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The following is an excerpt from a S-1/A SEC Filing, filed by ANSELL HEALTHCARE INC on 2/17/2000.
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ANSELL HEALTHCARE INC - S-1/A - 20000217 - BUSINESS

BUSINESS

OVERVIEW

We are a global leader in the design, development, manufacture and marketing of protective gloves and condoms. Our operations are organized into three business segments:

- Professional Healthcare (medical examination and surgical gloves),

- Occupational Healthcare (industrial and consumer gloves), and

- Personal Healthcare (condoms marketed in both retail and public health channels).

We manufacture our products in Asia, North America and the United Kingdom and market these products worldwide. In fiscal 1999, we sold products in more than 100 countries. The Americas, Europe and Asia Pacific accounted for approximately 56%, 32% and 12%, respectively, of our net sales in fiscal 1999.

We were founded in 1905 by Eric Ansell in Melbourne, Australia and acquired by Dunlop Australia Limited (now Pacific Dunlop Limited) in 1969. Pacific Dunlop Limited is a diversified multinational marketer and manufacturer of consumer and industrial products, based in Australia. In 1997, we relocated our executive offices from Melbourne, Australia to Red Bank, New Jersey. Prior to this offering, Pacific Dunlop Limited indirectly owned 100% of our common stock.

We compete in the medical glove, the industrial and consumer glove and the condom markets which we estimated to be approximately $1.5 billion, $3.6 billion and $750 million on a global basis, respectively, in 1998. See Note 12 to the Combined Financial Statements regarding "Segment Data." We believe that we have the leading global market share position in, and the broadest product range of, protective gloves serving the healthcare and occupational sectors of the barrier protective market. We also believe that we are one of the world's largest manufacturers and marketers of condoms. In fiscal 1999, our net sales in the Professional Healthcare, Occupational Healthcare and Personal Healthcare divisions were 36%, 51% and 13%, respectively.

Our products are made predominantly of natural and synthetic latex that share common manufacturing processes and polymer dipping technologies. We have developed proprietary formulations and related manufacturing processes that enable us to produce many different types and styles of high quality gloves and condoms. We maintain a flexible supply and logistics infrastructure in order to switch production between various products based on market demand.

We are an innovator in the design and manufacture of protective gloves and condoms. In each of the past three years more than 15% of our net sales have come from products that have been on the market for three years or less and that we developed internally. We believe that we are well positioned to capitalize on the technology transfer opportunities that exist among our three business segments, our recent acquisitions and our manufacturing facilities.

In addition to our success with new product development, we have been an active acquiror of businesses within the protective barrier products industry. We have pursued acquisitions in order to expand and augment our main product lines, provide additional distribution channels, add new technologies to enhance our manufacturing capabilities and to enter new geographic markets.

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The following table highlights our strategic acquisitions over the last three years:

  BUSINESS ACQUIRED                                PRIMARY
        (DATE)           BUSINESS SEGMENT/      MANUFACTURING        PRIMARY SALES
  (TRANSACTION COST)          PRODUCT              REGIONS              REGIONS             TRANSACTION BENEFITS
----------------------  -------------------  -------------------  -------------------  -------------------------------
Medical glove business  Professional         Malaysia             United States        - Brand and product expansion
of Johnson & Johnson    Healthcare/                               Europe               - Expanded science and
(expected early 2000)   Surgical and                              Latin America          technology capability
($97.6 million)         examination gloves                                             - Modern manufacturing facility

Suretex Limited         Personal             Thailand             Developing           - Modern manufacturing
(November 1998)         Healthcare/          India                countries            facilities
($26.4 million)         Condoms                                                        - Low cost export capacity
                                                                                       - Expansion capability for
                                                                                       global production
                                                                                       - Established access to public
                                                                                         sector bid/tender market

Kemwell International   Professional         India                Africa               - Low cost export capacity
Limited -- 74.8%        Healthcare/                               South America        - Expansion capability for
(September 1998)        Low-cost surgical                         Europe               global production
($7.6 million)          gloves                                    Asia                 - Platform to access the Indian
                                                                                         domestic surgical glove
                                                                                         market

JK Chemicals,           Personal             India                India                - Brand expansion with the
Limited -- 50%          Healthcare/                                                      addition of KamaSutra
(September 1997)        Condoms                                                        - Low cost export capacity
($2.7 million)                                                                         - Established access to Indian
                                                                                         government bid/tender market

Golden Needles          Occupational         United States        United States        - Integration of automated
Knitting, Inc.          Healthcare/                               Europe                 knitting technology with our
(April 1997)            Automated seamless                                               latex dipping technology for
($81.2 million)         knitted industrial                                               ergonomic new products
                        gloves using                                                   - U.S. market leading position
                        engineered yarns                                               in knitted, cut-resistant
                                                                                         gloves
                                                                                       - Platform to expand product
                                                                                         offerings

STRATEGY

We intend to be the leading designer, developer, manufacturer and marketer of protective gloves, condoms and other healthcare barrier protective products worldwide. In order to achieve our objective, we will continue to:

- Offer a Broad Range of Products and Brands. We intend to continue to expand our product lines and brands across all three of the market segments in which we operate. We will look for opportunities that will enable us to leverage our existing manufacturing, technology and marketing capabilities as we develop new products or acquire new businesses. We believe that our ability to offer a broad spectrum of products to our customers affords us a competitive advantage.

- Focus on Value Added, Higher Margin Branded Products. We will continue to design, develop, manufacture and market higher margin products that emphasize comfort, quality and brand recognition. In the Professional Healthcare glove market we will focus on enhanced feature, form-fitting, powder-free examination and surgical gloves. In the Occupational Healthcare glove market we will focus on enhanced feature products for the high specification clean room environment, the food and service industry and the general manufacturing industry. In the Personal Healthcare market we will focus on expanding the Discs packaging with different condom styles and enhanced pleasure and branded products.

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- Leverage Research and Development. We intend to continue to invest in research and development, which we call science and technology, in order to augment our product offerings. We have a history of new product development and innovation. We are currently focusing our product innovation on developing gloves using non-latex materials for both medical and critical environment (sterile or clean room) applications, ergonomically designed polymer coated seamless liner industrial gloves, chlorine and powder-free, low allergenic coated medical gloves, as well as food-safe gloves. We intend to use our research and development platform to design and manufacture products that, with limited modifications, will have application in both our Professional Healthcare segment and Occupational Healthcare segment and share common materials and manufacturing technologies.

- Augment Internal Growth with Acquisitions. We intend to continue to pursue acquisitions in order to expand into related product areas and new markets. Optimal acquisition candidates would also provide synergy with our manufacturing, marketing, sales and science and technology capabilities. We believe that our debt level, as reflected in our pro forma balance sheet, together with substantial positive cash flow, provides substantial borrowing capacity that would allow us to grow through acquisitions.

- Leverage Manufacturing Where We Have a Technological Advantage. We intend to continue to develop innovative manufacturing processes and facilities that will improve quality while maintaining and improving efficiency and safety. We plan to remain flexible in our ability to manufacture multiple products in the same facilities and selectively outsource certain products where we can do so more cost effectively than manufacturing them ourselves or where we have a temporary lack of capacity.

- Focus on Customer Service. We will continue to enhance customer satisfaction by focusing on and improving customer service. We will continue to emphasize educational programs and services designed to assist customers and end users in effective and efficient product selection. We will continue to work with customers to identify opportunities for product design improvements and to respond in a timely manner to customer needs.

