1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to______
Commission file number 0-26268
MINIMED INC.
(Exact Name of Registrant as Specified in its Charter)
---------------
Delaware 95-4408171
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
12744 SAN FERNANDO ROAD, SYLMAR,
CA 91342 (Address of Principal
Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (818) 362-5958
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 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:
TITLE OF EACH CLASS OUTSTANDING AT NOVEMBER 3, 1998
Common Stock, $.01 par value 13,486,090
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2
INDEX
MINIMED INC.
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Consolidated Balance Sheets (Unaudited) - January 2, 1998 and October 2, 1998 3
Consolidated Statements of Income (Unaudited) -- Three months and nine months
ended September 26, 1997 and October 2, 1998 4
Consolidated Statements of Cash Flows (Unaudited) -- Nine months ended
September 26, 1997 and October 2, 1998 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION 17
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
INDEX TO EXHIBITS 19
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
MINIMED INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 2, 1998 AND OCTOBER 2, 1998
ASSETS
1997 1998
------------- -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ................................................... $ 22,282,000 $ 14,336,000
Short-term investments ...................................................... 18,713,000 2,239,000
Accounts receivable, net of allowance for doubtful accounts of $6,250,000 and
$5,693,000 at January 2, 1998 and October 2, 1998, respectively ........... 24,661,000 28,813,000
Inventories ................................................................. 10,672,000 15,055,000
Deferred income taxes ....................................................... 5,803,000 8,611,000
Prepaid expenses and other current assets ................................... 1,279,000 3,379,000
------------- -------------
Total current assets ............................................ 83,410,000 72,433,000
LONG-TERM INVESTMENTS ......................................................... 4,118,000 1,569,000
NOTE RECEIVABLE FROM MRG ...................................................... -- 3,600,000
OTHER ASSETS .................................................................. 1,348,000 4,211,000
------------- -------------
LAND, BUILDINGS, PROPERTY AND EQUIPMENT - Net ................................. 16,943,000 28,538,000
------------- -------------
TOTAL ........................................................................ $ 105,819,000 $ 110,351,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable ............................................ $ 2,453,000 $ 275,000
Accounts payable ............................................................ 4,371,000 3,361,000
Accrued salaries and related benefits ....................................... 3,719,000 3,795,000
Accrued sales commissions ................................................... 1,943,000 1,038,000
Accrued warranties .......................................................... 3,498,000 3,558,000
Income taxes payable ........................................................ 276,000 188,000
Other accrued expenses ...................................................... 3,741,000 859,000
------------- -------------
Total current liabilities ........................................ 20,001,000 13,074,000
------------- -------------
Deferred tax liabilities .................................................... 2,007,000 2,282,000
Notes payable ............................................................... 728,000 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; 40,000,000 shares authorized; 13,260,240 and
13,476,890 shares issued and outstanding as of January 2, 1998
and October 2, 1998, respectively ........................................ 135,000 137,000
Additional capital ......................................................... 73,806,000 78,989,000
Cumulative foreign currency translation .................................... (312,000) (275,000)
Unrealized gain (loss) on marketable securities ............................ 1,371,000 (209,000)
Retained earnings .......................................................... 8,083,000 16,353,000
------------- -------------
Total stockholders' equity ...................................... 83,083,000 94,995,000
------------- -------------
TOTAL ......................................................................... $ 105,819,000 $ 110,351,000
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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4
MINIMED INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26, OCTOBER 2,
1997 1998 1997 1998
------------ ------------ ------------ ------------
(Unaudited)
NET SALES ................................. $ 25,038,000 $ 34,897,000 $ 67,121,000 $ 92,979,000
COST OF SALES ............................. 9,547,000 13,071,000 26,628,000 36,511,000
------------ ------------ ------------ ------------
GROSS PROFIT .............................. 15,491,000 21,826,000 40,493,000 56,468,000
OPERATING EXPENSES:
Selling, general and administrative ..... 10,669,000 14,643,000 28,334,000 37,963,000
Research and development ................ 2,424,000 3,892,000 6,357,000 10,946,000
Research and development contract income -- (1,500,000) -- (4,500,000)
------------ ------------ ------------ ------------
Total operating expenses ...... 13,093,000 17,035,000 34,691,000 44,409,000
------------ ------------ ------------ ------------
OPERATING INCOME .......................... 2,398,000 4,791,000 5,802,000 12,059,000
OTHER INCOME, Including interest income ... 467,000 446,000 983,000 1,172,000
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ............... 2,865,000 5,237,000 6,785,000 13,231,000
PROVISION FOR INCOME TAXES ................ 986,000 2,020,000 2,349,000 4,961,000
------------ ------------ ------------ ------------
NET INCOME ................................ $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
============ ============ ============ ============
BASIC EARNINGS PER SHARE .................. $ 0.14 $ 0.24 $ 0.35 $ 0.62
============ ============ ============ ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING . 13,193,000 13,416,000 12,787,000 13,337,000
============ ============ ============ ============
DILUTED EARNINGS PER SHARE ................ $ 0.14 $ 0.23 $ 0.33 $ 0.59
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 13,771,000 14,158,000 13,419,000 14,046,000
============ ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
5
MINIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
1997 1998
