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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 MARCH 31, 1997
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or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 1-6247
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ALZA CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 77-0142070
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 494-5000
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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
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Number of shares outstanding of each of the registrant's classes of common stock
as of April 30, 1997:
Common Stock, $.01 par value - 84,956,839 shares
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ALZA CORPORATION
Condensed Consolidated Statement of Income (unaudited)
(In millions, except per share amounts)
Three Months Ended
March 31,
1997 1996
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Revenues:
Royalties, fees and other $44.2 $37.5
Research and development 33.8 30.3
Net sales 27.5 20.7
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Total revenues 105.5 88.5
Expenses:
Research and development 35.0 31.3
Costs of products shipped 19.7 16.0
Selling, general and administrative 11.6 10.2
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Total expenses 66.3 57.5
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Operating income 39.2 31.0
Interest income 16.9 8.3
Interest expense 13.7 6.4
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Net interest income 3.2 1.9
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Income before income taxes 42.4 32.9
Provision for income taxes 16.1 12.5
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Net income $26.3 $20.4
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Net income per common and
common equivalent share* $0.30 $0.24
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Weighted average common and
common equivalent shares 97.8 84.6
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See accompanying notes.
* The net income per common and common equivalent share calculation uses
adjusted net income of $29.5 for the quarter ended March 31, 1997.
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ALZA CORPORATION
Condensed Consolidated Balance Sheet (unaudited)
(In millions)
March 31, December 31,
1997 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 240.3 $ 187.7
Short-term investments 133.8 199.3
Receivables, net 114.3 116.6
Inventories, at cost:
Raw materials 17.3 17.7
Work in process 16.7 18.0
Finished goods 4.6 3.5
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Total inventories 38.6 39.2
Prepaid expenses and other current assets 30.4 19.2
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Total current assets 557.4 562.0
Property, plant and equipment 412.4 408.1
Less accumulated depreciation and amortization (105.7) (100.3)
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Net property, plant and equipment 306.7 307.8
Investments in long-term securities(1) 641.1 612.8
Other assets 134.2 131.1
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Total assets $ 1,639.4 $ 1,613.7
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14.3 $ 28.7
Accrued income taxes 22.3 7.3
Accrued compensation 8.1 15.4
Accrued interest 11.5 7.7
Other current liabilities 8.9 8.1
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Total current liabilities 65.1 67.2
5% convertible subordinated debentures 500.0 500.0
5 1/4% zero coupon convertible subordinated debentures 387.3 382.3
Other long-term liabilities 73.7 67.5
Stockholders' equity:
Common stock and additional paid-in capital 368.3 363.0
Net unrealized losses on available-for-sale
securities, net of tax effect (15.1) (0.1)
Retained earnings 260.1 233.8
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Total stockholders' equity 613.3 596.7
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Total liabilities and stockholders' equity $ 1,639.4 $ 1,613.7
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See accompanying notes.
(1) The balance at December 31, 1996 was previously
included in short-term investments and has been reclassified
to conform with current year presentation (See Note 1).
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ALZA CORPORATION
Condensed Consolidated Statement of Cash Flows (unaudited)
(In millions)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26.3 $ 20.4
Non-cash adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 6.7 4.0
Interest on 5 1/4% zero coupon convertible
subordinated debentures 5.0 4.8
(Increase) decrease in assets:
Receivables 2.2 (0.8)
Inventories 0.7 (3.0)
Prepaid expenses and other current assets (0.8) (6.1)
Increase (decrease) in liabilities:
Accounts payable (14.5) 0.1
Accrued income taxes 15.0 6.6
Accrued compensation (7.3) (1.9)
Accrued interest 3.7 (2.2)
Other current and long-term liabilities 1.7 (2.7)
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Total adjustments 12.4 (1.2)
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Net cash provided by operating activities 38.7 19.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (189.3) (90.4)
Sales of available-for-sale securities 201.2 54.6
Maturities of available-for-sale securities - 20.1
Capital expenditures (4.4) (7.3)
Increase in other assets (4.4) (10.9)
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Net cash provided by (used in) investing activities 3.1 (33.9)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 6.6 -
Principal payments on long-term debt (1.1) -
Issuances of common stock 5.3 40.2
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Net cash provided by financing activities 10.8 40.2
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Net increase in cash and cash
equivalents 52.6 25.5
Cash and cash equivalents at beginning
of period 187.7 88.0
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Cash and cash equivalents at end
of period $ 240.3 $ 113.5
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</TABLE>
See accompanying notes.
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ALZA CORPORATION
March 31, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The information at March 31, 1997 and for the three months ended
March 31, 1997 and 1996 is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) that 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 and accompanying
notes for the year ended December 31, 1996 included in ALZA's 1996 Annual Report
to Stockholders.