INDUSTRY OVERVIEW

We estimate that the aggregate market size for the three business segments in which we compete was $5.8 billion in 1998. Historically, these business segments have been characterized by moderate growth, but we believe that there is higher growth potential in several niche areas and geographic markets. We believe that we are well positioned to take advantage of these niche opportunities while remaining competitive in our more mature product lines and markets.

PROFESSIONAL HEALTHCARE SEGMENT

Based on our estimates, we believe that in 1998 the total global market was approximately $1 billion for medical examination gloves and $500 million for surgical gloves. We estimate that in 1998 the total U.S. market was $700 million for medical examination gloves and $210 million for surgical gloves. Sales in the U.S. market of medical examination gloves are divided between the hospital and alternate care markets, which we estimate to be approximately 55% and 45%, respectively.

The growth in these markets is largely attributable to ongoing concerns among the general public and healthcare professionals regarding the increased risk from the transmission of infectious diseases, particularly the human immunodeficiency virus, or HIV, and the hepatitis B virus. In 1987, the Centers for Disease Control issued U.S. guidelines that anyone coming into contact with bodily fluids should use universal precautions, including wearing protective gloves. Furthermore, since 1991 Occupational Safety and Health Administration U.S. regulations have required that protective gloves be worn when it can be reasonably anticipated that an employee will have contact with blood, saliva or other potentially infectious substances. These workers include hospital, clinic and dental office employees, persons engaged in

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paramedic services and those who work in nursing homes, drug and alcohol treatment facilities and funeral homes. Healthcare professionals routinely wear and frequently replace protective gloves throughout the day. The growth in this market has also resulted from general public awareness of such infectious diseases, population growth, as well as more stringent regulatory requirements and regulations in the medical field. The increased use of protective gloves has led to greater demand for more comfortable and higher quality gloves.

The Professional Healthcare market is subject to pricing pressures and the continual need to innovate and produce higher quality, more comfortable products in order to maintain market share. Although product volumes in the Professional Healthcare market have been increasing overall, prices of less technologically-advanced gloves have been falling, creating modest overall growth in this market. Pricing of medical examination and surgical gloves may also be influenced by reimbursement policies and regulations of government health administration authorities, private health insurers and other organizations. Such third-party payors are increasingly challenging the price of medical products and services.

OCCUPATIONAL HEALTHCARE SEGMENT

We estimate that in 1998 the total global industrial and consumer glove market was approximately $3.6 billion. Although we do not participate in the cotton and leather segment of the global industrial and consumer protective glove market, many cotton and leather protective gloves are being replaced with higher value, ergonomically superior industrial and consumer gloves utilizing synthetic dipped and coated design materials. We have focused our resources on converting traditional cotton and leather glove users to our line of efficient, synthetic general purpose gloves. This focus has resulted in:

- our Hynit glove being purchased by customers as an alternative to light cotton canvas, jersey, and string knit gloves used in light fabrication, assembly and other materials handling applications,

- our Hycron, Hylite and Edge gloves being purchased by customers as alternatives for leather products and 18-24 ounce cotton gloves in medium to heavy duty applications requiring increased worker protection from abrasions, cuts, and punctures, and

- our HyFlex glove being recently introduced into the general purpose market to replace conventional cotton string, canvas, jersey and nylon gloves used in auto and electronic assembly, light fabrication and other small parts handling applications.

We estimate that in 1998 the total U.S. industrial and consumer glove market was approximately $1.3 billion, of which we believe that the synthetic and seamless knitted segment accounted for $800 million or approximately 60% of that market.

Significant growth opportunities exist in the critical environment market sector and food and food service industry. The growth in these markets is expected to result from increased regulatory legislation around the world designed to protect workers against occupational hazards and increased concern for protecting products from contamination by workers and the environment. This market remains highly fragmented with many suppliers. We believe that many of these suppliers will be candidates for consolidation in the future.

We estimate the worldwide critical environment market grew at approximately 10% per year between 1996 and 1998, based on units sold, due to growing demand for improved synthetic dipped gloves among users in the:

- semiconductor,

- electronics,

- biotechnology,

- pharmaceutical,

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- research segments of the high technology and scientific markets, and

- specific clean room environments within general industrial manufacturing.

Increasingly, the manufacturing process in these industries takes place in clean rooms and requires gloves that minimize the amount of particles on their surfaces to prevent the gloves from contaminating the product, or the worker from contaminating the work environment. The increasing demand for micro- electronic components that require extremely clean manufacturing conditions is expected to continue to drive this growth.

Like critical environment gloves, products for the food and food service market are designed to protect both the worker from the product and the product from worker contamination. Stringent new regulatory requirements in this industry, particularly in Europe, together with heightened awareness of contamination of food products by workers, are expected to continue to drive the growth of this industry and demand for our products.

The growth in demand in the Occupational Healthcare market is expected to be partially offset by a number of factors such as:

- increased automation, which decreases the employed workforce and, therefore, the number of gloves required,

- multiple re-use and washing of gloves, which decreases the purchase of new gloves, and

- increased globalization of buyers and large specialized buying groups, which results in price compression.

PERSONAL HEALTHCARE SEGMENT

We estimate that in 1998 the total global condom market (excluding the Peoples Republic of China) was approximately $750 million with the U.S. market accounting for approximately $170 million. We believe that growth in this market will continue due to ongoing concerns regarding HIV and other sexually transmitted diseases, unwanted pregnancies and global population control. In addition, the shift in distribution channels from traditional outlets, such as pharmacies, to mass merchandisers and convenience stores, as well as marketing efforts emphasizing packaging improvements, the pleasure aspects of sex and increased brand awareness, are expected to contribute to growth in this market.

PRODUCTS

We believe our broad portfolio of products, geographic diversity and product development strategy, make us well positioned to address current industry dynamics. We design, develop, manufacture and market products through our Professional Healthcare division (medical examination and surgical gloves), Occupational Healthcare division (industrial and consumer gloves and, to a limited degree, protective clothing) and Personal Healthcare division (condoms).

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The following charts show the relative allocation of net sales and operating income (calculated as earnings before interest and taxes) for fiscal 1999 from each of our three business segments:

Net Sales and Operating Income In Fiscal 1999 by Business Segment

[EDGAR REPRESENTATION OF PIE CHARTS]

Total Net Sales.............................................  $738.4 million
     Occupational Healthcare................................  $377.5 million(51.1%)
     Professional Healthcare................................  $264.2 million(35.8%)
     Personal Healthcare....................................  $ 96.6 million(13.1%)

Total Income from Operations................................  $ 86.9 million
     Professional Healthcare................................  $ 46.9 million(53.9%)
     Occupational Healthcare................................  $ 34.6 million(39.8%)
     Personal Healthcare....................................  $  5.4 million(6.2%)

PROFESSIONAL HEALTHCARE SEGMENT

Net sales in fiscal 1999 of our medical examination gloves accounted for $124 million of the global medical examination glove market and sales of our surgical gloves accounted for $140 million of the global surgical glove market. Based on our estimates, the size of such markets in 1998 were approximately $1 billion and $500 million, respectively. Our sales of medical examination gloves reflects limited penetration of the alternate care sector of that market. Historically, we have not focused on the alternate care sector, which we estimate represents approximately 45% of the total U.S. medical examination glove market. We are now pursuing a strategy to gain a greater share of the alternate care market by leveraging our existing product base through additional distribution channels.

