIVE INCOME, NET OF TAX
Foreign currency translation adjustments 82 -2
Unrealized gains on marketable securities 139
------ -----
COMPREHENSIVE INCOME 15,572 8,668
------ -----
</Table>
21. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(a) SFAS 133: ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133). In June 1999, the FASB issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of FASB Statement No. 133. In June 2000, the FASB
issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or a
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative instrument's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows a derivative instrument's gains and losses to offset related
results on the hedged item in the income statement, to the extent effective, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
The Company adopted SFAS No. 133 on January 1, 2001, which has no effect on the
Company's financial statements, since it does not hold any derivative
instruments.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
(b) SFAS 141 AND SFAS 142: GOODWILL AND OTHER INTANGIBLE ASSETS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 141 requires the use of the
purchase method of accounting for all business combinations initiated after June
30, 2001. SFAS No. 141 requires intangible assets to be recognized if they arise
from contractual or legal rights or are "separable", i.e., it is feasible that
they may be sold, transferred, licensed, rented, exchanged or pledged. As a
result, it is likely that more intangible assets will be recognized under SFAS
No. 141 than its predecessor, APB Opinion No.16 although in some instances
previously recognized intangibles will be subsumed into goodwill.
Under SFAS No. 142, goodwill will no longer be amortized on a straight-line
basis over its estimated useful life, but will be tested for impairment on an
annual basis and whenever indicators of impairment arise. The goodwill
impairment test, which is based on fair value, is to be performed on a reporting
unit level. A reporting unit is defined as a SFAS No. 131 operating segment or
one level lower. Goodwill will no longer be allocated to other long-lived assets
for impairment testing under SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. Additionally,
goodwill on equity method investments will no longer be amortized; however, it
will continue to be tested for impairment in accordance with Accounting
Principles Board Opinion No. 18, The Equity Method of Accounting for Investments
in Common Stock. Under SFAS No. 142 intangible assets with indefinite lives will
not be amortized. Instead they will be carried at the lower cost or market value
and tested for impairment at least annually. All other recognized intangible
assets will continue to be amortized over their estimated useful lives.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001
although goodwill on business combinations consummated after July 1, 2001 will
not be amortized. On adoption the company may need to record a cumulative effect
adjustment to reflect the impairment of previously recognized intangible assets.
In addition, goodwill on prior business combinations will cease to be amortized
beginning January 1, 2002. The Company has determined the adoption of these
Statements will not have a material effect on the Company's intangible assets
and there will be no cumulative effect adjustment required upon adoption.
(c) SFAS 143: ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. An entity shall measure changes in the liability for an asset
retirement obligation due to passage of time by applying an interest method of
allocation to the amount of the liability at the beginning of the period. The
interest rate used to measure that change shall be the credit-adjusted risk-free
rate that existed when the liability was initially measured. That amount shall
be recognized as an increase in the carrying amount of the liability and as an
expense classified as an operating item in the statement of income. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002. The Company does
not anticipate that adoption of SFAS No. 143 will have a material impact on its
results of operations or its financial position.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
(d) SFAS 144: ACCOUNTING FOR IMPAIRMENT OF DISPOSAL OF LONG LIVED ASSETS
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 establishes a
single accounting model for long-lived assets to be disposed of by sale
consistent with the fundamental provisions of SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
While it supersedes APB Opinion 30 "Reporting the Results of operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" it retains the
presentation of discontinued operations but broadens that presentation to
include a component of an entity (rather than a segment of a business). However,
discontinued operations are no longer recorded at net realizable value and
future operating losses are no longer recognized before they occur. Under SFAS
No. 144 there is no longer a requirement to allocate goodwill to long-lived
assets to be tested for impairment. It also establishes a probability weighted
cash flow estimation approach to deal with situations in which there are a range
of cash flows that may be generated by the asset being tested for impairment.
SFAS No. 144 also establishes criteria for determining when an asset should be
treated as held for sale.
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and
interim periods within those fiscal years, with early application encouraged.
