<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1995
------------------
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 1-6247
------
ALZA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0142070
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 Page Mill Road, P.O. Box 10950, Palo Alto, California 94303-0802
- --------------------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 494-5000
--------------
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 / /
Number of shares outstanding of each of the registrant's classes of common stock
as of October 31, 1995:
Common Stock, $.01 par value - 82,488,105 shares
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
ALZA CORPORATION
Condensed Consolidated Statement of Income (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Royalties and fees $ 35,506 $ 28,377 $ 103,698 $ 89,185
Research and development 27,525 17,724 72,710 49,308
Net sales 16,377 14,226 54,383 51,862
Interest and other 6,190 5,907 18,052 13,193
---------- ---------- ---------- ----------
Total revenues 85,598 66,234 248,843 203,548
COSTS AND EXPENSES:
Research and development 26,147 18,694 72,533 55,019
Costs of products shipped 15,422 12,734 48,582 40,752
General, administrative
and marketing 7,862 8,629 24,762 24,586
Interest and other 6,774 6,140 17,949 13,940
---------- ---------- ---------- ----------
Total costs and expenses 56,205 46,197 163,826 134,297
---------- ---------- ---------- ----------
Income before income taxes 29,393 20,037 85,017 69,251
Provision for income taxes 11,170 7,527 32,307 26,376
---------- ---------- ---------- ----------
Net income $ 18,223 $ 12,510 $ 52,710 $ 42,875
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per common and
common equivalent share $ .22 $ .15 $ .64 $ .52
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common and
common equivalent shares 82,843 82,358 82,548 82,325
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
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<PAGE>
ALZA CORPORATION
Condensed Consolidated Balance Sheet (unaudited)
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
- ------ ------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 79,050 $ 88,844
Short-term investments 326,393 256,084
Receivables, net 99,750 84,879
Inventories, at cost:
Raw materials 16,199 18,264
Work in process 14,869 10,175
Finished goods 2,914 4,976
------------- ------------
Total inventories 33,982 33,415
Prepaid expenses and other current assets 23,473 29,211
------------- ------------
Total current assets 562,648 492,433
Property, plant and equipment 341,147 315,688
Less accumulated depreciation and amortization (78,328) (70,238)
------------- ------------
Net property, plant and equipment 262,819 245,450
Other assets 68,586 68,369
------------- ------------
Total assets $ 894,053 $ 806,252
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 9,852 $ 20,006
Accrued income taxes 2,413 1,418
Accrued compensation 11,413 10,099
Deferred revenue 23,125 16,340
Other current liabilities 8,174 8,125
------------- ------------
Total current liabilities 54,977 55,988
5 1/4% zero coupon convertible subordinated debentures 358,305 344,593
Deferred income taxes 23,380 18,513
Other long-term liabilities 24,990 22,679
Stockholders' equity:
Common stock and additional paid-in capital 310,291 302,967
Unrealized gain (loss) on available-for-sale securities,
net of tax effect 417 (7,471)
Retained earnings 121,693 68,983
------------- ------------
Total stockholders' equity 432,401 364,479
------------- ------------
Total liabilities and stockholders' equity $ 894,053 $ 806,252
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
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<PAGE>
ALZA CORPORATION
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 52,710 $ 42,875
Non-cash adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 10,957 9,532
Interest on 5 1/4% zero coupon convertible
subordinated debentures 13,712 3,661
Deferred income taxes 4,867 4,345
(Increase) decrease in assets:
Receivables (14,871) (22,610)
Inventories (567) (10,224)
Prepaid expenses and other current assets 246 (1,284)
Increase (decrease) in liabilities:
Accounts payable (10,154) (5,079)
Accrued income taxes 995 5,351
Accrued compensation 1,314 2,066
Deferred revenue 6,785 7,584
Accrued and other liabilities 2,360 4,034
--------- ---------
Total adjustments 15,644 (2,624)
--------- ---------
Net cash provided by operating activities 68,354 40,251
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (27,961) (21,334)
Purchases of available-for-sale securities (147,772) (293,544)
Sales of available-for-sale securities 83,831 115,831
Maturities of available-for-sale securities 7,012 101,074
Increase in cash surrender value-life
insurance and prepaid premiums (2,312) (4,702)
(Increase) decrease in other assets 1,730 (522)
--------- ---------
Net cash used in investing activities (85,472) (103,197)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from 5 1/4% zero coupon convertible
subordinated debentures - 328,117
Maturities of commercial paper, net - (249,520)
Principal payments on long-term debt - (858)
Issuances of common stock 7,324 5,476
--------- ---------
Net cash provided by financing activities 7,324 83,215
--------- ---------
Net increase (decrease) in cash and cash equivalents (9,794) 20,269
Cash and cash equivalents at beginning of period 88,844 53,683
--------- ---------
Cash and cash equivalents at end of period $ 79,050 $ 73,952
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
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<PAGE>
ALZA CORPORATION
September 30, 1995
Notes to Condensed Consolidated Financial Statements (unaudited)
- ----------------------------------------------------------------
1. Basis of Presentation
---------------------
The information at September 30, 1995 and for the quarter and nine months
ended September 30, 1995 and 1994 is unaudited, but includes all adjustments
(consisting only of normal recurring adjustments) which the management of ALZA
Corporation ("ALZA") believes necessary for fair presentation of the results for
the periods presented. Interim results are not necessarily indicative of
results for the full year. The condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
for the year ended December 31, 1994 included in ALZA's 1994 Annual Report to
Stockholders.