------------ ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 4,436,000 $ 8,270,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation .......................................... 2,057,000 2,723,000
Deferred income taxes ................................. (2,259,000) (1,564,000)
Changes in operating assets and liabilities:
Accounts receivable, net ............................ 465,000 (4,152,000)
Inventories ......................................... (3,169,000) (7,407,000)
Prepaid expenses and other current assets ........... 145,000 (2,100,000)
Other assets ........................................ (1,309,000) 902,000
Accounts payable .................................... 672,000 (1,010,000)
Income taxes payable ................................ 450,000 3,409,000
Accrued expenses .................................... 684,000 (3,651,000)
------------ ------------
Net cash provided by (used in) operating activities . $ 2,172,000 $ (4,580,000)
============ ============
CASH FLOWS FROM INVESTING ACTIVITIES -
Short-term investments .............................. (5,706,000) 16,473,000
Long-term investments ............................... (2,000,000) --
Acquisition of Dartec A.B ........................... -- (2,625,000)
Issuance of notes receivable ........................ -- (1,140,000)
Purchase of land, buildings, property and equipment . (4,153,000) (14,899,000)
------------ ------------
Net cash used in investing activities ............... $(11,859,000) $ (2,191,000)
============ ============
CASH FLOWS FROM FINANCING ACTIVITIES -
Repayment of notes payable .......................... -- (2,905,000)
Issuance of notes payable ........................... 768,000 --
Proceeds from public offering, net of expenses ...... 22,169,000 --
Proceeds from exercises of warrants ................. 2,600,000 --
Proceeds from stock option exercises ................ 212,000 1,226,000
Proceeds from issuance of common stock under employee
stock plan ....................................... 280,000 467,000
------------ ------------
Net cash provided by (used in) financing activities $ 26,029,000 $ (1,212,000)
============ ============
Effect of cumulative foreign currency translation
adjustment on cash and equivalents ................ (275,000) 37,000
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ......................................... 16,067,000 (7,946,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD .............................................. 10,405,000 22,282,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD .............................................. $ 26,472,000 $ 14,336,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest .............................................. $ 167,000 $ 49,000
Income taxes .......................................... $ 3,596,000 $ 5,421,000
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY - During the nine months
ended October 2, 1998, the Company recorded an unrealized holding loss of
$1,580,000, net of estimated taxes, on marketable securities classified as
long-term investments available for sale. The Company has recognized a reduction
in income taxes payable of $623,000 and $3,497,000 during the nine months ended
September 26, 1997 and October 2, 1998, respectively, related to the exercise of
nonqualified stock options. On September 1, 1998, the Company accepted a $3.6
million note receivable from a related party in conjunction with the sale of
$3.0 million of net implantable pump inventory components and $600,000 of net
implantable pump fixed assets.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
6
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
The fiscal years referenced herein are as follows:
FISCAL YEAR YEAR ENDED
----------- ----------
1998 January 1, 1999
1997 January 2, 1998
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of MiniMed Inc.
("MiniMed" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
normal, recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements included in the Annual Report of MiniMed Inc. filed
on Form 10-K with the Securities and Exchange Commission for the year ended
January 2, 1998. The results of operations for the nine months ended October 2,
1998 are not necessarily indicative of the results that may be expected for the
fiscal year ending January 1, 1999.
NOTE 2. INCOME TAXES
Net income and earnings per share reflect income taxes which have been
recorded at the Company's estimated effective tax rate for the year. This
estimated income tax rate has been determined by giving consideration to the
pretax earnings and losses applicable to foreign and domestic tax jurisdictions.
NOTE 3. WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128), basic earnings per share for the three and nine
months ended September 26, 1997 and October 2, 1998, were computed by dividing
net income by weighted average common shares outstanding during the periods
presented. Diluted earnings per share for the periods presented were computed by
dividing net income by weighted average common and common equivalent shares
outstanding, computed in accordance with the treasury stock method. The
computation of basic and diluted EPS is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26, OCTOBER 2,
1997 1998 1997 1998
------------- ----------- ------------- -----------
(Unaudited)
BASIC EPS COMPUTATION
Numerator:
Net income applicable to common stock ............ $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
----------- ----------- ----------- -----------
Denominator:
Weighted average common shares outstanding ....... 13,193,000 13,416,000 12,787,000 13,337,000
----------- ----------- ----------- -----------
Basic earnings per share ......................... $ 0.14 $ 0.24 $ 0.35 $ 0.62
=========== =========== =========== ===========
DILUTED EPS COMPUTATION
Numerator:
Net income applicable to common stock ............ $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
----------- ----------- ----------- -----------
Denominator:
Weighted average common shares outstanding ....... 13,193,000 13,416,000 12,787,000 13,337,000
Effect of dilutive securities
Stock options ............................... 578,000 742,000 632,000 709,000
----------- ----------- ----------- -----------
Diluted weighted average shares outstanding ...... 13,771,000 14,158,000 13,419,000 14,046,000
----------- ----------- ----------- -----------
Diluted earnings per share ....................... $ 0.14 $ 0.23 $ 0.33 $ 0.59
=========== =========== =========== ===========
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7
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
NOTE 4. CONSOLIDATED BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows:
JANUARY 2, OCTOBER 2,
1998 1998
------------ ------------
(Unaudited)