Beginning with the quarter ended March 31, 1997, ALZA changed the
presentation of its consolidated statement of income and consolidated balance
sheet. In the consolidated statement of income, royalties, fees and other
revenue now include items related to operations that were previously reflected
in interest and other income. Interest income and expense are now shown
separately after operating income. On the consolidated balance sheet, ALZA has
reclassified securities which have maturities of one year or more as investments
in long-term securities; these securities were previously treated as current
assets. Prior year amounts have been changed to conform with the current year
presentation.
2. LITIGATION
See Part II, Item 1 of this Quarterly Report on Form 10-Q.
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ALZA CORPORATION
March 31, 1997
3. RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "EARNINGS PER SHARE" ("SFAS 128"), which is required to be
adopted on December 31, 1997. At that time, ALZA will be required to change
the method currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating basic earnings per
share, which replaces primary earnings per share, the dilutive effect of
stock options and other common stock equivalents will be excluded. Basic
earnings per share is expected to be $0.01 higher than the reported primary
earnings per share for the quarter ended March 31, 1997 and no change is
expected for the quarter ended March 31, 1996. The impact of SFAS 128 on the
calculation of fully diluted earnings per share for these quarters is not
expected to be material.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTICE CONCERNING FORWARD-LOOKING STATEMENTS
Some of the statements made in this Form 10-Q are forward-looking in
nature, including but not limited to ALZA's product development activities and
plans, plans concerning the commercialization of products, and other statements
that are not historical facts. The occurrence of the events described, and the
achievement of the intended results, are subject to the future occurrence of
many events, some or all of which are not predictable or within ALZA's control;
therefore, actual results may differ materially from those anticipated in any
forward-looking statements. Many risks and uncertainties are inherent in the
pharmaceutical industry; others are more specific to ALZA's business. Many of
the significant risks related to ALZA's business are described in ALZA's Annual
Report on Form 10-K, including risks associated with technology and product
development, risks relating to clinical development, regulatory clearance to
market products and medical acceptance of products, changes in the health care
marketplace, patent and intellectual property matters, regulatory and
manufacturing issues, and risks associated with competition from other
companies.
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FIRST QUARTER EVENTS
In February, ALZA announced it had exercised its option to license from
Therapeutic Discovery Corporation ("TDC") an OROS -Registered Trademark-
hydromorphone product and entered into an agreement with Knoll Pharmaceutical
Company (together with its affiliates, "Knoll") for the development and
worldwide commercialization of this product. The OROS -Registered Trademark-
hydromorphone product, which utilizes ALZA's advanced oral osmotic
technology, is designed for the 24-hour management of chronic pain. Under the
agreement, Knoll will fund ongoing development costs for the product and will
make milestone payments to ALZA related to key development objectives. ALZA
will manufacture and sell the product to Knoll. ALZA also has the right to
co-promote the product in the United States and an option to co-promote the
product outside the United States after a specified period.
Two royalty-bearing products developed by ALZA were launched by ALZA's
clients during the first quarter of 1997. Novartis Pharmaceuticals
Corporation ("Novartis") launched DynaCirc CR-Registered Trademark-
(isradipine) in the United States. DynaCirc CR-Registered Trademark- is a
once-daily calcium channel blocker incorporating ALZA's OROS-Registered
Trademark- technology. Merck & Co., Inc. ("Merck") introduced the IVOMEC
SR-Registered Trademark- Bolus (ivermectin) in the United States. IVOMEC
SR-Registered Trademark- is a product combining the antiparasitic agent
ivermectin with ALZA's ruminal bolus technology for control of internal and
external parasites in cattle. The product is marketed by Merck in a number
of countries outside of the United States.
During the first quarter of 1997, ALZA filed an Investigational New
Drug application with the U.S. Food and Drug Administration ("FDA") for a
DUROS-TM- leuprolide
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human implant product designed for the palliative treatment of prostate
cancer for up to 12 months, with discontinuation of treatment possible at any
time. Phase I/II clinical trials of the product, which is under development
with TDC, began during the first quarter of 1997. Also during the first
quarter of 1997, a New Drug Application for a second generation transdermal
testosterone product to follow Testoderm-Registered Trademark- and
Testoderm-Registered Trademark- with Adhesive was filed with the FDA
following its submission in December 1996. This product, under
development with TDC, is a single patch that can be worn on the arm or the
torso and is designed to provide convenient physiologic testosterone
replacement therapy.
