1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
Commission File Number 1-09623
IVAX CORPORATION
FLORIDA 16-1003559
- -------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33137
---------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 575-6000
--------------
(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 [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
159,735,762 SHARES OF COMMON STOCK, $.10 PAR VALUE, OUTSTANDING AS OF APRIL 30,
2001.
2
IVAX CORPORATION
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000 ......................................... 2
Consolidated Statements of Operations
for the three months ended March 31, 2001 and 2000 ............ 3
Consolidated Statements of Cash Flows
for the three months ended March 31, 2001 and 2000 ............ 5
Notes to Consolidated Financial Statements .................... 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 14
Item 3 - Quantitative and Qualitative Disclosures About Market Risk .... 19
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ............................................. 20
Item 2 - Changes in Securities and Use of Proceeds ..................... 20
Item 6 - Exhibits and Reports on Form 8-K .............................. 20
i
3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
MARCH 31, DECEMBER 31,
2001 2000
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 203,045 $ 251,528
Accounts receivable, net of allowances for doubtful
accounts of $18,392 in 2001 and $19,703 in 2000 189,990 155,685
Inventories 197,550 178,910
Other current assets 66,380 72,991
----------- -----------
Total current assets 656,965 659,114
Property, plant and equipment, net 273,834 250,852
Intangible assets, net 248,337 117,171
Other assets 42,053 41,049
----------- -----------
Total assets $ 1,221,189 $ 1,068,186
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 20,257 $ 1,877
Current portion of long-term debt 977 934
Accounts payable 57,244 49,951
Accrued income taxes payable 23,575 11,854
Accrued expenses and other current liabilities 157,767 156,008
----------- -----------
Total current liabilities 259,820 220,624
Long-term debt, net of current portion 253,616 253,755
Other long-term liabilities 33,241 23,472
Minority interest 14,467 1,712
Shareholders' equity:
Common stock, $.10 par value, authorized 437,500 (350,000 shares pre-split),
issued and outstanding 199,773 in 2001 and 198,547 in 2000 19,977 19,855
Capital in excess of par value 383,067 315,039
Put options 62,500 84,503
Retained earnings 263,338 203,206
Accumulated other comprehensive loss (68,837) (53,980)
----------- -----------
Total shareholders' equity 660,045 568,623
----------- -----------
Total liabilities and shareholders' equity $ 1,221,189 $ 1,068,186
=========== ===========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE BALANCE SHEETS.
2
4
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
2001 2000
--------- ---------
THREE MONTHS ENDED MARCH 31,
(In thousands, except per share data)
Net revenues $ 259,932 $ 183,258
Cost of sales 123,724 95,173
--------- ---------
Gross profit 136,208 88,085
--------- ---------
Operating expenses:
Selling 27,502 17,979
General and administrative 23,721 24,175
Research and development 18,883 15,456
Amortization of intangible assets 3,593 1,967
--------- ---------
Total operating expenses 73,699 59,577
--------- ---------
Income from operations 62,509 28,508
Other income (expense):
Interest income 3,808 1,054
Interest expense (4,359) (2,042)
Other income, net 1,750 4,822
Gain on partial sale of IVAX Diagnostics, Inc. 10,278 --
--------- ---------
Total other income 11,477 3,834
--------- ---------
Income from continuing operations before income taxes
and minority interest 73,986 32,342
Provision for income taxes 13,755 5,440
--------- ---------
Income from continuing operations before minority interest 60,231 26,902
Minority interest (99) (236)
--------- ---------
Income from continuing operations 60,132 26,666
Cumulative effect of a change in accounting principle, net of
tax benefit of $2,773 in 2000 -- (6,471)
--------- ---------
Net income $ 60,132 $ 20,195
========= =========
(Continued)
3
5
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continuation)
2001 2000
----------- -----------
THREE MONTHS ENDED MARCH 31,
(In thousands, except per share data)
BASIC EARNINGS PER COMMON SHARE (PRE-SPLIT):
Continuing operations $ 0.38 $ 0.17
Cumulative effect of a change in accounting principle -- (0.04)
----------- -----------
Net income $ 0.38 $ 0.13
=========== ===========
DILUTED EARNINGS PER COMMON SHARE (PRE-SPLIT):
Continuing operations $ 0.36 $ 0.17
Cumulative effect of a change in accounting principle -- (0.04)
----------- -----------
Net income $ 0.36 $ 0.13
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (PRE-SPLIT):
Basic 159,404 153,764
=========== ===========
Diluted 165,016 160,042
=========== ===========
-------------------------------------
BASIC EARNINGS PER COMMON SHARE (POST-SPLIT):
Continuing operations $ 0.30 $ 0.14
Cumulative effect of a change in accounting principle -- (0.03)
----------- -----------
Net income $ 0.30 $ 0.11
=========== ===========
DILUTED EARNINGS PER COMMON SHARE (POST-SPLIT):
Continuing operations $ 0.29 $ 0.13
Cumulative effect of a change in accounting principle -- (0.03)
----------- -----------
Net income $ 0.29 $ 0.10
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (POST-SPLIT):
Basic 199,255 192,205
=========== ===========
Diluted 206,270 200,053
=========== ===========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
AN INTEGRAL PART OF THESE STATEMENTS.