Inventories:
Raw materials ............... $ 5,152,000 $ 4,792,000
Work-in-progress ............ 1,819,000 2,295,000
Finished goods .............. 3,701,000 7,968,000
------------ ------------
Total ....................... $ 10,672,000 $ 15,055,000
============ ============
Property, plant and equipment:
Land, buildings and
improvements .............. $ 10,625,000 $ 12,733,000
Machinery and equipment ..... 8,533,000 16,964,000
Tooling and molds ........... 2,493,000 2,205,000
Furniture and fixtures ...... 1,948,000 4,511,000
------------ ------------
23,599,000 36,413,000
Less accumulated depreciation (6,656,000) (7,875,000)
------------ ------------
Total ....................... $ 16,943,000 $ 28,538,000
============ ============
Other assets:
Technology license .......... $ 197,000 $ 158,000
Inventory components, non
current .................. 999,000 --
Dartec A.B. goodwill ........ -- 2,625,000
Notes receivable ............ -- 1,140,000
Other ....................... 152,000 288,000
------------ ------------
Total ....................... $ 1,348,000 $ 4,211,000
============ ============
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8
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
NOTE 5. COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ----------------------------
SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26, OCTOBER 2,
1997 1998 1997 1998
------------- ----------- ------------- -----------
(Unaudited)
Net income $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
Other comprehensive income (loss):
Foreign currency translation
adjustments 2,000 35,000 (275,000) 37,000
Unrealized loss on securities -- (676,000) -- (2,549,000)
----------- ----------- ----------- -----------
Other comprehensive income (loss),
before tax 2,000 (641,000) (275,000) (2,512,000)
Income tax expense related to items of
other comprehensive income -- 258,000 -- 969,000
----------- ----------- ----------- -----------
Other comprehensive income (loss) 2,000 (383,000) (275,000) (1,543,000)
----------- ----------- ----------- -----------
Total comprehensive income $ 1,881,000 $ 2,834,000 $ 4,161,000 $ 6,727,000
=========== =========== =========== ===========
NOTE 6. SALE OF IMPLANTABLE INSULIN PUMP ASSETS
On September 1, 1998, the Company sold assets and transferred
technology related to its implantable pump program to Medical Research Group,
LLC ("MRG") and entered into a series of related transactions. MRG was founded
by Alfred E. Mann, founder, Chairman, CEO and largest stockholder of MiniMed.
Mr. Mann continues to hold a substantial equity interest in MRG.
MiniMed sold assets, consisting primarily of inventories and equipment,
to MRG in exchange for a note receivable of approximately $3.6 million. No gain
or loss has been recognized on the sale of these assets. The note receivable is
due and payable in full on December 31, 2003, and accrued interest is payable on
December 31 of each year prior to maturity. The note bears interest at a rate of
7.0% annually. The note is secured by the assets sold to MRG. The Company has
also leased facilities and improvements to MRG at which MRG will carry out its
activities. The obligations of MRG under such lease are guaranteed by Mr. Mann.
Certain employees of the Company involved in the manufacturing operations and
research and development activities related to the implantable pump product line
have become employees of MRG. The Company has been granted exclusive
distribution rights to the implantable pump product line for specific medical
conditions. Pursuant to the distribution agreement, MiniMed will purchase
implantable pump units from MRG at negotiated transfer prices, and must purchase
minimum quantities in order to preserve exclusivity of such rights. The Company
is also responsible for pursuing regulatory approval of the implantable pump for
the treatment of diabetes. The Company has also provided MRG with a working
capital line of credit of $3.0 million, which will bear interest at 7.0%
annually. Any amounts borrowed under the line of credit are due on or before
December 31, 2001 and will be secured by a pledge of MiniMed common stock owned
by Mr. Mann. To date, MRG has not borrowed any funds under this line of credit.
As part of this transaction MRG has also granted MiniMed an option to
acquire exclusive world-wide distribution rights to MRG's long-term glucose
sensor, currently under development, for $30.0 million. The option is
exercisable upon MRG's achievement of certain development milestones. MRG is
attempting to integrate its long-term glucose technology with the implantable
pump. MRG has also agreed to pursue the development of certain improvements to
the electronic design of the implantable pump.
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MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
NOTE 7. CONTINGENCIES
On September 11, 1996, the Company filed an action against Fimed, Inc.
("Fimed") seeking rescission of a product distribution contract. Subsequent to
the filing of this action, Fimed filed a counterclaim seeking compensatory
damages of approximately $400 million, plus punitive damages. The Company
believes that it has meritorious defenses to the counterclaim asserted by Fimed.
Fact discovery pertaining to the litigation has been largely completed, and
trial has been set to commence May 1999. The Company has been pursuing its
claims and defending against Fimed's claims vigorously.
During 1998, the Company has been undertaking the integration of the
operations of Home Medical Supply, Inc. and its affiliated companies ("HMS")
which the Company acquired in January 1998. In connection with these activities,
the Company discovered certain business practices, relating to charges billed to
the State of Florida for health care services provided through an affiliated
pharmacy, which were implemented by HMS' prior owners and which may potentially
result in liability to the Company. The Company has received no notice of any
action which is pending or threatened against it in connection therewith. The
Company has corrected such practices, notified the State of Florida authorities
of its findings, initiated legal action against the prior owners to seek
indemnification for any such liability and is pursuing other legal remedies. The
amount of liability to the Company, if any, cannot be determined at this time,
although the Company believes that indemnification for such liability would be
available from HMS' prior owners.
The Company has initiated a plan to address the year 2000 issue.
Management estimates that the implementation of the entire plan will be
completed prior to the year 2000, and will cost approximately $500,000.
Management believes that the Company has adequate working capital to fund the
program.