During the quarter, ALZA purchased two million shares of common stock
(9.7% of total outstanding shares) of Alkermes Inc. ("Alkermes"), a drug
delivery company. Separately, ALZA and Alkermes agreed in principle to
collaborate on a program for the development and commercialization of a
product utilizing Alkermes' Prolease-Registered Trademark- or
Medisorb-Registered Trademark- drug delivery technology. ALZA also purchased
1,178,882 shares of common stock (4.9% of total outstanding shares) of U.S.
Bioscience, Inc. during the quarter.
RESULTS OF OPERATIONS
ALZA's net income was $26.3 million or $0.30 per share for the quarter
ended March 31, 1997, compared to net income of $20.4 million or $0.24 per share
for the quarter ended March 31, 1996.
ALZA's net income currently results primarily from royalties and fees from
client companies. Royalties and fees, which are generally derived from sales by
client companies of products developed jointly with ALZA, 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
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directly within ALZA's control.
The introduction of competitive products can also have an adverse
effect on royalties and fees. In addition, with increasing pressures for
cost containment in the U.S. health care system, it can be expected that
pharmaceutical product prices, including those of products developed by ALZA,
will not increase as quickly as they have in the past, and could decrease.
During the next several years, ALZA intends to become less dependent on
royalties and fees by continuing to expand ALZA's sales and marketing
activities and by directly marketing 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 and clinical activities, the length of the regulatory approval
process, uncertainties surrounding the acceptance of products by the intended
markets, the marketing of competitive products, and the current health care
cost containment environment. ALZA expects that, in the near term, net
income will continue to result primarily from royalties on sales of currently
marketed products.
Royalties, fees and other revenue for the quarter ended March 31, 1997
increased to $44.2 million, compared to $37.5 million for the same period in
1996. Royalties, fees and other revenue for the quarter ended March 31, 1997
include an upfront payment from Knoll in connection with an agreement for the
continued development and worldwide commercialization of the OROS-Registered
Trademark- hydromorphone product. The increase in royalties, fees and other
revenue also resulted from increased
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sales of NicoDerm-Registered Trademark- CQ-TM- (nicotine), the
over-the-counter version of Nicoderm-Registered Trademark-, by SmithKline
Beecham ("SB"), Duragesic-Registered Trademark- by Janssen Pharmaceutica,
Inc. ("Janssen") and Glucotrol XL-Registered Trademark- by Pfizer Inc.
("Pfizer"). The increase in royalties was offset in part by decreased
royalties on sales of Transderm-Nitro-Registered Trademark- by Novartis and
Procardia XL-Registered Trademark- by Pfizer. Sales of Procardia
XL-Registered Trademark-, as reported by Pfizer, decreased 22% during the
three months ended March 31, 1997 compared to the same period in 1996.
Royalties from Procardia XL-Registered Trademark- accounted for approximately
35% of ALZA's royalties and fees for the quarter ended March 31, 1997.
Research and development revenue of $33.8 million for the quarter ended
March 31, 1997 represents an increase of 12% over the same period in 1996,
due to product development activities conducted under agreements with client
companies other than TDC. Research and development revenue from TDC was
$23.4 million and $22.9 million for the quarters ended March 31, 1997 and
March 31, 1996, respectively. Research and development expenses for the
quarter ended March 31, 1997 increased 12% to $35.0 million as compared with
the corresponding quarter in 1996, reflecting the increased activities
described above.
If expenditures on product development by TDC continue at approximately
current levels, it is expected that all TDC funds available for product
development will be exhausted during the third quarter of 1997, and product
development funding by TDC will then cease. Several factors could impact the
timing of TDC exhausting its funds, including the acceleration or
deceleration of product development and/or clinical activities, product
development or clinical study results, the licensing of TDC products by ALZA,
the issuance of patents to third parties, changes in the competitive
commercial environment or other matters.
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Once TDC has expended all of its funds available for product development,
ALZA will be required to determine whether or not to exercise its option,
exercisable at ALZA's sole discretion, to purchase, in accordance with a
predetermined formula set forth in TDC's Restated Certificate of
Incorporation, all (but not less than all) of the outstanding shares of TDC
Class A common stock (the "Purchase Option"). The Purchase Option will
expire, if not exercised, on the 60th day after TDC files a Form 10-K or Form
10-Q with the Securities and Exchange Commission containing a balance sheet
showing less than an aggregate of $5 million in cash and cash equivalents,
short-term and long-term investments. Under the formula, the Purchase Option
exercise price is expected to be $100 million. The purchase price may be
paid in cash, in ALZA common stock, or in any combination of the two, at the
option of ALZA. If ALZA were to exercise the Purchase Option, ALZA would
incur a one-time charge due to the acquisition of in-process technology and
might realize certain tax benefits. In addition, ALZA would need to fund
the continued development expenses for the TDC products. If ALZA were to
decide not to exercise the Purchase Option, ALZA would have the right, for an
additional 90 days, to license any or all TDC products, on a
product-by-product and country-by-country basis. ALZA would make payments to
TDC, with respect to any licensed products, for countries as to which the
license option is exercised, equal to a specified percentage of net sales of
the licensed products by ALZA in those countries and a specified portion of
any up-front fees and sublicensing revenues received by ALZA from third
parties marketing the licensed products in those countries under arrangements
with ALZA.