4
6
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
2001 2000
--------- --------
THREE MONTHS ENDED MARCH 31,
(In thousands, except per share data)
Cash flows from operating activities:
Net income $ 60,132 $ 20,195
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 10,529 8,142
Deferred tax provision (1,115) 762
Tax effect of stock option exercises 1,642 --
Compensation expense related to partial sale of IVAX
Diagnostics 1,041 --
Provision for doubtful accounts 421 226
Provision for inventory obsolescence 5,140 1,037
Minority interest 99 236
Equity in earnings of affiliates (388) (539)
Gain on partial sale of IVAX Diagnostics (10,278) --
Gain on sale of product rights (1,290) (769)
Gains (losses) on disposal of assets, net 362 (991)
Cumulative effect of a change in accounting principle -- 6,471
Changes in operating assets and liabilities:
Accounts receivable (16,227) 10,172
Inventories (2,952) (7,882)
Other current assets 3,748 9,931
Other assets 2,318 (1,026)
Accounts payable, accrued expenses, and other
current liabilities 7,639 79
Other long-term liabilities 3,439 (1,366)
Other, net (291) --
--------- --------
Net cash flows from operating activities 63,969 44,678
--------- --------
Cash flows from investing activities:
Proceeds from sale of product rights 1,230 769
Capital expenditures (9,171) (9,348)
Proceeds from sales of assets 22 23
Proceeds from partial sale of IVAX Diagnostics 22,285 --
Acquisitions of patents, trademarks, licenses and other
intangibles (10,925) (161)
Acquisitions of businesses, net of cash acquired (59,401) --
Investment in affiliated companies (5,197) --
--------- --------
Net cash flows from investing activities (61,157) (8,717)
--------- --------
Cash flows from financing activities:
Borrowings on long-term debt and loans payable 1,093 761
Payments on long-term debt and loans payable (2,212) (1,301)
Exercise of stock options and employee stock purchases 4,120 15,604
Repurchase of common stock net of put option premium (53,482) --
--------- --------
Net cash flows from financing activities (50,481) 15,064
--------- --------
Effect of exchange rate changes on cash and cash equivalents (814) 3,847
--------- --------
Net increase (decrease) in cash and cash equivalents (48,483) 54,872
Cash and cash equivalents at the beginning of the year 251,528 41,408
--------- --------
Cash and cash equivalents at the end of the period $ 203,045 $ 96,280
========= ========
(Continued)
5
7
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continuation)
2001 2000
--------- ----------
THREE MONTHS ENDED MARCH 31,
(In thousands, except per share data)
Supplemental disclosures:
Interest paid $ 104 $ 1,950
========= ==========
Income tax payments $ 863 $ 634
========= ==========
Supplemental schedule of non-cash investing and financing activities:
Information with respect to acquisitions which were accounted for under
the purchase method of accounting is summarized as follows:
Fair value of assets acquired $ 84,197
Liabilities assumed 56,536
---------
27,661
Reduction of minority interest --
---------
Net assets acquired 27,661
---------
Purchase price:
Cash, net of cash acquired 59,374
Acquisition costs 27
Fair market value of stock and options issued 93,365
---------
Total 152,766
---------
Goodwill $ 125,105
=========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
AN INTEGRAL PART OF THESE STATEMENTS.
6
8
IVAX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data)
(1) GENERAL:
The accompanying unaudited interim consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q and, therefore, do not include
all information normally included in audited financial statements. However, in
the opinion of management, all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the results of operations, financial
position and cash flows have been made. The results of operations and cash flows
for the three months ended March 31, 2001 are not necessarily indicative of the
results of operations and cash flows which may be reported for the remainder of
2001. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes to
consolidated financial statements included in IVAX' Annual Report on Form 10-K
for the year ended December 31, 2000.
Certain prior period amounts presented in the consolidated financial
statements have been reclassified to conform to the current period's
presentation.
(2) INVENTORIES:
Inventories consist of the following:
MARCH 31, DECEMBER 31,
2001 2000
---------- ------------
Raw materials $ 79,365 $ 72,991
Work-in-process 29,695 27,683
Finished goods 88,490 78,236
-------- --------
Total inventories $197,550 $178,910
======== ========
(3) EARNINGS PER SHARE:
On April 20, 2001, IVAX' Board of Directors approved a 5-for-4 stock
split effective May 18, 2001, in the form of a stock dividend for shareholders
of record on May 1, 2001 and to increase the number of authorized shares
proportionately. All share and per share amounts have been retroactively
restated for the split, except where otherwise indicated. A reconciliation of
the denominator of the basic and diluted earnings per share computation for
income from continuing operations is as follows:
2001 2000
------- -------
THREE MONTHS ENDED MARCH 31,
Basic weighted average number of shares outstanding 199,255 192,205
Effect of dilutive securities - stock options and warrants 7,015 7,848
------- -------
Diluted weighted average number of shares outstanding 206,270 200,053
======= =======
Not included in the calculation of diluted earnings per
share because their impact is antidilutive:
Stock options outstanding 2,654 2,278
Convertible debt 8,412 --
Put options -- 2,110
7
9
(4) REVENUES:
Net revenues are comprised of gross revenues less provisions for
expected customer returns, inventory credits, discounts, promotional allowances,
volume rebates, chargebacks and other allowances. The reserve balances related
to these provisions are included in "Accounts receivable, net of allowances for
doubtful accounts" and "Accrued expenses and other current liabilities" in the
accompanying consolidated balance sheets in the amounts of $53,673 and $64,544,
respectively, at March 31, 2001 and $51,080 and $63,448, respectively, at
December 31, 2000.
(5) PARTIAL SALE OF IVAX DIAGNOSTICS, INC.:
On March 14, 2001, IVAX' wholly-owned subsidiary, IVAX Diagnostics,
Inc., was merged with b2bstores.com, a non-operating company with a significant
amount of cash, approximately $22,285, resulting in IVAX owning approximately
70% of the newly merged public company. IVAX received 20,000 shares of
b2bstores.com common stock in exchange for all of the outstanding shares of IVAX
Diagnostics, Inc. and b2bstores.com's name was changed to IVAX Diagnostics, Inc.