During the normal course of business, the Company may be subject to
litigation involving various business matters. Management believes that an
adverse outcome of any such known matters would not have a material adverse
impact on the Company.
NOTE 8. SUBSEQUENT EVENTS
On October 31, 1998, the Company acquired Diabetes Support Systems,
Inc. ("DSS"), a distributor of diabetes products, including the Company's
products, located in South Florida. The Company purchased substantially all of
the net assets of DSS, with the exclusion of certain liabilities and
contingencies, for $3.2 million in cash and notes payable totaling $1.8 million.
The notes payable bear interest at 6.0% and are due and payable $800,000 on
October 31, 1999 and $1.0 million on October 31, 2000. The Company intends to
integrate DSS with its Florida operations.
On November 5, 1998, the Company and an affiliate of Medtronic, Inc.
("Medtronic") entered into an agreement under which Medtronic is to purchase up
to $30.0 million of MiniMed common stock at $60.00 per share. Under the
arrangement, Medtronic purchased 233,334 shares on November 5, 1998, for
approximately $14.0 million and entered into a second agreement to purchase
266,666 shares for approximately $16.0 million, subject to compliance with the
Hart-Scott-Rodino Antitrust Improvements Act.
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10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of MiniMed should be read in conjunction with the consolidated
financial statements and the related notes thereto incorporated by reference
herein. Any statements released by the Company that are forward looking,
including statements relating to future operating results, product development
and research activities, pharmaceutical product sales, pharmacy restructuring,
regulatory approvals, the impact on the Company of the sale of its implantable
pump assets to MRG, the benefits to be derived from the DSS acquisition, the
ability of the Company to obtain indemnification from HMS' prior owners, the
Company's plans to exercise its option to purchase marketing rights to the MRG
long-term glucose sensor, research and development expenditures, adequacy of
working capital and cash requirements, litigation and other contingencies,
capital expenditures and requirements, manufacturing trends, product and service
offerings, financing of new facilities and Year 2000 compliance issues are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that forward-looking statements
involve risks and uncertainties which may affect the Company's business and
prospects, including changes in economic and market conditions, healthcare
legislation, the ability to obtain licensing and regulatory approvals, progress
in MiniMed's alliances with pharmaceutical companies, the development of
competing drug delivery systems, management of growth, the effective integration
of HMS and DSS into the Company, MRG's ability to effectively develop
implantable pumps and its long-term glucose sensor, the outcome of certain
litigation, and other factors discussed in the Company's filings with the
Securities and Exchange Commission.
GENERAL
Product development has focused upon four product lines: external
insulin pumps and related disposables, implantable insulin pumps, continuous
glucose monitoring systems, and therapy delivery systems for other chronic
medical conditions. Sales and profits to date have been generated primarily
through the sale of external pumps and disposable products used to deliver
insulin for the intensive management of diabetes. With its acquisition of HMS
effective January 2, 1998, the Company's consolidated operating results also
include sales related to the distribution of other diabetes supplies and
pharmaceutical products.
RESULTS OF OPERATIONS
The following table sets forth, for the three and nine month periods ended
October 2, 1998, and September 26, 1997, the percentage relationship to net
sales of certain items in the Company's consolidated statements of income and
the percentage change in the dollar amount of such items on a comparative basis.
PERCENTAGE OF NET SALES
------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------- -----------------------------------
OCTOBER 2, SEPTEMBER 26, % INCREASE OCTOBER 2, SEPTEMBER 26, % INCREASE
1998 1997 (DECREASE) 1998 1997 (DECREASE)
---------- ------------- ---------- ---------- ------------- ----------
(Unaudited)
Net sales 100.0% 100.0% 39.4% 100.0% 100.0% 38.5%
Cost of sales 37.5 38.1 36.9 39.3 39.7 37.1
----- ----- ----- ----- ----- -----
Gross profit 62.5 61.9 40.9 60.7 60.3 39.5
Operating expenses:
Selling, general and administrative 41.9 42.6 37.2 40.8 42.2 34.0
Research and development 11.2 9.7 60.6 11.8 9.5 72.2
Research and development contract (4.3) 0.0 n/a (4.8) 0.0 n/a
----- ----- ----- ----- ----- -----
Total operating expenses 48.8 52.3 30.1 47.8 51.7 28.0
----- ----- ----- ----- ----- -----
Operating income 13.7% 9.6% 99.8% 12.9% 8.6% 107.8%
===== ===== ===== ===== ===== =====
10
11
The following table sets forth domestic and international net sales and
gross profits related to the Company's primary product lines for the three and
nine month periods ended September 26, 1997 and October 2, 1998.