If ALZA were to exercise the Purchase Option, or to license some or all
of the TDC products for commercialization in some or all countries, ALZA
would need to fund any additional product development necessary to complete
the development of each of the products. In addition, ALZA has agreed to fund
certain TDC product development activities, already underway, which will not
be completed before TDC's funds are exhausted. Such funding by ALZA would
begin, on a product-by-product basis, when TDC no longer has funds available
to pay for such activities. Such funding obligation will continue only until
the exercise or the expiration of the Purchase Option and ALZA's option to
license each TDC product, on a product-by-product and country-by-country
basis. However, this funding by ALZA is subject to ALZA's determination of
the continued technical and commercial feasibility of the product and the
compatibility of the product with ALZA's product portfolio and business
objectives.
If ALZA were to use its own funds to cover the continued development of
the TDC products, these product development activities would result in
research and development expenses without the corresponding research and
development revenues previously provided by TDC. ALZA could also choose to
fund the expenses by partnering with third parties for the continued
development and
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commercialization of some or all of the products, either on a worldwide basis
or in specified markets. Alternatively, ALZA could determine to continue
product development through other financing arrangements.
Net sales of $27.5 million for the quarter ended March 31, 1997 increased
33% compared to the corresponding period in 1996, primarily due to increased
contract manufacturing of NicoDerm-Registered Trademark- CQ-TM-. Net sales
of Ethyol-Registered Trademark- (amifostine) for the first quarter of 1997
were $3.5 million compared to $2.5 million for the first quarter of 1996;
Ethyol-Registered Trademark- sales in the first quarter of 1996 reflected
shipments of launch quantities prior to introduction of the product in April
1996. The timing and quantities of orders for products marketed by client
companies are not within ALZA's control. Net sales, therefore, can be
expected to fluctuate from period to period, sometimes very significantly,
depending on the volume, mix and timing of orders of products shipped to
client companies, and in some quarters, due to the shipment of launch
quantities of products prior to their introduction.
ALZA's gross margin (net sales less costs of products shipped) as a
percent of net sales increased to 28% for the quarter ended March 31, 1997
compared to 23% for the quarter ended March 31, 1996. The increase was
largely due to proportionately greater shipments of higher margin products.
In addition, because many of ALZA's manufacturing costs are substantially
fixed, increased shipments in any quarter can generally be expected to result
in a higher gross margin for the quarter. ALZA expects its gross margin on
net sales to increase from historical rates over the longer term, although
quarter-to-quarter fluctuations, even significant ones, can be expected to
continue to occur for the reasons discussed above. A trend of higher than
historical gross margins may ultimately be achieved through increased
utilization of capacity, greater operating efficiencies and a proportionate
increase in the sales of ALZA-marketed products.
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Selling, general and administrative expenses of $11.6 million for the
quarter ended March 31, 1997 increased 13% compared to the corresponding
period in 1996. The increase was due to higher sales expenses by ALZA
Pharmaceuticals, primarily as a result of the expansion of ALZA's sales force
in support of Ethyol-Registered Trademark-, and increased overall general and
administrative expenses in support of corporate activities.
Interest income increased for the quarter ended March 31, 1997 to $16.9
million, compared to $8.3 million during the same period in 1996, primarily
due to higher average invested cash balances following ALZA's sale of $500
million of 5% convertible subordinated debentures due 2006 (the "5%
Debentures") in April 1996, and also due to gains realized on sales of
securities.
Interest expense increased to $13.7 million for the quarter ended March
31, 1997, compared to $6.4 million during the same period in 1996, reflecting
the interest expense associated with ALZA's 5% Debentures and the higher
outstanding balance on ALZA's 5 1/4% zero coupon convertible subordinated
debentures due 2014 (the "5 1/4% Debentures").
ALZA's effective combined federal and state income tax rate for the year
ended 1996 and for the quarter ended March 31, 1997 was 38%.