For accounting purposes, this transaction is treated as a partial sale of IVAX
Diagnostics, Inc. in exchange for cash of b2bstores.com. IVAX elected income
statement recognition as its accounting policy for sales of subsidiary stock and
recorded a gain of $10,278. Deferred taxes have not been recorded related to the
gain as it represents an outside basis difference and IVAX expects it can
recover its investment in IVAX Diagnostics, Inc. tax-free. Also recorded was
$1,041 of nondeductible compensation expense from outstanding options under the
IVAX Diagnostics, Inc. 1999 Stock Option Plan converting to a fair value plan as
a result of the merger. IVAX Diagnostics, Inc. is engaged in the development,
manufacture and marketing of diagnostic test kits, reagents and instruments.
(6) ACQUISITIONS:
On February 9, 2001, IVAX indirectly acquired Laboratorios Fustery,
S.A. de C.V. ("Fustery"), a corporation organized under the laws of Mexico, by
purchasing the outstanding securities of Fustery's parent, Maancirkel Holding
BV, a corporation organized under the laws of The Netherlands, from Morcob CVA,
an entity organized under the laws of Belgium pursuant to a stock purchase
agreement entered into among the parties on October 11, 2000. Under the terms of
the stock purchase agreement, IVAX acquired Maancirkel for 1,656 shares (1,325
shares pre-split) of common stock of IVAX, valued at $57,000, and $57,210 in
cash, net of cash acquired. Pursuant to the term of the stock purchase
agreement, the amount of common stock may be adjusted within 180 days based on
the per share market price of IVAX' common stock. The preliminary fair value of
net assets acquired was $21,135 resulting in goodwill of $93,075 being recorded.
The operating results of Fustery are included in the consolidated financial
statements subsequent to the February 9, 2001 acquisition date.
On February 26, 2001, IVAX acquired the assets of a research
organization located in the United States for 609 shares (487 shares pre-split)
of common stock of IVAX, valued at $18,000, $4,650 in cash, net of cash
acquired, and other costs of $7. The preliminary fair value of net assets
acquired was $5,714 resulting in goodwill of $16,943 being recorded. The
operating results of this company are included in the consolidated financial
statements subsequent to the February 26, 2001 acquisition date.
On March 13, 2001, IVAX acquired Netpharma Scandinavia AB
("Netpharma"), a Swedish pharmaceutical company for 624 shares (499 shares
pre-split) of common stock of IVAX, valued at $18,365, other costs of $20 and
received cash in excess of cash paid of $949. In addition, additional shares of
IVAX common stock, valued at $2,052, will be issued contingent on achievement of
earnout targets for each of the next two years. If the earnout targets are
achieved, the number of additional shares issued will be based on the exchange
rate in effect on the payment dates and the average price of IVAX common stock
8
10
just prior to April 30, 2002 and 2003. The preliminary fair value of net assets
acquired was $812 resulting in goodwill of $16,624 being recorded. The operating
results of Netpharma are included in the consolidated financial statements
subsequent to the March 13, 2001 acquisition date.
Pro-forma information for the above acquisitions as if the purchases
occurred on January 1 of each year are presented below.
2001 2000
-------- --------
THREE MONTHS ENDED MARCH 31,
Revenues $286,627 $217,863
Net income 60,690 24,262
Diluted weighted average shares (pre-split) 166,313 162,353
Diluted earnings per share (pre-split) $ 0.36 $ 0.15
Diluted weighted average shares (post-split) 207,892 202,942
Diluted earnings per share (post-split) $ 0.29 $ 0.12
These pro-forma results of operations are not necessarily indicative of
results that might have been achieved if the acquisitions had actually occurred
on January 1 of the periods presented.
During the first quarter of 2001, IVAX received $1,673 representing a
reduction of purchase price and goodwill of Laboratorios Elmor, S.A. that was
acquired in June, 2000. In addition, IVAX paid $136 of other costs, representing
an increase to the purchase price and goodwill of Wakefield Pharmaceuticals,
Inc. that was acquired in September, 2000.
(7) INCOME TAXES:
The provision for income taxes from continuing operations consists of
the following:
2001 2000
-------- ------
THREE MONTHS ENDED MARCH 31,
Current:
Domestic $ 11,144 $ 250
Foreign 3,726 4,428
Deferred (1,115) 762
-------- ------
Total $ 13,755 $5,440
======== ======
The domestic current provision was favorably impacted by $8,156 from
utilization of previously reserved net operating loss and tax credit
carryforwards. Payment of the current tax provision for the year ended December
31, 2001, for domestic and foreign operations will be reduced by $1,384 and
$258, respectively, representing the incremental impact of compensation expense
deductions associated with non-qualified stock option exercises during the
current quarter. These amounts were credited to "Capital in excess of par
value". As of March 31, 2001, a domestic net deferred tax asset of $41,960 and
an aggregate foreign net deferred tax asset of $10,348 are included in "Other
current assets" and "Other assets" in the accompanying consolidated balance
sheet. The domestic net deferred tax asset was approximately 47% reserved as of
March 31, 2001. Realization of the net deferred tax assets is dependent upon
generating sufficient future domestic and foreign taxable income. Although
realization is not assured, management believes it is more likely than not that
the net deferred tax assets will be realized.
