##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended June 30,
    2003                                            
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-11397



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ICN Pharmaceuticals, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                          |  |                                         
|----------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                  |  | 33-0628076                              
|(State or other jurisdiction of
    incorporation or organization)                        |  | (I.R.S. Employer
    Identification No.)
|                                                                                         
|3300 Hyland Avenue
    Costa Mesa, California(Address of principal executive
    offices) |  | 92626(Zip Code)                         

(714) 545-0100

(Registrants telephone number, including
area code)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark whether the Registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes þ          No o

The number of outstanding shares of the
registrants Common Stock, $.01 par value, as of
August 7, 2003 was 83,079,905.



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TABLE OF CONTENTS



|                             |                                                                                              |  |  |  |  |  |  | 
|---------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                             | CONSOLIDATED CONDENSED BALANCE SHEETS                                                       
|                             | CONSOLIDATED CONDENSED STATEMENTS OF INCOME                                                 
|                             | CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME                                   
|                             | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS                                             
|                             | NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS                                        
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Condition
|                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                          
|                             | Item 4. Controls and Procedures.                                                            
|PART II -- OTHER INFORMATION
|                             | Item 1. Legal Proceedings                                                                   
|                             | Item 4. Submission of Matters to a Vote of Security Holders                                 
|                             | Item 6. Exhibits and Reports on Form 8-K                                                    
|SIGNATURES                  
|EXHIBIT INDEX               
|EXHIBIT3.1                  
|EXHIBIT 15.1                
|EXHIBIT 15.2                
|EXHIBIT 31.1                
|EXHIBIT 31.2                
|EXHIBIT 32.1                



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##### Table of Contents



ICN PHARMACEUTICALS, INC.

INDEX

|                                   |  |                                                                                                                              |    |        |    | 
|---------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------- | -- | ------ | -- | 
|                                   |  |                                                                                                                              |    | Page  
|                                   |  |                                                                                                                              |    | Number
|                                   |  |                                                                                                                              |    |       
|PART I  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements (unaudited)                                                                                             |    |        |    | 
|                                   |  | Consolidated Condensed Balance Sheets 
    June 30, 2003 and December 31, 2002                                              |    |        | 2  | 
|                                   |  | Consolidated Condensed Statements of
    Income  Three months and six months ended
    June 30, 2003 and 2002               |    |        | 3  | 
|                                   |  | Consolidated Condensed Statements of
    Comprehensive Income  Three months and six months
    ended June 30, 2003 and 2002 |    |        | 4  | 
|                                   |  | Consolidated Condensed Statements of Cash
    Flows  Six months ended June 30, 2003 and 2002                                |    |        | 5  | 
|                                   |  | Managements Statement Regarding Unaudited
    Financial Statements                                                          |    |        | 6  | 
|                                   |  | Notes to Consolidated Condensed Financial
    Statements                                                                     |    |        | 7  | 
|Item 2.                            |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                    |    |        | 19 | 
|Item 3.                            |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                               |    |        | 27 | 
|Item 4.                            |  | Controls and Procedures                                                                                                      |    |        | 27 | 
|PART II  OTHER
    INFORMATION   
|Item 1.                            |  | Legal Proceedings                                                                                                            |    |        | 29 | 
|Item 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                      |    |        | 29 | 
|Item 6.                            |  | Exhibits and Reports on Form 8-K                                                                                             |    |        | 29 | 
|SIGNATURES                         |  |                                                                                                                              | 30 |       

1



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##### Table of Contents



PART I  FINANCIAL
INFORMATION

Item 1. Financial
Statements


ICN PHARMACEUTICALS, INC.






CONSOLIDATED CONDENSED BALANCE
SHEETS


June 30, 2003 and December 31,
2002


(Unaudited, in thousands, except per share
data)


|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |           |         | 
|------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | --------- | ------------ | ------- | - | --------- | --------- | ------- | 
|                                            |                                                                                                                                                                                                                 | June 30,                      |           | December 31,
|                                            |                                                                                                                                                                                                                 | 2003                          |           | 2002        
|                                            |                                                                                                                                                                                                                 |                               |           |             
|ASSETS                                     
|Current Assets:                             |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            | Cash and cash equivalents                                                                                                                                                                                       |                               | $         | 402,334      |         |   | $         | 245,184   |        
|                                            | Accounts receivable, net                                                                                                                                                                                        |                               |           | 181,107      |         |   |           | 215,776   |        
|                                            | Inventories, net                                                                                                                                                                                                |                               |           | 92,238       |         |   |           | 88,862    |        
|                                            | Income taxes receivable                                                                                                                                                                                         |                               |           |             |         |   |           | 12,779    |        
|                                            | Prepaid expenses and other current assets                                                                                                                                                                       |                               |           | 15,684       |         |   |           | 13,972    |        
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | Total current assets          |           |              | 691,363 |   |           |           | 576,573 | 
|Property, plant and equipment, net          |                                                                                                                                                                                                                 |                               | 238,961   |              |         |   | 242,888   |          
|Deferred tax assets, net                    |                                                                                                                                                                                                                 |                               | 89,316    |              |         |   | 39,180    |          
|Intangibles, net                            |                                                                                                                                                                                                                 |                               | 371,777   |              |         |   | 384,286   |          
|Other assets                                |                                                                                                                                                                                                                 |                               | 46,310    |              |         |   | 43,792    |          
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | Total non-current assets      |           |              | 746,364 |   |           |           | 710,146 | 
|Assets of discontinued operations           |                                                                                                                                                                                                                 |                               | 51,609    |              |         |   | 201,830   |          
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | $                             | 1,489,336 |              |         | $ | 1,488,549 |          
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|LIABILITIES AND STOCKHOLDERS
    EQUITY   
|Current Liabilities:                        |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            | Trade payables                                                                                                                                                                                                  |                               | $         | 29,254       |         |   | $         | 33,487    |        
|                                            | Accrued liabilities                                                                                                                                                                                             |                               |           | 133,025      |         |   |           | 142,093   |        
|                                            | Notes payable and current portion of long-term
    debt                                                                                                                                                         |                               |           | 4,425        |         |   |           | 3,923     |        
|                                            | Income taxes payable                                                                                                                                                                                            |                               |           | 5,802        |         |   |           |          |        
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | Total current liabilities     |           |              | 172,506 |   |           |           | 179,503 | 
|Long-term debt, less current portion        |                                                                                                                                                                                                                 |                               | 478,932   |              |         |   | 481,548   |          
|Deferred income taxes and other liabilities |                                                                                                                                                                                                                 |                               | 48,673    |              |         |   | 52,288    |          
|Minority interest                           |                                                                                                                                                                                                                 |                               | 35,600    |              |         |   | 23,452    |          
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | Total non-current liabilities |           |              | 563,205 |   |           |           | 557,288 | 
|Liabilities of discontinued operations      |                                                                                                                                                                                                                 |                               | 22,433    |              |         |   | 48,068    |          
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|Commitments and contingencies               |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|Stockholders Equity:                       |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            | Common stock, $.01 par value; 200,000 shares
    authorized; 83,063 (June 30, 2003) and 84,066
    (December 31, 2002) shares outstanding (after deducting
    shares in treasury of 1,068 as of June 30, 2003) |                               |           | 831          |         |   |           | 841       |        
|                                            | Additional capital                                                                                                                                                                                              |                               |           | 1,012,674    |         |   |           | 1,027,335 |        
|                                            | Accumulated deficit                                                                                                                                                                                             |                               |           | (234,768     | )       |   |           | (256,809  | )      
|                                            | Accumulated other comprehensive loss                                                                                                                                                                            |                               |           | (47,545      | )       |   |           | (67,677   | )      
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | Total stockholders equity    |           |              | 731,192 |   |           |           | 703,690 | 
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          
|                                            |                                                                                                                                                                                                                 | $                             | 1,489,336 |              |         | $ | 1,488,549 |          
|                                            |                                                                                                                                                                                                                 |                               |           |              |         |   |           |          

The accompanying notes are an integral part of
these consolidated condensed financial statements.

2



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##### Table of Contents



ICN PHARMACEUTICALS, INC.






CONSOLIDATED CONDENSED STATEMENTS OF
INCOME


For the three months and six months ended
June 30, 2003 and 2002


(Unaudited, in thousands, except per share
data)


|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |         |         |  
|------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------- | ------ | ---------------- | ------- | ---- | ------- | ------- | -------- | - | ------- | ------- | ------- |  | ------- | ------- | ------- | -
|                                                                                |                                                         |                               |        |                 
|                                                                                |                                                         | Three Months Ended            |        | Six Months Ended
|                                                                                |                                                         | June 30,                      |        | June 30,        
|                                                                                |                                                         |                               |        |                 
|                                                                                |                                                         | 2003                          |        | 2002             |         | 2003 |         | 2002   
|                                                                                |                                                         |                               |        |                  |         |      |         |        
|Revenues:                                                                       |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Product sales                                           |                               | $      | 131,532          |         |      | $       | 114,811 |          |   | $       | 241,666 |         |  | $       | 242,816 |        
|                                                                                | Royalties                                               |                               |        | 51,955           |         |      |         | 66,000  |          |   |         | 100,538 |         |  |         | 123,001 |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                |                                                         | Total revenues                |        |                  | 183,487 |      |         |         | 180,811  |   |         |         | 342,204 |  |         |         | 365,817 |  
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|Costs and expenses:                                                             |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Cost of goods sold                                      |                               |        | 48,297           |         |      |         | 37,355  |          |   |         | 89,167  |         |  |         | 73,591  |        
|                                                                                | Selling expenses                                        |                               |        | 43,390           |         |      |         | 39,062  |          |   |         | 80,668  |         |  |         | 78,980  |        
|                                                                                | General and administrative expenses                     |                               |        | 24,839           |         |      |         | 211,422 |          |   |         | 55,285  |         |  |         | 238,629 |        
|                                                                                | Research and development costs                          |                               |        | 9,790            |         |      |         | 12,959  |          |   |         | 18,949  |         |  |         | 22,047  |        
|                                                                                | Amortization expense                                    |                               |        | 8,335            |         |      |         | 8,174   |          |   |         | 16,918  |         |  |         | 16,030  |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                |                                                         | Total expenses                |        |                  | 134,651 |      |         |         | 308,972  |   |         |         | 260,987 |  |         |         | 429,277 |  
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                |                                                         | Income (loss) from operations |        |                  | 48,836  |      |         |         | (128,161 | ) |         |         | 81,217  |  |         |         | (63,460 | )
|Other income (loss), net, including translation
    and exchange                |                                                         |                               | (5,803 | )                |         |      | 5,252   |         |          |   | (1,712  | )       |         |  | 3,939   |        
|Gain on sale of subsidiary stock                                                |                                                         |                               |       |                  |         |      | 262,949 |         |          |   |        |         |         |  | 262,949 |        
|Loss on early extinguishment of debt                                            |                                                         |                               |       |                  |         |      | (43,268 | )       |          |   |        |         |         |  | (43,268 | )      
|Interest income                                                                 |                                                         |                               | 1,131  |                  |         |      | 1,665   |         |          |   | 2,113   |         |         |  | 2,976   |        
|Interest expense                                                                |                                                         |                               | (7,729 | )                |         |      | (10,798 | )       |          |   | (16,021 | )       |         |  | (25,192 | )      
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|Income from continuing operations before income
    taxes and minority interest |                                                         |                               | 36,435 |                  |         |      | 87,639  |         |          |   | 65,597  |         |         |  | 137,944 |        
|Provision for income taxes                                                      |                                                         |                               | 13,845 |                  |         |      | 32,154  |         |          |   | 24,927  |         |         |  | 51,313  |        
|Minority interest, net                                                          |                                                         |                               | 5,152  |                  |         |      | 4,934   |         |          |   | 10,011  |         |         |  | 4,968   |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Income from continuing operations                       |                               |        | 17,438           |         |      |         | 50,551  |          |   |         | 30,659  |         |  |         | 81,663  |        
|                                                                                | Loss from discontinued operations                       |                               |        | (2,567           | )       |      |         | (18,153 | )        |   |         | (2,118  | )       |  |         | (19,109 | )      
|                                                                                | Cumulative effect of change in accounting
    principle |                               |        |                 |         |      |         |        |          |   |         |        |         |  |         | (21,791 | )      
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Net income                                              |                               | $      | 14,871           |         |      | $       | 32,398  |          |   | $       | 28,541  |         |  | $       | 40,763  |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|Basic earnings per share:                                                       |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Income from continuing operations                       |                               | $      | 0.21             |         |      | $       | 0.61    |          |   | $       | 0.36    |         |  | $       | 0.99    |        
|                                                                                | Discontinued operations                                 |                               |        | (0.03            | )       |      |         | (0.22   | )        |   |         | (0.02   | )       |  |         | (0.23   | )      
|                                                                                | Cumulative effect of change in accounting
    principle |                               |        |                 |         |      |         |        |          |   |         |        |         |  |         | (0.27   | )      
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Basic net income per share                              |                               | $      | 0.18             |         |      | $       | 0.39    |          |   | $       | 0.34    |         |  | $       | 0.49    |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|Diluted earnings per share:                                                     |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Income from continuing operations                       |                               | $      | 0.21             |         |      | $       | 0.56    |          |   | $       | 0.36    |         |  | $       | 0.93    |        
|                                                                                | Discontinued operations                                 |                               |        | (0.03            | )       |      |         | (0.18   | )        |   |         | (0.02   | )       |  |         | (0.19   | )      
|                                                                                | Cumulative effect of change in accounting
    principle |                               |        |                 |         |      |         |        |          |   |         |        |         |  |         | (0.22   | )      
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Diluted net income per share                            |                               | $      | 0.18             |         |      | $       | 0.38    |          |   | $       | 0.34    |         |  | $       | 0.52    |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|Shares used in per share computation:                                           |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Basic                                                   |                               |        | 84,117           |         |      |         | 82,827  |          |   |         | 84,110  |         |  |         | 82,552  |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        
|                                                                                | Diluted                                                 |                               |        | 84,574           |         |      |         | 99,398  |          |   |         | 84,433  |         |  |         | 99,504  |        
|                                                                                |                                                         |                               |        |                  |         |      |         |         |          |   |         |         |         |  |         |        

The accompanying notes are an integral part of
these consolidated condensed financial statements.