2. Short-term Investments
----------------------
ALZA has classified its entire investment portfolio, including cash
equivalents of $71.9 million at September 30, 1995, as available-for-sale.
Although ALZA may not dispose of all of the securities in its investment
portfolio within one year, ALZA's investment portfolio is available for current
operations and, therefore, has been classified as a current asset. Investments
in the available-for-sale category are carried at fair value with unrealized
gains and losses recorded as a separate component of stockholders' equity. At
September 30, 1995, net unrealized gains on available-for-sale securities were
$0.4 million, net of a $0.3 million tax effect.
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<PAGE>
ALZA CORPORATION
September 30, 1995
The following is a summary of ALZA's investment portfolio at September 30, 1995.
<TABLE>
<CAPTION>
Estimated
Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
government agencies $ 181,946 $ 1,383 $ (1,693) $ 181,636
Collateralized mortgage
obligations and asset
backed securities 42,274 109 (390) 41,993
Corporate securities 173,384 1,696 (397) 174,683
---------- ---------- ---------- ----------
$ 397,604 $ 3,188 $ (2,480) $ 398,312
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The amortized cost and estimated fair value of debt and marketable equity
securities at September 30, 1995, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because the issuers
of the securities may have the right to prepay certain of the obligations
without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Fair
(In thousands) Cost Value
---------- ----------
<S> <C> <C>
Due in one year or less $ 91,618 $ 91,605
Due after one year through four years 128,656 128,342
Due after four years through eight years 177,330 178,365
---------- ----------
$ 397,604 $ 398,312
---------- ----------
---------- ----------
</TABLE>
3. Litigation
----------
See Part II, Item 1 of this Quarterly Report on Form 10-Q.
-6-
<PAGE>
ALZA CORPORATION
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
ALZA Corporation ("ALZA" or the "Company") develops, primarily under joint
development and commercialization agreements with ALZA's client companies,
including Therapeutic Discovery Corporation, a broad range of pharmaceutical
products based on ALZA's proprietary therapeutic systems technologies. ALZA's
therapeutic systems can often improve the medical value as well as the
cost-effectiveness of drug compounds by increasing efficacy, minimizing
unpleasant or harmful side effects and/or providing greater patient compliance.
ALZA is developing multiple products under an arrangement with Therapeutic
Discovery Corporation ("TDC"). TDC, which commenced operations in 1993, was
formed by ALZA for the purpose of selecting and developing new human
pharmaceutical products combining ALZA's proprietary drug delivery technologies
with various drug compounds, and commercializing such products, most likely
through licensing to ALZA. ALZA and TDC currently have more than 20 products in
the development pipeline, including several in early clinical evaluation.
Additional product candidates are under consideration.
ALZA markets certain products it has developed and promotes two products
under co-promotion arrangements with client companies. ALZA manufactures all or
a portion of certain clients' requirements for products developed by ALZA, and
also manufactures products marketed by ALZA.