9
11
(8) COMPREHENSIVE INCOME:
The components of IVAX' comprehensive income are as follows:
2001 2000
-------- --------
THREE MONTHS ENDED MARCH 31,
Net income $ 60,132 $ 20,195
Unrealized gains on marketable securities,
net of taxes (104) 279
Foreign currency translation adjustments (14,753) (6,381)
-------- --------
Comprehensive income $ 45,275 $ 14,093
======== ========
(9) BUSINESS SEGMENT INFORMATION:
IVAX is a multinational company with subsidiaries that operate in the
pharmaceutical business and are engaged in the research, development,
manufacture, marketing and sale of pharmaceutical products. Pharmaceutical
products include prescription drugs and over-the-counter products. IVAX reviews
financial information, allocates resources and manages its business by major
operating subsidiary. However, IVAX' pharmaceutical subsidiaries utilize similar
production processes, and sell similar types of products to similar types of
customers under similar regulatory environments using similar methods of
distribution. IVAX also expects these subsidiaries to have similar long-term
financial performance. Since these pharmaceutical subsidiaries meet the
aggregation criteria under paragraph 17 of Statement of Financial Accounting
Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, the pharmaceutical operating subsidiaries are aggregated into one
reportable segment, pharmaceutical, and all other subsidiaries are reported in
Corporate and Other.
To provide additional information, IVAX has disaggregated its
pharmaceutical segment results into the geographic regions in which the
subsidiaries are located. The North America region contains IVAX subsidiaries in
the United States and Canada. The Europe region contains subsidiaries located in
Europe. Latin America consists of subsidiaries in South America and Mexico.
Corporate and Other includes the diagnostic subsidiaries, animal health
subsidiary and subsidiaries located in other geographic regions as well as
corporate activities and elimination of intercompany transactions.
The information provided is based on internal reports and was developed
and utilized by management for the sole purpose of tracking trends and changes
in the results of the regions. The information, including the allocations of
expense and overhead, were calculated based on a management approach and may not
reflect the actual economic costs, contributions or results of operations of the
regions as stand alone businesses. If a different basis of presentation or
allocation were utilized, the relative contributions of the regions might differ
but the relative trends would, in management's view, likely not be materially
impacted.
Other revenues included in "Net revenues" in the accompanying
consolidated statements of operations consist of license fees, royalties and
product development fees, received primarily from two companies.
10
12
REVENUES BY REGION
THREE MONTHS ENDED MARCH 31, 2001 2000
--------- ---------
North America
External sales $ 138,743 $ 67,733
Intersegment sales 386 200
Other revenues 121 14,846
--------- ---------
Net revenue - North America 139,250 82,779
--------- ---------
Europe
External sales 70,288 76,733
Intersegment sales 7,741 7,276
Other revenues 15,205 7,548
--------- ---------
Net revenue - Europe 93,234 91,557
--------- ---------
Latin America
External sales 26,509 7,762
Other revenues 229 474
--------- ---------
Net revenue - Latin America 26,738 8,236
--------- ---------
Corporate & Other
External sales 8,371 8,146
Intersegment sales (8,127) (7,476)
Other revenues 466 16
--------- ---------
Net revenue - Corporate & Other 710 686
--------- ---------
Consolidated net revenues $ 259,932 $ 183,258
========= =========
PROFITS BY REGION
THREE MONTHS ENDED MARCH 31, 2001 2000
--------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST:
North America $ 35,086 $ 15,966
Europe 75 (655)
Latin America 1,305 296
Corporate & Other 23,765 11,295
--------- ---------
Income from continuing operations
before minority interest 60,231 26,902
--------- ---------
NET INCOME:
Minority interest (99) (236)
--------- ---------
Net income $ 60,132 $ 20,195
========= =========
MARCH 31,
------------------------
LONG-LIVED ASSETS: 2001 2000
--------- ---------
North America $ 61,410 $ 53,842
Europe 213,595 194,001
Latin America 177,154 7,157
Corporate & Other 96,851 29,798
--------- ---------
Total $ 549,010 $ 284,798
========= =========
11
13
(10) RECENTLY ISSUED ACCOUNTING STANDARDS:
Effective January 1, 2001, IVAX adopted SFAS No. 133, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the derivative is
designated as a fair value hedge, the changes in the fair value of the
derivative and of the hedged item attributable to the hedged risk are recognized
in earnings. If the derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are recorded in
Accumulated Other Comprehensive Loss ("OCL") and are recognized in the income
statement when the hedged item affects earnings. Ineffective portions of changes
in the fair value of cash flow hedges are recognized in earnings.
Certain forecasted transactions are exposed to foreign currency risk.
The principal currency hedged is the Irish punt against the British pound.
Forward options used to hedge a portion of forecasted international expenses for
up to one year in the future are designated as cash flow hedging instruments.
The adoption of SFAS 133 on January 1, 2001 resulted in an increase to OCL of
$1,613, net of tax of $179. The increase to OCL is mostly attributable to
unrealized gains on cash flow hedges. The net derivative gains included in OCL
as of January 1, 2001, will be reclassified into earnings during the twelve
months ended December 31, 2001.
During the first quarter of 2001, IVAX adopted EITF Issue No. 00-19,
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND POTENTIALLY
SETTLED IN, A COMPANY'S OWN STOCK, which addresses the classification and
accounting treatment of equity derivative contracts (such as IVAX' put options)
as equity instruments (either temporary or permanent) or assets and liabilities.
As a result, put options were reclassified from temporary equity to permanent
equity.
As of March 31, 2001, IVAX had outstanding freestanding put options for
2,144 (1,715 pre-split) shares of IVAX common stock that were issued in
connection with the share repurchase program. The put options bear strike prices
ranging from $27.68 to $30.40 ($34.60 to $38.00 pre-split) and mature between
April and July 2001. In the event the put options are exercised, IVAX may elect
to settle by one of three methods: physical settlement by payment in exchange
for IVAX shares, net cash settlement or net share settlement. The maximum
repurchase obligation under the physical settlement method is $62,500.
(11) LEGAL PROCEEDINGS:
With respect to the case styled AMERICAN BIOSCIENCE, INC. V. DONNA E.