DOLLARS IN THOUSANDS % OF NET SALES
----------------------------------------------- ----------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- --------------------- ------------------ -----------------
OCT 2, SEPT 26, OCT 2, SEPT 26, OCT 2, SEPT 26, OCT 2, SEPT 26,
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- ----- ----- ----- -----
(Unaudited)
DOMESTIC AND
INTERNATIONAL NET SALES
External pumps and
related disposables
Domestic $ 28,637 $ 18,627 $ 72,965 $ 48,476 82.1% 74.4% 78.5% 72.2%
International 2,688 1,740 7,644 4,820 7.7 6.9 8.2 7.2
-------- -------- -------- -------- ----- ----- ----- -----
Subtotal 31,325 20,367 80,609 53,296 89.8 81.3 86.7 79.4
Other diabetes supplies 1,364 714 4,334 3,960 3.9 2.9 4.7 5.9
Pharmaceutical products 2,065 3,681 7,554 9,203 5.9 14.7 8.1 13.7
Implantable Pumps 143 276 482 662 0.4 1.1 0.5 1.0
-------- -------- -------- -------- ----- ----- ----- -----
Net Sales $ 34,897 $ 25,038 $ 92,979 $ 67,121 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ===== ===== ===== =====
GROSS PROFITS
External pumps and
related disposables $ 21,577 $ 14,999 $ 55,544 $ 38,510 61.8% 59.9% 59.7% 57.4%
Other diabetes supplies 481 264 1,655 1,702 1.4 1.1 1.8 2.5
Pharmaceutical products 62 552 925 1,381 0.2 2.2 1.0 2.1
Implantable pumps (294) (324) (1,656) (1,100) (0.8) (1.3) (1.8) (1.6)
-------- -------- -------- -------- ----- ----- ----- -----
Total $ 21,826 $ 15,491 $ 56,468 $ 40,493 62.6% 61.9% 60.7% 60.4%
======== ======== ======== ======== ===== ===== ===== =====
NET SALES
Net sales increased 39.4% during the three months ended October 2, 1998
over the three months ended September 26, 1997 to $34,897,000 from $25,038,000,
and 38.5% to $92,979,000 from $67,121,000 from the first nine months of 1997 to
the first nine months of 1998. This sales growth is principally the result of an
increase of 53.8%, or $10,958,000, in the sales volume of external pumps and
related disposables for the third quarter of 1998 over the third quarter of
1997, with sales of these products increasing $27,313,000 or 51.2% for the first
nine months of 1998 over the corresponding period of 1997. Domestic sales of
these products grew 53.7% or $10,010,000 in the third quarter of 1998 compared
to the third quarter of 1997, while international sales increased 54.5% or
$948,000 during the same period. For the first nine months of 1998, domestic and
foreign sales of external pumps and related disposable products increased by
50.5% and 58.6%, respectively, over the comparable period of 1997.
Domestic net sales growth resulted primarily from increased volume of
external pumps and related disposables, with some of the domestic sales growth
attributable to an increase in the average realized sales price of external
pumps. The effective price increase is generally the result of a continued shift
of external pump sales from independent dealers to internal sales, thus
eliminating the discount given to such dealers. International sales of external
pumps and related disposable products grew primarily due to greater sales
volumes of external pumps. The Company has realized a slight decrease in the
average sales price realized on international pump sales as the Company is
expanding its presence in several countries. Domestic and international pricing
for disposable products did not change materially from the first nine months of
1997 to the first nine months of 1998.
Pharmaceutical product sales decreased 43.9% or $1,616,000 to
$2,065,000 in the third quarter of 1998 compared to $3,681,000 in the third
quarter of 1997 and decreased 17.9% or $1,649,000 to $7,554,000 in the first
nine months of 1998 compared to $9,203,000 in the first nine months of 1997.
Pharmacy sales will continue to be lower than 1997 sales as the pharmacy
operations are being restructured to better serve MiniMed's diabetes business.
Such restructuring includes the discontinuation of certain product lines
previously offered by the pharmacy. Sales of other diabetes supplies increased
91.0% or $650,000 to $1,364,000 for the third quarter of 1998 compared to
$714,000 in the 1997 third quarter and have increased by 9.4% or $374,000 to
$4,334,000 during the first nine months of 1998 compared to $3,960,000 in the
comparable period of 1997. The increase in sales of other diabetes supplies for
both the three and nine months ended October 2, 1998 was primarily attributable
to sales from the Company's subsidiary in Sweden. Domestic sales
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volumes of other diabetes supplies have increased, however, gross profits on
these products have decreased due to pricing pressures.
On October 31, 1998, the Company acquired Diabetes Support Systems,
Inc. ("DSS"), a distributor of the Company's products and other diabetes
supplies located in South Florida (see notes to consolidated financial
statements). The Company believes that the acquisition of DSS will enhance its
internal distribution channels to a broader patient base and provide more
support for sales growth of its core business products and other diabetes
supplies.
Sales of implantable pumps decreased from the third quarter of 1997 to
the third quarter of 1998 and have decreased for the first nine months of 1998
compared to the first nine months of 1997. Regulatory approval for the
implantable pump and special insulin utilized in the implantable system is still
pending. Although the Company received certification for the implantable pump
under the applicable directives issued by the European Union (the "EU") and
received the CE Mark in March 1995 (permitting commercial sale throughout the
EU), separate approval from the EU is required for commercial sale of the
insulin and no assurance can be given as to when such approval will be received,
if at all. The implantable pump and the special insulin remain subject to
regulatory review and approval in the United States. No assurance can be given
when such approvals will be received, if at all.