The various styles of surgical gloves that we sell include standard lightly powdered, latex powder-free, synthetic neoprene and polyurethane powder-free, orthopedic and micro-optic surgical gloves. Surgical gloves are specifically developed for use in the operating theater. Most of our surgical gloves are sold in sterilized pairs that are opened immediately prior to use. Our various styles of medical examination gloves include standard lightly powdered, latex powder-free, synthetic vinyl, synthetic nitrile and sterile. Most of our examination gloves are sold in boxes of large quantities of ambidextrous gloves. Examination gloves are generally less expensive than surgical gloves which require sterile packaging and have enhanced features. Physicians, dentists, dental hygienists, nurses and other healthcare professionals typically use and dispose of several examination gloves each work day to help reduce the risk of cross-infection during the examination and treatment of patients.

We believe that we are one of the largest manufacturers and marketers of medical examination and surgical gloves. Our medical examination and surgical gloves are marketed under the brands of Ansell and Ansell Perry and under specific product brands such as Gammex, Conform, Encore, NuTex, MicrOptic, X-AM, Synsation, DermaClean and Nitra-Touch. Through the pending acquisition of the medical glove business of Johnson & Johnson, we will add the following brand names: Micro-Touch, Maxxus, Neutralon, Ultralon, Surgikos, Dispos-a-Glove and Allergard.

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We are a premium quality manufacturer and innovator in the medical glove market with a long history of developing products that use advanced materials to meet the needs of our customers. The following table illustrates selected product innovations introduced over the last three years by our Professional Healthcare segment:

BRAND NAME            PRODUCT                       INNOVATION
----------            -------                       ----------
1999
Encore Acclaim        Latex surgical glove          Powder-free, damp-hand donnable, smooth
                                                      finish
Nitra-Tex EP          Nitrile extra-protection      First powder-free, extra long, added
                        exam glove                    protection nitrile exam glove
Sterile Synsation     Vinyl exam glove              Powder-free, sterile, high tensile
Sterile Nitra-Touch   Nitrile exam glove            Powder-free, sterile, nitrile exam glove
DermaClean PFC        Latex exam glove              Powder-free, no secondary chlorination,
                                                      improved grip
1998
Derma Prene PF        Neoprene surgical glove       Powder-free, damp-hand donnable
Elite                 Polyurethane surgical glove   First powder-free, polyurethane surgical
                                                      glove
Encore MicrOptic      Micro-thin surgical glove     Powder-free, micro-thin surgical glove
Nitra-Tex             Nitrile exam glove            Powder-free, textured finish
1997
Encore Orthopedic     Latex surgical glove          First powder-free, orthopedic glove
Synsation             Vinyl exam glove              Powder-free, high tensile glove
Nitra-Touch           Nitrile exam glove            First powder-free, synthetic glove approved
                                                      for use with chemotherapy

OCCUPATIONAL HEALTHCARE SEGMENT

As regulations and standards in the Occupational Healthcare segment intensify, the manufacturing and technological experience and expertise we have achieved in our Professional Healthcare segment can be employed in the design and manufacture of products for the growth sectors of our Occupational Healthcare segment. We believe that increased regulations and standards in the Occupational Healthcare segment may pose additional technological barriers to existing competitors and potential newcomers.

We estimate that in 1998 the total global industrial and consumer glove market was approximately $3.6 billion. We believe we are the global market leader in the manufacturing and marketing of synthetic and seamless knitted gloves portion of the market, servicing the industrial and consumer protective glove segment of the market in which we participate. Our net sales in this market in fiscal 1999 accounted for $377.5 million. We also have a global leadership position in the manufacturing and marketing of synthetic dipped and coated protective gloves and seamless automatically knitted gloves using engineered yarns for use in the industrial glove market. These gloves are principally branded Ansell Edmont. We also manufacture consumer gloves for sale primarily in Europe, the United States and Australia under the Ansell brand, as well as various private labels. As a result of our automated knitting and dipping processing technologies, we are one of only a few glove manufacturers capable of developing various types of specialized light, cut-resistant and ergonomically designed gloves using engineered yarns such as kevlar and spectra for many kinds of industrial and commercial applications. Our proprietary seamless knitting technology and engineered yarns know-how enables us to produce finished high performance industrial gloves and liners for polymer coated industrial gloves.

We are a premium quality manufacturer and innovator in the Occupational Healthcare market with a long history of developing innovative products that use advanced materials to meet the needs of our

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customers. The following table illustrates selected product innovations introduced over the last three years by our Occupational Healthcare segment:

BRAND NAME       INDUSTRY SECTOR               INNOVATION
----------       ---------------               ----------
1999
Nitrilite Silky  Critical Environment          Improved flexible formulation and ergonomic
                                                 shape to provide better dexterity and
                                                 electrostatic discharge properties
Foam Lined HHG   Food and Food Service         Foam lining technology provides improved
                 Consumer Market                 perspiration absorption and protection
                                                 against hot and cold in light duty
                                                 applications
ProFood          Food and Food Service         Range of food-safe gloves designed and
                                                 formulated to meet heightened food handling
                                                 and processing industry hygiene standards
1998
Hyflex           General Manufacturing         Light-duty seamless liner dipped in patented
                 Consumer Market                 nitrile foam formulation
Bull-hyd         General Manufacturing         Heavy-duty seamless liner dipped in patented
                                                 nitrile foam formulation
1997
Barrier          General Manufacturing         Highly chemical resistant glove (multi-layer
                                                 film with improved ergonomic properties)
                                                 that provides better comfort and fit
Thermaprene      Food and Food Service         Thermal liner, inside a neoprene shell with
                                                 heat and liquid-proof resistance
Touch n' Tuff    Food and Food Service         Thin nitrile technology that provides a
                 General Manufacturing           superior fit for a non-latex glove

Our protective gloves are sold to occupational safety supply companies, large industrial supply companies and various governmental agencies principally in the United States and Europe. The global market for occupational healthcare gloves is highly fragmented and has many small local competitors. Given the broad nature of the market, we have developed a focused strategy that concentrates on the following specific market sectors: critical environment, food and service, general manufacturing and the consumer market.

Critical Environment

The critical environment market sector includes semiconductor, electronics and other high technology manufacturers who require a controlled atmosphere or clean room environment. Our critical environment gloves protect the worker from the manufacturing process and protect the manufactured product from contamination by the worker or the environment. The rapid growth in demand for micro-electronic components which require extremely clean manufacturing conditions, as well as the need for non-shedding gloves, are expected to continue to drive growth in this market. We intend to expand our efforts to develop new gloves specifically designed for this market, such as our Nitrilite and Accutech lines.

Food and Food Service

We offer a broad range of food-safe gloves developed exclusively for the worldwide food processing and food service industries. Participants in this industry are involved with the packing, processing, preparation and service of various food products. The products that we market for this industry include the following brands: ProFood, Duratouch, Versatouch, Conform and Food Mates.

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General Manufacturing

The general manufacturing industry requires gloves designed to protect workers from cuts, bruises, chemicals, temperature extremes and other occupational hazards encountered in the work environment. The automotive and durable goods industries are a large part of this market. We combine our know-how in automatic seamless knitting of engineered yarns with our proprietary polymer dipping technology to develop lighter, more comfortable and task-specific gloves that address these industry needs. We manufacture and market products under the following brand names for this industry: Hynit, Hycron, Easyflex, Solvex, Bull-hyd and Hyflex.