SHALALA, ET AL., previously reported in IVAX' Annual Report on Form 10-K for
the year ended December 31, 2000, on March 30, 2001, the appellate court vacated
the district court's decision and remanded the case based on FDA's failure to
file an administrative record in the court below. On April 6, 2001, FDA filed
its administrative record and American BioScience, Inc. ("ABI") renewed its
motion for a temporary restraining order or preliminary injunction. On April 19,
2001, the district court again denied ABI's motion. ABI has appealed this
ruling, and on May 4, 2001, the appellate court ordered that the appeal be
expedited.
With respect to the case styled BRISTOL MYERS SQUIBB COMPANY V. ZENITH
GOLDLINE PHARMACEUTICALS, INC., ET AL., previously reported in IVAX' Annual
Report on Form 10-K for the year ended December 31, 2000, on April 20, 2001, the
appellate court affirmed the district court's grant of summary judgment of
invalidity with respect to all but two of the asserted claims of Bristol's
patents and remanded the remaining claims to the district court for further
proceedings. The Company will now pursue its counterclaims against Bristol.
12
14
(12) RESTRUCTURING COSTS:
The components of restructuring costs, spending and other activity, as
well as the remaining reserve balances at March 31, 2001, which are included in
"Accrued expenses and other current liabilities" in the accompanying
consolidated balance sheets, are as follows:
EMPLOYEE TOTAL
TERMINATION PLANT RESTRUCTURING
BENEFITS CLOSURES RESERVES
----------- ---------- -------------
Balance at January 1, 2001 $ 110 $ 619 $ 729
Cash payments during 2001 (15) (52) (67)
Non-cash activities 81 (22) 59
----- ----- -----
Balance at March 31, 2001 $ 176 $ 545 $ 721
===== ===== =====
(13) SUBSEQUENT EVENTS:
On April 3, 2001, IVAX acquired the remaining 70% of Indiana Protein
Technologies, Inc. for $4,169 in cash, of which $2,500 is subject to an earnout
over a period of 5 years.
On April 10, 2001, IVAX made a final payment of $16,309 in cash in lieu
of additional shares for the acquisition of Fustery.
During April 2001, IVAX repurchased 225 shares (180 shares pre-split)
of its stock at a total cost, including commissions, of $5,095.
On May 4, 2001, IVAX consummated a private offering of $575,000 of its
4.5% Convertible Senior Subordinated Notes due May 15, 2008 pursuant to Rule
144A, Regulation D and Regulation S under the Securities Act of 1933, as amended
(the "Securities Act"), and received net proceeds of approximately $559,550
therefrom. On May 9, 2001, IVAX sold an additional $150,000 of its 4.5% Notes
under the over-allotment option provided to the initial purchaser and received
net proceeds of $146,100. The 4.5% Notes were issued without registration under
the Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements. The
4.5% Notes are convertible at any time prior to maturity, unless previously
redeemed, into 24.96875 shares (19.975 shares pre-split) of IVAX' common stock
per $1,000 of principal amount of the 4.5% Notes. This ratio results in a
conversion price of approximately $40.05 per share ($50.0625 per share
pre-split). The 4.5% Notes are redeemable by IVAX on or after May 29, 2004. The
net proceeds from the sale of the 4.5% Notes are expected to be used primarily
to acquire other businesses and products, to fund the research, development,
testing and commercialization of pharmaceutical products and for general working
capital purposes.
13
15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements, the related notes to consolidated
financial statements and management's discussion and analysis of financial
condition and results of operations included in IVAX' Annual Report on Form 10-K
for the year ended December 31, 2000 and the unaudited interim consolidated
financial statements and the related notes to unaudited interim consolidated
financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
All per share amounts have been retroactively restated to reflect the 5-for-4
stock split payable May 18, 2001 to shareholders of record on May 1, 2001.
Certain prior period amounts presented have been reclassified to conform to the
current period's presentation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2000
Net income was $60.1 million, or $.29 per diluted share ($.36 per share
pre-split), for the three months ended March 31, 2001, compared to $20.2
million, or $.10 per diluted share ($.13 per share pre-split), for the three
months ended March 31, 2000. Income from continuing operations was $60.1
million, or $.29 per diluted share ($.36 per share pre-split), for the three
months ended March 31, 2001, compared to $26.7 million, or $.13 per diluted
share ($.17 per share pre-split), for the same period of the prior year. During
2000, IVAX recorded a cumulative change in accounting principle charge in the
amount of $6.5 million, or $.03 per diluted share ($.04 per share pre-split), as
a result of SAB No. 101, related to up-front receipts previously recognized in
income during 1998 and 1999.
NET REVENUES AND GROSS PROFIT
Net revenues for the three months ended March 31, 2001 totaled $260
million, an increase of $77 million, or 42%, from the $183 million reported in
the same period of the prior year. This increase was comprised of increases of
$56 million, $2 million and $19 million in net revenues from North American,
European, and Latin American subsidiaries, respectively.
North American subsidiaries net revenues totaled $139 million for the
three months ended March 31, 2001, compared to $83 million for the same period
of 2000. The 68% increase was primarily attributable to increased sales volume,
in part due to new product releases, partially offset by higher sales returns
and allowances and lower prices. North American subsidiaries recorded provisions
for sales returns and allowances that reduced gross sales by $58 million and $38
million in 2001 and 2000, respectively. The increase of $20 million, or 53%, was
primarily due to reduced prices on certain generic pharmaceuticals and increase
in sales volume.