The provisions of the Statement are generally to be applied prospectively. The
Company currently has no plans to dispose of any operations and accordingly,
does not anticipate that adoption of SFAS No. 144 will have a material impact on
its results of operations or its financial position.
- --------------------------------------------------------------------------------
<Page>
LAFON GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of euro, except as otherwise stated)
- --------------------------------------------------------------------------------
22. SUPPLEMENTARY INFORMATION RELATING TO CONSOLIDATED COMPANIES
Name of companies Location
- ----------------- --------
French companies
----------------
Financiere LAFON SA 19, rue Francois 1er
75008 PARIS
SIRET No. (company database code):
34010239100018
Orsymonde SA 19, rue Francois 1er
75008 PARIS
SIRET No.: 58207971100021
Societe d'Entrepot de Mitry-Mory ZI de Mitry-Mory rue de Newton Compans
77 290 MITRY-MORY
SIRET No.: 31881157700010
Laboratoire Louis Lafon SA 19 avenue du Professeur Cadiot
94700 MAISONS-ALFORT
SIRET No.: 55206196200015
Societe Civile Immobiliere Martigny 5, rue Charles Martigny
94700 MAISONS-ALFORT
SIRET No.: 33206183700016
SNC Genepharmex 5, avenue C.Martigny
94700 MAISONS-ALFORT
SIRET No.: 39889984900010
SNC Farmalyoc 5, rue C. Martigny
94700 MAISONS-ALFORT
SIRET No.: 34756559000010
LABORATOIRE RATIOPHARM 5, rue Charles Martigny
94700 MAISONS-ALFORT
SIRET No.: 378394357
Foreign companies
-----------------
Lafon Pharma SA Certified Public Accountant: Boulevard
de Perolles
55 Case postale 144 CH-1705 FREIBURG
(Switzerland)
Genelco Certified Public Accountant: Boulevard
de Perolles
55 Case postale 144 CH-1705 FREIBURG
(Switzerland)
- --------------------------------------------------------------------------------
7(b) PRO FORMA FINANCIAL INFORMATION:
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On December 28, 2001, Cephalon, Inc. (the "Company") completed its
previously announced acquisition (the "Acquisition") of the outstanding shares
of capital stock of Financiere Lafon S.A. and Organisation de Synthese Mondiale
Orsymonde S.A. (collectively, "Group Lafon"). The purchase price was
approximately $450 million in cash plus transaction costs. The purchase price
was funded in part by the proceeds of the Company's offering of 2-1/2%
convertible subordinated notes, which was completed on December 11, 2001.
The following presents certain unaudited pro forma condensed consolidated
financial information of the Company as of September 30, 2001, and for the
nine-month period then ended, and for the year ended December 31, 2000. The
unaudited pro forma condensed consolidated balance sheet was prepared as if the
Acquisition took place on September 30, 2001, and the unaudited pro forma
condensed consolidated statements of operations were prepared as if the
Acquisition took place on January 1, 2000. The financial statements give pro
forma effect to (i) borrowings used to fund the Acquisition, and (ii)
preliminary allocation of the purchase price based upon the fair value of the
assets acquired and liabilities assumed.
The unaudited pro forma condensed consolidated financial statements reflect
pro forma adjustments that are based upon available information and certain
assumptions that management believes are reasonable. The unaudited pro forma
condensed consolidated financial statements do not purport to represent the
Company's results of operations or financial position that would have resulted
had the transactions to which pro forma effects are given been consummated as of
the date or for the periods indicated. The pro forma condensed consolidated
financial statements reflect preliminary estimates of the allocation of the
purchase price for the Acquisition that may be adjusted. Management does not
expect such adjustments to be material.
The unaudited pro forma condensed consolidated financial statements and
accompanying notes should be read in conjunction with the historical financial
statements of the Company contained in its 2000 Annual Report and the historical
financial statements of Group Lafon contained herein.