The number of weighted average common and common equivalent shares for
the quarter ended March 31, 1997 includes 12.3 million shares issuable upon
conversion of the 5 1/4% Debentures. The 5 1/4% Debentures are considered
common stock equivalents, but were excluded from the earnings per share
calculation for the quarter ended March 31, 1996 as their inclusion would
have had an antidilutive effect. Earnings per share for the quarter ended
March 31, 1997 are calculated by adding to net income the after-tax interest
incurred on the 5 1/4% Debentures for the period ($3.2 million) and dividing
by the number of weighted average common and common equivalent shares.
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LIQUIDITY AND CAPITAL RESOURCES
ALZA invested $4.4 million during the first three months of 1997 in
additions to property, plant and equipment to support its expanding research,
development and manufacturing activities. While ALZA believes its current
facilities and equipment are sufficient to meet its current operating
requirements, ALZA is expanding its facilities and equipment to support its
medium-term and long-term requirements.
ALZA believes that its existing cash and investment balances are adequate
to fund its cash needs for 1997 and beyond. In addition, should the need arise,
ALZA believes it would be able to borrow additional funds or otherwise raise
additional capital. 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 product development and support for product marketing
and sales.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Product liability suits have been filed against Janssen and ALZA from time
to time relating to the Duragesic-Registered Trademark- product which is
manufactured by ALZA and marketed by Janssen. Janssen is managing the defense
of these suits in consultation with ALZA under an agreement between the parties.
Historically, the cost of resolution of 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 ALZA.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.11 Agreement and Amendment No. 1 to License Agreement dated
February 10, 1997 between ALZA Corporation and Therapeutic
Discovery Corporation
11 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule for the three months ended
March 31, 1997
27.2 Restated Financial Data Schedule for the year ended
December 31, 1996
27.3 Restated Financial Data Schedule for the nine months ended
September 30, 1996
27.4 Restated Financial Data Schedule for the six months ended
June 30, 1996
27.5 Restated Financial Data Schedule for the three months ended
March 31, 1996
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27.6 Restated Financial Data Schedule for the year ended
December 31, 1995
27.7 Restated Financial Data Schedule for the nine months ended
September 30, 1995
27.8 Restated Financial Data Schedule for the six months ended
June 30, 1995
27.9 Restated Financial Data Schedule for the three months ended
March 31, 1995
27.10 Restated Financial Data Schedule for the year ended
December 31, 1994
27.11 Restated Financial Data Schedule for the nine months ended
September 30, 1994
(b) No reports on Form 8-K were filed during the quarter
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SIGNATURES
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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: May 15, 1997 By: /s/ E. Mario
-----------------------------
Dr. Ernest Mario
Chief Executive Officer
Date: May 15, 1997 By: /s/ Bruce C. Cozadd
------------------------------
Bruce C. Cozadd
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
10.11 Agreement and Amendment No. 1 to License Agreement dated February 10,
1997 between ALZA Corporation and Therapeutic Discovery Corporation
11 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule for the three months ended March 31, 1997
27.2 Restated Financial Data Schedule for the year ended December 31, 1996
27.3 Restated Financial Data Schedule for the nine months ended September
30, 1996
27.4 Restated Financial Data Schedule for the six months ended June 30,
1996
27.5 Restated Financial Data Schedule for the three months ended
March 31, 1996
27.6 Restated Financial Data Schedule for the year ended December 31, 1995
27.7 Restated Financial Data Schedule for the nine months ended September
30, 1995
27.8 Restated Financial Data Schedule for the six months ended June 30,
1995
27.9 Restated Financial Data Schedule for the three months ended
March 31, 1995
27.10 Restated Financial Data Schedule for the year ended December 31, 1994
27.11 Restated Financial Data Schedule for the nine months ended September
30, 1994
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AGREEMENT
AND
AMENDMENT NO. 1 TO LICENSE AGREEMENT
DATED FEBRUARY 10, 1997
This Agreement and Amendment No. 1 to License Agreement dated as of
February 10, 1997 (the "Agreement") is made effective as of the 10th day of
February, 1997 by and between ALZA Corporation ("ALZA") and Therapeutic
Discovery Corporation ("TDC").