European subsidiaries generated net revenues of $93 million for the
three months ended March 31, 2001, compared to $92 million for the same period
of the prior year. The 2% increase was primarily due to increased product
development fees and higher sales volumes of respiratory products partially
offset by unfavorable effects of currency exchange rates and lower prices for
certain generic products. European subsidiaries recorded provisions for sales
returns and allowances that reduced gross sales by $10 million and $6 million in
2001 and 2000, respectively.
Latin American subsidiaries generated net revenues of $27 million for
the three months ended March 31, 2001, compared to $8 million for the same
14
16
period of the prior year. The increase was primarily due to the sales volume of
Laboratorios Elmor, S.A. ("Elmor") and Laboratorios Fustery, S.A. de C.V.
("Fustery"), which were acquired June 19, 2000 and February 9, 2001,
respectively.
Gross profit was $136.2 million (52% of net revenues) for the three
months ended March 31, 2001, compared to $88.1 million (48% of net revenues) for
the three months ended March 31, 2000. The increase in gross profit percentage
was primarily attributable to product mix and higher margin sales from the
operations of Elmor, Wakefield Pharmaceuticals, Inc. ("Wakefield") and Fustery.
OPERATING EXPENSES
Selling expenses increased $9.5 million, or 53%, to $27.5 million (11%
of net revenues) from $18.0 million (10% of net revenues) in 2000. The increase
was due to higher expense from the operations of Elmor, Wakefield and Fustery,
increased sales force and promotional expenses at the European subsidiaries and
increased promotional expenses in North America.
General and administrative expenses totaled $23.7 million (9% of net
revenues) for the three months ended March 31, 2001, compared to $24.2 million
(13% of net revenues) for the three months ended March 31, 2000, a decrease of
$.5 million, or 2%. The decrease is primarily attributable to lower expenses
from the European subsidiaries due to a combination of a one-time write down of
patents at the UK subsidiary recorded in 2000 and lower operating expenses in
2001. The decrease was partially offset by $1.6 million additional general and
administrative expenses from the operations of Elmor, Fustery and Wakefield and
by $1.0 million of nondeductible compensation expense from outstanding options
under the IVAX Diagnostics, Inc. 1999 Stock Option Plan converting to a fair
value plan as a result of the partial sale of IVAX Diagnostics, Inc. discussed
below.
Research and development expenses for the three months ended March 31,
2001 increased 22% to a total of $18.9 million (7% of net revenues), compared to
the three months ended March 31, 2000. IVAX' future level of research and
development expenditures will depend on, among other things, the outcome of
clinical testing of products under development, delays or changes in government
required testing and approval procedures, technological and competitive
developments, strategic marketing decisions and liquidity.
OTHER INCOME (EXPENSE)
Interest income and expense increased $2.8 million and $2.3 million,
respectively, for the three months ended March 31, 2001, as compared to the
three months ended March 31, 2000 due primarily to additional cash on hand from
the issuance of $250 million of 5 1/2% Convertible Senior Subordinated Notes in
2000 partially offset by the conversion of 6 1/2% Convertible Subordinated Notes
to common stock and cash in 2000 and the payoff of the related-party Frost
Nevada Limited Partnership note during 2000.
Other income, net decreased $3.1 million for the three months ended
March 31, 2001, as compared to the three months ended March 31, 2000. On March
14, 2001, IVAX sold a partial interest in IVAX Diagnostics, Inc. through a
merger with b2bstores.com, Inc. resulting in a gain of $10.3 million. While IVAX
does not currently have plans to sell additional shares of subsidiaries, such
transactions could occur in the future.
RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 2001, IVAX adopted SFAS No. 133, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the derivative is
15
17
designated as a fair value hedge, the changes in the fair value of the
derivative and of the hedged item attributable to the hedged risk are recognized
in earnings. If the derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are recorded in
Accumulated Other Comprehensive Loss ("OCL") and are recognized in the income
statement when the hedged item affects earnings. Ineffective portions of changes
in the fair value of cash flow hedges are recognized in earnings.
Certain forecasted transactions are exposed to foreign currency risk.
The principal currency hedged is the Irish punt against the British pound.
Forward options used to hedge a portion of forecasted international expenses for
up to one year in the future are designated as cash flow hedging instruments.
The adoption of SFAS 133 on January 1, 2001 resulted in an increase to OCL of
$1.6 million, net of tax of $.2 million. The increase to OCL is mostly
attributable to gains on cash flow hedges. The net derivative gains included in
OCL as of January 1, 2001, will be reclassified into earnings during the twelve
months ended December 31, 2001.
During the first quarter of 2001, IVAX adopted EITF Issue No. 00-19,
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND POTENTIALLY
SETTLED IN, A COMPANY'S OWN STOCK, which addresses the classification and
accounting treatment of equity derivative contracts (such as IVAX' put options)
as equity instruments (either temporary or permanent) or assets and liabilities.
As a result, put options were reclassified from temporary equity to permanent
equity.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, IVAX' working capital was $397.1 million, compared
to $438.5 million at December 31, 2000. Cash and cash equivalents totaled $203.0
million at March 31, 2001, as compared to $251.5 million at December 31, 2000.
Net cash of $64 million was provided by operating activities during the
first quarter of 2001, compared to $44.7 million during the first quarter of
2000. The increase in cash provided by operating activities was primarily the
result of improved operating earnings, partially offset by an increase in
accounts receivable.
Net cash of $61.2 million was used for investing activities during the
first quarter of 2001, as compared to $8.7 million during the same period of the
prior year. In the first quarter of 2001, $59.4 million was used to acquire new
businesses and $10.9 million was used to acquire patents and other intangible
assets compared to $0.2 million used in the first quarter of 2000 to acquire
patents and other intangible assets. The primary acquisitions made by IVAX in
the first quarter of 2001 were: Fustery, $57.2 million net cash used; Netpharma
Scandinavia AB, $0.9 million net cash provided; the assets of a research
organization, $4.7 million net cash used; and the exclusive rights to develop
and market Talampanel, $10.0 million net cash used. These acquisitions were
partially offset by the partial sale of IVAX Diagnostics, Inc. which provided
proceeds of $22.3 million.