CEPHALON, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2001
(unaudited)
CEPHALON, GROUP PRO FORMA PRO FORMA
INC.(1) LAFON(2) ADJUSTMENTS CONSOLIDATED
--------------- --------------- ----------------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 42,167,000 $ 9,470,000 $ - $ 51,637,000
Investments 402,217,000 43,000 - 402,260,000
Receivables, net 29,873,000 22,729,000 (4,801,000)(3) 47,801,000
Inventory 30,096,000 20,076,000 - 50,172,000
Other 5,600,000 3,235,000 - 8,835,000
--------------- --------------- -------------- ---------------
Total current assets 509,953,000 55,553,000 (4,801,000) 560,705,000
PROPERTY AND EQUIPMENT, net 35,660,000 20,999,000 6,000,000 (4) 62,659,000
INTANGIBLE ASSETS, net 127,609,000 2,987,000 394,646,000 (5) 525,242,000
OTHER 15,041,000 5,891,000 - 20,932,000
--------------- --------------- -------------- ---------------
$ 688,263,000 $ 85,430,000 $ 395,845,000 $ 1,169,538,000
=============== =============== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,010,000 $ 22,729,000 $ (4,801,000)(3) $ 22,938,000
Accrued expenses 34,591,000 2,494,000 10,000,000 (6) 47,085,000
Current portion of deferred revenues 1,198,000 - - 1,198,000
Current portion of long-term debt 5,702,000 3,770,000 - 9,472,000
--------------- --------------- -------------- ---------------
Total current liabilities 46,501,000 28,993,000 5,199,000 80,693,000
LONG-TERM DEBT 440,482,000 5,438,000 450,000,000 (7) 895,920,000
DEFERRED REVENUES and OTHER 5,598,000 19,643,000 (7,998,000)(8) 17,243,000
--------------- --------------- -------------- ---------------
Total liabilities 492,581,000 54,074,000 447,201,000 993,856,000
--------------- --------------- -------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital 711,366,000 36,000 (36,000)(9) 711,366,000
Treasury stock (6,093,000) - - (6,093,000)
Accumulated earnings (deficit) (512,146,000) 31,159,000 (51,159,000)(10) (532,146,000)
Accumulated other comprehensive income 2,555,000 161,000 (161,000)(9) 2,555,000
--------------- --------------- -------------- ---------------
195,682,000 31,356,000 (51,356,000) 175,682,000
--------------- --------------- -------------- ---------------
$ 688,263,000 $ 85,430,000 $ 395,845,000 $ 1,169,538,000
=============== =============== ============== ===============
See accompanying notes to unaudited pro forma condensed consolidated
financial information.
CEPHALON, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(unaudited)
CEPHALON, GROUP PRO FORMA PRO FORMA
INC.(11) LAFON(12) ADJUSTMENTS CONSOLIDATED
------------ ----------- ------------ ------------
REVENUES $187,093,000 $91,316,000 $(27,662,000)(13) $250,747,000
------------ ----------- ------------ ------------
COSTS AND EXPENSES:
Cost of product sales 31,912,000 22,271,000 (25,906,000)(14) 28,277,000
Research and development 59,821,000 15,529,000 - 75,350,000
Selling, general and administrative 85,597,000 38,189,000 8,549,000 (15) 132,335,000
------------ ----------- ------------ ------------
177,330,000 75,989,000 (17,357,000) 235,962,000
------------ ----------- ------------ ------------
INCOME FROM OPERATIONS 9,763,000 15,327,000 (10,305,000) 14,785,000
------------ ----------- ------------ ------------
OTHER INCOME (EXPENSE) (3,718,000) (739,000) (10,800,000)(16) (15,257,000)
------------ ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST, EXTRAORDINARY
GAIN, AND DIVIDENDS ON PREFERRED STOCK 6,045,000 14,588,000 (21,105,000) (472,000)
INCOME TAXES - (5,412,000) 5,412,000 (17) -
MINORITY INTEREST - (2,057,000) 2,057,000 (18) -
------------ ----------- ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN AND
DIVIDENDS ON PREFERRED STOCK 6,045,000 7,119,000 (13,636,000) (472,000)
EXTRAORDINARY GAIN 3,016,000 - - 3,016,000
------------ ----------- ------------ ------------
INCOME BEFORE DIVIDENDS ON
PREFERRED STOCK 9,061,000 7,119,000 (13,636,000) 2,544,000