OPERATING RESULTS
Cost of Sales and Gross Profits--Cost of sales increased 36.9% during
the three months ended October 2, 1998 as compared to the three months ended
September 26, 1997 to $13,071,000 from $9,547,000, and increased 37.1% to
$36,511,000 from $26,628,000 for the nine months ended October 2, 1998 as
compared to the nine months ended September 26, 1997. As a percentage of net
sales, cost of sales in the 1998 third quarter decreased to 37.5% from 38.1% in
the comparable period of 1997, while cost of sales as a percentage of net sales
for the first nine months of 1998 decreased to 39.3% from 39.7% for comparable
period of 1997. Gross margins on external pumps and disposables decreased to
68.9% of such sales during the 1998 third quarter, compared to 73.6% for this
product line during the 1997 third quarter. For the first nine months of 1998
gross margins on external pumps and disposables decreased to 68.9% of such sales
compared to 72.3% for the comparable period in 1997. Year-to-date and quarterly
gross margins on these products were affected by several factors. The Company
has added a disposable product line which is not manufactured in-house,
therefore resulting in lower margins. The Company intends to continue to
purchase and sell various disposable products manufactured by third party
manufacturers and expects to achieve better margins on these products when
certain purchase volumes have been met. In an effort to seed international
growth, the Company has realized a reduction in average external pump sales
prices outside of the United States. Gross margins as a percentage of
corresponding product line sales in 1998 have also decreased for the
pharmaceutical products and other diabetes supplies product lines for the third
quarter of 1998 and on a year-to-date basis as compared to the third quarter and
first nine months of 1997. The reduction in pharmaceutical products gross
margins is the result of the restructuring of the pharmacy operations and
discontinuation of certain pharmaceutical product lines. Other diabetes supplies
gross margins have decreased due to the lower domestic average sales prices
described above.
The Company's gross profits have been adversely impacted by the
implantable pump product line during the nine months ended October 2, 1998 due
to continued limited sales prior to such product's full commercial release. Such
limited sales have inhibited the Company's ability to realize manufacturing
efficiencies on this product line and have caused unfavorable manufacturing
variances. On September 1, 1998, the Company sold assets and transferred
technology related to its implantable pump business to MRG. MRG was founded by
Alfred E. Mann, the Company's founder, Chairman, CEO and largest stockholder.
Mr. Mann continues to hold a substantial equity position in MRG. MRG will assume
all manufacturing and development activity related to the implantable pump (see
notes to consolidated financial statements).
Operating Expenses--Selling, general and administrative expenses
increased 37.2% during the three months ended October 2, 1998 as compared to the
three months ended September 26, 1997 to $14,643,000 from $10,669,000. For the
nine months ended October 2, 1998, selling, general and administrative expenses
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grew 34.0% to $37,963,000 from $28,334,000 for the nine months ended September
26, 1997. As a percentage of net sales, these expenses decreased to 41.9% and
40.8% during the three and nine month periods ended October 2, 1998 compared to
42.6% and 42.2% for the comparable three and nine month periods ended September
26, 1997. These expenses have decreased as a percentage of sales primarily due
to the Company's increased sales volumes. The overall increase in spending is
also related primarily to the increase in sales activities during such periods.
Research and development expenses grew 60.6% during the three months
ended October 2, 1998 over the three months ended September 26, 1997 to
$3,892,000 from $2,424,000, with research and development expenses increasing
72.2% to $10,946,000 for the first nine months of 1998 compared to $6,357,000
for the first nine months of 1997. As a percentage of sales, research and
development expenses increased to 11.2% during the three months ended October 2,
1998 from 9.7% during the comparable period in 1997, and increased to 11.8% from
9.5% of net sales during the first nine months of 1998 as compared to the first
nine months of 1997. The 1998 increase in research and development costs
resulted from greater resources directed to the development of continuous
glucose monitoring systems, start-up manufacturing operations of the continuous
glucose monitoring systems, future generation external insulin pumps and
disposable products, data communication capabilities for external pumps and
continuous glucose monitoring systems and the Company's joint development
project with Roche Diagnostics/Boehringer Mannheim Corporation. The Company will
realize a reduction in research and development expenses in future periods due
to the sale of assets related to the implantable pump program to MRG (see notes
to consolidated financial statements). However, on an overall basis, research
and development expenses will continue to increase during the fourth quarter of
1998 and during 1999. Future increases in research and development spending are
expected for various continuous glucose monitoring systems and future generation
external pumps and related disposable products for the treatment of diabetes and
other medical conditions as well as other new activities.
The Company filed an application with the Food and Drug Administration
("FDA") for 510(k) clearance for the first continuous glucose monitoring system
for ambulatory use during the fourth quarter of 1997. This application has been
converted to an application for premarket approval which required additional
documentation to be submitted by the Company to the FDA prior to approval of the
first generation of continuous glucose monitoring systems. Substantially all of
such documentation has been submitted to the FDA. The FDA has granted the
Company expedited review status on this product and has completed an audit of
the statistical results obtained in clinical studies and an inspection of the
Company's continuous glucose monitoring systems manufacturing facilities. Future
research and development costs on the continuous glucose monitoring systems
relate to continued refinement of the products prior to regulatory approval,
continued investment in a continuous glucose monitoring systems manufacturing
operation and development of the next generation of continuous glucose
monitoring systems. The Company anticipates that research and development
expenditures for future periods will increase as more of its new technological
innovations approach commercialization. The Company achieved the necessary
milestone on its research and development contract with American Medical
Instruments, Inc., a member of The Marmon Group of Companies, ("AMI"), and
appropriately recognized $1.5 million in research and development contract
revenues during the quarter, recorded as a reduction of operating expenses.
The Company from time to time invests in new and developing
technologies that may provide improvements to the Company's core technology or
that may provide additional applications for the Company's existing technologies
and products. These investments may be in the form of equity investments, loans,
research and development agreements, and strategic alliance or cooperation
agreements. No assurance can be given as to when such investments will provide
useful new technologies or applications, if at all. Such investments may result
in losses that could adversely affect the Company's future earnings and results
of operations.