RECITALS
WHEREAS, ALZA and TDC have entered into that certain Development
Agreement dated as of March 10, 1993 (the "Development Contract") pursuant to
which ALZA performs research and development activities on behalf of TDC
directed toward the development of pharmaceutical products; and
WHEREAS, under the terms of the Development Contract, ALZA has performed
research and development activities on behalf of TDC directed toward the
development of a product, referred to by the parties as "TDC-4", for the
delivery of hydromorphone by means of ALZA's OROS-Registered
Trademark- technology (the "Licensed Product"); and
WHEREAS, ALZA and TDC have entered into that certain License Option
Agreement dated as of March 10, 1993 (the "Option Agreement") pursuant to
which TDC granted ALZA an option to license any product accepted by TDC for
development under the Development Contract on a product-by-product and
country-by-country basis; and
WHEREAS, ALZA exercised its option to license the Licensed Product on a
worldwide basis effective as of February 10, 1997 and entered into a License
Agreement dated as of February 10, 1997 (the "Product License Agreement"), in
the form required under the Option Agreement, to memorialize ALZA's license
of the Licensed Product; and
WHEREAS, ALZA has entered into an agreement with Knoll Pharmaceutical
Company and its parent Knoll AG (collectively, "Knoll") for the continued
development and worldwide commercialization of the Licensed Product; and
WHEREAS, ALZA and TDC desire to amend the Product License Agreement to
reflect the agreement of the parties with respect to certain payments to be
made by ALZA to TDC under the Product License Agreement and to memorialize
certain other arrangements between the parties.
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, ALZA and TDC hereby agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Product License
Agreement.
2. AMENDMENTS TO SECTION 3.1 OF THE PRODUCT LICENSE AGREEMENT. The
first sentence of Section 3.1 of the Product License Agreement is hereby
deleted in its entirety and the following substituted therefor:
<PAGE>
3.1 PAYMENTS. In consideration of the grant of the license,
ALZA shall pay TDC royalties with respect to the Licensed Product as
follows:
(a) up to a maximum of 5% of Net Sales of the Licensed
Product in the Territory determined as follows: 2% of such Net Sales,
plus an additional 0.1% of such Net Sales for each full one million
dollars of Development Costs of the Licensed Product paid by TDC; plus
(b) up to a maximum of 50% of Sublicensing Revenues in
respect of sales of the Licensed Product in the Territory determined
as follows: 20% of such Sublicensing Revenues, plus an additional 1%
of such Sublicensing Revenues for each full one million dollars of
Development Costs of the Licensed Product paid by TDC.
3. EXCLUSIONS FROM SPECIAL ROYALTY PAYMENTS AND SUBLICENSING REVENUES.
ALZA and TDC hereby agree that, for purposes of the Product License
Agreement, the payments due to ALZA from Knoll in the first quarter of 1997
with respect to the Licensed Product shall not be included within the
definition of Special Royalty Payments or Sublicensing Revenues with respect
to the Licensed Product.
4. LICENSED PRODUCT CLINICAL SUPPLIES. The parties acknowledge that
substantial clinical supplies and other materials have been acquired by ALZA
in connection with the development of the Licensed Product and paid for by
TDC under the Development Contract. Certain of those supplies and other
materials are expected to be utilized by Knoll in the ongoing development of
the Licensed Product. TDC hereby grants to ALZA, and ALZA hereby accepts, the
right to use (i) all clinical supplies of the Licensed Product which have
been manufactured as of the date hereof under the Development Contract, and
(ii) all materials, goods and services (including supplies of hydromorphone,
placebos and comparator drugs to be used in clinical studies) which have been
purchased or manufactured for use under the development program for the
Licensed Product pursuant to the Development Contract (collectively, the
"Supplies"). TDC grants ALZA the right to use, and ALZA accepts, the
Supplies on an "AS-IS" and "WHERE-IS" basis. TDC EXPRESSLY DISCLAIMS ANY AND
ALL WARRANTIES WITH RESPECT TO THE SUPPLIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
5. MISCELLANEOUS. Except as otherwise expressly provided herein,
the terms of the Product License Agreement shall remain in full force and
effect. This Agreement may not be amended except by a writing signed by both
parties. This Agreement shall be governed by the laws of the State of
California as applied to residents of that state entering into contracts to
be performed in that state. The headings set forth at the beginning of the
various sections of this Agreement are for reference and convenience and shall
not affect the meanings of the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, ALZA and TDC have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
ALZA Corporation Therapeutic Discovery Corporation
By: /s/ Bruce C. Cozadd By: /s/ Gary L. Neil
----------------------------- ---------------------------------------
Bruce C. Cozadd Gary L. Neil
Senior Vice President and President and Chief Executive Officer
Chief Financial Officer
<PAGE>
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
(In millions, except per share amounts)
PRIMARY
------------------------
Quarter Ended
March 31,
1997 1996
--------- ---------
Common stock 84.8 83.6
Common stock options 0.7 1.0
$25 warrants - -
$65 warrants - -
5 1/4% zero coupon convertible
subordinated debentures 12.3 -
--------- ---------
Weighted average common and
dilutive common equivalent
shares 97.8 84.6
--------- ---------
--------- ---------
Net income available to common
stockholders $ 26.3 $ 20.4
Add after-tax interest on 5 1/4% zero
coupon convertible subordinated
debentures 3.2 -
--------- ---------
Adjusted net income $ 29.5 $ 20.4
--------- ---------
--------- ---------
Net income per common and
common equivalent share $ 0.30 $ 0.24
--------- ---------
--------- ---------
Primary earnings per share is based on weighted average shares of common
stock outstanding plus dilutive common equivalent shares. The 5 1/4% zero coupon
convertible subordinated debentures are considered common stock equivalents but
were not included in the per share calculation for the quarter ended
March 31, 1996, as their inclusion would have had an antidilutive effect.