DIVIDENDS ON CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK (5,664,000) - - (5,664,000)
------------ ----------- ------------ ------------
INCOME (LOSS) APPLICABLE TO COMMON SHARES $ 3,397,000 $ 7,119,000 $(13,636,000) $ (3,120,000)
============ =========== ============ ============
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
Income (loss) per common share before
extraordinary gain $ 0.01 $ (0.13)
Extraordinary gain 0.06 0.06
------------ ------------
$ 0.07 $ (0.07)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 46,909,000 46,909,000
============ ============
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
CEPHALON, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(unaudited)
CEPHALON, GROUP PRO FORMA PRO FORMA
INC.(11) LAFON(12) ADJUSTMENTS CONSOLIDATED
------------- ------------ ------------ ------------
REVENUES $111,790,000 $131,427,000 $(25,539,000)(13) $217,678,000
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of product sales 17,768,000 30,133,000 (22,442,000)(14) 25,459,000
Research and development 69,829,000 20,927,000 - 90,756,000
Selling, general and administrative 85,967,000 51,703,000 11,475,000 (15) 149,145,000
Royalty pre-payment on revenue-sharing notes 6,600,000 - - 6,600,000
Merger and integration costs 13,811,000 - - 13,811,000
Acquired in-process research and development 22,200,000 - - 22,200,000
------------ ------------ ------------ ------------
216,175,000 102,763,000 (10,967,000) 307,971,000
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (104,385,000) 28,664,000 (14,572,000) (90,293,000)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE) 10,641,000 (263,000) (14,400,000)(16) (4,022,000)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST, DIVIDENDS ON
PREFERRED STOCK, AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE (93,744,000) 28,401,000 (28,972,000) (94,315,000)
INCOME TAXES - (10,256,000) 7,263,000 (17) (2,993,000)
MINORITY INTEREST - (3,947,000) 3,947,000 (18) -
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE DIVIDENDS ON
PREFERRED STOCK AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE (93,744,000) 14,198,000 (17,762,000) (97,308,000)
DIVIDENDS ON CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK (9,063,000) - - (9,063,000)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (102,807,000) 14,198,000 (17,762,000) (106,371,000)
CUMULATIVE EFFECT OF ADOPTING STAFF ACCOUNTING
BULLETIN 101 (SAB 101) (7,434,000) - - (7,434,000)
------------ ------------ ------------ ------------
INCOME (LOSS) APPLICABLE TO COMMON SHARES $(110,241,000) $14,198,000 $(17,762,000) $(113,805,000)
============= =========== ============ =============
BASIC AND DILUTED LOSS PER COMMON SHARE:
Loss per common share before
cumulative effect of adopting SAB 101 $(2.51) $(2.60)
Cumulative effect of adopting SAB 101 (0.19) (0.19)
------------- -------------
$(2.70) $(2.78)
============= =============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 40,893,000 40,893,000
============= =============
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
CEPHALON, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
AND THE YEAR ENDED DECEMBER 31, 2000
On December 28, 2001, the Company completed its previously announced
acquisition of the outstanding shares of capital stock of Group Lafon. The
purchase price was approximately $450,000,000 in cash plus transaction costs.
The cash consideration paid was funded in part by a portion of the proceeds
from $600,000,000 of 2 1/2% convertible subordinated notes due 2006 which
were issued on December 11, 2001. Group Lafon's principal business is
producing and commercializing pharmaceutical products, especially painkiller
related drugs and central nervous system drugs. Group Lafon additionally
profits from the licensing of its patents. Group Lafon focuses its research
and development on four specific areas, central nervous system,
lyophilisation process, oncology and cardiovascular system.