3



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##### Table of Contents



ICN PHARMACEUTICALS, INC.






CONSOLIDATED CONDENSED STATEMENTS OF
COMPREHENSIVE INCOME


For the three months and six months ended
June 30, 2003 and 2002


(Unaudited, in thousands)


|                            |                                                                      |                    |        |                  |  |      |        |        |   |   |        |        |   |   |        |       |  
|--------------------------- | -------------------------------------------------------------------- | ------------------ | ------ | ---------------- |  | ---- | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ----- | -
|                            |                                                                      |                    |        |                 
|                            |                                                                      | Three Months Ended |        | Six Months Ended
|                            |                                                                      | June 30,           |        | June 30,        
|                            |                                                                      |                    |        |                 
|                            |                                                                      | 2003               |        | 2002             |  | 2003 |        | 2002  
|                            |                                                                      |                    |        |                  |  |      |        |       
|Net income                  |                                                                      | $                  | 14,871 |                  |  | $    | 32,398 |        |   | $ | 28,541 |        |   | $ | 40,763 |      
|Other comprehensive income: |                                                                      |                    |        |                  |  |      |        |        |   |   |        |        |   |   |        |      
|                            | Foreign currency translation adjustments                             |                    |        | 26,251           |  |      |        | 12,564 |   |   |        | 20,199 |   |   |        | 1,786 |  
|                            | Unrealized gain (loss) on marketable equity
    securities and other |                    |        | 285              |  |      |        | (745   | ) |   |        | (67    | ) |   |        | (745  | )
|                            |                                                                      |                    |        |                  |  |      |        |        |   |   |        |        |   |   |        |      
|Comprehensive income        |                                                                      | $                  | 41,407 |                  |  | $    | 44,217 |        |   | $ | 48,673 |        |   | $ | 41,804 |      
|                            |                                                                      |                    |        |                  |  |      |        |        |   |   |        |        |   |   |        |      

The accompanying notes are an integral part of
these consolidated condensed financial statements.

4



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##### Table of Contents



ICN PHARMACEUTICALS, INC.






CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS


For the six months ended June 30, 2003
and 2002


(Unaudited, in thousands)


|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |          |          |         |  
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------------------------- | ------- | ------- | ------- | ------- | -------- | -------- | ------- | -
|                                                                            |                                                                                                 |                                                                           
|                                                                            |                                                                                                 | Six Months Ended                                                          
|                                                                            |                                                                                                 | June 30,                                                                  
|                                                                            |                                                                                                 |                                                                           
|                                                                            |                                                                                                 | 2003                                                                       |                                                         | 2002   
|                                                                            |                                                                                                 |                                                                            |                                                         |        
|Cash flows from operating
    activities:                                   |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            | Income from continuing operations                                                               |                                                                            | $                                                       | 30,659  |         |         | $       | 81,663   |         
|                                                                            | Adjustments to reconcile net income to net cash
    (used in) provided by operating activities: |                                                                            |                                                         |         |         |         |         |          |         
|                                                                            |                                                                                                 | Depreciation and amortization                                              |                                                         |         | 29,055  |         |         |          | 28,484   |        
|                                                                            |                                                                                                 | Provision for losses on accounts receivable and
    inventory obsolescence |                                                         |         | 3,104   |         |         |          | 2,581    |        
|                                                                            |                                                                                                 | Translation and exchange (gains) losses, net                               |                                                         |         | 1,712   |         |         |          | (3,939   | )      
|                                                                            |                                                                                                 | Other non-cash items                                                       |                                                         |         | 730     |         |         |          | 44,346   |        
|                                                                            |                                                                                                 | Deferred income taxes                                                      |                                                         |         | (7,456  | )       |         |          | (3,909   | )      
|                                                                            |                                                                                                 | Minority interest                                                          |                                                         |         | 10,011  |         |         |          | 4,968    |        
|                                                                            |                                                                                                 | Gain on sale of subsidiary stock                                           |                                                         |         |        |         |         |          | (262,949 | )      
|                                                                            |                                                                                                 | Loss on extinguishment of debt                                             |                                                         |         |        |         |         |          | 43,268   |        
|                                                                            | Change in assets and liabilities, net of effects
    of acquisitions:                           |                                                                            |                                                         |         |         |         |         |          |         
|                                                                            |                                                                                                 | Accounts receivable                                                        |                                                         |         | 37,971  |         |         |          | 12,500   |        
|                                                                            |                                                                                                 | Inventories                                                                |                                                         |         | (526    | )       |         |          | (2,559   | )      
|                                                                            |                                                                                                 | Prepaid expenses and other assets                                          |                                                         |         | (7,835  | )       |         |          | (22,488  | )      
|                                                                            |                                                                                                 | Trade payables and accrued liabilities                                     |                                                         |         | (26,604 | )       |         |          | 27,520   |        
|                                                                            |                                                                                                 | Income taxes payable                                                       |                                                         |         | 37,840  |         |         |          | 18,523   |        
|                                                                            |                                                                                                 | Other liabilities                                                          |                                                         |         | (6,036  | )       |         |          | 4,217    |        
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            |                                                                                                 | Cash flow from operating activities in continuing
    operations           |                                                         |         | 102,625 |         |         |          | (27,774  | )      
|                                                                            |                                                                                                 | Cash flow from operating activities in
    discontinued operations         |                                                         |         | 15,552  |         |         |          | 5,170    |        
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            |                                                                                                 |                                                                            | Net cash provided by (used in) operating
    activities |         |         | 118,177 |         |          |          | (22,604 | )
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|Cash flows from investing
    activities:                                   |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            | Capital expenditures                                                                            |                                                                            |                                                         | (6,382  | )       |         |         | (9,887   | )       
|                                                                            | Proceeds from sale of assets                                                                    |                                                                            |                                                         | 170     |         |         |         | 202      |         
|                                                                            | Proceeds from sale of subsidiary stock                                                          |                                                                            |                                                         |        |         |         |         | 276,611  |         
|                                                                            | Acquisition of license rights, product lines and
    businesses                                 |                                                                            |                                                         | (150    | )       |         |         | (22,931  | )       
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            | Cash flow from investing activities in continuing
    operations                                |                                                                            |                                                         | (6,362  | )       |         |         | 243,995  |         
|                                                                            | Cash flow from investing activities in
    discontinued operations                              |                                                                            |                                                         | 47,085  |         |         |         | 5,958    |         
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            |                                                                                                 | Net cash provided by investing activities                                  |                                                         |         | 40,723  |         |         |          | 249,953  |        
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|Cash flows from financing
    activities:                                   |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            | Proceeds from issuance of long-term debt and
    notes payable                                  |                                                                            |                                                         |        |         |         |         | 375      |         
|                                                                            | Payments on long-term debt and notes payable                                                    |                                                                            |                                                         | (3,159  | )       |         |         | (233,048 | )       
|                                                                            | Proceeds from exercise of stock options                                                         |                                                                            |                                                         | 175     |         |         |         | 12,753   |         
|                                                                            | Dividends paid                                                                                  |                                                                            |                                                         | (6,500  | )       |         |         | (12,631  | )       
|                                                                            | Repurchase of common stock                                                                      |                                                                            |                                                         |        |         |         |         | (31,955  | )       
|                                                                            | Funds received from discontinued operations                                                     |                                                                            |                                                         | 69,574  |         |         |         | 3,980    |         
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            | Cash flow from financing activities in continuing
    operations                                |                                                                            |                                                         | 60,090  |         |         |         | (260,526 | )       
|                                                                            | Cash flow from financing activities in
    discontinued operations                              |                                                                            |                                                         | (69,870 | )       |         |         | (3,803   | )       
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|                                                                            |                                                                                                 | Net cash used in financing activities                                      |                                                         |         | (9,780  | )       |         |          | (264,329 | )      
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|Effect of exchange rate changes on cash and cash
    equivalents            |                                                                                                 |                                                                            | 1,051                                                   |         |         |         | 200     |         
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|Net increase (decrease) in cash and cash
    equivalents                    |                                                                                                 |                                                                            | 150,171                                                 |         |         |         | (36,780 | )       
|Cash and cash equivalents at beginning of period                            |                                                                                                 |                                                                            | 253,664                                                 |         |         |         | 325,253 |         
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|Cash and cash equivalents at end of period                                  |                                                                                                 |                                                                            | 403,835                                                 |         |         |         | 288,473 |         
|Cash and cash equivalents classified as part of
    discontinued operations |                                                                                                 |                                                                            | (1,501                                                  | )       |         |         | (15,787 | )       
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         
|Cash and cash equivalents of continuing operations                          |                                                                                                 | $                                                                          | 402,334                                                 |         |         | $       | 272,686 |         
|                                                                            |                                                                                                 |                                                                            |                                                         |         |         |         |         |         

The accompanying notes are an integral part of
these consolidated condensed financial statements.

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##### Table of Contents



MANAGEMENTS STATEMENT REGARDING
UNAUDITED FINANCIAL STATEMENTS

The consolidated condensed financial statements
included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared
on the basis of accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant
to such rules and regulations. The results of operations
presented herein are not necessarily indicative of the results
to be expected for a full year. Although the Company believes
that all adjustments (consisting only of normal, recurring
adjustments) necessary for a fair presentation of the interim
periods presented are included and that the disclosures are
adequate to make the information presented not misleading, these
consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Companys Annual Report on Forms
10-K for the year ended December 31, 2002.

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##### Table of Contents



ICN PHARMACEUTICALS, INC.






NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS


June 30, 2003


(Unaudited)




|   |                                               
|-- | ----------------------------------------------
|1. | Summary of Significant Accounting
    Policies

Principles of Consolidation:The accompanying consolidated
condensed financial statements include the accounts of ICN
Pharmaceuticals, Inc. and its wholly owned subsidiaries (the
Company) and all of its majority-owned subsidiaries.
Minority interest in results of operations of consolidated
subsidiaries, including Ribapharm Inc. (Ribapharm),
represents the minority shareholders share of the income
or loss of such consolidated subsidiaries. The minority interest
in the consolidated balance sheets reflect the original
investment by the minority shareholders in these consolidated
subsidiaries, along with their proportional share of the
earnings or losses of these subsidiaries adjusted for any
dividends, as appropriate. Investments in 20% through 50% owned
affiliated companies are included under the equity method where
the Company exercises significant influence over operating and
financial affairs. Investments in less than 20% owned companies
or 20% through 50% owned companies where the Company does not
exercise significant influence over operating and financial
affairs are recorded at the lower of cost or fair value. All
significant intercompany account balances and transactions have
been eliminated.

Comprehensive
Income:Accumulated other
comprehensive loss consists of accumulated foreign currency
translation adjustments, unrealized losses on marketable equity
securities and minimum pension liability. Other comprehensive
loss has not been recorded net of any tax provision or benefit
as the Company does not expect to realize any significant tax
benefit or expense from these items.

Per Share Information:In 2003, the Companys Board of
Directors declared a first and second quarter cash dividend of
$0.0775 per share, which was paid on April 23 and
July 25, 2003, respectively. While the Company has
historically paid quarterly cash dividends, there can be no
assurance that the Company will continue to do so.

Goodwill and Intangible Assets:In July 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations,and SFAS No. 142,
Goodwill and Other Intangible Assets. During the second
quarter of 2002, the Company completed the transitional
impairment test required by SFAS 142. As a result, the
Company recorded an impairment loss of $25,332,000 which was
offset by a benefit of $3,541,000 for the write-off of negative
goodwill. The net amount of $21,791,000 has been recorded as a
cumulative effect of change in accounting principle in the six
months ended June 30, 2002.

At June 30, 2003 and December 31, 2002,
amortizable intangible assets were as follows (in thousands):

|                   |                |               |   |                   |  |        |   |              |   |  |   |         |  |  |   |          |  
|------------------ | -------------- | ------------- | - | ----------------- |  | ------ | - | ------------ | - |  | - | ------- |  |  | - | -------- | -
|                   |                |               |   |                  
|                   |                | June 30, 2003 |   | December 31, 2002
|                   |                |               |   |                  
|                   |                | Gross         |   | Accumulated       |  | Gross  |   | Accumulated 
|                   |                | Amount        |   | Amortization      |  | Amount |   | Amortization
|                   |                |               |   |                   |  |        |   |             
|Intangible assets: |                |               |   |                   |  |        |   |              |   |  |   |         |  |  |   |         
|                   | Product rights |               | $ | 514,531           |  |        | $ | (142,754     | ) |  | $ | 511,556 |  |  | $ | (127,270 | )
|                   |                |               |   |                   |  |        |   |              |   |  |   |         |  |  |   |         

Estimated amortization expense for each of the
five years ending December 31, 2006 is $30,000,000.