<PAGE>
FULLY DILUTED
--------------------
Quarter Ended
March 31,
1997 1996
---------- --------
Common stock 84.8 83.6
Common stock options 0.7 1.1
$25 warrants - -
$65 warrants - -
5 1/4% zero coupon convertible
subordinated debentures 12.3 -
5% convertible subordinated
debentures - -
---------- --------
Weighted average common and
dilutive common equivalent
shares 97.8 84.7
---------- --------
---------- --------
Net income available to
common stockholders $ 26.3 $ 20.4
Add after-tax interest on 5 1/4% zero
coupon convertible subordinated
debentures 3.2 -
---------- --------
Adjusted net income $ 29.5 $ 20.4
---------- --------
---------- --------
Net income per common and
common equivalent share $ 0.30 $ 0.24
---------- --------
---------- --------
Fully diluted earnings per share is based on weighted average shares of
common stock outstanding plus dilutive common equivalent shares and dilutive
convertible securities. The 5 1/4% zero coupon convertible subordinated
debentures are considered common stock equivalents but were not included in the
per share calculation for the quarter ended March 31, 1996 as their inclusion
would have had an antidilutive effect. The 5% convertible subordinated
debentures are not considered common stock equivalents and were not included in
the fully diluted earnings per share calculation as their inclusion would have
had an antidilutive effect. Fully diluted earnings per share is not presented
on the face of the Consolidated Statement of Income since dilution is less than
3% for each period presented.
<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 MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 240
<SECURITIES> 134
<RECEIVABLES> 114
<ALLOWANCES> 0
<INVENTORY> 39
<CURRENT-ASSETS> 557
<PP&E> 412
<DEPRECIATION> 106
<TOTAL-ASSETS> 1,639
<CURRENT-LIABILITIES> 65
<BONDS> 887
0
0
<COMMON> 1
<OTHER-SE> 612
<TOTAL-LIABILITY-AND-EQUITY> 1,639
<SALES> 28
<TOTAL-REVENUES> 106
<CGS> 20
<TOTAL-COSTS> 55
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 42
<INCOME-TAX> 16
<INCOME-CONTINUING> 26
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN PART II, ITEM 8 OF FORM 10-K DATED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 188
<SECURITIES> 199
<RECEIVABLES> 117
<ALLOWANCES> 0
<INVENTORY> 39
<CURRENT-ASSETS> 562
<PP&E> 408
<DEPRECIATION> 100
<TOTAL-ASSETS> 1,614
<CURRENT-LIABILITIES> 67
<BONDS> 882
0
0
<COMMON> 1
<OTHER-SE> 596
<TOTAL-LIABILITY-AND-EQUITY> 1,614
<SALES> 109
<TOTAL-REVENUES> 411
<CGS> 85
<TOTAL-COSTS> 227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 149
<INCOME-TAX> 57
<INCOME-CONTINUING> 92
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
<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, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 340
<SECURITIES> 107
<RECEIVABLES> 120
<ALLOWANCES> 0
<INVENTORY> 36
<CURRENT-ASSETS> 628
<PP&E> 392
<DEPRECIATION> 95
<TOTAL-ASSETS> 1,566
<CURRENT-LIABILITIES> 65
<BONDS> 877
0
0
<COMMON> 1
<OTHER-SE> 565
<TOTAL-LIABILITY-AND-EQUITY> 1,566
<SALES> 84
<TOTAL-REVENUES> 302
<CGS> 67
<TOTAL-COSTS> 168
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 108
<INCOME-TAX> 41
<INCOME-CONTINUING> 67
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
<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 JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 499
<SECURITIES> 42
<RECEIVABLES> 130
<ALLOWANCES> 0
<INVENTORY> 36
<CURRENT-ASSETS> 733
<PP&E> 380
<DEPRECIATION> 91
<TOTAL-ASSETS> 1,533
<CURRENT-LIABILITIES> 60
<BONDS> 873
0
0
<COMMON> 1
<OTHER-SE> 542
<TOTAL-LIABILITY-AND-EQUITY> 1,533
<SALES> 54
<TOTAL-REVENUES> 204
<CGS> 46
<TOTAL-COSTS> 115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 70
<INCOME-TAX> 27
<INCOME-CONTINUING> 44
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