The Acquisition will be accounted for in accordance with the
purchase method. Based on a preliminary valuation of net tangible and
intangible assets acquired, the Company has allocated the total cost of the
Acquisition of Group Lafon as follows:
Purchase price $ 450,000,000
Estimated transaction costs and costs
to exit certain activities 10,000,000
-------------
Total consideration $ 460,000,000
-------------
Net tangible assets $ 42,000,000
Identifiable intangible assets 148,000,000
In-process research and development 20,000,000
Goodwill 250,000,000
-------------
$ 460,000,000
-------------
The pro forma consolidated financial statements reflect preliminary
estimates of the allocation of the purchase price for the Acquisition that may
be adjusted. Management does not expect such adjustments to be material.
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only, giving effect to the Acquisition, as
described, and therefore are not indicative of the operating results that might
have been achieved had the combination occurred as of an earlier date, nor are
they indicative of operating results which may occur in the future.
The consolidated financial statements of Group Lafon contained herein in
this Form 8-K/A have been prepared in accordance with generally accepted
accounting principles in France ("French GAAP"). Group Lafon prepared its
consolidated financial statements in French Francs and has adopted the Euro as
its reporting currency for periods after January 1, 1999. A reconciliation from
the French GAAP consolidated financial statements of Group Lafon reported in
euros to the U.S. GAAP consolidated financial statements reported in U.S.
dollars is contained in footnote 19 herein.
The condensed consolidated financial statements of Cephalon are derived
from the Company's Form 10-Q for the quarter ended September 30, 2001 and the
Form 10-K for the year ended December 31, 2000 as filed with the Securities and
Exchange Commission.
The unaudited pro forma condensed consolidated balance sheet includes the
adjustments necessary to give effect to the Acquisition as if it had been
consummated at September 30, 2001 and to reflect the allocation of the purchase
price to the fair value of tangible and intangible assets acquired and
liabilities assumed. Adjustments included in the pro forma condensed
consolidated balance sheet are summarized as follows:
Balance Sheet
(1) Represents the Company's historical balance sheet at September 30, 2001.
(2) Represents the historical consolidated balance sheet for Group Lafon at
September 30, 2001 (see note 19).
(3) To eliminate intercompany receivables and payables between Group Lafon and
Cephalon.
(4) To record the step-up of Group Lafon's land, buildings, property and
equipment to fair value.
(5) Elimination of Group Lafon intangibles $ (2,987,000)
Recognition of identifiable intangibles related to acquisition of Group Lafon 148,000,000
Recognition of goodwill related to acquisition of Group Lafon 249,633,000
------------
$394,646,000
============
(6) To accrue transaction and certain other exit costs related to acquisition
of Group Lafon.
(7) To recognize financing completed for the acquisition of Group Lafon.
(8) Elimination of Group Lafon minority interests which were acquired as part
of the transaction.
(9) Elimination of Group Lafon shareholders' equity.
(10) Elimination of Group Lafon shareholders' equity. $(31,159,000)
Recognition of in-process research & development charge related to acquisition of Group Lafon (20,000,000)
------------
$(51,159,000)
============
The unaudited pro forma statements of operations give effect to the
acquisition as if it had been consummated as of the beginning of the period
presented. The adjustments which follow are those which are required by
Article 11 of Regulation S-X. In connection with the Acquisition, $20,000,000
of purchase price has been allocated to in-process research and development
and has been charged to operations by the Company as of the date the
Acquisition was completed. This charge has not been included on the pro forma
statement of operations.
Statement of Operations
(11) Represents the Company's historical statement of operations for the nine
month period ended September 30, 2001 or the year ended December 31, 2000.
(12) Represents the historical consolidated statement of operations for Group
Lafon (see note 19).