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<PAGE>
ALZA CORPORATION
September 30, 1995
RESULTS OF OPERATIONS
ALZA's net income was $18.2 million or $0.22 per common share for the
quarter ended September 30, 1995 compared to net income of $12.5 million or
$0.15 per common share for the quarter ended September 30, 1994. The results
for both periods include charges for a royalty reserve, discussed below, but the
results are not directly comparable because the charge taken during the quarter
ended September 30, 1994 covered prior periods. Net income for the nine months
ended September 30, 1995 was $52.7 million, or $0.64 per common share compared
to net income of $42.9 million or $0.52 per common share for the nine months
ended September 30, 1994.
ALZA's net income currently results primarily from royalties and fees from
client companies. Royalties and fees are derived from sales by client companies
of products developed jointly with ALZA, and will vary from quarter to quarter
as a result of changing levels of product sales by client companies and,
occasionally, the receipt by ALZA of certain one-time fees. Because ALZA's
clients generally take responsibility for obtaining necessary regulatory
approvals and make all marketing and commercialization decisions regarding such
products, most of the variables that affect ALZA's royalties and fees are not
directly within ALZA's control. In addition, with increasing pressures for cost
containment in the United States health care system, it can be expected that
pharmaceutical product prices, including those of ALZA's royalty-bearing
products, will not increase as quickly as they have in the past, and could
decrease. Within the next several years, ALZA intends to become less dependent
on royalties and fees as ALZA markets more products (including products
developed with TDC); however, there can be no assurance that these expanded
activities will be successful, due to factors such as the risks of product
development, the
-8-
<PAGE>
ALZA CORPORATION
September 30, 1995
length of the regulatory approval process, acceptance of products by the
intended markets, and the current health care cost containment environment.
Royalties and fees for the quarter and nine months ended September 30,
1995 increased to $35.5 million and $103.7 million, respectively, compared to
$28.4 million and $89.2 million for the same periods in 1994. Royalties from
sales by Bayer AG of Adalat CR-Registered Trademark- (which is marketed by
Pfizer Inc in the United States as Procardia XL-Registered Trademark-) and
sales of Glucotrol XL-Registered Trademark- by Pfizer Inc, among other
products, contributed to the growth in royalties and fees. Royalties and
fees for the quarter and nine months ended September 30, 1994 were reduced by
approximately $6 million to establish a reserve for a potential adjustment in
royalty revenue on U.S. sales of Procardia XL-Registered Trademark- for the
period from November 1993 through September 1994 due to a U.S. patent issued
to Bayer AG. Royalties and fees for the quarter and nine months ended
September 30, 1995 reflect reductions of approximately $2 million and
$7 million, respectively, to account for the reserve. Until a further
determination is made regarding this matter, ALZA intends to maintain a
reserve sufficient to cover the maximum potential reduction in Procardia
XL-Registered Trademark- royalties as a result of the Bayer AG patent.
Royalties from Procardia XL-Registered Trademark- accounted for approximately
45% of ALZA's royalties and fees for both the quarter and nine months ended
September 30, 1995 after taking into account the reserve. ALZA expects that,
in the near term, net income will continue to result primarily from royalty
revenue on sales of currently marketed products and additional products that
were recently approved or are now awaiting approval by the U.S. Food and Drug
Administration and regulatory agencies in other countries.
-9-
<PAGE>
ALZA CORPORATION
September 30, 1995
Research and development revenue of $27.5 million for the quarter ended
September 30, 1995 and $72.7 million for the nine months ended September 30,
1995 represent increases of 55% and 47%, respectively, from the same periods in
1994 due to increased product development activities undertaken on behalf of
TDC. Research and development revenue from TDC was $18.4 million and
$47.0 million for the quarter and nine months ended September 30, 1995,
respectively, and $8.1 million and $21.1 million for the corresponding periods
in 1994. ALZA and TDC are parties to a development agreement pursuant to which
ALZA conducts product development activities on behalf of TDC. ALZA has granted
to TDC a royalty-free, perpetual license to use ALZA's proprietary drug delivery
technologies to develop and commercialize specified TDC products. Because
products in early stages of development generally require lower levels of
expenditures, ALZA's research and development revenue from TDC for any product
can be expected to be lower during the early stages of development. During the
quarter, ALZA and Wyeth-Ayerst terminated the remaining activities under their
November 1991 multi-product development agreement. Development of one product
with Wyeth-Ayerst continues under a separate arrangement. During the course of
the collaboration, early development activities were undertaken on several
products which the parties ultimately determined not to pursue for commercial
or technical considerations.