Consumer Market

Light duty consumer application gloves are sold for both general household tasks and the Do-It-Yourself market sectors. Gloves for household use are sold to consumers primarily through traditional retail organizations, such as supermarkets and drug stores. Gloves for the Do-It-Yourself market are sold through specialist hardware and home improvement outlets. We view the consumer glove market as a mature market having relatively low growth potential, with the exception of the Do-It-Yourself market, which we expect will grow at a faster rate. Our consumer gloves are sold under the Ansell and Ansell Edmont brands and under private labels of various marketing organizations and retailers.

PERSONAL HEALTHCARE SEGMENT

We estimate that in 1998 the global condom market (excluding the Peoples Republic of China) was approximately $750 million. Net sales of our condoms accounted for $96 million of this market in fiscal 1999. We are a leading manufacturer and marketer of branded condoms worldwide with significant presence in the United States, Western Europe, India and Australia. We also sell branded and unbranded condoms in the worldwide public sector bid/tender market, where condoms are supplied for free or subsidized sale by population, health and social welfare programs, mainly in developing countries. We also participate in the contract market through sales of our branded condoms to government agencies in the United States.

We have multiple condom lines in the Personal Healthcare segment, with several different product variations in each line. We continue to add new products to provide additional options for our customers. We also use innovative marketing, merchandising and packaging to further differentiate our products from the competition. We manufacture and market a variety of condoms with different flavors, colors, lubricants and spermicides, as well as specialized shapes and textured features. Packaging is another important element in marketing condoms, which is why we recently introduced Discs for our LifeStyles brand. Discs is a thermoformed plastic tray with a peel back lid that we call a "butter-pack." This package is easy to open and also helps ensure that the condom is put on correctly each time.

We manufacture and market branded condoms worldwide, and we offer different brands in various markets including the following:

----------------------------------------------------------------------------------------------------
    MAIN MARKETS                                             BRAND NAMES
    ------------                                             -----------
    United States and Canada..............................   LifeStyles, Contempo
    Western Europe........................................   Benetton, LifeStyles, Manix, Primex
    Eastern Europe........................................   LifeStyles, KamaSutra
    United Kingdom........................................   Mates
    Latin America.........................................   Prime, Contempo, LifeStyles
    Australia.............................................   LifeStyles, Chekmate
    India and Southeast Asia..............................   KamaSutra
----------------------------------------------------------------------------------------------------

SALES AND MARKETING

Sales and marketing coverage in each of our business segments requires the use of several channels in order to accommodate customer needs and effectively cover the diverse industries and geographic regions

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we serve. We market our products to wholesale distributors, medical buying groups, governments, international aid agencies, institutions and retail chains either through our over 400 person global direct sales force or, in some countries, through agents and distributors.

Our sales and marketing strategy across all our business segments is to market to end-users in targeted market segments, quickly respond to new opportunities and achieve rapid new product implementation. Our direct, specialized sales representatives cover key growth segments through consultative selling. We also conduct comprehensive survey programs to gauge customer response and reaction to our products.

We participate in various workshops and educational programs relating to worker protection in order to promote our products and educate healthcare professionals and counselors in the appropriate use of our products. In addition, we have clinical consultants in the United States, Canada and Australia who work with customers and other end-users to provide advice regarding clinical barrier protection, allergy management, cost reduction and risk management. Our goal is to educate and provide the most recent information to consumers of our products.

PROFESSIONAL HEALTHCARE SEGMENT

Sales of Professional Healthcare products represented approximately 35.8% of our net sales for fiscal 1999. Our marketing efforts in the Professional Healthcare segment focus principally on the hospital, medical laboratory and dental markets. Sales to hospitals represented approximately 80% of the net sales of our Professional Healthcare division during fiscal 1999, while sales to medical laboratories, dental offices, veterinary offices and other clinics accounted for the balance.

Our direct sales forces in the major markets of the United States, Canada, Germany, the United Kingdom, France and Australia are responsible for sales of our Professional Healthcare products in those countries. We generally use regional and local distributors for sales of our medical gloves in countries where our presence is less significant.

A substantial portion of our U.S. sales of Professional Healthcare products are made through contracts with GPOs. GPOs accounted for 12.4%, 24.8%, 23.5% and 24.2% of our net sales of the Professional Healthcare segment in fiscal 1997, 1998, and 1999 and the six months ended December 31, 1999, respectively. GPOs evaluate and select suppliers based on several criteria, including price, quality and consistent and reliable service. GPO contracts enable us to be placed on a list of approved suppliers. Hospitals, clinical laboratories and other facilities that are members of GPOs are required or, in some cases, incentivized to purchase particular products from those approved suppliers. Hospitals are incentivized to purchase from approved suppliers because they can receive discounts and rebates from the supplier for purchasing larger volumes. We also have contracts with hospital buying groups which are similar to GPOs in that they seek to achieve economies of scale by aggregating multiple hospitals' purchases from us.

On December 21, 1999, Novation, one of our top three GPOs in fiscal 1999 based on net sales, advised us that our contract for the supply of latex medical exam gloves has been renewed. Moreover, we will be the only current latex exam glove contract participant to have their status renewed, and there will be two vendors on the new contract. The term of the contract is for three years with two one-year renewal periods if both parties agree to renew.

Final purchasing decisions by individual hospitals are customarily made by a hospital staff committee which evaluates products based on quality criteria, such as effectiveness, durability, comfort and avoidance of allergies, as well as price and value. Our sales representatives or distributors work with hospital personnel to ensure that our products are considered in the process and that their comparative advantages are known by the committee. Our sales staff also participate in healthcare industry trade shows to introduce prospective customers to our products and to generate sales orders for distributors. We also participate in various workshops and educational programs relating to healthcare worker protection and

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skin disorders in order to promote our products and educate the hospital and other personnel utilizing the products.

We plan to focus future marketing efforts on other healthcare professionals in physicians' offices, nursing homes, outpatient clinics, surgical centers, blood banks and other areas of the alternate-care market.

OCCUPATIONAL HEALTHCARE SEGMENT

Sales of our Occupational Healthcare products represented approximately 51.1% of our net sales during fiscal 1999. We use distributors for virtually all of our Occupational Healthcare products in all of our markets. In our major markets, the United States, Canada, Germany, the United Kingdom, France, Italy and Spain, these distributors are supported by our direct, specialized sales representatives who are responsible for sales to major end users. We intend to continue to increase the number of specialized sales representatives serving key end users in selected markets.

Our specialized sales representatives assist distributors by training and educating the distributors' sales forces with respect to our Occupational Healthcare products through specific and proprietary educational programs, training aids and literature on our products. They also spend a considerable amount of time helping key end users identify and resolve occupational hazard problems by conducting plant hand safety surveys and making recommendations for specific gloves in particular work situations. This consultative and educational approach reinforces our image of expertise and leadership with key end users and distributors.

Sales of our consumer and Do-It-Yourself gloves are made directly to distributors who purchase and brand our products with either an Ansell brand or their own labels. The distributors then resell to the consumers through traditional retail organizations such as supermarkets and drug stores. Gloves for the Do-It-Yourself market are also sold through specialist hardware and home improvement outlets.