(13) To eliminate intercompany sales between Group Lafon and Cephalon as
follows:
Nine Months
Ended Year End
September 30, December 31,
2001 2000
------------- -------------
Sales of raw materials by Lafon $17,993,000 $19,243,000
Royalties paid to Lafon by Cephalon 9,669,000 6,296,000
----------- -----------
$27,662,000 $25,539,000
=========== ===========
(14) To eliminate cost of sales on intercompany sales between Group Lafon and
Cephalon as follows:
Nine Months
Ended Year End
September 30, December 31,
2001 2000
------------- -------------
Royalties paid to Lafon by Cephalon $ 9,669,000 $ 6,296,000
Raw materials used by Cephalon 10,970,000 6,855,000
Raw materials--elimination of
intercompany profit in inventory 5,267,000 9,291,000
----------- -----------
$25,906,000 $22,442,000
=========== ===========
Nine Months
Ended Year End
September 30, December 31,
2001 2000
------------- ------------
(15) Elimination of Group Lafon intangible asset amortization $ (205,000) $ (197,000)
Recognition of additional depreciation on increase in fair value of assets acquired 554,000 739,000
Recognition of additional amortization on identifiable intangible assets related to
the Group Lafon acquisition 8,200,000 10,933,000
---------- -----------
$8,549,000 $11,475,000
========== ===========
(16) To recognize interest expense on financing completed for the
acquisition of Group Lafon.
(17) Adjustment to Group Lafon tax provision for pro-forma adjustments.
(18) Elimination of Group Lafon minority interests.
(19) French to U.S. Adjustments:
The information for the adjustments was obtained from footnote 7 and 10,
respectively, in the September 30, 2001 and December 31, 2000 consolidated
financial statements of Group Lafon contained herein. The unaudited condensed
consolidated balance sheet is translated into U.S. dollars using the exchange
rate in effect at September 30, 2001 ($ .9098 per euro). The unaudited condensed
consolidated statements of operations are translated into U.S. dollars using the
average exchange rate in effect during the period ($.8967 and $.92492 per euro
for the nine months ended September 30, 2001 and the year ended December 31,
2000, respectively).
A reconciliation of the unaudited condensed consolidated balance sheet of
Group Lafon as of September 30, 2001 prepared in accordance with French GAAP
reported in euros to U.S. GAAP reported in dollars is as follows:
GROUP GROUP GROUP
LAFON LAFON LAFON
FRENCH GAAP ADJUSTMENTS US GAAP US GAAP
(EUROS) (EUROS) (EUROS) (US$)[A]
------------- ------------- ---------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents E 10,409,000 E - E10,409,000 $ 9,470,000
Investments 47,000 - 47,000 43,000
Receivables, net 25,047,000 (65,000)[B] 24,982,000 22,729,000
Inventory 22,066,000 - 22,066,000 20,076,000
Other 3,556,000 - 3,556,000 3,235,000
------------- ----------- ----------- -----------
Total current assets 61,125,000 (65,000) 61,060,000 55,553,000
PROPERTY AND EQUIPMENT, net 23,081,000 23,081,000 20,999,000
INTANGIBLE ASSETS, net 21,638,000 (18,355,000)[C] 3,283,000 2,987,000
OTHER 2,249,000 4,226,000 [D] 6,475,000 5,891,000
------------- ----------- ----------- -----------
E 108,093,000 E(14,194,000) E93,899,000 $85,430,000
============= =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable E 24,982,000 E - E24,982,000 $22,729,000
Accrued expenses 2,741,000 - 2,741,000 2,494,000
Current portion of deferred revenues - - - -
Current portion of long-term debt 4,144,000 - 4,144,000 3,770,000
------------- ------------ ----------- -----------
Total current liabilities 31,867,000 - 31,867,000 28,993,000
LONG-TERM DEBT 5,977,000 - 5,977,000 5,438,000
DEFERRED REVENUES and OTHER 10,633,000 10,957,000 [E] 21,590,000 19,643,000