Stock-Based Compensation:The Company has adopted the
disclosure-only provisions of SFAS No. 123 and
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.
Compensation cost for stock-based compensation issued to
employees has been measured using the intrinsic value method
provided by Accounting Principles Board Opinion No. 25.
Accordingly, no compensation cost has been recognized for
options granted under the stock option plan as all options
granted under the Companys stock option plan had an
exercise price equal to the market value of the underlying
common stock on the date of grant. Had compensation cost for the
Companys stock option plan been determined based on the
fair value at the grant date for awards in the three and six
months ended June 30, 2003 and 2002 consistent with the

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

provisions of SFAS No. 123, the
Companys net income and earnings per share would have been
the unaudited pro forma amounts indicated below (in thousands,
except per share data):

|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |      | 
|---------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------ | ------ | ---------------- |  | ---- | ------- | ---- |  | - | ------ | ---- |  | - | ------- | ---- | 
|                                                                                                                       |                       |                    |        |                 
|                                                                                                                       |                       | Three Months Ended |        | Six Months Ended
|                                                                                                                       |                       | June 30,           |        | June 30,        
|                                                                                                                       |                       |                    |        |                 
|                                                                                                                       |                       | 2003               |        | 2002             |  | 2003 |         | 2002
|                                                                                                                       |                       |                    |        |                  |  |      |         |     
|Net income as reported                                                                                                 |                       | $                  | 14,871 |                  |  | $    | 32,398  |      |  | $ | 28,541 |      |  | $ | 40,763  |     
|Compensation costs related to ICNs employee
    stock compensation plan, net                                          |                       |                    |       |                  |  |      | 38,068  |      |  |   |       |      |  |   | 38,068  |     
|Stock based employee compensation expense
    determined under fair value based method, net of related tax
    effects |                       |                    | (880   | )                |  |      | (22,918 | )    |  |   | (1,352 | )    |  |   | (25,186 | )   
|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     
|Pro forma net income                                                                                                   |                       | $                  | 13,991 |                  |  | $    | 47,548  |      |  | $ | 27,189 |      |  | $ | 53,645  |     
|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     
|Earnings per share:                                                                                                    |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     
|                                                                                                                       | Basic  as reported   |                    | $      | 0.18             |  |      | $       | 0.39 |  |   | $      | 0.34 |  |   | $       | 0.49 | 
|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     
|                                                                                                                       | Basic  pro forma     |                    | $      | 0.17             |  |      | $       | 0.57 |  |   | $      | 0.32 |  |   | $       | 0.65 | 
|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     
|                                                                                                                       | Diluted  as reported |                    | $      | 0.18             |  |      | $       | 0.38 |  |   | $      | 0.34 |  |   | $       | 0.52 | 
|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     
|                                                                                                                       | Diluted  pro forma   |                    | $      | 0.17             |  |      | $       | 0.54 |  |   | $      | 0.32 |  |   | $       | 0.65 | 
|                                                                                                                       |                       |                    |        |                  |  |      |         |      |  |   |        |      |  |   |         |     

Under the Companys Amended and Restated
1998 Stock Option Plan (the Option Plan), all
outstanding options immediately vested as a result of the Change
of Control that occurred as a result of the May 2002 Annual
Meeting of Stockholders (See Note 5). The pro forma amounts
for the three and six months ended June 30, 2002 include
the expense of all unvested options under the Option Plan
vesting in these periods.

Reclassifications:Certain prior year amounts have been
reclassified to conform with the current period presentation,
with no effect on previously reported net income or
stockholders equity.



|   |                        
|-- | -----------------------
|2. | Discontinued Operations

In June 2002, the Company initiated a strategic
review that included retaining investment bankers and a
consulting firm. As a result of this strategic review, in the
second half of 2002 the Company made the decision to divest its
Russian Pharmaceuticals segment, Biomedicals segment, Photonics
business, raw materials businesses and manufacturing capability
in Central Europe and Circe unit.

The results of the Discontinued Businesses have
been reflected as discontinued operations in the consolidated
condensed financial statements in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The consolidated condensed financial
statements have been reclassified to conform to discontinued
operations presentation for all historical periods presented.

In June 2003, the Company sold its Russian
Pharmaceuticals segment and certain assets of its Biomedicals
segment. The Company received gross proceeds of $55,000,000 in
cash for the Russian Pharmaceuticals segment and
727,990 shares of its common stock, which had a fair market
value of approximately $12,369,000, for the assets of its
Biomedicals segment. The Company recorded a net loss on disposal
of discontinued operations of $6,596,000, net of a tax benefit
of approximately $9,542,000 related to the sale of these
businesses in the quarter ended June 30, 2003. Deferred tax
assets of approximately $34,000,000 related to the businesses
sold have been reclassified from net assets of discontinued
operations to Deferred tax assets, net, as of June 30, 2003
in the accompanying condensed consolidated balance sheets.

8



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##### Table of Contents



ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

The Company disposed of the Circe unit in the
fourth quarter of 2002 for a nominal sales price.

The Company disposed of its Photonics business in
two stages. First, it discontinued the medical services business
in September 2002. Second, the Company sold the laser device
business in March 2003 for approximately $505,000.

The Company is actively marketing for sale the
remaining Biomedicals business segment, Dosimetry, and the raw
materials businesses and manufacturing capability in Central
Europe. The Company expects all of the remaining discontinued
operations will be sold by the end of 2003.

Summarized selected financial information for
discontinued operations for the three and six months ended
June 30, 2003 and 2002 is as follows (in thousands):

|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |         |         |  
|------------------------------------------- | --------------------------------------------------- | --------------------------------- | ------- | ---------------- | ------ | ---- | ------- | ------- | ------- | - | ------- | ------ | ------ | - | ------- | ------- | ------- | -
|                                            |                                                     |                                   |         |                 
|                                            |                                                     | Three Months Ended                |         | Six Months Ended
|                                            |                                                     | June 30,                          |         | June 30,        
|                                            |                                                     |                                   |         |                 
|                                            |                                                     | 2003                              |         | 2002             |        | 2003 |         | 2002   
|                                            |                                                     |                                   |         |                  |        |      |         |        
|Revenue                                     |                                                     | $                                 | 49,149  |                  |        | $    | 56,216  |         |         | $ | 101,494 |        |        | $ | 111,133 |        
|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |        
|Income (loss) before income taxes           |                                                     | $                                 | 3,739   |                  |        | $    | (11,514 | )       |         | $ | 5,625   |        |        | $ | (11,291 | )      
|Income tax benefit (provision)              |                                                     |                                   | 290     |                  |        |      | 1,458   |         |         |   | (1,147  | )      |        |   | 279     |        
|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |        
|                                            | Income (loss) from discontinued operations,
    net |                                   |         | 4,029            |        |      |         | (10,056 | )       |   |         | 4,478  |        |   |         | (11,012 | )      
|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |        
|Loss on disposal of discontinued operations |                                                     |                                   | (16,138 | )                |        |      | (9,224  | )       |         |   | (16,138 | )      |        |   | (9,224  | )      
|Income tax benefit                          |                                                     |                                   | 9,542   |                  |        |      | 1,127   |         |         |   | 9,542   |        |        |   | 1,127   |        
|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |        
|                                            | Loss on disposal of discontinued operations, net    |                                   |         | (6,596           | )      |      |         | (8,097  | )       |   |         | (6,596 | )      |   |         | (8,097  | )      
|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |        
|                                            |                                                     | Loss from discontinued operations |         | $                | (2,567 | )    |         | $       | (18,153 | ) |         | $      | (2,118 | ) |         | $       | (19,109 | )
|                                            |                                                     |                                   |         |                  |        |      |         |         |         |   |         |        |        |   |         |        

The assets and liabilities of discontinued
operations are stated separately as of June 30, 2003 and
December 31, 2002 on accompanying consolidated condensed
balance sheets. The major asset and liability categories are as
follows:

|                                   |                                        |          |        |              |  |   |        |         | 
|---------------------------------- | -------------------------------------- | -------- | ------ | ------------ |  | - | ------ | ------- | 
|                                   |                                        | June 30, |        | December 31,
|                                   |                                        | 2003     |        | 2002        
|                                   |                                        |          |        |             
|Cash                               |                                        | $        | 1,501  |              |  | $ | 9,098  |        
|Accounts receivable, net           |                                        |          | 13,026 |              |  |   | 46,601 |        
|Inventories, net                   |                                        |          | 10,206 |              |  |   | 54,306 |        
|Property, plant and equipment, net |                                        |          | 13,098 |              |  |   | 29,481 |        
|Other assets                       |                                        |          | 13,778 |              |  |   | 62,344 |        
|                                   |                                        |          |        |              |  |   |        |        
|                                   | Assets of discontinued operations      |          | $      | 51,609       |  |   | $      | 201,830 | 
|                                   |                                        |          |        |              |  |   |        |        
|Accounts payable                   |                                        | $        | 3,814  |              |  | $ | 20,010 |        
|Accrued liabilities                |                                        |          | 14,063 |              |  |   | 26,372 |        
|Other liabilities                  |                                        |          | 4,556  |              |  |   | 1,686  |        
|                                   |                                        |          |        |              |  |   |        |        
|                                   | Liabilities of discontinued operations |          | $      | 22,433       |  |   | $      | 48,068  | 
|                                   |                                        |          |        |              |  |   |        |        

Included in accumulated other comprehensive loss
are translation gains of $6,825,000 related to discontinued
operations.

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)



|   |                                            
|-- | -------------------------------------------
|3. | Non-recurring and Other Unusual
    Charges

The Company recorded $179,917,000 and
$181,038,000 of non-recurring and other unusual charges, which
are included in general and administrative expenses, for the
three months and six months ended June 30, 2002,
respectively. The following is a summary of the non-recurring
and other unusual charges:

|                                                                                      |  |              |         |            |  |   |         | 
|------------------------------------------------------------------------------------- |  | ------------ | ------- | ---------- |  | - | ------- | 
|                                                                                      |  | Three Months |         | Six Months
|                                                                                      |  | Ended        |         | Ended     
|                                                                                      |  | June 30,     |         | June 30,  
|                                                                                      |  | 2002         |         | 2002      
|                                                                                      |  |              |         |           
|Executive and director bonuses paid in connection
    with the Ribapharm IPO (Note 4) |  | $            | 47,839  |            |  | $ | 47,839  | 
|Professional fees related to Ribapharm
    (Note 4)                                   |  |              | 13,000  |            |  |   | 13,000  | 
|Compensation costs related to ICNs employee
    stock compensation plan (Note 5)     |  |              | 61,400  |            |  |   | 61,400  | 
|Long-term incentive plan compensation costs
    (Note 5)                              |  |              | 12,022  |            |  |   | 12,022  | 
|Severance costs (Note 5)                                                              |  |              | 12,000  |            |  |   | 12,000  | 
|Asset impairments                                                                     |  |              | 9,100   |            |  |   | 9,100   | 
|Write-off of capitalized offering costs                                               |  |              | 18,295  |            |  |   | 18,295  | 
|Costs incurred in ICNs 2002 proxy contest                                            |  |              | 6,261   |            |  |   | 7,382   | 
|                                                                                      |  |              |         |            |  |   |         | 
|                                                                                      |  | $            | 179,917 |            |  | $ | 181,038 | 
|                                                                                      |  |              |         |            |  |   |         | 

There were no non-recurring and other unusual
charges in the three and six months ended June 30, 2003.

Based on a number of factors including changes in
market conditions and changes in strategic direction, the
Company evaluated the net realizable value of certain long-lived
assets, including capitalized offering costs related to the
proposed public offering of ICN International AG, the
Companys corporate aircraft and other assets. The Company
concluded that due to the passage of time and the strategic
business review, the capitalized offering costs of ICN
International AG of $18,295,000 should be written-off. Also, an
impairment charge of $9,100,000 was recorded for the difference
between the carrying value and the fair value of the corporate
aircraft, as determined by appraisals.

The Company incurred a significant amount of
professional fees in connection with proxy contests in 2002.
Proxy contest expenses were $6,261,000 and $7,382,000 for the
three and six months ended June 30, 2002, respectively.



|   |                                                                                  
|-- | ---------------------------------------------------------------------------------
|4. | Ribapharm Initial Public Offering, Debt
    Repurchase and Ribapharm Tender Offer

In April 2002, the Company completed an
underwritten public offering of 29,900,000 shares of common
stock, par value $.01 per share, of Ribapharm, previously a
wholly-owned subsidiary, representing 19.93% of the total
outstanding common stock of Ribapharm (the Ribapharm
Offering). In connection with the Ribapharm Offering, the
Company received net cash proceeds of $276,611,000 and recorded
a gain on the sale of Ribapharms stock of $262,949,000,
net of offering costs.

In connection with the Ribapharm Offering, the
Company paid cash bonuses to its officers, directors and
employees totaling $47,839,000 in April 2002. The Company is
seeking to recover a portion of these bonuses (See Note 9
Commitments and Contingencies  Derivative and
Class Actions). Additionally, the Company paid other
professional fees of $13,000,000 related to the structuring of
Ribapharm in April 2002. These amounts are included on the
Companys statements of income in selling, general and
administrative expenses.

On April 17, 2002, the Company used the
proceeds of the Ribapharm Offering to complete its tender offer
and consent solicitation for all of its outstanding 8 3/4%
Senior Notes due 2008. The redemption of these notes resulted in
a loss on extinguishment of debt of $43,268,000.

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

In June 2003, the Company commenced an exchange
offer to acquire all of publicly traded shares of Ribapharm
common stock for $5.60 per share. The Company amended the
exchange offer to increase the offer price to $6.25 per share in
August 2003. The exchange offer expires on August 19, 2003,
and is contingent on the Companys acquiring a minimum of
66 2/3% of the outstanding shares of Ribapharm not held by
the Company, or the officers and directors of Ribapharm and the
Company.



|   |                  
|-- | -----------------
|5. | Change of Control

As a result of the May 29, 2002 Annual
Meeting of Stockholders, three persons nominated by Franklin
Mutual Advisors, LLC and Iridian Asset Management LLC were
elected to the Board of Directors. Under the terms of employment
agreements with some key executives, a long-term stock incentive
plan and the Option Plan, the results of the 2002 election,
together with the results of the 2001 election, constitute a
change of control (the Change of Control).

Under the terms of a long-term incentive plan,
all restricted stock awards vested immediately upon the Change
of Control on June 11, 2002. As a result, compensation
expense of $12,022,000 was recorded in the quarter ended
June 30, 2002.

The Option Plan provides that all options
immediately vested and that an option holder had sixty days
following the Change of Control to elect to surrender his or her
nonqualified options to the Company for a cash payment equal to
the excess of the highest closing market price of the stock
during the 90 days preceding the Change of Control, which
was $32.50 per share, or the closing market price on the day
preceding the date of surrender, whichever is higher, over the
exercise price for the surrendered options. During the quarter
ended June 30, 2002, the Company recorded a charge of
$61,400,000 related to the cash payment obligation under the
Option Plan.