PERSONAL HEALTHCARE SEGMENT

Sales of our condoms represented approximately 13.1% of our net sales during fiscal 1999. Sales of our retail branded condom products in North America, the United Kingdom, France, Australia, India, Italy, Spain and Germany are made primarily through our own sales force and, to a lesser extent, through distributors and commissioned brokers. We use regional and local distributors for sales of our retail branded condoms in other countries. In several European countries and the United States, sales of our retail branded condoms are also made in the public sector bid/tender market, where organizations, such as Planned Parenthood and various government and non-government agencies, purchase condoms for subsidized distribution to selected eligible groups within the community.

We have had success in introducing our products into non-traditional retail distribution channels, such as supermarkets, convenience stores, record stores, vending machines, and through the internet. In the United States, sales of our condoms are made directly to traditional and non-traditional retailers through our own sales force, with support from commissioned brokers.

In certain markets where we do not have a leadership position for our products, we rely on innovative brand strategies, such as the launch in 1998 of our licensed Benetton brand condom in the European market, to achieve an initial market position.

As part of our marketing program, we communicate at events throughout the world with young consumers -- those people most at risk for sexually transmitted diseases and unintended pregnancies. In the United States, we also offer free product information and samples through our website at www.lifestyles.com. In the United States and some other countries we have changed the advertising emphasis of our branded products from the need for protection to the pleasure aspects of sex. In many countries, we advertise on television, radio and print media. We promote our products on college campuses and through educational and event-type marketing. In Europe, Australia and Asia, we have several brands that have been established over a number of years. Specific marketing strategies are developed in other

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countries, in conjunction with our distributors and the retail trade, aiming to leverage the same themes and concepts worldwide.

Additional sales of our branded and unbranded condoms are made through competitive tenders or bids issued by government agencies, multinational public sector organizations (such as the World Health Organization) and by non-governmental organizations. The condoms are supplied through population, health and social welfare programs, mainly in developing countries, and after being purchased from us are generally distributed free or through subsidized sale, by the relevant organization.

RESEARCH AND DEVELOPMENT (WHICH WE CALL SCIENCE AND TECHNOLOGY)

Science and technology is a critical component of our focus on product innovation and manufacturing optimization. Historically, we have spent approximately 1.1-1.6% of our annual revenues on research and development, investing $8.3 million in fiscal 1999, $8.8 million in fiscal 1998 and $10.4 million in fiscal 1997. These efforts have resulted in more than 15% of our sales in each of the last three fiscal years coming from products that we have developed and that have been on the market for three years or less. Our science and technology efforts also focus on improving manufacturing techniques, which have contributed to several major process improvements and automation efficiencies in our plants. We intend to continue to invest in science and technology activities to develop additional products that will complement our glove and condom product lines and define new ways to streamline manufacturing.

We operate two major science and technology centers, one in Malaysia and one in the United States. Our highly qualified and experienced research staff at these centers develop new products and test existing products to determine potential improvements in design and quality. In addition, technical and process support exists in each of our main manufacturing locations worldwide.

The process of developing, testing and bringing new products to market may be lengthy, particularly for products that are regulated as medical devices (such as medical gloves and condoms) and may require notification to, and prior approval by, the FDA and similar approvals from non-U.S. regulatory agencies. Considering design control and other regulatory requirements, it can take twelve months to more than two years to bring a product from design inception to market. This process also depends on the complexity of the product or process. We currently have a number of projects at varying stages of development. These projects range from new product and material concepts to prototype products undergoing extensive consumer acceptability studies, field trials and consumer training.

Recent examples of successful products derived from our science and technology function include the:

- Hyflex line of gloves that offer a superior combination of fit, comfort and dexterity,

- critical environment nitrile glove which we believe is recognized as the industry quality standard,

- first commercial surgical glove made from polyurethane,

- first commercial synthetic neoprene surgical glove, and

- first commercial chlorinated powder-free surgical glove.

We have established relationships with several medical research institutions such as Georgetown University, Drexel University and Johns Hopkins University and we have contributed on an annual basis to scientific research programs at the University of Tampere in Finland and the Medical College of Wisconsin. Our sponsored research includes, among other things, the identification and isolation of natural rubber latex proteins which may contribute to latex allergies in some people. We use the results of this research to improve our product quality and we encourage the researchers to publish their findings in scientific journals as part of the AnsellCares program.

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ANSELLCARES

The AnsellCares Scientific Advisory Board, established in 1992, is composed of some of the leading latex allergy researchers worldwide. The Advisory Board's charter is to direct research into critical hand barrier protection issues, such as latex and chemical allergy, factors affecting glove barrier integrity and development of synthetic glove polymers. Research groups on three continents, with our support, are responsible for numerous scientific breakthroughs and have presented their work at many national and international allergy conferences. The output from our Advisory Board has paved the way for a greater understanding of these complex issues and, through publication and dissemination, has provided manufacturers with the tools necessary to reduce the allergenicity of their products and clinicians with guidelines on how to manage affected healthcare workers and patients and reduce the risk of sensitization for future generations. The AnsellCares program includes accredited continuing medical education programs, video presentations, technical bulletins, newsletters, as well as periodic lectures and seminars.

We provide pertinent information on a variety of glove related issues to healthcare professionals. In addition, we offer a number of literature summaries, along with a complete library of clinical articles. One of our newsletters, Source to Surgery, is a periodic publication edited by members of the Advisory Board. The newsletter summarizes developments associated with hand barrier protection, including natural rubber latex allergy. The newsletters also offer brief synopses of recently published articles and details regulatory efforts to address manufacturing and other relevant issues.

In addition, we have designed and implemented comprehensive educational programs to inform healthcare workers of the latest advances in hand barrier protection. For example, our Advanced Solutions programs include information regarding:

- product line selection           - glove utilization & management
- gloving techniques               - hand barrier protection
- latex allergy management         - risk management

MANUFACTURING

We currently manufacture our products at eighteen factories in seven countries: Malaysia (premium surgical, powder-free examination and latex-light-duty gloves), Sri Lanka (premium surgical gloves, powder-free examination gloves and supported dipped synthetic gloves), Thailand (condoms, powder-free examination gloves, latex light-duty gloves and critical environment gloves), India (standard surgical gloves and condoms), the United Kingdom (synthetic dipped gloves), the United States (synthetic dipped, seamless knitted, premium surgical and critical environment gloves) and Mexico (synthetic dipped gloves). In addition, we operate packaging and warehouse facilities in Australia, South Africa, the United Kingdom, France, Belgium and Mexico. The majority of our factories are located in Southeast Asia in order to be close to the rubber tree plantations, which are our source of natural latex, as well as for the favorable cost and availability of labor and favorable tax treatment in certain countries.

During fiscal 1998 and 1999 and the six months ended December 31, 1999, we invested $16 million, $30 million and $12 million, respectively, to increase and convert production capacity in Thailand, Malaysia, Sri Lanka and the United States. This is enabling us to expand production of powder-free and low allergenic medical examination gloves in our Southeast Asia facilities, and to relocate all of our condom manufacturing from Dothan, Alabama to Surat Thani, Thailand. It also is enabling us to expand our Troy, Alabama critical environment glove plant, and convert our Dothan, Alabama plant to a synthetic nitrile glove facility capable of producing gloves for both our Professional and Occupational Healthcare segments. We plan to continue installing proprietary automation throughout our operations, including automation for testing, processing and prepackaging of our products, in order to reduce manufacturing lead time and costs, while at the same time increasing product quality and efficiency.