Research and development expenses for the quarter and nine months ended
September 30, 1995 increased approximately 40% and 32%, respectively, from the
same periods in 1994, primarily due to increased product development activities
on behalf of TDC. As additional products are accepted by TDC into its
development pipeline and as
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<PAGE>
ALZA CORPORATION
September 30, 1995
products enter later stages of development, ALZA expects both its research
and development revenues and expenses attributable to TDC products to
continue at current levels or to increase.
Net sales of $16.4 million and $54.4 million for the quarter and nine
months ended September 30, 1995 increased 15% and 5%, respectively, compared to
the corresponding periods in 1994, due largely to increased contract
manufacturing activities. Costs of products shipped increased 21% and 19% for
the quarter and nine months ended September 30, 1995, respectively, compared to
the corresponding periods in 1994 primarily due to increased manufacturing costs
including costs associated with ALZA's ongoing quality assurance activities.
ALZA's Vacaville manufacturing facility provides substantial manufacturing
capacity for ALZA-developed products. Because of the nature of the
substantially fixed costs at this facility, costs of products shipped as a
percent of net sales may vary significantly from period to period due to the
utilization of the facility and the mix of products manufactured. ALZA expects
costs of products shipped as a percent of net sales to decline over the longer
term through increased utilization of capacity, greater operating efficiencies
and increased sales of ALZA-marketed products.
General, administrative and marketing expenses of $7.9 million for the
quarter ended September 30, 1995 decreased 9% compared to the third quarter of
1994. The decrease resulted from certain one-time or infrequent fluctuations in
general and administrative expenses and is not expected to be indicative of any
trend. General, administrative and
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<PAGE>
ALZA CORPORATION
September 30, 1995
marketing expenses for the nine months ended September 30, 1995 were relatively
flat compared to the same period in 1994.
Interest and other revenue, which consists primarily of interest income,
increased 5% and 37%, respectively, for the quarter and nine months ended
September 30, 1995 compared to the same periods in 1994, due to higher invested
cash balances and higher interest rates.
Through the first half of 1994 interest expense consisted primarily of
interest expense on ALZA's $250 million of commercial paper. During the third
quarter of 1994, ALZA retired its commercial paper with proceeds from an
offering of 5 1/4% zero coupon convertible subordinated debentures. Interest
expense for the third quarter of 1995 increased 10% as compared to the
corresponding quarter in 1994 primarily because of the increasing balance of the
5 1/4% zero coupon convertible subordinated debentures, reflecting the
additional original issue discount accrued. For the nine months ended September
30, 1995, interest expense increased 29% compared to the same period in 1994 due
to the higher amount of outstanding debt and a higher interest rate on such
debt.
ALZA's effective combined federal and state tax rate for the periods
presented was 38%.
LIQUIDITY AND CAPITAL RESOURCES
ALZA invested $28.0 million during the first nine months of 1995 in
additions to property, plant and equipment to support its research and
development and manufacturing activities. While ALZA believes its current
facilities and equipment are sufficient to meet its
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<PAGE>
ALZA CORPORATION
September 30, 1995
current operating requirements, ALZA intends to expand its facilities and
equipment to support its medium-term and long-term requirements.
ALZA believes that its existing cash balances and investments are adequate
to fund its current cash needs. In addition, should the need arise, ALZA
believes it would be able to borrow additional funds or raise additional capital
in the marketplace. ALZA may consider using its capital to make strategic
investments or to acquire or license technology or products. ALZA may also
enter into strategic alliances with third parties which could provide additional
funding for research and development and support for marketing and sales.
-13-
<PAGE>
ALZA CORPORATION
September 30, 1995
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In December 1991, a patent infringement suit was filed by Ciba-Geigy
("Ciba") against Marion Merrell Dow Inc., now Hoechst Marion Roussel Inc.
("HMR"), and ALZA in connection with the commercialization of
Nicoderm-Registered Trademark-. In October 1994, the District Court granted
a motion for summary judgment brought by ALZA and HMR, ruling the Ciba patent
invalid. During October 1995, the Court of Appeals for the Federal Circuit
upheld the most significant portions of the summary judgment decision, and
sent back to the District Court the issue of validity of certain other more
limited claims. ALZA believes that these narrower claims are invalid and do
not cover the Nicoderm-Registered Trademark-product. During January 1995,
ALZA and HMR filed a separate suit against Ciba and LTS Lohmann Therapy
Systems Corporation for infringement of two U.S. patents issued to ALZA in
1994 relating to the transdermal administration of nicotine.