In addition, on June 19, 2002,
Mr. Milan Panic, the Companys former Chief Executive
Officer and Chairman of the Board, resigned with immediate
effect from his positions as Chairman and Chief Executive
Officer and from all positions he held as an officer or director
of any of the Companys affiliates. Mr. Panic also
resigned as one of the Companys employees with effect from
June 30, 2002 and is no longer one of the Companys
directors as of May 22, 2003. In connection with
Mr. Panics termination, the Company recorded
severance expense of $12,000,000 in the second quarter of 2002,
which is included in selling, general and administrative
expenses.



|   |                   
|-- | ------------------
|6. | Earnings Per Share

The following table sets forth the computation of
basic and diluted earnings per share (in thousands, except per
share data):

|        |                                                                                                                      |                    |   |                  |  |      |   |        |  |  |   |        |  |  |   |        | 
|------- | -------------------------------------------------------------------------------------------------------------------- | ------------------ | - | ---------------- |  | ---- | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|        |                                                                                                                      |                    |   |                 
|        |                                                                                                                      | Three Months Ended |   | Six Months Ended
|        |                                                                                                                      | June 30,           |   | June 30,        
|        |                                                                                                                      |                    |   |                 
|        |                                                                                                                      | 2003               |   | 2002             |  | 2003 |   | 2002  
|        |                                                                                                                      |                    |   |                  |  |      |   |       
|Income: |                                                                                                                      |                    |   |                  |  |      |   |        |  |  |   |        |  |  |   |       
|        | Numerator for basic earnings per
    share  income available to common stockholders                                 |                    | $ | 14,871           |  |      | $ | 32,398 |  |  | $ | 28,541 |  |  | $ | 40,763 | 
|        | Interest expense on convertible debt, net of tax                                                                     |                    |   |                 |  |      |   | 5,719  |  |  |   |       |  |  |   | 11,374 | 
|        |                                                                                                                      |                    |   |                  |  |      |   |        |  |  |   |        |  |  |   |       
|        | Numerator for diluted earnings per
    share  income available to common stockholders after
    assumed conversions |                    | $ | 14,871           |  |      | $ | 38,117 |  |  | $ | 28,541 |  |  | $ | 52,137 | 
|        |                                                                                                                      |                    |   |                  |  |      |   |        |  |  |   |        |  |  |   |       

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |        |        | 
|--------------------------- | ------------------------------------------------------------------------------------------------------------- | ------------------------- | - | ---------------- | --- | ---- | - | ------ | ------ |  | - | ------ | --- |  | - | ------ | ------ | 
|                            |                                                                                                               |                           |   |                 
|                            |                                                                                                               | Three Months Ended        |   | Six Months Ended
|                            |                                                                                                               | June 30,                  |   | June 30,        
|                            |                                                                                                               |                           |   |                 
|                            |                                                                                                               | 2003                      |   | 2002             |     | 2003 |   | 2002  
|                            |                                                                                                               |                           |   |                  |     |      |   |       
|Shares:                     |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Denominator for basic earnings per
    share  weighted-average shares outstanding                            |                           |   | 84,117           |     |      |   | 82,827 |        |  |   | 84,110 |     |  |   | 82,552 |       
|                            | Effect of dilutive securities:                                                                                |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |        |       
|                            |                                                                                                               | Employee stock options    |   |                  | 455 |      |   |        | 1,232  |  |   |        | 322 |  |   |        | 1,608  | 
|                            |                                                                                                               | Convertible debt          |   |                  |    |      |   |        | 15,326 |  |   |        |    |  |   |        | 15,326 | 
|                            |                                                                                                               | Other dilutive securities |   |                  | 2   |      |   |        | 13     |  |   |        | 1   |  |   |        | 18     | 
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Dilutive potential common shares                                                                              |                           |   | 457              |     |      |   | 16,571 |        |  |   | 323    |     |  |   | 16,952 |       
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Denominator for diluted earnings per
    share  weighted-average shares adjusted for assumed
    conversions |                           |   | 84,574           |     |      |   | 99,398 |        |  |   | 84,433 |     |  |   | 99,504 |       
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|Basic earnings per share:   |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Income from continuing operations                                                                             |                           | $ | 0.21             |     |      | $ | 0.61   |        |  | $ | 0.36   |     |  | $ | 0.99   |       
|                            | Discontinued operations, net of taxes                                                                         |                           |   | (0.03            | )   |      |   | (0.22  | )      |  |   | (0.02  | )   |  |   | (0.23  | )     
|                            | Cumulative effect of change in accounting
    principle                                                       |                           |   |                 |     |      |   |       |        |  |   |       |     |  |   | (0.27  | )     
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Basic net income per share                                                                                    |                           | $ | 0.18             |     |      | $ | 0.39   |        |  | $ | 0.34   |     |  | $ | 0.49   |       
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|Diluted earnings per share: |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Income from continuing operations                                                                             |                           | $ | 0.21             |     |      | $ | 0.56   |        |  | $ | 0.36   |     |  | $ | 0.93   |       
|                            | Discontinued operations, net of taxes                                                                         |                           |   | (0.03            | )   |      |   | (0.18  | )      |  |   | (0.02  | )   |  |   | (0.19  | )     
|                            | Cumulative effect of change in accounting
    principle                                                       |                           |   |                 |     |      |   |       |        |  |   |       |     |  |   | (0.22  | )     
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       
|                            | Diluted net income per share                                                                                  |                           | $ | 0.18             |     |      | $ | 0.38   |        |  | $ | 0.34   |     |  | $ | 0.52   |       
|                            |                                                                                                               |                           |   |                  |     |      |   |        |        |  |   |        |     |  |   |       

For the three and six months ended June 30,
2003, 3,050,425 and 3,142,709 weighted average stock options,
respectively, and 13,591,690 shares from the effect of
convertible debt are not included in the computation of earnings
per share as such securities are anti-dilutive.

7.     Detail of
Certain Accounts

|                          |                                 |                |         |              |   |   |         |         |  
|------------------------- | ------------------------------- | -------------- | ------- | ------------ | - | - | ------- | ------- | -
|                          |                                 | June 30,       |         | December 31,
|                          |                                 | 2003           |         | 2002        
|                          |                                 |                |         |             
|                          |                                 |               
|                          |                                 | (In thousands)
|Accounts receivable, net: |                                 |                |         |              |   |   |         |        
|                          | Trade accounts receivable       |                | $       | 101,549      |   |   | $       | 100,724 |  
|                          | Royalties receivable            |                |         | 69,398       |   |   |         | 105,496 |  
|                          | Other receivables               |                |         | 18,188       |   |   |         | 17,202  |  
|                          |                                 |                |         |              |   |   |         |        
|                          |                                 |                | 189,135 |              |   |   | 223,422 |        
|                          | Allowance for doubtful accounts |                |         | (8,028       | ) |   |         | (7,646  | )
|                          |                                 |                |         |              |   |   |         |        
|                          |                                 | $              | 181,107 |              |   | $ | 215,776 |        
|                          |                                 |                |         |              |   |   |         |        

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

|                                    |                                           |                |         |              |   |   |         |          |  
|----------------------------------- | ----------------------------------------- | -------------- | ------- | ------------ | - | - | ------- | -------- | -
|                                    |                                           | June 30,       |         | December 31,
|                                    |                                           | 2003           |         | 2002        
|                                    |                                           |                |         |             
|                                    |                                           |               
|                                    |                                           | (In thousands)
|Inventories, net:                   |                                           |                |         |              |   |   |         |         
|                                    | Raw materials and supplies                |                | $       | 36,856       |   |   | $       | 53,217   |  
|                                    | Work-in-process                           |                |         | 32,662       |   |   |         | 29,290   |  
|                                    | Finished goods                            |                |         | 33,696       |   |   |         | 17,415   |  
|                                    |                                           |                |         |              |   |   |         |         
|                                    |                                           |                | 103,214 |              |   |   | 99,922  |         
|                                    | Allowance for inventory obsolescence      |                |         | (10,976      | ) |   |         | (11,060  | )
|                                    |                                           |                |         |              |   |   |         |         
|                                    |                                           | $              | 92,238  |              |   | $ | 88,862  |         
|                                    |                                           |                |         |              |   |   |         |         
|Property, plant and equipment, net: |                                           |                |         |              |   |   |         |         
|                                    | Property, plant and equipment, at cost    |                | $       | 371,975      |   |   | $       | 361,357  |  
|                                    | Accumulated depreciation and amortization |                |         | (133,014     | ) |   |         | (118,469 | )
|                                    |                                           |                |         |              |   |   |         |         
|                                    |                                           | $              | 238,961 |              |   | $ | 242,888 |         
|                                    |                                           |                |         |              |   |   |         |         

8.     Related Party
Transactions

In April 2001, the Company made a loan to
Mr. Milan Panic, the former Chairman of the Board and
former Chief Executive Officer, of $2,731,519 as part of the
Stock Option Program. On June 27, 2003, the Company
accepted 173,066 shares of the Companys common stock
with a fair market value of approximately $2,925,000 as payment
in full on the loan and accrued interest.

9.     Commitments
and Contingencies

Ribapharm Tender Offer Litigation:On June 2003, seven purported class
actions on behalf of certain stockholders of Ribapharm were
filed against the Company, Ribapharm and certain directors and
officers of Ribapharm in the Delaware Court of Chancery. Six of
these complaints were consolidated under the caption In re
Ribapharm Inc. Shareholders Litigation, Consol. C.A.
No. 20337. The seventh suit has not yet been formally
consolidated into C.A. No. 20337 but is proceeding in
coordination with the consolidated case. On June 26, 2003,
the plaintiffs in the consolidated action filed a First Amended
Class Action Complaint naming only the Company as a defendant.
The First Amended Class Action Complaint alleges, among
other things, that the Company breached its fiduciary duties as
a controlling stockholder of Ribapharm in connection with its
tender offer for the shares of Ribapharm it did not already own.
On August 4, 2003, the Company and the plaintiffs reached
an agreement in principle to settle these lawsuits and, after
settlement papers are prepared, will present that settlement to
the Court of Chancery for its approval.

On June 25, 2003, the Company instituted a
suit captioned ICN Pharmaceuticals, Inc. v. Ribapharm, Inc.,
Daniel J. Paracka, Santo J. Costa, Gregory F.
Boron, James Pieczknski and Andre Dimitriadis, C.A.
No. 20387 for declaratory and injunctive relief against
Ribapharm and certain of its directors in the Delaware Court of
Chancery. This complaint alleges, among other things, that the
defendants breached their fiduciary duties and certain contracts
by implementing a shareholder rights plan in response to the
Companys tender offer. The Company requested a preliminary
injunction hearing prior to the expiration of the tender offer
on July 22, 2003 and sought a temporary restraining order
barring the defendants from taking certain actions with respect
to Ribapharms newly enacted shareholders rights plan. On
June 30, 2003, the Court of Chancery scheduled a
preliminary injunction hearing for September 3, 2003.

On June 27, 2003, a purported class action
on behalf of certain stockholders of Ribapharm was filed against
the Company in the Delaware Court of Chancery. This class action
is captioned Maxine Phillips,

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

Robert Garfield, Nora Mazzini, Andrew Samet,
Kathleen A. Pasek, Richard Jacob and Steven Silverberg v.
ICN Pharmaceuticals, Inc., C.A.
No. 20391, and seeks a declaration that the shareholders
rights plan is valid and enforceable. This action has been
consolidated with the suit instituted by the Company on
June 25, 2003 and captioned In re Ribapharm, Inc. Rights
Plan Litigation, Consol. C.A. No. 20387. On
August 4, 2003, the Company and the plaintiffs reached an
agreement in principle to settle this lawsuit. Such settlement
will be completed in combination with the settlement In re
Ribapharm Inc. Shareholders Litigation, Consol. C.A.
No. 20337.

On June 3, 2003, a purported class action,
captioned Len Brody v. Roberts A. Smith, Andre C.
Dimitriadis, Santo J. Costa, James J. Pieczynski,
Daniel J. Paracka, Gregory F. Boron, Ribapharm, Inc.
and ICN Pharmaceuticals, Inc., Case No. 03
CC 00211, was filed in the Superior Court of Orange County,
California, against the Company, Ribapharm and certain of
Ribapharms officers and directors. The complaint in this
action purports to assert the same claims, on behalf of the same
class of plaintiffs and against the same defendants as in the
seven lawsuits filed in Delaware that are described above. The
Company has entered into a stipulation with the plaintiff in
this action that extends the Companys time to respond to
the complaint until August 21, 2003, to allow the parties
time to ascertain how to proceed in California given the
multiplicity of identical and related actions pending in
Delaware and which Delaware law governs.

Derivative Actions:The Company is a nominal defendant in
a shareholder derivative lawsuit pending in state court in
Orange County, California. This lawsuit, which was filed on
June 6, 2002, purports to assert derivative claims on
behalf of the Company against certain current and/or former
officers and directors of the Company. The lawsuit asserts
claims for breach of fiduciary duties, abuse of control, gross
mismanagement and waste of corporate assets. The plaintiff
seeks, among other things, damages and a constructive trust over
cash bonuses paid to the officer and director defendants in
connection with the Ribapharm Offering (the Ribapharm
Bonuses). Because it is a derivative lawsuit, the
plaintiff does not seek recovery from the Company but rather on
behalf of the Company.

On October 1, 2002, several former and
current directors of the Company, as individuals, as well as the
Company, as a nominal defendant, were named as defendants in a
second shareholders derivative complaint filed in Delaware
Chancery Court. The complaint purports to state causes of action
for violation of Delaware General Corporate Law
Section 144, breach of fiduciary duties and waste of
corporate assets in connection with the defendants
management of the Company. Because it is a derivative lawsuit,
the complaint does not seek recovery from the Company but rather
on behalf or the Company. The allegations largely duplicate
those contained in the derivative lawsuit filed in Orange
County, California, but add a disclosure-based claim relating to
the allegations of federal securities law violations made in the
class actions.