------------- ------------ ----------- -----------
Total liabilities 48,477,000 10,957,000 59,434,000 54,074,000
------------- ------------ ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock and additional paid-in capital 40,000 - 40,000 36,000
Treasury stock
Accumulated earnings (deficit) 59,399,000 (25,151,000)[F] 34,248,000 31,159,000
Accumulated other comprehensive income 177,000 - 177,000 161,000
------------- ------------ ----------- -----------
59,616,000 (25,151,000) 34,465,000 31,356,000
------------- ------------ ----------- -----------
E108,093,000 E(14,194,000) E93,899,000 $85,430,000
============= ============ =========== ===========
A reconciliation of the unaudited condensed consolidated statement of
operations of Group Lafon for the nine months ended September 30, 2001 prepared
in accordance with French GAAP reported in euros to U.S. GAAP reported in
dollars is as follows:
Nine months ended September 30, 2001
GROUP GROUP GROUP
LAFON LAFON LAFON
FRENCH GAAP ADJUSTMENTS US GAAP US GAAP
(EUROS) (EUROS) (EUROS) (US$)[A]
------------ ------------ ------------ -----------
REVENUES E101,836,000 E - E101,836,000 $91,316,000
------------ ---------- ------------ -----------
COSTS AND EXPENSES:
Cost of product sales 24,837,000 - 24,837,000 22,271,000
Research and development 17,318,000 - 17,318,000 15,529,000
Selling, general and administrative 43,444,000 (856,000)[G] 42,588,000 38,189,000
------------ ---------- ------------ -----------
85,599,000 (856,000) 84,743,000 75,989,000
------------ ---------- ------------ -----------
INCOME FROM OPERATIONS 16,237,000 856,000 17,093,000 15,327,000
------------ ---------- ------------ -----------
OTHER INCOME (EXPENSE) (769,000) (55,000)[H] (824,000) (739,000)
------------ ---------- ------------ -----------
INCOME BEFORE INCOME TAXES,
MINORITY INTEREST, EXTRAORDINARY
GAIN, AND DIVIDENDS ON PREFERRED STOCK 15,468,000 801,000 16,269,000 14,588,000
INCOME TAXES (6,193,000) 157,000 [I] (6,036,000) (5,412,000)
MINORITY INTEREST (2,360,000) 66,000 [J] (2,294,000) (2,057,000)
------------ ---------- ------------ -----------
INCOME BEFORE EXTRAORDINARY GAIN AND
DIVIDENDS ON PREFERRED STOCK 6,915,000 1,024,000 7,939,000 7,119,000
EXTRAORDINARY GAIN - - - -
------------ ---------- ------------ -----------
INCOME BEFORE DIVIDENDS ON
PREFERRED STOCK 6,915,000 1,024,000 7,939,000 7,119,000
DIVIDENDS ON CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK - - - -
------------ ---------- ------------ -----------
INCOME APPLICABLE TO COMMON SHARES E 6,915,000 E1,024,000 E 7,939,000 $ 7,119,000
============ ========== =========== ===========
A reconciliation of the unaudited condensed consolidated statement of
operations of Group Lafon for the year ended December 31, 2000 prepared in
accordance with French GAAP reported in euros to U.S. GAAP reported in dollars
is as follows:
Year ended December 31, 2000
GROUP GROUP GROUP
LAFON LAFON LAFON
FRENCH GAAP ADJUSTMENTS US GAAP US GAAP
(EUROS) (EUROS) (EUROS) (US$)[A]
------------- ----------- ------------ ------------
REVENUES E142,096,000 E - E142,096,000 $131,427,000
------------ ---------- ------------ -----------
COSTS AND EXPENSES:
Cost of product sales 32,579,000 - 32,579,000 30,133,000
Research and development 22,626,000 - 22,626,000 20,927,000
Selling, general and administrative 57,119,000 (1,219,000)[G] 55,900,000 51,703,000
Royalty pre-payment on revenue-sharing notes - - - -
Merger and integration costs - - - -
Acquired in-process research and development - - - -
------------ ---------- ------------ -----------
112,324,000 (1,219,000) 111,105,000 102,763,000
------------ ---------- ------------ -----------
INCOME FROM OPERATIONS 29,772,000 1,219,000 30,991,000 28,664,000