The FDA's Quality System Regulation specifies good manufacturing practices (known as QSR/GMP requirements) for medical devices. These requirements provide that, from design to raw materials through to finished product, our manufacturing process is designed to be carefully documented and validated,

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conducted in accordance with standard operating procedures and routinely assessed by a series of in-process tests and quality control procedures, designed to help assure that the company consistently produces high quality products. See "Government Regulation and Quality Control -- U.S. Government Regulation" for a discussion regarding the most recent inspection of our manufacturing facility in Dothan, Alabama. Our manufacturing technology is designed to ensure that the products we produce provide effective protection and are low in extractable proteins and chemicals. Our manufacturing capabilities allow us to produce condoms, standard and premium surgical, medical examination and commercial light and heavy duty gloves, as well as advanced polymer-coated powder-free gloves, of complex design and construction.

We have an ongoing commitment to worker safety at our facilities. Over each of the last three years, we have consistently reduced the number and severity of work-related injuries. For example, days lost per 100 employees have decreased from 21 days in fiscal 1997 to 6.2 in fiscal 1999, despite the addition of several acquired facilities in less-developed countries.

Our major raw materials are natural and synthetic latex, chemicals, plastics, cotton, synthetic yarns and packaging materials. Natural latex and other raw materials are generally available from several sources and distributors, with natural latex production confined largely to countries in Southeast Asia. We have had no significant raw material supply problems to date. Although latex is one of our primary raw materials, it only accounted for approximately 7% of overall cost of goods sold in fiscal 1999.

In fiscal 1999, we outsourced approximately $80 million of finished goods for resale. We have established accreditation procedures to ensure that the manufacturing facilities and products that we outsource meet our standards and those of applicable regulatory agencies. We look to outsource finished goods for resale when we believe we can acquire the product more efficiently than manufacturing the product ourselves. This occurs, for example, with products that are not technologically advanced and that are readily available at a low cost in the market, such as standard powdered latex examination gloves, disposable vinyl gloves and lower sales volume products. We also outsource to fill temporary imbalances between product demand and manufacturing capacity.

GOVERNMENT REGULATION AND QUALITY CONTROL

All of the countries in which we market our products have regulations of varying degrees affecting our products. These regulations have been particularly advanced in the United States by the Safe Medical Devices Act of 1990; and in Europe, with the completion of the work required by the Single European Act of 1986 and its on-going implementation. In addition, harmonization of regulatory requirements on an international basis has led to the adoption of an international quality management system standard which is being implemented progressively by various regulatory authorities including the FDA and the Commission of the European Union.

U.S. GOVERNMENT REGULATION

In the United States, products offered through our Professional Healthcare and Personal Healthcare segments are regulated as medical devices under the Federal Food, Drug and Cosmetic Act (the FDC Act) by the FDA. We believe that all of our products regulated by the FDC Act are in compliance in all material respects with the relevant sections of the FDC Act and the advice and guidance provided by the FDA.

Medical devices are regulated under the FDC Act in three separate classes (Class I, Class II and Class III). Class I devices are those considered to require the least regulation to assure their safety and effectiveness. They are subject only to the FDC Act's "general controls" including, unless specifically exempted, the QSR/GMP requirements. In addition, virtually all Class I devices have been exempted from the Section 510(k) premarket notification requirements (as described below), except those Class I devices deemed by the FDA to present a potential unreasonable risk of illness or injury or intended for a use which is of substantial importance in preventing impairment of human heath. Class II devices are those for which the general controls alone are not sufficient to ensure safety and effectiveness and for

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which the FDA is authorized to impose "special controls" to provide such assurance. Class III devices are those for which neither general controls nor special controls, either alone or in combination, are adequate to ensure safety and effectiveness and for which the FDA is authorized to require prior approval of a premarket approval application. We do not currently manufacture or market any Class III devices. Condoms are generally regulated by the FDA as Class II devices. Medical examination and surgical gloves are currently regulated as Class I devices that are not exempt from either the 510(k) premarket notification or QSR/GMP requirements.

With the growing concerns the FDA has had with quality and allergy issues with respect to all medical gloves, the FDA has proposed that both surgical gloves and medical examination gloves be reclassified as Class II medical devices which would be subject to new labeling requirements for powder and protein levels. This reclassification, if it occurs, is expected to make entry into this market more difficult as companies will be required to maintain a suitable infrastructure to fully document, implement and audit the requirements of the new regulations if and when they go into effect. The reclassification of surgical and medical examination gloves from Class I to Class II would subject glove manufacturers to additional requirements applicable to the manufacturing, testing and labeling of their products.

Medical device manufacturers are subject to periodic inspection by the FDA for compliance with the FDA's current QSR/GMP requirements. The FDA has a number of compliance and enforcement procedures when deviations from QSR/GMP requirements are observed during such inspections. Which procedures are used depends upon the seriousness of the observations as well as the compliance history of the facility inspected and the company owning it. As a general matter, the FDA often seeks to resolve observed QSR/GMP deficiencies on a voluntary basis without resorting to formal administrative enforcement action. In many cases, the FDA and the affected company enter into an agreement whereby the company retains one or more recognized, expert consultants to assist the company in achieving substantial compliance with the relevant QSR/GMP requirements and to certify that such efforts have been successful. When observed QSR/GMP deficiencies cannot be resolved through voluntary action, the FDA has the option of initiating further enforcement action as described below.

Failure to comply with applicable regulatory requirements can result in administrative enforcement, such as:

- warning letters,

- import alerts,

- product bans,

- field corrections,

- seizures,

- recalls,

- injunctions,

- civil penalties,

- fines based on the equitable remedy of disgorgement,

- adverse publicity issued by the FDA and

- criminal prosecutions.

Each manufacturing operation of Ansell has a Quality Assurance/Quality Control (QA/QC) department with its own budget. Also, we operate in a total quality environment where all participants in the manufacturing process are responsible for quality. It is the responsibility of the QA/QC department along with manufacturing to maintain the quality systems and records.

The FDA has periodically inspected most of our manufacturing facilities, including our overseas manufacturing facilities and has made observations on how our manufacturing operations could be improved. In upgrading our manufacturing facilities to address the FDA's observations and evolving technology and to otherwise comply with QSR/GMP requirements, we have and will continue to expend time, monies and efforts in the areas of product and quality control.

Our Dothan, Alabama manufacturing facility was inspected by the FDA in August and September 1999 and a number of inspectional observations were made, including observations with respect to QSR/ GMP requirements. We responded to these observations and met with the FDA on November 10 and November 22, 1999. We are continuing to operate the facility and retained a consulting firm to help us

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upgrade manufacturing and quality control procedures with the objective of satisfying the FDA and obtaining certification that the facility is in compliance with QSR/GMP requirements. We anticipate having the Dothan plant certified by December 2000.

The FDA currently requires manufacturers intending to market a new medical examination glove, surgical glove or condom to obtain prior 510(k) clearance. Although we typically have not experienced delays in obtaining 510(k) clearance for new medical examination glove, surgical glove or condom products, there can be no assurance that we will not experience such delays for future products. An adverse determination by the FDA or a request for additional data or information could have the effect of delaying or precluding 510(k) clearance and, at the same time, could materially delay or block the commencement of marketing new medical examination glove, surgical glove or condom products.