The Company established a Special Litigation
Committee to evaluate the plaintiffs claims in both
derivative actions. The Special Litigation Committee concluded
that it would not be in the best interests of the Companys
shareholders to pursue many of the claims in these two lawsuits,
but decided to pursue, through litigation or settlement, claims
arising from the April 2002 decision of the Board to approve the
payment of approximately $50,000,000 in bonuses to various
members of the Board and management arising from the initial
public offering of Ribapharm. On April 25, 2003, the
Company filed a motion to stay or dismiss the California
plaintiffs complaint in favor of the Company amending the
existing Delaware derivative action to substitute the Company as
the plaintiff. The hearing on the Companys motion in the
California action is scheduled for August 18, 2003.

Securities Class
Actions:Since July 25, 2002,
multiple class actions have been filed in the United States
District Courts for the Eastern District of New York, the
District of New Jersey and the Central District of California
against the Company and some of our current and former executive
officers. The lawsuits allege that the defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, and Rule 10b-5 promulgated thereunder, by issuing
false and misleading financial results to the market during
different class periods ranging from May 3, 2001 to
July 10, 2002, thereby artificially inflating the price of
the

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

Companys stock. The lawsuits generally
claim that the Company issued false and misleading statements
regarding the Companys earnings prospects and sales
figures, its operations in Russia and the earnings and sales of
its Photonics division. The plaintiffs generally seek to recover
compensatory damages, including interest.

On May 9, 2003, a bondholder filed a class
action lawsuit in Orange County Superior Court against the
Company and some of its current and former directors and
executive officers. The lawsuit alleges that defendants violated
Sections 11 and 15 of the Securities Act of 1933 by making
false and misleading statements in connection with an offering
of Convertible Subordinated Notes in November 2001, thereby
artificially inflating the market price of the Notes. The
plaintiffs generally seek to recover compensatory damages,
including interest. The Company intends to vigorously defend
itself.

Schering Dispute:In
August 2001, Schering-Plough Ltd. (Schering)
informed the Company and Ribapharm that it believed royalties
paid under its Exclusive License Agreement with Ribapharm (the
License Agreement) should not include royalties on
products distributed as part of its indigent patient marketing
program. Schering claimed that because it received no revenue
from products given to indigent patients, it should not have to
pay royalties on these products under the License Agreement. As
a result, Schering withheld approximately $11,628,000 from its
royalty payment relating to the second quarter of 2001. The
amount withheld was purportedly intended by Schering to be a
retroactive adjustment of royalties previously paid to the
Company and Ribapharm through the third quarter of 2000 on
products distributed as part of this indigent patient marketing
program. Since the fourth quarter of 2000, Schering withheld all
royalty payments purportedly related to this indigent patient
marketing program. The Company and Ribapharm recognized the
$11,628,000 of withheld royalty payments for the retroactive
adjustment and $3,050,000 of royalty payments withheld for the
fourth quarter of 2000 and the first quarter of 2001 as revenue.
These amounts are included on the Companys consolidated
balance sheet as a receivable. The Company and Ribapharm did not
establish a reserve for these amounts, because, in the opinion
of Ribapharms management, collectibility was reasonably
assured. Since the second quarter of 2001, the Company and
Ribapharm no longer recognized any of these withheld royalty
payments as revenue, as such amounts could no longer be
determined due to a lack of information provided by Schering.
The Company and Ribapharm commenced arbitration with Schering.
On July 31, 2003, the arbitrator ruled orally that the
Company was entitled to receive certain past royalties for sales
of ribavirin under the indigent patient marketing program prior
to 2002, plus interest. The arbitrators ruling is binding.
The amount awarded is approximately equal to the receivable the
Company and Ribapharm had recorded on their balance sheet for
such payments; therefore, it is expected that the ruling will
have little impact on the Companys and Ribapharms
financial results or condition. In addition, the arbitrator
agreed with Scherings method of calculation of royalties
on the indigent patient marketing program on a prospective basis.

Generic Litigation:Three generic pharmaceutical
companies, Geneva Pharmaceuticals Technology Corporation, which
merged into its parent, Geneva Pharmaceuticals, Inc.
(Geneva), Three Rivers Pharmaceuticals, LLC
(Three Rivers) and Teva Pharmaceuticals USA, Inc.
(Teva), filed Abbreviated New Drug Applications
(ANDA) with the FDA to market generic forms of
ribavirin for use as part of a combination therapy for the
treatment of hepatitis C. The Company and Ribapharm sued
all three of these pharmaceutical companies to prevent them from
marketing a generic form of ribavirin in the United States
market. The three cases were all before the same judge, and
summary judgment motions were filed by the defendants. In July
2003, the U.S. District Court for the Central District of
California issued a memorandum of decision and order granting
the defendants their motion for summary judgment of
non-infringement of the asserted patents in the patent
infringement suit brought by the Company and Ribapharm. The
decision and order did not rule on defendants motion for
summary judgment that the patents are invalid. This ruling
permits the FDA to approve the defendant generic companies
ANDAs, in their discretion. The Company and Ribapharm are
considering a judicial appeal and on July 17, 2003 filed a
Citizens Petition with the FDA

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ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

requesting that the Commissioner of Food and
Drugs refrain from approving ANDA for ribavirin products with
labelling that omits information about the products use in
combination with PEG-Intron® (peginterferon alfa-2b). The
successful entry of any generic pharmaceutical company into the
U.S. market will have a material negative impact on the
Companys and Ribapharms future U.S. royalty
revenue.

Ribapharm Patents:Various parties are opposing
Ribapharms ribavirin patents in actions before the
European Patent Office, and Ribapharm is responding to these
oppositions. Regardless of the outcome of these oppositions, the
Company believes the combination therapies marketed by Schering
and Roche will continue to benefit from a period of data and
marketing protection in the major markets of the European Union
until 2009 for Schering and 2012 for Roche.

Yugoslavia:In March
1999, arbitration was initiated in the following matters before
the International Chamber of Commerce International Court of
Arbitration: (a) State Health Fund of Serbia v. ICN
Pharmaceuticals, Inc., Case No. 10 373/ AMW/ BDW, and
(b) ICN Pharmaceuticals, Inc. v. Federal Republic of
Yugoslavia and Republic of Serbia, Case No. 10 439/ BWD. At
issue in these matters is the parties respective ownership
percentages in ICN Yugoslavia, a joint venture formed by the
parties purported predecessors-in-interest in 1990.

In these proceedings, the Company has asserted
claims and counterclaims against the Federal Republic of
Yugoslavia and the Republic of Serbia for unlawful expropriation
of its majority interest in the joint venture, failure to pay
obligations in excess of $176,000,000, violation of a
contractual right of first refusal regarding the minority
owners sale of its interest, and failure to return the
Companys contributed intangible assets following partial
appropriation of the Companys majority interest. The State
Health Fund of Serbia has asserted a claim against the Company
for breach of the joint venture agreement based on the
Companys alleged failure to contribute certain intangible
assets and alleged mismanagement.

The arbitration hearings in this matter began in
November 2002 and continued in April 2003. The Tribunal has
requested supplemental briefing and may order one or more rounds
of additional hearings.

Circe:The former
shareholders (the Circe Stockholders) of Circe
Biomedical, Inc. (Circe) filed in July 2003 a demand
for arbitration claiming indemnification from the Company for
approximately $10,000,000 of purported financial losses, based
on provisions of an agreement entered into at the time the
Company acquired Circe. The Circe Stockholders claim to have
suffered such losses as a result of the Companys alleged
breach of its obligations to register for resale the Company
shares issued to the Circe Stockholders as part of the purchase
price for the Circe acquisition. The Company intends to
vigorously defend against the claim.

Russia:The Company
is involved in various legal proceedings relating to its
distribution company in Russia. These proceedings arise out of a
claim relating to non-payment under a contract entered into in
January 1995, prior to the Companys acquisition of the
Russian distribution company. The claimant, Minnex Trading
Corporation (Minnex) in July 2001 initiated
bankruptcy proceedings against OAO Pharmsnabsbyt
(PSS), the Companys Russian distribution
company, in the Arbitration Court of Moscow Region, and seeks to
recover $6,200,000 in damages, plus expenses. Certain other ICN
affiliates are also creditors of PSS, and have asserted claims
in bankruptcy in excess of $12,000,000. Claims have also been
made that the Company is responsible for PSSs bankruptcy.
Under certain circumstances, Russian law imposes liability on a
company whose actions create liabilities or cause bankruptcy for
its Russian subsidiary. The Company intends to vigorously assert
its interests in this matter.

Other:The Company
has also identified potential violations of the U.S. Asset
Control Regulations by its subsidiaries with respect to certain
business transactions. The Company submitted a voluntary
disclosure of the potential violations to the Office of Foreign
Assets Control (OFAC), as well as a request for
settlement. The Company does not expect any such settlement to
have a material adverse impact on our financial situation or our
ability to operate as planned. The Company is a party to other
pending lawsuits or subject to a number

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##### Table of Contents



ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

of threatened lawsuits. While the ultimate
outcome of pending and threatened lawsuits or pending violations
cannot be predicted with certainty, and an unfavorable outcome
could have a negative impact on the Company, at this time in the
opinion of management, the ultimate resolution of these matters
will not have a material effect on the Companys
consolidated financial position, results of operations or
liquidity.

10.     Business
Segments

The Company has four reportable pharmaceutical
segments comprising the Companys pharmaceutical operations
in North America, Latin America, Europe and Asia, Africa and
Australia. In addition, the Company has its majority-owned
subsidiary, Ribapharm. The segment reporting has been
reclassified to conform to discontinued operations presentation
for all periods presented. See Note 2 for discussion of
discontinued operations.

The following table sets forth the amounts of
segment revenues and operating income of the Company for each of
the three months and six months ended June 30, 2003 and
2002 (in thousands):

|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |         |         | 
|--------------------------------------------------------------------------------------------- | -------------------------- | --------------------- | ------- | ---------------- | ------- | ---- | -------- | ------ | ------- | - | ------- | ------- | ------- | - | -------- | ------- | ------- | 
|                                                                                              |                            |                       |         |                 
|                                                                                              |                            | Three Months Ended    |         | Six Months Ended
|                                                                                              |                            | June 30,              |         | June 30,        
|                                                                                              |                            |                       |         |                 
|                                                                                              |                            | 2003                  |         | 2002             |         | 2003 |          | 2002  
|                                                                                              |                            |                       |         |                  |         |      |          |       
|Revenues                                                                                      |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|Pharmaceuticals                                                                               |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|                                                                                              | North America              |                       | $       | 26,063           |         |      | $        | 19,470 |         |   | $       | 41,434  |         |   | $        | 61,394  |        
|                                                                                              | Latin America              |                       |         | 33,685           |         |      |          | 32,547 |         |   |         | 60,056  |         |   |          | 62,034  |        
|                                                                                              | Europe                     |                       |         | 59,308           |         |      |          | 49,524 |         |   |         | 114,884 |         |   |          | 94,298  |        
|                                                                                              | Asia, Africa, Australia    |                       |         | 12,476           |         |      |          | 13,270 |         |   |         | 25,292  |         |   |          | 25,090  |        
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|                                                                                              |                            | Total Pharmaceuticals |         |                  | 131,532 |      |          |        | 114,811 |   |         |         | 241,666 |   |          |         | 242,816 | 
|                                                                                              | Ribapharm royalty revenues |                       |         | 51,955           |         |      |          | 66,000 |         |   |         | 100,538 |         |   |          | 123,001 |        
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|                                                                                              |                            | Consolidated revenues |         | $                | 183,487 |      |          | $      | 180,811 |   |         | $       | 342,204 |   |          | $       | 365,817 | 
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|Operating Income (Loss)                                                                       |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|Pharmaceuticals                                                                               |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|                                                                                              | North America              |                       | $       | 8,977            |         |      | $        | 4,746  |         |   | $       | 6,046   |         |   | $        | 23,624  |        
|                                                                                              | Latin America              |                       |         | 11,600           |         |      |          | 12,204 |         |   |         | 18,379  |         |   |          | 21,251  |        
|                                                                                              | Europe                     |                       |         | 9,299            |         |      |          | 5,852  |         |   |         | 16,437  |         |   |          | 12,023  |        
|                                                                                              | Asia, Africa, Australia    |                       |         | (62              | )       |      |          | 967    |         |   |         | 1,588   |         |   |          | 2,383   |        
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|                                                                                              |                            | Total Pharmaceuticals |         |                  | 29,814  |      |          |        | 23,769  |   |         |         | 42,450  |   |          |         | 59,281  | 
|Ribapharm                                                                                     |                            |                       | 37,266  |                  |         |      | 49,896   |        |         |   | 70,809  |         |         |   | 98,702   |        
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|Consolidated segment operating income                                                         |                            |                       | 67,080  |                  |         |      | 73,665   |        |         |   | 113,259 |         |         |   | 157,983  |        
|Corporate expenses                                                                            |                            |                       | (18,244 | )                |         |      | (201,826 | )      |         |   | (32,042 | )       |         |   | (221,443 | )      
|Interest income                                                                               |                            |                       | 1,131   |                  |         |      | 1,665    |        |         |   | 2,113   |         |         |   | 2,976    |        
|Interest expense                                                                              |                            |                       | (7,729  | )                |         |      | (10,798  | )      |         |   | (16,021 | )       |         |   | (25,192  | )      
|Other, net                                                                                    |                            |                       | (5,803  | )                |         |      | 224,933  |        |         |   | (1,712  | )       |         |   | 223,620  |        
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        
|Income from continuing operations before
    provision for income taxes and minority interest |                            | $                     | 36,435  |                  |         | $    | 87,639   |        |         | $ | 65,597  |         |         | $ | 137,944  |        
|                                                                                              |                            |                       |         |                  |         |      |          |        |         |   |         |         |         |   |          |        

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##### Table of Contents



ICN PHARMACEUTICALS, INC.


NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth the segment total
assets of the Company as of June 30, 2003 and
December 31, 2002 (in thousands):

|                        |                         |                       |           |              |         |   |           |         |         | 
|----------------------- | ----------------------- | --------------------- | --------- | ------------ | ------- | - | --------- | ------- | ------- | 
|                        |                         |                      
|                        |                         | Total Assets         
|                        |                         |                      
|                        |                         | June 30,              |           | December 31,
|                        |                         | 2003                  |           | 2002        
|                        |                         |                       |           |             
|Pharmaceuticals         |                         |                       |           |              |         |   |           |        
|                        | North America           |                       | $         | 429,504      |         |   | $         | 435,506 |        
|                        | Latin America           |                       |           | 164,790      |         |   |           | 162,877 |        
|                        | Europe                  |                       |           | 312,545      |         |   |           | 292,047 |        
|                        | Asia, Africa, Australia |                       |           | 22,771       |         |   |           | 19,658  |        
|                        |                         |                       |           |              |         |   |           |        
|                        |                         | Total Pharmaceuticals |           |              | 929,610 |   |           |         | 910,088 | 
|Corporate               |                         |                       | 321,448   |              |         |   | 177,556   |        
|Ribapharm               |                         |                       | 186,669   |              |         |   | 199,075   |        
|Discontinued operations |                         |                       | 51,609    |              |         |   | 201,830   |        
|                        |                         |                       |           |              |         |   |           |        
|Total                   |                         | $                     | 1,489,336 |              |         | $ | 1,488,549 |        
|                        |                         |                       |           |              |         |   |           |        

11.     Common
Stock

During the second quarter of 2003, the Company
sold the corporate aircraft for 166,980 shares of the
Companys common stock with a fair market value of
approximately $2,837,000, which was the carrying value of this
asset.

On May 23, 2003, the Company granted its
non-employee directors 69,653 shares of phantom stock with
a fair market value of approximately $840,000. Each share of
phantom stock vests over one year and is exchanged for a share
of the Companys common stock one year after the director
ceases to serve as a member of the Companys Board.

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Condition

The following discussion relates to the
information presented in the Consolidated Condensed Financial
Statements included in this Quarterly Report. With respect to
certain items set forth in such Consolidated Condensed Financial
Statements, management has sought, in connection with its
discussion of the material changes in the Companys
financial condition and results of operations between the
periods for which information is presented in the Consolidated
Condensed Financial Statements, to identify and, in some cases,
quantify, the material factors which contributed to such
material changes. However, the quantification of such factors
may result in the presentation of numerical measures that
exclude amounts that are included in the most directly
comparable measure calculated and presented in accordance with
generally accepted accounting principles in the United States
(GAAP). Management is providing this information
because it believes that it is useful to enable readers to
assess material changes in the Companys financial
condition and results of operations between the periods for
which information is presented in the Financial Statements. In
each instance, such information is presented immediately
following (and in connection with an explanation of) the most
directly comparable financial measure calculated in accordance
with GAAP, and includes other material information necessary to
reconcile the information with the comparable GAAP financial
measure.

Results of Operations

Certain financial information for the
Companys business segments is set forth below. This
discussion should be read in conjunction with the Consolidated
Condensed Financial Statements of the Company included elsewhere
in this Quarterly Report. For additional financial information
by business segment, see Note 10 of Notes to Consolidated
Condensed Financial Statements included elsewhere in this
Quarterly Report.

The Company has four reportable pharmaceutical
segments comprising the Companys pharmaceutical operations
in North America, Latin America, Europe and Asia, Africa and
Australia. In addition, the Company has its majority-owned
subsidiary, Ribapharm. The segment reporting has been
reclassified to conform to discontinued operations presentation
for all periods presented. See Note 2 of Notes to
Consolidated Condensed Financial Statements for the discussion
of discontinued operations.



| |                        
| | -----------------------
| | Revenues (in thousands)

|                                     |                         |                       |         |                  |         |      |         |        |         |   |         |         |         |   |         |        |         | 
|------------------------------------ | ----------------------- | --------------------- | ------- | ---------------- | ------- | ---- | ------- | ------ | ------- | - | ------- | ------- | ------- | - | ------- | ------ | ------- | 
|                                     |                         |                       |         |                 
|                                     |                         | Three Months Ended    |         | Six Months Ended
|                                     |                         | June 30,              |         | June 30,        
|                                     |                         |                       |         |                 
|                                     |                         | 2003                  |         | 2002             |         | 2003 |         | 2002  
|                                     |                         |                       |         |                  |         |      |         |       
|Pharmaceuticals                      |                         |                       |         |                  |         |      |         |        |         |   |         |         |         |   |         |       
|                                     | North America           |                       | $       | 26,063           |         |      | $       | 19,470 |         |   | $       | 41,434  |         |   | $       | 61,394 |        
|                                     | Latin America           |                       |         | 33,685           |         |      |         | 32,547 |         |   |         | 60,056  |         |   |         | 62,034 |        
|                                     | Europe                  |                       |         | 59,308           |         |      |         | 49,524 |         |   |         | 114,884 |         |   |         | 94,298 |        
|                                     | Asia, Africa, Australia |                       |         | 12,476           |         |      |         | 13,270 |         |   |         | 25,292  |         |   |         | 25,090 |        
|                                     |                         |                       |         |                  |         |      |         |        |         |   |         |         |         |   |         |       
|                                     |                         | Total pharmaceuticals |         |                  | 131,532 |      |         |        | 114,811 |   |         |         | 241,666 |   |         |        | 242,816 | 
|Ribapharm royalty revenues           |                         |                       | 51,955  |                  |         |      | 66,000  |        |         |   | 100,538 |         |         |   | 123,001 |       
|                                     |                         |                       |         |                  |         |      |         |        |         |   |         |         |         |   |         |       
|Total revenues                       |                         | $                     | 183,487 |                  |         | $    | 180,811 |        |         | $ | 342,204 |         |         | $ | 365,817 |       
|                                     |                         |                       |         |                  |         |      |         |        |         |   |         |         |         |   |         |       
|Cost of goods sold                   |                         | $                     | 48,297  |                  |         | $    | 37,355  |        |         | $ | 89,167  |         |         | $ | 73,591  |       
|Gross profit margin on product sales |                         |                       | 63      | %                |         |      | 67      | %      |         |   | 63      | %       |         |   | 70      | %     

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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL

CONDITION AND RESULTS OF OPERATIONS


Quarter Ended June 30, 2003 Compared to
2002



| |                        
| | -----------------------
| | Pharmaceutical Revenues

In the North America Pharmaceuticals segment,
revenues for the three months ended June 30, 2003 were
$26,063,000 compared to $19,470,000 for the same period of 2002,
an increase of $6,593,000 (34%). The increase is primarily due
to increased revenues in the second quarter of 2003 from the
completion of an inventory reduction program at the
Companys wholesalers in April 2003. The Company began the
inventory reduction program in June 2002.

In the Latin America Pharmaceuticals segment,
revenues for the three months ended June 30, 2003 were
$33,685,000, compared to $32,547,000 for the same period of
2002, an increase of $1,138,000 (3%). The increase is primarily
due to an increase in revenues in Argentina and Brazil of
$1,433,000. Revenues in Mexico were negatively affected by a 9%
decrease in the value of the peso and slightly lower sales
volumes due to generic competition and the reduction of
government funding, offset by price increases.

In the Europe Pharmaceuticals segment, revenues
for the three months ended June 30, 2003 were $59,308,000
compared to $49,524,000 for the same period of 2002, an increase
of $9,784,000 (20%). The increase is primarily due to an
increase in the value of currencies in the region relative to
the U.S. Dollar, which resulted in an increase in revenues
of $7,279,000. Additionally, excluding the effect of currencies,
revenues in Poland increased $2,314,000 primarily due to price
increases.

In the Asia, Africa and Australia
(AAA) Pharmaceuticals segment, revenues for the
three months ended June 30, 2003 were $12,476,000 compared
to $13,270,000 for the same period of 2002, a decrease of
$794,000 (6%). The decrease is primarily due to lower sales
volume throughout the region partially off-set by an increase in
sales of Nyal® products in Australia.

Ribapharm Royalty Revenues:Royalty revenues represent amounts
earned by the Companys Ribapharm subsidiary under the
License and Supply Agreement with Schering (the License
Agreement) and for the three months ended June 30,
2003, under a license agreement with F. Hoffman-LaRoche
Ltd. (Roche). Under the License Agreement, Schering
licensed all oral forms of ribavirin for the treatment of
chronic hepatitis C in combination with Scherings
alpha interferon (the Combination Therapy).

On January 6, 2003, the Company, Ribapharm
and Roche reached agreement on a settlement regarding pending
patent disputes over Roches combination anti-viral product
containing Roches version of ribavirin, known as Copegus.
Under the agreement, Roche may continue to register and
commercialize Copegus globally. The financial terms of this
settlement agreement include a license by Ribapharm of ribavirin
to Roche. The license authorizes Roche to make or have made and
to sell Copegus under Ribapharms patents. Roche pays
royalty fees to Ribapharm on all sales of Copegus for use in
combination with interferon alfa or pegylated interferon alfa.

Royalties earned for the three months ended
June 30, 2003 from Schering and Roche were $51,955,000
compared to $66,000,000 for the same period of 2002, a decrease
of $14,045,000 (21%). The Company and Ribapharm believe that the
decrease in royalties during the three months ended
June 30, 2003, include the effects of increasing
competition between Schering and Roche, Scherings
provision for estimated rebates on its U.S. sales of
ribavirin and changes in trade inventory levels as reported to
Ribapharm by Schering. The Company and Ribapharm have no
information with regard to the basis for the rebate and return
provision other than public statements by Schering suggesting
generic competition in the last half of 2003 would have an
impact on demand.

Gross Profit:Gross
profit margin on product sales decreased to 63% for the three
months ended June 30, 2003 compared to 67% for 2002. The
decrease in gross profit is primarily due to a change in the
geographic mix in sales, primarily in Europe, which lowered the
Companys overall margin, higher

20



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##### Table of Contents



inefficiencies in the Companys
manufacturing operations in certain regions and costs related
the Companys manufacturing rationalization project.


Selling Expenses:Selling expenses were $43,390,000 for
the three months ended June 30, 2003, compared to
$39,062,000 for the same period in 2002, an increase of
$4,328,000 (11%). The increase is consistent with the increase
in product sales and reflects the Companys increased
promotional efforts, especially in Europe.

General and Administrative Expenses:General and administrative expenses
were $24,839,000 for the three months ended June 30, 2003,
compared to $211,422,000 for the same period in 2002, a decrease
of $186,583,000. Included in selling, general and administrative
expenses for the quarter ended June 30, 2002 are reported
non-recurring and other unusual charges of $179,917,000, which
primarily include stock compensation costs related to the Change
of Control under the Companys Option Plan ($61,400,000);
executive and director bonuses paid in connection with the
Ribapharm Offering ($47,839,000); professional fees related to
Ribapharm ($13,000,000); incentive compensation costs related to
the accelerated vesting of restricted stock upon the Change of
Control under the Companys Long-Term Incentive Plan
($12,022,000); costs incurred in the Companys 2002 proxy
contest ($6,261,000); the write-down of the corporate airplane
($9,100,000); the write-off of ICN International AG capitalized
offering costs ($18,295,000) and severance costs related to the
termination of Mr. Panic ($12,000,000).

The remaining decrease of $6,666,000 reflects a
reduction in corporate general and administrative expenses of
$7,011,000, which is mainly attributable to expenses incurred in
the three months ended June 30, 2002 related to severance
costs of $3,793,000 and the write-off of deferred acquisition
costs of $1,902,000 and lower general and administrative
expenses in the pharmaceuticals segment in 2003. The decrease
was partially offset by an increase in Ribapharms general
and administrative expenses of $2,936,000.

Research and Development:Research and development expenses for
the 2003 second quarter were $9,790,000 compared to $12,959,000
for the same period in 2002. The decrease is primarily
attributable to the timing of costs associated with the clinical
trials of Viramidine and Hepavir B. It is expected that
research and development expenses will increase in the third
quarter of 2003 as progress continues with the clinical trials
of Viramidine and Hepavir B.

Gain on Sale of Subsidiary Stock:In April 2002, the Company sold,
through an underwritten public offering, 29,900,000 shares of
common stock representing 19.93% of the total outstanding common
stock of Ribapharm (the Ribapharm Offering). In
connection with the Ribapharm Offering, the Company received net
cash proceeds of $276,611,000 and recorded a gain on the sale of
Ribapharms stock of $262,949,000, net of offering costs in
the three months ended June 30, 2002.

Other Income, Net, Including Translation and
Exchange:Other income, net, including
translation and exchange was a loss of $5,803,000 for the three
months ended June 30, 2003 compared to a gain of $5,252,000
for the same period in 2002, a change of $11,055,000. In the
second quarter of 2003, the Company recorded translation and
exchange losses primarily related to the Companys dollar
denominated net assets in Latin America of $2,547,000 and in
Canada of $2,766,000. The Company is currently taking steps to
mitigate the impact of foreign currency translation on the
income statement.

Interest Income and Expense:Interest expense during the three
months ended June 30, 2003 decreased $3,069,000 compared to
the same period in 2002. The decrease was the result of the
repurchase of $194,611,000 of 8 3/4% Senior Notes in April
2002 and the repurchase of $59,410,000 principal amount of the
Companys 6 1/2% Convertible Subordinated Notes due
2008 in July and August 2002. Interest income decreased from
$1,665,000 in 2002 to $1,131,000 in 2003 due to lower yields on
investments partially offset by an increase in interest-bearing
cash.