------------ ---------- ------------ -----------
OTHER INCOME (EXPENSE) (373,000) 89,000 [H] (284,000) (263,000)
------------ ---------- ------------ -----------
INCOME BEFORE INCOME TAXES,
MINORITY INTEREST, DIVIDENDS ON
PREFERRED STOCK, AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE 29,399,000 1,308,000 30,707,000 28,401,000
INCOME TAXES (11,289,000) 200,000 [I] (11,089,000) (10,256,000)
MINORITY INTEREST (4,345,000) 78,000 [J] (4,267,000) (3,947,000)
------------ ---------- ------------ -----------
INCOME BEFORE DIVIDENDS ON
PREFERRED STOCK AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE 13,765,000 1,586,000 15,351,000 14,198,000
DIVIDENDS ON CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK - - - -
------------ ---------- ------------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 13,765,000 1,586,000 15,351,000 14,198,000
CUMULATIVE EFFECT OF ADOPTING STAFF ACCOUNTING
BULLETIN 101 (SAB 101) - - - -
------------ ---------- ------------ -----------
INCOME APPLICABLE TO COMMON SHARES E 13,765,000 E1,586,000 E 15,351,000 $14,198,000
============ ========== ============ ===========
[A] The unaudited condensed consolidated balance sheet and statements of
operations of Group Lafon are translated into U.S. dollars at rates in
effect at the balance sheet date, except that revenues, costs, and expenses
are translated at average rates during each period presented.
[B] Adjustment is to record non-interest bearing receivable at net present
value.
[C] Reduction of goodwill for the difference between fair value and historical
cost for acquisitions of shares from entities under common control.
[D] Recognition of deferred tax asset related to US GAAP adjustments. E 4,706,000
Adjustment is to record non-interest bearing long-term receivable at net present value. (480,000)
-----------
E 4,226,000
===========
[E] Adjustment to record pension obligations using methods and assumptions
allowable under US GAAP E12,799,000
Effect of US GAAP adjustments on minority interest (1,842,000)
-----------
E10,957,000
===========
[F] Effect of US GAAP adjustments on shareholders' equity
Nine Months
Ended Year Ended
September 30, December 31,
2001 2000
------------- ------------
[G] Adjustment to record pension expense using methods and assumptions
allowable under US GAAP E 550,000 E 656,000
Adjustment to goodwill amortization for reduction of goodwill (see (1,406,000) (1,875,000)
[C] above) ----------- -----------
E (856,000) E(1,219,000)
=========== ===========
Nine Months
Ended Year Ended
September 30, December 31,
2001 2000
------------- ------------
[H] Adjustment to interest expense for the recording of receivables
at net present value E 63,000 E 117,000
Adjustment to interest expense for the recording of long-term
receivables at net present value 21,000 (28,000)
Adjustment to other income for recognition of unrealized gains
as a component of shareholders' equity at December 31, 2000 (139,000) --
----------- -----------
E (55,000) E 89,000
=========== ===========
[I] Effect of US GAAP adjustments on income taxes
[J] Effect of US GAAP adjustments on minority interest
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.
CEPHALON, INC.
Date: April 16, 2002 By: /s/ JOHN E. OSBORN
-----------------------------
John E. Osborn, Esq.
Senior Vice President, General
Counsel and Secretary
EXHIBIT INDEX
EXHIBIT
- -------
2.1* SHARE PURCHASE AGREEMENT
2.2* AMENDMENT TO SHARE PURCHASE AGREEMENT
2.3* REPRESENTATIONS AND WARRANTIES AGREEMENT
2.4* ESCROW AGREEMENT
23.1+ CONSENT OF BEFEC-PRICE WATERHOUSE
99.1* PRESS RELEASE
- --------------
* Previously filed as an exhibit to this Current Report on Form 8-K
filed with the SEC on January 10, 2002 and incorporated herein
by reference.
+ Filed herewith.