Changes in existing requirements or adoption of new requirements could adversely affect our ability to comply with regulatory requirements. Failure to comply with regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

EUROPEAN GOVERNMENT REGULATION

As part of the process of unification in Europe, the European Community through the European Committee for Standardization (CEN) has developed common sets of standards for each of condoms and medical and industrial gloves.

The CEN standards are legally mandatory. Products that are sold in Europe must be tested to these standards by an independent testing firm, and once products pass these tests, such products are entitled to display the CE mark to signify general compliance. There is also a series of standardized pictograms to identify certain characteristics of the gloves, such as the glove's effectiveness against physical hazards, chemical hazards, cold or heat resistance and microorganisms. Gloves which pass the minimum qualifications in the appropriate tests are entitled to have these pictograms displayed on their labels.

All of our gloves and condoms sold in Europe now carry the CE mark. Pictograms and levels of performance are included in our European catalog with respect to our Occupational Healthcare gloves. We carried out a very extensive testing program in order to achieve these goals.

The European Community is also having considerable influence on the rest of the world with respect to standardization. The Vienna Agreement is a formal statement of joint policy between the CEN and the ISO, the International Standards Organization. Under this agreement, the two organizations will not develop competing standards, and standards which are being developed within one of these organizations will have a fast track for approval by the other.

In connection with the harmonization of market conditions in Europe, all of the areas and product segments within Europe in which we currently operate are subject to Directives issued by the European Commission. These are mandatory safety requirements that must be verified by an independent testing firm before products are sold in the European Economic Area (which are the fifteen states of the European Union plus Iceland, Norway and Liechtenstein), and products or their packaging must display a CE mark to show compliance with these requirements. In addition, the effect of these legislative controls has been extended into the wider area covered by the European Economic Area.

Condoms and medical gloves are regulated by Directive 93/42/EEC of the European Commission on medical devices that came into effect on January 1, 1995. This directive regulates the sale of all medical devices throughout the European Union and the European Economic Area. Our condoms and medical gloves are in compliance with the requirements of this directive and all relevant standards (including rules for the affixing and use of CE conformity marking set forth by Directive 93/465/EEC of the European Commission) allowing these products to carry the CE mark and to be sold in all European countries without further approval.

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OTHER GOVERNMENT REGULATION

Whether or not the FDA clearance is obtained for a new product, approval or clearance of a product by regulatory authorities in foreign countries may be required prior to the commencement of sales of the product in such countries. The requirements governing product approvals or clearances vary widely from country to country, and the time required for approval may be longer or shorter than that required for FDA approval.

Additionally, we operate plants in the United Kingdom, Malaysia, Sri Lanka, Thailand, Mexico and India. The occupational, health and safety laws and regulations vary dramatically within these countries. Our policy is to comply with all the prescribed regulations and to ensure that an internationally acceptable work environment is provided for employees. We coordinate our international occupational health and safety program through our Global Safety, Health and Environment Director. All plants are required to report on all occupational health and safety issues on a monthly basis to senior management.

ENVIRONMENTAL MATTERS

We are subject to regulations pertaining to factory discharges and emissions promulgated by the respective environmental regulatory authorities in the United States, the United Kingdom, Malaysia, Thailand, Sri Lanka, Mexico and India, which have enforceable parameters for discharges to air, water and landfills. Both U.S. and non-U.S. environmental regulatory authorities conduct random inspections of our facilities for, among other things, compliance with acceptable noise and dust levels and other environmental regulations.

We seek to ensure that we operate within the recognized international standards for environmental protection by using water based systems in all of our manufacturing operations in order to avoid the complication or potential hazards associated with solvent based systems. We have also embarked on a program of water and energy conservation by recycling water, installing thermal insulation and operating energy efficient processes. In addition, we have a Global Safety, Health and Environment Director whose responsibility is to ensure that the necessary systems are in place to provide workers in our facilities with a safe and healthy work environment. The performance of each of our plants is monitored on a monthly basis by senior management.

While we believe that our operations comply, in all material respects, with applicable environmental laws and regulations, we are presently undertaking, and in the future may be required to undertake, work to correct instances of noncompliance with environmental laws and regulations and to address contamination at a number of our facilities. Although there can be no assurance that the development or discovery of facts or conditions will not result in environmental liabilities that have a material effect upon our capital expenditures, earnings or competitive position, based on information currently available, we do not expect our environmental liabilities to have such a material effect.

COMPETITION

All of the markets in which we operate are competitive. We compete in the overall medical gloves market on the basis of innovation, product quality, price and service. The global industrial gloves market is largely fragmented with many local manufacturers with product customization and customer service providing the basis for competitive differentiation. Generally, competition in the condom market is based on perceived brand quality, innovation and customer service, as well as price in the public bid/tender market.

The failure to continue to distinguish our products on the basis of quality, reliability and value could have a material adverse effect on our business and results of operations. Further, we cannot assure you that our competitors or others will not develop products, manufacturing processes or new technologies which would be more cost effective or more efficient than ours. Such competition could have a material adverse effect on our business, financial condition and results of operations.

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We face competition with each of our products from a variety of sources, including international and local producers. We have seven major international competitors for our products. We are the largest marketer on a global basis in protective gloves, but not necessarily in each individual country. Our major international competitors are:

PROFESSIONAL HEALTHCARE

- SSL International plc (formed by a merger of London International Group and Seton Scholl Healthcare International), which competes with us globally.

- Cardinal Health Inc., which distributes and manufactures medical gloves through Allegiance, and competes with us globally.

- Safeskin Corporation, a U.S. company (which has entered into an agreement to be acquired by Kimberly Clark) competes with us in the United States and Europe.

OCCUPATIONAL HEALTHCARE

- Mapa-Spontex, a French company which competes with us in Europe's consumer sector and primarily produces household and light industrial gloves.

- Best Gloves, a U.S. company that competes with us globally.

- SHOWA, our dominant competitor in Japan which competes with Ansell Golden Needles gloves, primarily produces household and light industrial gloves.

PERSONAL HEALTHCARE

- Carter Wallace Inc., which is our major branded condom competitor in the United States.

- SSL International which competes with us globally.

Factors that further our competitive position are:

- our in-house Science and Technology capabilities,

- our high quality manufacturing capabilities,

- our in-house direct sales force,

- our established brands and reputation,

- the quality of our products,

- the training of our customers in the use of our products,

- the global infrastructure that we have in place, and

- our history as an industry consolidator.

Factors that negatively affect our competitive position are:

- our competitors may have stronger financial and management resources, and

- the challenges we face in protecting our innovations from being duplicated.

INTELLECTUAL PROPERTY

We rely upon a combination of patent, trade secret and trademark law to protect our intellectual property. We currently hold over 140 patents in the United States and in other countries on some of our significant products and manufacturing processes. However, we consider that our technological skill, new product development and frequent product enhancements are essential in establishing a technological leadership position. Therefore, we believe that the expiration or loss of any one of our patents would not have a material affect on our operations.

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We rely on trade secrets and continuing technological advancement to maintain our competitive position. We typically enter into confidentiality agreements with our employees and consultants. That are involved in the development of our new technologies and manufacturing processes which further protect our proprietary rights. Nonetheless, unauthorized parties may obtain and use our proprietary property or develop products with the same functionality as our products. In addition, there can be no assurance that these measures will prevent access, unauthorized disclosure or use of our trade secrets and know-how. Further, we cannot be certain that we have taken all the steps to prevent the misappropriation of our proprietary property, particularly in foreign countries where the laws may not protect rights as fully as do the laws in the United States.