Other--Other income during the three and nine months ended October 2,
1998 and during the three and nine months ended September 26, 1997 consists
primarily of interest income generated from the Company's cash, cash
equivalents, and short-term investment balances. Other income will fluctuate in
future periods based upon the funds available to the Company for investment.
13
14
The Company's effective tax rate during the first nine months of 1998
and 1997 has been computed giving consideration to the pretax earnings and
losses applicable to the Company's foreign and domestic tax jurisdictions.
Inflation has not significantly impacted the Company's results of operations for
the past two years.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended October 2, 1998, the Company used cash
in operations of $4,580,000 compared to $2,172,000 provided by operations in the
comparable period in 1997. Cash used in operations increased primarily due to
increased receivables related to sales growth, increased inventory levels
required to support planned sales growth, product introductions and payment of
several current liabilities, including the payment of fiscal 1997 accrued
compensation and the retirement of trade debt owed to several significant
vendors associated with HMS operations. The Company also used $2.6 million of
cash to complete its acquisition of Dartec A.B., a Scandinavian distributor
during the first quarter of 1998. The increase in capital expenditures to
$14,899,000 during the first nine months of 1998 compared to $4,153,000 spent
during the comparable period in 1997, resulted primarily from building
continuous glucose monitoring systems manufacturing capacity, as well as other
building improvements, to support growth, manufacturing expansion, research and
development engineering equipment and information systems requirements. The
Company anticipates that future capital expenditures will continue to increase
to support the Company's new product activities and to build the infrastructure
necessary to accommodate the Company's anticipated growth. The Company also used
cash of $2.9 million to retire bank debt related to HMS operations, with
$275,000 of debt remaining outstanding as of October 2, 1998.
There were no significant equity transactions during the first nine
months of 1998. On November 5, 1998, the Company and Medtronic entered into an
agreement under which Medtronic is to purchase up to $30.0 million of MiniMed
common stock at $60.00 per share. Under the arrangement, on November 5, 1998,
Medtronic purchased 233,334 shares for approximately $14.0 million and entered
into a second agreement to purchase 266,666 shares for approximately $16.0
million, subject to compliance with the Hart-Scott-Rodino Antitrust Improvements
Act. The Company maintains an unsecured line of credit which enables the Company
to borrow up to $10.0 million through January 31, 1999. The Company has not
drawn any funds under such line of credit. The line of credit, if used, bears
interest at an adjustable rate equal to the 30-day commercial paper rate plus
2.15% (7.2% as of October 29, 1998). The Company is also required to maintain
certain cash, net worth and debt covenants under the provisions of this line of
credit. The Company is currently in compliance with all of these covenants.
In the process of integrating certain HMS operations, the Company
discovered certain business practices relating to charges billed to the State of
Florida which were implemented by prior ownership and that may potentially
result in liability. Such billing activities were related to health care
services provided through an affiliated pharmacy. The Company has received no
notice of any action which is pending or threatened against it in connection
therewith. The Company has corrected such practices, notified the State of
Florida of its findings and initiated legal action against the prior owners to
seek indemnification for any such liability. The amount of liability to the
Company, if any, cannot be determined at this time, although the Company
believes that indemnification for such liability would be available from such
prior owners. The Company also is involved in certain other litigation, the
financial impact of which is uncertain. (see notes to consolidated financial
statements.)
Under terms of its research and development contract with AMI, the
Company received $4.5 million during the first nine months of 1998. The Company
also has the right to purchase the technologies developed at prices ranging from
an aggregate of $13.5 million to $19.0 million during certain periods through
July 30, 2002. The Company may alternatively elect to pay royalties on sales of
these products in lieu of purchasing the technologies. The Company has entered
into an agreement by which, among other transactions, the Company has acquired
an option to purchase the exclusive world-wide marketing rights to a long-term
glucose sensor developed by MRG for $30.0 million (see notes to consolidated
financial statements). The Company does not anticipate exercising this option
prior to 2000. In the event that the Company pursues either of these
opportunities, additional capital resources will be required.
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On October 31, 1998, the Company acquired DSS, a distributor of the
Company's products and other diabetes supplies located in South Florida. The
Company paid $5.0 million consisting of $3.2 million in cash and $1.8 million in
notes payable, $800,000 due in 1999 and $1,000,000 in 2000 for substantially all
of the net assets of DSS. In connection with this acquisition, the Company will
also retire approximately $2.0 million in short-term and long-term debt of DSS
during the 1998 fourth quarter.
The Company plans to develop a new corporate headquarters in Southern
California, not far from the current Sylmar location. Substantial capital
resources will be required to construct and equip this facility, and the Company
is pursuing alternative financing sources in connection therewith. The Company
anticipates that the construction of this facility will be financed under a
synthetic lease, with a separate operating lease on the land for 40-years plus
renewal opportunities.
Management believes that the Company's current level of cash and cash
equivalents, combined with the Company's existing line of credit, will be
sufficient to meet its needs for working capital and capital expenditures for
the next twelve to twenty-four months. However, the requirements for additional
capital and working capital are subject to change and will depend upon numerous
factors, including the level of capital expenditures, research and development
activities and results, competitive and technological developments, health care
reimbursement trends, and the availability for acquisition by the Company of
complementary additional distribution channels, products, and technologies.
During future periods, the Company may require significant amounts of cash to
pursue opportunities and promote continued growth and expansion.