Net cash of $50.5 million was used by financing activities during the
first quarter of 2001, compared to $15.1 million provided during the same period
of the prior year, primarily reflecting $53.5 million in repurchases of common
stock during the first quarter of 2001.
IVAX' principal sources of short-term liquidity are existing cash and
internally generated funds, which IVAX believes will be sufficient to meet its
operating needs and anticipated capital expenditures over the short term. For
the long term, IVAX intends to utilize principally internally generated funds,
16
18
which are anticipated to be derived primarily from the sale of existing
pharmaceutical products and pharmaceutical products currently under development.
There can be no assurance that IVAX will successfully complete the development
of products under development, that IVAX will be able to obtain regulatory
approval for any such product, or that any approved product may be produced in
commercial quantities, at reasonable costs, and be successfully marketed. IVAX
may consider issuing additional debt or equity securities in the future to fund
potential acquisitions and growth.
On May 4, 2001, IVAX consummated a private offering of $575 million of
its 4.5% Convertible Senior Subordinated Notes due May 15, 2008 pursuant to Rule
144A, Regulation D and Regulation S under the Securities Act of 1933, as amended
(the "Securities Act"), and received net proceeds of approximately $559.6
million therefrom. On May 9, 2001, IVAX sold an additional $150 million of its
4.5% Notes under the over-allotment option provided to the initial purchaser and
received net proceeds of $146.1 million. The 4.5% Notes were issued without
registration under the Securities Act and may not be offered or sold in the
United States absent registration or an applicable exemption from the
registration requirements. The 4.5% Notes are convertible at any time prior to
maturity, unless previously redeemed, into 24.96875 shares (19.975 shares
pre-split) of IVAX' common stock per $1,000 of principal amount of the 4.5%
Notes. This ratio results in a conversion price of approximately $40.05 per
share ($50.0625 per share pre-split). The 4.5% Notes are redeemable by IVAX on
or after May 29, 2004. The net proceeds from the sale of the 4.5% Notes are
expected to be used primarily to acquire other businesses and products, to fund
the research, development, testing and commercialization of pharmaceutical
products and for general working capital purposes.
CURRENCY FLUCTUATIONS
For the three months ended March 31, 2001 and 2000, approximately 47%
and 55%, respectively, of IVAX' net revenues were attributable to operations
which principally generated revenues in currencies other than the United States
dollar. Fluctuations in the value of foreign currencies relative to the United
States dollar affect the reported results of operations for IVAX. If the United
States dollar weakens relative to the foreign currency, the earnings generated
in the foreign currency will, in effect, increase when converted into United
States dollars and vice versa. Although IVAX does not speculate in the foreign
exchange market, it does, from time to time, manage exposures that arise in the
normal course of business related to fluctuations in foreign currency exchange
rates by entering into offsetting positions through the use of foreign exchange
forward contracts. At March 31, 2001, IVAX had subsidiaries domiciled in
Venezuela which is considered a highly inflationary environment. The unrealized
adjustment for inflation attributable to the Venezuelan operations for the first
quarter of 2001 was not significant to IVAX' operations or its subsidiaries and
it did not impact cash flows from operations. During the first quarter of 2000,
none of IVAX' subsidiaries were domiciled in highly inflationary environments.
As a result of exchange rate differences, net revenues decreased by
approximately $5.3 million for the three months ended March 31, 2001, as
compared to the same period of the prior year. The effects of inflation on
consolidated net revenues and operating income were not significant.
INCOME TAXES
IVAX recognized a $13.8 million tax provision for the three months
ended March 31, 2001, of which $2.8 million related to foreign operations. The
$11 million tax provision recognized by domestic operations was favorably
impacted by $8.2 million utilization of net operating loss and tax credit
carryforwards, which had been previously reserved.
17
19
As of March 31, 2001, domestic and aggregate foreign net deferred tax
assets totaled $42.0 million and $10.3 million, respectively. The domestic net
deferred tax asset was approximately 47% reserved as of March 31, 2001.
Realization of the net deferred tax assets is dependent upon generating
sufficient future domestic and foreign taxable income. Although realization is
not assured, management believes it is more likely than not that the net
deferred tax assets will be realized. Management's estimates of future taxable
income are subject to revision due to, among other things, regulatory and
competitive factors affecting the pharmaceutical industries in the markets in
which IVAX operates. Such factors are further discussed in management's
discussion and analysis of financial condition and results of operations
included in IVAX' Annual Report on Form 10-K for the year ended December 31,
2000.
SALES RETURNS AND ALLOWANCES
IVAX' pharmaceutical revenues may be affected by the level of
provisions for estimated returns, inventory credits and chargebacks, as well as
other sales allowances established by IVAX. The custom in the pharmaceutical
industry is generally to grant customers the right to return purchased goods. In
the generic pharmaceutical industry, this custom has resulted in a practice of
suppliers issuing inventory credits (also known as shelf-stock adjustments) to
customers based on the customers' existing inventory following decreases in the
market price of the related generic pharmaceutical product. The determination to
grant a credit to a customer following a price decrease is generally at the
discretion of IVAX, and generally not pursuant to contractual agreements with
customers. These credits allow customers with established inventories to compete
with those buying product at the current market price, and allow IVAX to
maintain shelf space, market share and customer loyalty.