<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 MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 114
<SECURITIES> 83
<RECEIVABLES> 109
<ALLOWANCES> 0
<INVENTORY> 38
<CURRENT-ASSETS> 367
<PP&E> 367
<DEPRECIATION> 86
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 65
<BONDS> 368
0
0
<COMMON> 1
<OTHER-SE> 512
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 21
<TOTAL-REVENUES> 88
<CGS> 16
<TOTAL-COSTS> 47
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 33
<INCOME-TAX> 13
<INCOME-CONTINUING> 20
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN PART II, ITEM 8 OF FORM 10-K DATED DECEMBER 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 88
<SECURITIES> 94
<RECEIVABLES> 108
<ALLOWANCES> 0
<INVENTORY> 34
<CURRENT-ASSETS> 341
<PP&E> 359
<DEPRECIATION> 83
<TOTAL-ASSETS> 937
<CURRENT-LIABILITIES> 68
<BONDS> 363
0
0
<COMMON> 1
<OTHER-SE> 454
<TOTAL-LIABILITY-AND-EQUITY> 937
<SALES> 77
<TOTAL-REVENUES> 325
<CGS> 65
<TOTAL-COSTS> 169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 117
<INCOME-TAX> 44
<INCOME-CONTINUING> 72
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
<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 ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 79
<SECURITIES> 20
<RECEIVABLES> 100
<ALLOWANCES> 0
<INVENTORY> 34
<CURRENT-ASSETS> 257
<PP&E> 341
<DEPRECIATION> 78
<TOTAL-ASSETS> 894
<CURRENT-LIABILITIES> 55
<BONDS> 358
0
0
<COMMON> 1
<OTHER-SE> 431
<TOTAL-LIABILITY-AND-EQUITY> 894
<SALES> 54
<TOTAL-REVENUES> 230
<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>
<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 JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 77
<SECURITIES> 81
<RECEIVABLES> 95
<ALLOWANCES> 0
<INVENTORY> 35
<CURRENT-ASSETS> 315
<PP&E> 332
<DEPRECIATION> 76
<TOTAL-ASSETS> 862
<CURRENT-LIABILITIES> 52
<BONDS> 353
0
0
<COMMON> 1
<OTHER-SE> 410
<TOTAL-LIABILITY-AND-EQUITY> 862
<SALES> 38
<TOTAL-REVENUES> 151
<CGS> 33
<TOTAL-COSTS> 108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 56
<INCOME-TAX> 21
<INCOME-CONTINUING> 34
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
<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 MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 86
<SECURITIES> 82
<RECEIVABLES> 92
<ALLOWANCES> 0
<INVENTORY> 33
<CURRENT-ASSETS> 321
<PP&E> 323
<DEPRECIATION> 73
<TOTAL-ASSETS> 829
<CURRENT-LIABILITIES> 51
<BONDS> 349
0
0
<COMMON> 1
<OTHER-SE> 384
<TOTAL-LIABILITY-AND-EQUITY> 829
<SALES> 19
<TOTAL-REVENUES> 74
<CGS> 16
<TOTAL-COSTS> 53
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 27
<INCOME-TAX> 10
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN PART II, ITEM 8 OF FORM 10-K DATED DECEMBER 31,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 89
<SECURITIES> 29
<RECEIVABLES> 85
<ALLOWANCES> 0
<INVENTORY> 33
<CURRENT-ASSETS> 265
<PP&E> 316
<DEPRECIATION> 70
<TOTAL-ASSETS> 806
<CURRENT-LIABILITIES> 56
<BONDS> 345
0
0
<COMMON> 1
<OTHER-SE> 363
<TOTAL-LIABILITY-AND-EQUITY> 806
<SALES> 69
<TOTAL-REVENUES> 261
<CGS> 57
<TOTAL-COSTS> 185
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 93
<INCOME-TAX> 35
<INCOME-CONTINUING> 58
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
<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, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 74
<SECURITIES> 58
<RECEIVABLES> 79
<ALLOWANCES> 0
<INVENTORY> 35
<CURRENT-ASSETS> 275
<PP&E> 300
<DEPRECIATION> 66
<TOTAL-ASSETS> 773
<CURRENT-LIABILITIES> 47
<BONDS> 340
0
0
<COMMON> 1
<OTHER-SE> 348
<TOTAL-LIABILITY-AND-EQUITY> 773
<SALES> 52
<TOTAL-REVENUES> 191
<CGS> 41
<TOTAL-COSTS> 134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 69
<INCOME-TAX> 26
<INCOME-CONTINUING> 43
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