YEAR 2000 COMPLIANCE
The Year 2000 problem ("Y2K") refers to the potential of all
electronic devices containing microprocessors to improperly calculate dates in
and beyond the year 2000. In the second quarter of 1998, the Company formed a
Year 2000 Oversight Committee (the "Committee") to evaluate the company's
position regarding Y2K. The Committee consists of members representing all of
the major operating and administrative departments within the Company including
information technology, facilities, manufacturing, research and development,
regulatory, quality assurance, materials, finance and accounting and legal.
The Committee established an Action Plan Program (the "Plan") to
facilitate the Company's Y2K compliance and minimize the potential effects of
Y2K on the Company's operations. The components of the plan include the
following steps: (1) Assess Y2K compliance of the Company's products; (2)
Inventory Company equipment and software and prioritize according to critical
business functions; (3) Implement Y2K compliance testing and remediation
according to priorities developed; (4) Assess vendor and health care payor
compliance; (5) Develop and implement policies to maintain Y2K compliance going
forward; and (6) Establish contingency plans. A timetable for the completion of
each of these action steps contained in the Plan has been developed by the
Committee. The Committee meets regularly to assess the Company's efforts to
comply with the Plan and to address any outstanding Y2K issues. The Committee is
also responsible for coordinating all communications and responding to all
inquiries relating to Y2K.
The Company has completed its evaluation of all of its current product
offerings. Such evaluation has shown that Y2K will not pose operating problems
for such products. The Company is currently in the process of creating a master
inventory of all equipment and software vulnerable to Y2K and is identifying the
equipment and software attendant to critical business processes. Once this
process is complete, the Company will be in a position to implement remediation
programs to address potential problems that are identified. The Company
currently believes that it will be able to modify, replace, or mitigate its
affected systems in time to avoid any material impact on its operations.
The Company has initiated formal communication with its vendors to
assess their compliance with Y2K. Questionnaires have been developed and are
being distributed to vendors with on site evaluations to be conducted at the
most critical vendors' sites of operations. The Company suspects that its
greatest Y2K risk will be vendor compliance. The Company relies on its vendors
to supply it with its requirements of critical components necessary for the
manufacture of its products. A program to assess the Y2K compliance of insurance
companies, management service organizations, and other third party payors is
also being implemented. The Company is also initiating discussion with its
strategic business partners regarding the
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state of their Y2K readiness. Once both the internal and external reviews
described above are completed, the Company will be able to design a contingency
plan to address its areas of greatest exposure.
The failure to correct a material Y2K problem could result in an
interruption in, or failure of certain normal business activities. Such failures
or interruptions could materially impact the Company's results of operations,
liquidity and financial position. Due to the general uncertainty inherent in the
Y2K problem, resulting primarily from the uncertainty of the Y2K readiness of
the Company's vendors and suppliers, the Company is unable to determine at this
time whether the consequences of Y2K failures will have a material adverse
impact on the Company. The Plan, implemented by the Committee, is expected to
significantly reduce both the Company's level of uncertainty about the Y2K
problem and the possibility of significant interruptions to the normal
operations.
Management currently believes that the cost of Y2K assessment and
remediation will not be material. The Company estimates that the implementation
of the Plan and remediation activities related to the Company's internal systems
and equipment will cost approximately $500,000. Management currently believes
that the Company has adequate working capital to fund these activities.
Readers are cautioned that forward looking statements contained in
this Year 2000 Compliance section should be read in conjunction with the
Company's cautionary language in the first paragraph of Management's Discussion
and Analysis of Financial Condition and Results of Operations on page 10.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Exhibit
- ----------- --------------------------------------------------------------
3(ii).1 Amendment to Bylaws of MiniMed Inc.
10.1 Agreement Regarding Implantable Pump Business dated September
1, 1998, by and between Medical Research Group, LLC, a
California limited liability company and MiniMed Inc., a
Delaware corporation.
10.2 Implantable Pump License and Distribution Agreement dated
September 1, 1998, by and between Medical Research Group, LLC,
a California limited liability company and MiniMed Inc., a
Delaware corporation.
10.3 Glucose Sensor Option Agreement dated September 1, 1998, by
and between Medical Research Group, LLC, a California limited
liability company and MiniMed Inc., a Delaware corporation.
10.4 Guarantee of Alfred E. Mann dated September 1, 1998.
27.1 Financial data schedule
(b) Reports on Form 8-K
None.
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SIGNATURE
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.
MiniMed Inc.
Date: November 13, 1998 /s/ KEVIN R. SAYER
----------------------------------
Kevin R. Sayer
Senior Vice President, Finance &
Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- --------------------------------------------------------------
3(ii).1 Amendment to Bylaws of MiniMed Inc.
10.1 Agreement Regarding Implantable Pump Business dated September
1, 1998, by and between Medical Research Group, LLC, a
California limited liability company and MiniMed Inc., a
Delaware corporation.
10.2 Implantable Pump License and Distribution Agreement dated
September 1, 1998, by and between Medical Research Group, LLC,
a California limited liability company and MiniMed Inc., a
Delaware corporation.
10.3 Glucose Sensor Option Agreement dated September 1, 1998, by
and between Medical Research Group, LLC, a California limited
liability company and MiniMed Inc., a Delaware corporation.
10.4 Guarantee of Alfred E. Mann dated September 1, 1998.
27.1 Financial data schedule
19