Provisions for estimated returns, inventory credits, and chargebacks,
as well as other sales allowances, are established by IVAX concurrently with the
recognition of revenue. The provisions are established in accordance with
generally accepted accounting principles based upon consideration of a variety
of factors, including actual return and inventory credit experience for products
during the past several years by product type, the number and timing of
regulatory approvals for the product by competitors of IVAX, both historical and
projected, the market for the product, estimated customer inventory levels by
product and projected economic conditions. Actual product returns and inventory
credits incurred are, however, dependent upon future events, including price
competition and the level of customer inventories at the time of any price
decreases. IVAX continually monitors the factors that influence the pricing of
its products and customer inventory levels and makes adjustments to these
provisions when management believes that actual product returns, inventory
credits and other allowances may differ from established reserves.
RISK OF PRODUCT LIABILITY CLAIMS
Testing, manufacturing and marketing pharmaceutical products subject
IVAX to the risk of product liability claims. IVAX is a defendant in a number of
product liability cases, none of which IVAX believes will have a material
adverse effect on IVAX' business, results of operations or financial condition.
IVAX believes that it maintains an adequate amount of product liability
insurance, but there can be no assurance that its insurance will cover all
existing and future claims or that IVAX will be able to maintain existing
coverage or obtain additional coverage at reasonable rates. There can be no
assurance that claims arising under any pending or future product liability
cases, whether or not covered by insurance, will not have a material adverse
effect on IVAX' business, results of operations or financial condition.
18
20
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the
consolidated financial position, results of operations or cash flows of IVAX.
IVAX, in the normal course of doing business, is exposed to the risks associated
with foreign currency exchange rates and changes in interest rates.
FOREIGN CURRENCY EXCHANGE RATE RISK - IVAX is exposed to exchange rate
risk when its U.S. and non-U.S. subsidiaries enter into transactions denominated
in currencies other than their functional currency. Certain firmly committed
transactions are hedged with foreign exchange forward contracts. As exchange
rates change, gains and losses on the exposed transactions are partially offset
by gains and losses related to the hedging contracts. Both the exposed
transactions and the hedging contracts are translated at current spot rates,
with gains and losses included in earnings. IVAX' derivative activities, which
primarily consist of foreign exchange forward contracts, are initiated primarily
to hedge forecasted cash flows that are exposed to foreign currency risk.
The foreign exchange forward contracts generally require IVAX to
exchange local currencies for foreign currencies based on pre-established
exchange rates at the contracts' maturity dates. If the counterparties to the
exchange contracts do not fulfill their obligations to deliver the contracted
currencies, IVAX could be at risk for currency related fluctuations. IVAX enters
into these contracts with counterparties that it believes to be credit worthy
and does not enter into any leveraged derivative transactions. As of March 31,
2001, IVAX had $18.4 million in foreign exchange forward contracts outstanding.
INTEREST RATE RISK - As of March 31, 2001, IVAX' only material debt
obligations relate to the 5 1/2% Convertible Notes, which bear fixed rates of
interest. IVAX believes that its exposure to market risk relating to interest
rate risk is not material.
COMMODITY PRICE RISK - IVAX does not believe it is subject to any
material risk associated with commodity prices.
19
21
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
With respect to the case styled AMERICAN BIOSCIENCE, INC. V. DONNA E.
SHALALA, ET AL., previously reported in IVAX' Annual Report on Form 10-K for
the year ended December 31, 2000, on March 30, 2001, the appellate court vacated
the district court's decision and remanded the case based on FDA's failure to
file an administrative record in the court below. On April 6, 2001, FDA filed
its administrative record and American BioScience, Inc. ("ABI") renewed its
motion for a temporary restraining order or preliminary injunction. On April 19,
2001, the district court again denied ABI's motion. ABI has appealed this
ruling, and on May 4, 2001, the appellate court ordered that the appeal be
expedited.
With respect to the case styled BRISTOL MYERS SQUIBB COMPANY V. ZENITH
GOLDLINE PHARMACEUTICALS, INC., ET AL., previously reported in IVAX' Annual
Report on Form 10-K for the year ended December 31, 2000, on April 20, 2001, the
appellate court affirmed the district court's grant of summary judgment of
invalidity with respect to all but two of the asserted claims of Bristol's
patents and remanded the remaining claims to the district court for further
proceedings. The Company will now pursue its counterclaims against Bristol.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Ivax issued three equity put options on December 7, 2000, two equity
put options on December 26, 2000 and one put option on March 7, 2001. The put
options were issued with strike prices from $34.60 and $38.00 and were issued
with expiration dates between April and July 2001. The put options were issued
under Section 4(2) of the Securities Act.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Articles of Incorporation Incorporated by reference to our
Form 8-B dated July 28, 1993.
3.3 Articles of Amendment to Articles of Incorporation of IVAX Filed herewith.
Corporation
10.27 Merger Agreement dated as of November 21, 2000, by and among IVAX Incorporated by reference to IVAX
CORPORATION, a Florida corporation, IVAX DIAGNOSTICS, INC., a DIAGNOSTICS, INC. f/k/a
Florida corporation and wholly-owned subsidiary of IVAX, and B2BSTORES.COM, INC. Form 14A,
B2BSTORES.COM, INC., a Delaware corporation. SEC File Number 001-14798 filed as
of January 30, 2001.
(b) REPORTS ON FORM 8-K
On February 23, 2001, IVAX filed a report dated February 9, 2001
under Item 2 - Acquisition or Disposition of Assets on Form 8-K reporting
its indirect acquisition of Laboratorios Fustery, S.A. de C.V.
20
22
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.
IVAX CORPORATION
Date: May 10, 2001 By: /S/ THOMAS E. BEIER
--------------------------------------
Thomas E. Beier
Senior Vice President-Finance
Chief Financial Officer
21