Our principal trademarks, which are registered in the United States and other countries, are Ansell, Ansell Edmont, Ansell Perry, Golden Needles, LifeStyles and, after the completion of the pending acquisition of the medical glove business of Johnson & Johnson, Micro-Touch. These trademarks are, individually, of material importance to our business as they have the effect of developing brand identification and maintaining customer loyalty.

We are not aware of any fact that would negatively impact the continuing validity or enforceability of any of our patents or trademarks or that would negatively impact the continuing use of our technology or trademarks. We cannot guarantee that our patents will not be found invalid or that any issued patent will provide protection that has commercial significance. Litigation may be necessary to protect our patent position which can be costly and time consuming.

EMPLOYEES

As of June 30, 1999, we employed approximately 12,000 people worldwide, of whom approximately 91% were employed in manufacturing operations (including logistics and quality control), 7% in sales and marketing activity, 1% in administration and 1% in science and technology. Approximately 17% of our employees are members of recognized trade unions. The length of these union contracts are typically three year terms. We believe that relations with our employees are good.

PROPERTIES AND FACILITIES

Our principal executive offices are located in Red Bank, New Jersey, where we lease 23,000 square feet of office space. In addition, we have sales, distribution, research and manufacturing operations in various properties and facilities that we own or lease throughout the world.

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The following table lists our principal facilities:

                                                         TYPE OF FACILITY
                                             ----------------------------------------
                                  OWNED                      DISTRIBUTION    SALES &    SQUARE FEET
                                OR LEASED    MANUFACTURING    PACKAGING     MARKETING   OF BUILDING
                                -----------  -------------   ------------   ---------   -----------
Glen Waverley, Australia          Leased                                           X       13,000
Aalst, Belgium                    Leased                             X             X       71,000
Cowansville, Canada               Owned                              X             X       50,000
Cergy, France                     Leased                             X             X       27,000
Munich, Germany                   Leased                                           X        8,000
Aurangabad, India                 Leased              X                                    59,000
Bangalore, India                  Leased              X                                    43,000
Bangalore, India                  Leased              X                                    74,000
Melaka, Malaysia                  Owned               X                                   277,000
Kedah, Malaysia                   Owned               X                                   204,000
Juarez, Mexico                    Owned               X                                    97,000
Juarez, Mexico                    Leased                             X                     50,000
Pietermaritzburg, South
  Africa                          Leased                             X                     12,000
Colombo, Sri Lanka                Owned               X                                   430,000
Bangkok, Thailand                 Owned               X                                   356,000
Surat Thani, Thailand             Owned               X                                   233,000
Newark, United Kingdom            Leased                             X                     12,000
Redditch, United Kingdom          Owned               X                                    30,000
Surbiton, United Kingdom          Leased                                           X        4,500
Tamworth, United Kingdom          Leased                             X                     25,000
Dothan, Alabama                   Owned               X                                   141,000
Dothan, Alabama                   Leased                             X                    102,000
Troy, Alabama                     Leased              X                                   125,000
Tarboro, North Carolina           Owned               X                                   100,000
Thomasville, North Carolina       Owned               X                                    88,000
Wilkesboro, North Carolina     Owned/Leased           X                                   286,000
Coshocton, Ohio                   Owned               X              X             X      375,000
Massillon, Ohio                   Owned               X              X             X      192,000


                                          BUSINESS SEGMENT
                               --------------------------------------
                               PROFESSIONAL   OCCUPATIONAL   PERSONAL
                               ------------   ------------   --------
Glen Waverley, Australia               X              X            X
Aalst, Belgium                                        X
Cowansville, Canada                    X              X            X
Cergy, France                          X                           X
Munich, Germany                        X
Aurangabad, India                                                  X
Bangalore, India                       X
Bangalore, India                                                   X
Melaka, Malaysia                       X
Kedah, Malaysia                        X              X
Juarez, Mexico                                        X
Juarez, Mexico                         X
Pietermaritzburg, South
  Africa                                                           X
Colombo, Sri Lanka                     X              X
Bangkok, Thailand                      X              X
Surat Thani, Thailand                                              X
Newark, United Kingdom                                X
Redditch, United Kingdom                              X
Surbiton, United Kingdom               X                           X
Tamworth, United Kingdom               X                           X
Dothan, Alabama                        X              X            X
Dothan, Alabama                                                    X
Troy, Alabama                                         X
Tarboro, North Carolina                               X
Thomasville, North Carolina                           X
Wilkesboro, North Carolina                            X
Coshocton, Ohio                                       X
Massillon, Ohio                        X

We operate various of our manufacturing and distribution facilities under long term leases, the majority of which expire at various dates beginning in 2004. The leases for our manufacturing facility in Wilkesboro, North Carolina expire in April 2000 and the leases for our distribution and packaging facilities in Dothan, Alabama and Juarez, Mexico will both expire in November 2000. In addition to these facilities, we rent public warehousing facilities in the United States, France, Germany and Australia. Our science and technology activities are principally conducted in our facilities located in Melaka, Malaysia and Massillon, Ohio.

We consider all of our principal manufacturing facilities and other principal properties to be in good condition and adequate to meet the current needs of our operations. As described under "Manufacturing" above, we are undergoing some facility conversions and moving production among different manufacturing facilities.

We have a continuing global program for improving our properties, including the retirement or improvement of older facilities and the construction of new facilities in order to maintain and achieve world-class status facilities. This program includes improvement and expansion of manufacturing facilities to enable production and quality control programs to meet or exceed the current state of technology and government regulations.

LEGAL PROCEEDINGS

As of January 31, 2000, we (along with a number of other manufacturers and distributors of latex gloves) were defendants in 310 lawsuits in the U.S. and two in Australia that have been filed since 1993 on behalf of individuals alleging wrongful death, personal injuries and lost wages as a result of their exposure to natural rubber latex gloves. The lawsuits claim among other things that we and other manufacturers of latex gloves, were negligent in the design and manufacture of the gloves and failed to give adequate warnings of the possibility of allergic reactions. As of January 31, 2000, the 310 lawsuits

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pending against us in the United States represented approximately 50% of latex related cases filed against all defendants in the United States. 195 of the U.S. cases have been consolidated for discovery pursuant to the rules on multi-district litigation before the U.S. District Court for the Eastern District of Pennsylvania. The remaining 115 cases are spread through state courts in 35 states, with the greatest concentration in California (18 cases). In the United States, we had 167 and 257 latex allergy lawsuits pending against us at June 30, 1998 and June 30, 1999, respectively. We are unable to anticipate how many additional plaintiffs may file similar lawsuits or how many lawsuits may be filed in other countries.

The latex gloves cases in which Ansell is a defendant are still in the discovery phase of litigation. Because of the uncertainty as to the outcome of these cases, created by the presence of multiple defendants in these cases, the difficulty of establishing who manufactured the natural rubber latex gloves which were used by particular plaintiffs and the need to determine whether latex gloves were the cause of any particular injury, any liability that we may incur in relation to these claims cannot be quantified.

We are a party to various other non-latex allergy proceedings, including environmental matters, incidental to the normal course of business. We do not expect that any of such proceedings will have a material adverse effect on our financial position, results of operations or liquidity.

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BROKERAGE PARTNERS