Income Taxes:The
Companys effective income tax rate for the three months
ended June 30, 2003 was 38% compared to 37% for the same
period of 2002. The increase in the effective tax rate results
from a shift in the mix of earnings to higher tax rate
jurisdictions.

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##### Table of Contents



Income (loss) from Discontinued Operations,
Net of Taxes:Income (loss) from
discontinued operations relates to the Companys Russian
Pharmaceuticals segment, Biomedicals segment, Photonics business
(in 2002) and raw materials businesses and manufacturing
capabilities in Central Europe and was a loss of $2,567,000 for
the three months ended June 30, 2003 compared to a loss of
$18,153,000 for the same period in 2002. In June 2003, the
Company sold its Russian Pharmaceuticals segment for cash
proceeds of $55,000,000 and certain assets of its Biomedicals
segment for 727,990 shares of its common stock, which had a fair
market value of approximately $12,369,000. The loss in 2003
includes a loss on disposal of discontinued operations of
$6,596,000, partially offset by income from discontinued
operations of $4,029,000. The loss for 2002 includes a loss from
discontinued operations of $10,056,027 primarily related to the
Photonics business and the Russian Pharmaceuticals business and
a loss on disposal of discontinued operations of $8,097,000
mainly due to Circe.

Six Months Ended June 30, 2003 Compared
to 2002



| |                        
| | -----------------------
| | Pharmaceutical Revenues

In the North America Pharmaceuticals segment,
revenues for the six months ended June 30, 2003 were
$41,434,000 compared to $61,394,000 for the same period of 2002,
a decrease of $19,960,000 (33%). The decrease in 2003 sales is
primarily due to reduced sales to wholesalers during the first
four months of 2003 related to an inventory reduction program at
the Companys wholesalers, which the Company began in June
2002 and completed in April 2003.

In the Latin America Pharmaceuticals segment,
revenues for the six months ended June 30, 2003 were
$60,056,000 compared to $62,034,000 for the same period of 2002,
a decrease of $1,978,000 (3%). The decrease is primarily due to
a decrease in sales in Mexico of $3,3036,000 due to a 12%
decrease in the value of the peso and slightly lower sales
volumes due to generic competition partially offset by price
increases.

In the Europe Pharmaceuticals segment, revenues
for the six months ended June 30, 2003 were $114,884,000
compared to $94,298,000 for the same period of 2002, an increase
of $20,586,000 (22%). The increase is primarily due to an
increase in the value of currencies in the region relative to
the U.S. Dollar, which resulted in an increase in revenues
of $14,614,000. Additionally, excluding the effect of
currencies, revenues in Poland increased $4,271,000 and revenues
in Spain increased $1,492,000 primarily due to price increases
and new product launches.

In the Asia, Africa and Australia Pharmaceuticals
segment, revenues for the six months ended June 30, 2003
were $25,292,000 compared to $25,090,000 for the same period of
2002, an increase of $202,000. The increase is due to an
increase in the value of currencies in the region relative to
the U.S. Dollar, which resulted in an increase in revenues
of $796,000, partially off-set by lower sales volume throughout
the region.

Ribapharm Royalty Revenues:Royalties earned for the six months
ended June 30, 2003 were $100,538,000 compared to
$123,001,000 for the same period of 2002, a decrease of
$22,463,000 (18%). The Company and Ribapharm believe that the
decrease in royalties during the six months ended June 30,
2003 includes the effects of increasing competition between
Schering and Roche, Scherings provision for estimated
rebates on its U.S. sales of ribavirin and changes in trade
inventory levels as reported to Ribapharm by Schering. The
Company and Ribapharm have no information with regard to the
basis for the rebate and return provision other than public
statements made by Schering suggesting generic competition in
the last half of 2003 would have an impact on demand.

Gross Profit:Gross
profit margin on product sales decreased to 63% for the six
months ended June 30, 2003 compared to 70% in 2002 The
decrease in gross profit is primarily due a change in the
geographic mix in sales, primarily in the U.S. and Europe,
which lowered the Companys overall gross profit margin,
higher inefficiencies in the Companys manufacturing
operations in certain regions and costs related to a
manufacturing rationalization project.

Selling Expenses:Selling expenses were $80,668,000 for
the six months ended June 30, 2003, compared to $78,980,000
for the same period in 2002, an increase of $1,688,000 (2%). The
increase reflects the Companys increased promotional
efforts, mainly in Europe of $4,746,000, partially offset by a
decrease in selling expenses in North America Pharmaceuticals
segment of $2,760,000.

22



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##### Table of Contents



General and Administrative Expenses:General and administrative expenses
were $55,285,000 for the six months ended June 30, 2003,
compared to $238,629,000 for the same period in 2002, a decrease
of $183,344,000. Included in selling, general and administrative
expenses for the six months ended June 30, 2002, are
non-recurring and other unusual charges of $181,038,000, which
primarily include stock compensation costs related to the
Companys Change of Control under the Companys Option
Plan ($61,400,000); executive and director bonuses paid in
connection with the Ribapharm Offering ($47,839,000);
professional fees related to Ribapharm ($13,000,000); incentive
compensation costs related to the accelerated vesting of
restricted stock upon the Change of Control under the
Companys Long-Term Incentive Plan ($12,022,000); costs
incurred in the Companys 2002 proxy contest ($7,382,000);
the write-down of the corporate airplane ($9,100,000); the
write-off of ICN International AG capitalized offering costs
($18,295,000); and severance costs related to the termination of
Mr. Panic ($12,000,000).

The remaining decrease of $2,306,000 reflects a
reduction in corporate general and administrative expenses of
$10,125,000, which is mainly attributable to expenses incurred
in the six months ended 2002 related to severance costs of
$4,232,000, a compensation charge of $2,968,000 for the exercise
of stock options and the write-off of deferred acquisition costs
of $2,468,000. These expenses were partially offset by an
increase in Ribapharms general and administrative expenses
of $6,459,000.

Research and Development:Research and development expenses for
the six months ended June 30, 2003 were $18,949,000,
compared to $22,047,000 for the same period in 2002. The
$3,098,000 decrease is primarily attributable to the timing of
costs associated with the clinical trials of Viramidine
and Hepavir B.

Other Income, Net, Including Translation and
Exchange:Other income, net, including
translation and exchange was a loss of $1,712,000 for the six
months ended June 30, 2003, compared to a gain of
$3,939,000 for the same period in 2002. In 2003, translation
gains principally consisted of transaction and exchange losses
related to the Companys dollar denominated net assets in
Canada of $5,039,000, partially offset by translation and
exchange gains in Europe and AAA of $2,574,000.

Interest Income and Expense:Interest expense during the six months
ended June 30, 2003 decreased $9,171,000 compared to the
same period in 2002 due to repurchases of debt in 2002. Interest
income decreased $863,000 due to lower yields on investments
partially offset by an increase in interest-bearing cash.

Income Taxes:The
Companys effective income tax rate for the six months
ended June 30, 2003 was 38% compared to 37% for 2002. The
increase in the effective tax rate is primarily the result of a
shift in the mix of earnings to higher tax rate jurisdictions.

Income (loss) from Discontinued
Operations, Net of Taxes:Income
(loss) from discontinued operations was a loss of $2,118,000 for
the six months ended June 30, 2003 compared to a loss of
$19,109,000 for the same period in 2002. The loss for 2003
includes loss on disposal of discontinued operations of
$6,596,000, partially offset by income from discontinued
operations of $4,478,000. The loss for 2002 includes a loss from
discontinued operations of $9,224,000 primarily related to the
Photonics business and the Russian Pharmaceutcals business and a
loss on disposal of discontinued operations of $8,097,000.

Liquidity and Capital Resources

Cash and cash equivalents totaled $402,334,000 at
June 30, 2003 compared to $245,184,000 at December 31,
2002. Working capital was $518,857,000 at June 30, 2003
compared to $397,070,000 at December 31, 2002. The change
in working capital of $121,787,000 is primarily attributable to
the increase in cash and cash equivalents of $157,150,000, which
includes cash generated from operations, cash proceeds of
$55,000,000 received in connection with the sale of the Russian
Pharmaceuticals business and collection of the fourth quarter
2002 Schering royalty payment.

During the six months ended June 30, 2003,
cash provided by operating activities totaled $118,177,000,
compared to cash used in operating activities of $22,604,000 in
2002. During the six months ended June 30, 2002, cash flow
from operating activities was negatively impacted by certain
non-recurring and other unusual cash payments. Those cash
payments included cash paid for the compensation costs related
to the change of

23



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##### Table of Contents



control of the Company under the Companys
Option Plan ($37,416,000), costs incurred in the Companys
recent proxy contest ($6,261,000), professional fees related to
Ribapharm ($13,000,000) and executive and director bonuses paid
in connection with the Ribapharm Offering ($47,839,000).


Cash provided by investing activities was
$40,723,000 for the six months ended June 30, 2003 compared
to $249,953,000 for the same period of 2002. In 2003, net cash
used in investing activities consisted of payments for capital
expenditures of $6,382,000 and cash provided by investing
activities in discontinued operations of $47,085,000 primarily
related to net proceeds from the sale of the Russian
Pharmaceuticals segment in June 2003 partially offset by capital
expenditures of $3,388,000. In 2002, net cash provided by
investing activities consisted of proceeds from the sale of
subsidiary stock of $276,611,000 partially offset by the
acquisition of license rights, product lines and businesses of
$22,931,000 and payments for capital expenditures of $9,887,000.

Cash used in financing activities totaled
$9,780,000 for the six months ended June 30, 2003,
including cash dividends paid on common stock of $6,500,000 and
payments on notes payable of $3,159,000. In 2002, cash used in
financing activities totaled $264,329,000 for the six months
ended June 30, 2002, including payments on long-term debt
of $233,048,000 principally consisting of the repurchase of
$194,611,000 principal of the Companys outstanding
8 3/4% Senior Notes, the repurchase of an aggregate
1,146,000 shares of the Companys common stock for
$31,955,000 and cash dividends paid on common stock of
$12,631,000 offset by proceeds from the exercise of employee
stock options of $12,753,000.

In June 2003, the Company commenced an exchange
offer to acquire all of the publicly traded shares of Ribapharm
common stock for $5.60 per share (the Tender Offer).
The Company amended the Tender Offer to increase the offer price
to $6.25 per share in August 2003. The Tender Offer expires on
August 19, 2003, and is contingent on the Company acquiring
a minimum of 66 2/3% of the outstanding shares of Ribapharm
not held by the Company, or the officers and directors of
Ribapharm and the Company. If sufficient shares are tendered and
all other conditions met, the Tender Offer would require the
Company to pay approximately $186,875,000 plus expenses in cash,
to reacquire the publicly traded shares of Ribapharm. The
Company anticipates using cash on hand to fund the Tender Offer.

Management believes that the Companys
existing cash and cash equivalents and funds generated from
operations will be sufficient to meet its operating requirements
at least through June 30, 2004 and to fund the Tender
Offer, anticipated acquisitions and capital expenditures and the
Companys research and development program. The Company may
also seek additional debt financing or issue additional equity
securities to finance future acquisitions. The Company funds its
cash requirements primarily from cash provided by its operating
activities. The Companys sources of liquidity are its cash
and cash equivalent balances and its cash flow from operations.

In February and March 2003, Schering entered into
license agreements with three generic pharmaceutical companies,
which granted to each company a non-exclusive, non-sublicensable
license to Scherings U.S. ribavirin patents. In
connection with the Companys and Ribapharms patent
infringement suit against the same three pharmaceutical
companies to prevent them from marketing a generic form of
ribavirin in the U.S., the U.S. District Court for the
Central District of California issued a memorandum of decision
and order granting the generic pharmaceutical companies
motion for summary judgment of non-infringement of the
Companys and Ribapharms asserted patents. The
decision and order did not rule on defendants motion for
summary judgment that the patents are invalid. The Company and
Ribapharm filed a joint Citizen Petition with the FDA on
July 17, 2003 and the Company and Ribapharm are considering
other options, including appealing the summary judgment
decision. Competition from generic pharmaceutical companies
could have a material negative impact on the Companys
future royalty revenue. With respect to Schering, royalties
received by Ribapharm will be affected by the likelihood of
reduced sales by Schering as well as a reduction in the royalty
rate per the license agreement. With respect to Roche, under the
license agreement, introduction of generics in any market will
eliminate the obligation of Roche to pay royalties for sales in
that market. See Note 9 of Notes to Consolidated
Condensed Financial Statements regarding Commitments
and Contingencies  Generic Litigation.

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While the Company has historically paid quarterly
cash dividends, there can be no assurance that the Company will
continue to do so.

As of June 30, 2003, Ribapharm has a payable
to the Company of $402,000. As of June 30, 2003,
$100,396,000 of cash and cash equivalents was retained by
Ribapharm. These funds may not be readily available to the
Company unless Ribapharm declares a dividend or loans funds to
the Company, or the Tender Offer is completed. The Company
provides Ribapharm a line of credit facility, which allows
Ribapharm to borrow up to $35,000,000 until December 30,
2005 or the date the Company ceases to be the beneficial owner
of at least 80% of the issued and outstanding common stock of
Ribapharm (the Expiration Date). All amounts
outstanding under the line of credit are due on the Expiration
Date. There are no amounts outstanding under this line of credit
as of June 30, 2003.

Upon the initial public offering of Ribapharm,
Ribapharm began receiving all royalties under the License
Agreement with Schering, which reduces cash available to the
Company and its other operations. The Company and Ribapharm are
jointly and severally liable for the principal and interest
obligations under the $525,000,000 Subordinated Convertible
Notes due 2008 issued in July 2001. Under terms contained
in an inter-debtor agreement between the Company and Ribapharm,
the Company has agreed to make all interest and principal
payments on the convertible notes.