During January 1994, a suit was filed against ALZA by Cygnus
Therapeutic Systems ("Cygnus") seeking a declaration of unenforceability and
invalidity of an ALZA patent relating to the transdermal administration of
fentanyl and alleging violation of antitrust laws. In April 1995, the Court
granted ALZA's motion to dismiss the lawsuit. Cygnus has appealed that
ruling.
Pharmaceutical companies are subject to product liability claims from
time to time. During the last two years, several product liability suits
have been filed against Janssen Pharmaceutica, Inc. ("Janssen") and ALZA
relating to the Duragesic-Registered Trademark- product. Janssen is managing
the defense of the Duragesic-Registered Trademark- suits in consultation with
ALZA under an
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<PAGE>
ALZA CORPORATION
September 30, 1995
agreement between the parties. Historically, the cost of resolution of ALZA's
liability (including product liability) claims has not been significant, and
ALZA is not aware of any asserted or unasserted claims pending against it,
including the suits mentioned above, the resolution of which would have a
material adverse impact on the operations or financial position of the Company.
-15-
<PAGE>
ALZA CORPORATION
September 30, 1995
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
11 Statement regarding weighted average common and dilutive common
equivalent shares used in computation of per share earnings
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
-16-
<PAGE>
ALZA CORPORATION
September 30, 1995
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.
ALZA CORPORATION
Date: November 13, 1995 By: /s/ Ernest Mario
------------------------------------
Dr. Ernest Mario
Co-Chairman and
Chief Executive Officer
Date: November 13, 1995 By: /s/ Bruce C. Cozadd
------------------------------------
Bruce C. Cozadd
Vice President and Chief
Financial Officer
-17-
<PAGE>
ALZA CORPORATION
September 30, 1995
EXHIBIT INDEX
Exhibit
-------
11 Statement regarding weighted average common and dilutive
common equivalent shares used in computation of per share
earnings
27 Financial Data Schedule
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<PAGE>
ALZA CORPORATION
September 30, 1995
EXHIBIT 11
Statement Regarding Weighted Average Common and Dilutive Common
Equivalent Shares Used in Computation of Per Share Earnings
(In thousands)
<TABLE>
<CAPTION>
Primary
------------------------------------------------------------------------------
Quarter Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common stock 82,378 81,914 82,205 81,772
$25 warrants - - - -
$65 warrants - - - -
5 1/4% zero coupon
convertible
subordinated
debentures - - - -
Stock options 465 444 343 553
-------- -------- -------- --------
Average shares 82,843 82,358 82,548 82,325
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
Fully Diluted
------------------------------------------------------------------------------
Quarter Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common stock 82,378 81,914 82,205 81,772
$25 warrants - - - -
$65 warrants - - - -
5 1/4% zero coupon
convertible
subordinated
debentures - - - -
Stock options 465 444 411 553
-------- -------- -------- --------
Average shares 82,843 82,358 82,616 82,325
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
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<PAGE>
ALZA CORPORATION
September 30, 1995
Primary and fully diluted earnings per share are based on weighted average
common and dilutive common equivalent shares, including ALZA common stock,
warrants and options, for the period each was outstanding. The 5 1/4% zero
coupon convertible subordinated debentures (issued in July 1994) are considered
common stock equivalents; they were antidilutive for the quarter and nine months
ended September 30, 1994 and 1995.
Fully diluted earnings per share are not presented on the face of the
condensed consolidated statement of income (unaudited) since dilution is less
than 3% for each period presented.
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS INCLUDED IN ITEM 1 OF FORM 10-Q DATED
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTRY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 79
<SECURITIES> 326
<RECEIVABLES> 100
<ALLOWANCES> 0
<INVENTORY> 34
<CURRENT-ASSETS> 563
<PP&E> 341
<DEPRECIATION> 78
<TOTAL-ASSETS> 894
<CURRENT-LIABILITIES> 55
<BONDS> 358
<COMMON> 310
0
0
<OTHER-SE> 122
<TOTAL-LIABILITY-AND-EQUITY> 894
<SALES> 54
<TOTAL-REVENUES> 249
<CGS> 49
<TOTAL-COSTS> 164
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 85
<INCOME-TAX> 32
<INCOME-CONTINUING> 53
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