The Company evaluates the carrying value of its
inventories at least quarterly, taking into account such factors
as historical and anticipated future sales compared with
quantities on hand, the price the Company expects to obtain for
its products in their respective markets compared with
historical cost, and the remaining shelf life of goods on hand.
If actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be
required. The Company also evaluates the collectibility of its
receivables at least quarterly. The Companys methodology
for establishing the allowance for bad debts varies with the
regions in which it operates. The allowance for bad debts is
based upon specific identification of customer accounts and the
Companys best estimate of the likelihood of potential
loss, taking into account such factors as the financial
condition and payment history of major customers. As of
June 30, 2003, the Company believes that adequate provision
has been made for inventory obsolescence and for anticipated
losses on uncollectible accounts receivable.

The Company is currently self-insured with
respect to product liability claims. While to date no material
adverse claim for personal injury resulting from allegedly
defective products has been successfully maintained against the
Company, a substantial claim, if successful, could have a
negative impact on the Companys liquidity and financial
performance.

Restructuring

During 2002, the Company conducted a strategic
review of its operations. As a result of that review, the
Company now intends to emphasize its specialty pharmaceuticals
business, to divest itself of those businesses that do not fit
the Companys strategic growth plans and to exert efforts
to bring its overall cost structure in line with industry
averages.

As a result of this strategic review, the Company
made the decision to divest its Russian Pharmaceuticals segment,
Biomedicals segment, Photonics business, raw materials business
and manufacturing capability in Central Europe and Circe unit.
The results of these operations and the related financial
position have been reflected as discontinued operations in the
Companys consolidated condensed financial statements in
accordance with Statement of Financial Accounting Standard
(SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The
consolidated condensed financial statements have been
reclassified to conform to the discontinued operations
presentation for all historical periods presented.

In June 2003, the Company sold its Russian
Pharmaceuticals segment and certain assets of its Biomedicals
segment. The Company received gross proceeds of $55,000,000 in
cash for the Russian Pharmaceuticals segment and
727,990 shares of its common stock, which had a fair market
value of approximately $12,369,000 for the assets of its
Biomedicals segment. The Company recorded a net loss on

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##### Table of Contents



disposal of discontinued operations of $6,596,000
related to the sale of these businesses in the quarter ended
June 30, 2003.


The Company is actively marketing for sale the
remaining Biomedicals business segment, Dosimetry, and the raw
materials businesses and manufacturing capability in Hungary and
the Czech Republic. The Company expects all of the remaining
discontinued operations will be sold by the end of 2003.

The Companys management recently announced
its intention to restructure the Companys global
manufacturing capabilities beginning in the second half of 2003.
This restructuring may result in the Company recording non-cash
impairment charges related to certain manufacturing assets. As
the Company has not finalized its restructuring plans, the
amount, if any, of impairment charges cannot be estimated at
this time.

Foreign Operations

Approximately 62% and 53% of the Companys
revenues from continuing operations for the six months ended
June 30, 2003 and 2002, respectively, were generated from
operations outside the United States. All of the Companys
foreign operations are subject to risks inherent in conducting
business abroad, including possible nationalization or
expropriation, price and currency exchange controls,
fluctuations in the relative values of currencies, political
instability and restrictive governmental actions. Changes in the
relative values of currencies occur from time to time and may,
in some instances, materially affect the Companys results
of operations. The effect of these risks remains difficult to
predict.

Inflation and Changing Prices

The effects of inflation are experienced by the
Company through increases in the costs of labor, services and
raw materials. The Company is subject to price control
restrictions on its pharmaceutical products in the majority of
countries in which it operates. While the Company attempts to
raise selling prices in anticipation of inflation, the Company
operates in some markets which have price controls that may
limit its ability to raise prices in a timely fashion. Future
sales and gross profit will be reduced if the Company is unable
to obtain price increases commensurate with the levels of
inflation.

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|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

The Companys business and financial results
are affected by fluctuations in world financial markets. The
Company evaluates its exposure to such risks on an ongoing
basis, and reviews its risk management policy to manage these
risks to an acceptable level, based on managements
judgment of the appropriate trade-off between risk, opportunity
and costs. The Company does not hold any significant amount of
market risk sensitive instruments whose value is subject to
market price risk. The Company seeks to manage its foreign
currency exposure by maintaining the majority of cash balances
at foreign subsidiaries in the U.S. dollar and through
operational means by managing local currency revenues in
relation to local currency costs. The Company is currently
taking steps to mitigate the impact of foreign currency on the
income statement, which will include hedging its foreign
currency exposure.

In the normal course of business, the Company
also faces risks that are either non-financial or
non-quantifiable. Such risks principally include country risk,
credit risk, and legal risk and are not discussed or quantified
in the following analysis.

Interest Rate Risk:The Company currently does not hold
financial instruments for trading or speculative purposes. The
financial assets of the Company are not subject to significant
interest rate risk due to their short duration. At June 30,
2003, the Company had $12,673,000 of foreign denominated debt
that would subject it to both interest and currency risk. The
principal financial liabilities of the Company that are subject
to interest rate risk are its fixed-rate long-term debt
(principally its 6 1/2% Subordinated Convertible Notes due
2008) totaling approximately $465,590,000. The Company does not
use any derivatives or similar instruments to manage its
interest rate risk. A 100 basis-point increase in interest rates
(approximately 15% of the Companys weighted average
interest rate on fixed-rate debt) affecting the Companys
financial instruments would have an immaterial effect on the
Companys six month and second quarter 2003 pretax
earnings. However, such a change would reduce the fair value of
the Companys fixed-rate debt instruments by approximately
$18,200,000 as of June 30, 2003.






|        |                         
|------- | ------------------------
|Item 4. | Controls and Procedures.

Commencing with the fiscal quarter ended
June 30, 2002, and continuing quarterly since then, the
Company has instituted a program of questionnaires sent to,
certifications provided by, and telephonic interviews conducted
with individual officers or employees responsible for oversight
and management of parts of the Companys different business
operations. The questionnaires, certifications and interviews
are intended to reinforce the Companys existing system of
internal controls, and are designed to ensure that information
required to be disclosed by the Company in the reports that it
files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms. Such controls and procedures
are also designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits
under that Act is accumulated and communicated to the
Companys management, including its principal executive
officer or officers and principal financial officer or officers,
or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The
Companys Chief Executive Officer and Chief Financial
Officer have conducted an evaluation of the effectiveness of the
Companys disclosure controls and procedures as of the end
of the period covered by this report. Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer have
concluded that the Companys disclosure controls and
procedures are effective.

There have been no significant changes in the
Companys internal controls or in other factors that could
significantly affect these controls subsequent to the evaluation
referred to in the preceding paragraph, including any corrective
actions with regard to significant deficiencies and material
weaknesses.

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FORWARD LOOKING STATEMENT

This Quarterly Report on Form 10-Q contains
statements that constitute forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Those statements appear in a number of places in this Quarterly
Report on Form 10-Q. Examples of forward-looking statements
include statements regarding, among other matters, the
Companys strategic review, the Companys acquisition
strategy, the Companys reorganization plans, the
Companys expectations regarding sales of products by the
North America Pharmaceutical segment, expectations regarding
research and development costs during the remainder of 2002 and
other factors affecting the Companys financial condition
or results of operations. In some cases, forward looking
statements may be identified by terminology such as
may, will, intends,
should, would, expects,
plans, anticipates,
believes, estimates,
predicts, potential, or
continue or the negative of those terms or
comparable terminology. Similarly, statements that describe the
Companys plans, strategies, intentions, expectations,
objectives, goals or prospects are forward looking.

The forward looking statements in this and other
reports generally assume a stable economic climate in the United
States and other countries in which the Company operates and
assumes that losses will not result from any of the risks to
which the Company is subject, including the following.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Companys dependence on foreign
    operations (which are subject to certain risks inherent in
    conducting business abroad, including possible nationalization
    or expropriation, restrictions on the exchange of currencies,
    limitations on foreign participation in local enterprises,
    health-care regulations, price controls, and other restrictive
    governmental conditions);
|
| |  | the risk of operations in Eastern Europe, Latin
    America and China in light of the unstable economic, political
    and regulatory conditions in such regions;                                                                                                                                                                                                                                      
|
| |  | the risk of potential claims against certain of
    the Companys research compounds;                                                                                                                                                                                                                                                                                                                  
|
| |  | the Companys ability to successfully
    develop and commercialize future products;                                                                                                                                                                                                                                                                                                                   
|
| |  | the limited protection afforded by the patents
    relating to ribavirin, and possibly on future drugs, techniques,
    processes or products the Company may develop or acquire;                                                                                                                                                                                                                      
|
| |  | the potential impact of the Euro currency;                                                                                                                                                                                                                                                                                                                                                             
|
| |  | the Companys ability to continue its
    expansion plan and to integrate successfully any acquired
    companies;                                                                                                                                                                                                                                                                                     
|
| |  | costs of defending and the results of lawsuits
    pending against the Company;                                                                                                                                                                                                                                                                                                                        
|
| |  | the Companys potential product liability
    exposure and lack of any insurance coverage thereof;                                                                                                                                                                                                                                                                                                     
|
| |  | government regulation of the pharmaceutical
    industry (including review and approval for new pharmaceutical
    products by the FDA in the United States and comparable agencies
    in other countries); business trends within the pharmaceutical
    industry and in other segments of the healthcare industry,
    including consolidations and mergers; and competition generally;             
|
| |  | the fact that, beginning with the third quarter
    of 2002, Ribapharm became entitled to receive the payments by
    Schering and Ribapharm does not expect to pay any dividends in
    the foreseeable future;                                                                                                                                                                                       
|
| |  | the risk that the Tender Offer will not be
    successfully completed.                                                                                                                                                                                                                                                                                                                                 

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##### Table of Contents






PART II  OTHER
INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

See Note 9 of Notes to Consolidated
Condensed Financial Statements in Item 1 of Part I of
this Quarterly Report, which is incorporated herein by reference.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

The Companys Annual Meeting of Stockholders
was held on May 22, 2003 in Costa Mesa, California.

|                                                                                                   |                        |     |            |            |  |             |            |  |  |  |         |           | 
|-------------------------------------------------------------------------------------------------- | ---------------------- | --- | ---------- | ---------- |  | ----------- | ---------- |  |  |  | ------- | --------- | 
|                                                                                                   |                        |     |            |            |  | Withheld/  
|                                                                                                   |                        | For |            | Against    |  | Abstentions
|                                                                                                   |                        |     |            |            |  |            
|Election of Directors:                                                                             |                        |     |            |            |  |             |            |  |  |  |         |          
|                                                                                                   | Lawrence N. Kugelman   |     |            | 74,818,174 |  |             |            |  |  |  |         | 1,334,442 | 
|                                                                                                   | Robert A. Ingram       |     |            | 74,821,629 |  |             |            |  |  |  |         | 1,330,987 | 
|                                                                                                   | Theodose Melas-Kyriazi |     |            | 74,823,932 |  |             |            |  |  |  |         | 1,328,685 | 
|Ratification of PricewaterhouseCoopers LLPs
    appointment as the Companys independent auditors |                        |     | 74,967,447 |            |  |             | 1,067,064  |  |  |  | 118,105 |          
|Approval of the Companys 2003 Equity
    Incentive Plan                                           |                        |     | 39,875,176 |            |  |             | 13,020,481 |  |  |  | 298,738 |          
|Approval of the Companys 2003 Employee
    Stock Purchase Plan                                    |                        |     | 46,643,498 |            |  |             | 6,265,629  |  |  |  | 285,276 |          






|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits

| |      |  |  |  |  |                                                                                                                                                                                            
| | ---- |  |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1  |  |  |  |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of Registrant, dated July 7,
    1998, which is filed herewith.                                                  
| | 15.1 |  |  |  |  | Review Report of Independent Accountants                                                                                                                                                   
| | 15.2 |  |  |  |  | Awareness Letter of Independent Accountants                                                                                                                                                
| | 31.1 |  |  |  |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                    
| | 31.2 |  |  |  |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                    
| | 32.1 |  |  |  |  | Certification of Chief Executive Officer and
    Chief Financial Officer of Periodic Financial Reports pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002,
    18 U.S.C. § 1350.

(b) Reports on Form 8-K

The Company filed the following reports on
Form 8-K during the quarter ended June 30, 2002:

| |    |  |  |  |  |                                                                                                                                                                                              
| | -- |  |  |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. |  |  |  |  | Current report on Form 8-K dated May 5,
    2003 (the date of the earliest event reported), filed on
    May 5, 2003, for the purpose of reporting certain
    information, under Item 7.    
| | 2. |  |  |  |  | Current report on Form 8-K dated
    June 10, 2003 (the date of the earliest event reported),
    filed on June 13, 2003, for the purpose of reporting
    certain information, under Item 7.

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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.



| |                                                      
| | -----------------------------------------------------
| | ICN PHARMACEUTICALS, INC.                            
| | Registrant                                           
|
| | /s/ ROBERT W. OLEARY                                
| |                                                      
| | Robert W. OLeary                                    
| | Chairman of the Board and Chief Executive
    Officer

Date: August 14, 2003



| |                                                         
| | --------------------------------------------------------
| | /s/ BARY G. BAILEY                                      
| |                                                         
| | Bary G. Bailey                                          
| | Executive Vice President and Chief Financial
    Officer
| | (principal financial and accounting
    officer)        

Date: August 14, 2003

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EXHIBIT INDEX

|        |    |    |  |  |  |                                                                                                                                                                                            
|------- | -- | -- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |  | 
|        |    |    |  | 
|        | 3  | .1 |  |  |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of Registrant.                                                                                                   
|        | 15 | .1 |  |  |  | Review Report of Independent Accountants.                                                                                                                                                  
|        | 15 | .2 |  |  |  | Awareness Letter of Independent Accountants.                                                                                                                                               
|        | 31 | .1 |  |  |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                    
|        | 31 | .2 |  |  |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                    
|        | 32 | .1 |  |  |  | Certification of Chief Executive Officer and
    Chief Financial Officer of Periodic Financial Reports pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002,
    18 U.S.C. § 1350.