Medco Research, Inc.
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, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 Commission file number 1-9771
MEDCO RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3318451
-------- ----------
(State or other Jurisdiction of (I.R.S. Identification No.)
Employer incorporation or
organization)
7001 Weston Parkway, Suite 300,
Cary, North Carolina 27513
---------------------------- -----
(Address of principal executive offices) (Zip Code)
(919) 653-7001
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock together with associated
Common Stock Purchase Rights New York Stock Exchange
---------------------------- -----------------------
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (b) 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 common stock, as of the
latest practical date 10,473,295 as of October 29, 1999.
Pursuant to the Securities Exchange Act of 1934 Release 15502 and Rule
240.03 (b), the pages of this document have been numbered sequentially. The
total pages contained herein are 14.
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Medco Research, Inc.
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
<CAPTION>
September 30, December 31,
1999 1998*
--------------------------------------------------
(in thousands except share data) (Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,407 $ 4,742
Investments held to maturity 18,508 21,434
Accounts and notes receivable:
Royalties 9,699 8,349
Other 72 85
Accrued interest income 885 578
Prepaid expenses and other 591 243
Deferred tax asset - current portion 458 458
--------------------------------------------------
Total current assets 34,620 35,889
Investments held to maturity 32,162 25,074
Property and equipment, at cost, net of accumulated depreciation and
amortization 607 465
Patent, trademark and distribution rights, at cost, net of accumulated
amortization 1,166 1,629
Deferred tax asset 1,228 1,228
--------------------------------------------------
Total assets $69,783 $64,285
==================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $3,013 $3,401
Accrued royalties 1,916 2,166
Accrued compensation 348 509
--------------------------------------------------
Total current liabilities 5,277 6,076
Other long-term liabilities - 150
--------------------------------------------------
Total liabilities 5,277 6,226
Stockholders' equity,
Common stock, no par value, authorized 40,000,000 shares; shares issued of
11,427,595 and 11,298,732 at September 30, 1999 and December 31, 1998,
respectively; shares outstanding of 10,353,295 and 10,409,332 at September
30, 1999 and December 31, 1998, respectively 55,288 53,806
Retained earnings 24,482 15,061
Cost of stock held in treasury, 1,074,300 and 889,400 shares at September
30, 1999 and December 31, 1998, respectively (15,264) (10,808)
--------------------------------------------------
Total stockholders' equity 64,506 58,059
--------------------------------------------------
Commitments and contingencies
--------------------------------------------------
Total liabilities and stockholders' equity $69,783 $64,285
==================================================
See accompanying notes to consolidated financial statements.
*Abstracted from audited year-end financial statements.
</TABLE>
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Medco Research, Inc.
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
(in thousands, except per share data) 1999 1998 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Royalty revenue $ 9,210 $ 6,426 $25,713 $19,191
Royalty expense 1,810 1,063 4,718 3,246
----------------------------------------------------------------------------------------
Gross margin 7,400 5,363 20,995 15,945
----------------------------------------------------------------------------------------
Operating expenses:
Research & development costs 2,484 1,379 6,836 6,942
General and administrative expenses 701 635 2,232 1,832
----------------------------------------------------------------------------------------
3,185 2,014 9,068 8,774
----------------------------------------------------------------------------------------
Operating income 4,215 3,349 11,927 7,171
Other income:
Interest income 778 722 2,249 1,995
Other income - - - 4,000
----------------------------------------------------------------------------------------
Income before taxes 4,993 4,071 14,176 13,166
Provision for income taxes 1,675 362 4,755 1,064
----------------------------------------------------------------------------------------
Net income $ 3,318 $ 3,709 $ 9,421 $12,102
========================================================================================
Basic earnings per share $ 0.32 $ 0.35 $ 0.91 $ 1.15
========================================================================================
Diluted earnings per share $ 0.31 $ 0.34 $ 0.88 $ 1.11
========================================================================================
Weighted average shares outstanding 10,347 10,586 10,347 10,554
========================================================================================
Net effect of dilutive stock options
based on treasury stock method
using average market price 411 396 400 340
========================================================================================
Weighted average shares outstanding
Assuming dilution 10,758 10,982 10,747 10,894
========================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
Medco Research, Inc.
Consolidated Statements of Stockholders' Equity
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands)
<CAPTION>
Common Stock
----------------------------------
Cost of
Number of Retained stock held
shares Amount Earnings in treasury Total
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1998 10,409 $53,806 $15,061 $(10,808) $58,059
Stock options
exercised 89 942 - - 942
Stock warrants
exercised 40 540 - - 540
Purchase of stock held
in treasury (185) - - (4,456) (4,456)
Net income - - 9,421 - 9,421
---------------------------------------------------------------------------------------------
Balance at
September 30, 1999 10,353 $55,288 $24,482 $(15,264) $64,506
=============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
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<TABLE>
Medco Research, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
NINE MONTHS ENDED
-----------------------------------------------
September 30, September 30,
1999 1998
-----------------------------------------------
(in thousands)
<S> <C> <C>
Operating activities:
Net income $9,421 $12,102
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of property and equipment 150 72
Amortization of patent, trademark and distribution
rights 463 450
Net amortization of investment discount (9) (276)
Changes in operating assets and liabilities:
Accounts receivable (1,337) (277)
Prepaid expenses (348) (140)
Accounts payable and accrued expenses (699) (415)
Accrued royalty expense (250) (199)
Accrued interest income (307) (104)
Deferred tax asset - 321
Deferred royalty payments - (1,101)
-----------------------------------------------
Net cash provided by operating activities $7,084 $10,433
-----------------------------------------------
</TABLE>
(Continued)
6
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<TABLE>
Medco Research, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
NINE MONTHS ENDED
-----------------------------------------------
September 30, September 30,
1999 1998
-----------------------------------------------
(in thousands)
<S> <C> <C>
Investing activities:
Purchase of investments held to maturity (21,153) (34,293)
Maturity of investments held to maturity 17,000 24,922
Purchases of property and equipment (292) (19)
Purchases of patents - (713)
-----------------------------------------------
Net cash (used in) investing activities (4,445) (10,103)
-----------------------------------------------
Financing activities:
Proceeds from exercise of options 942 871
Proceeds from exercise of warrants 540 -
Purchase of stock held in treasury (4,456) -
-----------------------------------------------
Net cash provided by (used in) financing activities (2,974) 871
-----------------------------------------------
Increase (decrease) in cash and cash equivalents (335) 1,201
Cash and cash equivalents at beginning of period 4,742 2,726
-----------------------------------------------
Cash and cash equivalents at end of period $4,407 $3,927
===============================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
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Medco Research, Inc.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
General
The accompanying interim financial statements have been prepared by Medco
Research, Inc. (the "Company") in accordance with generally accepted accounting
principles. Certain disclosures and information normally included in financial
statements have been condensed or omitted. In the opinion of the management of
the Company, these financial statements contain all adjustments (all of a
recurring nature) necessary for a fair presentation for the interim periods.
These statements should be read in conjunction with the financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Adoption of New Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("SFAS No. 130") for its fiscal year ending
December 31, 1998. SFAS No. 130 requires the Company to display an amount
representing the total comprehensive income for the period in a financial
statement which is displayed with the same prominence as other financial
statements. The Company has no items of other comprehensive income in any period
presented and therefore is not required to report comprehensive income.
The Company will adopt Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Investments and Hedging Activities" ("SFAS No. 133")
for its fiscal year ending December 31, 2000. SFAS No. 133 establishes a new
model for accounting for derivatives and hedging activities and supersedes and
amends a number of existing standards. The adoption of this pronouncement is
expected to have no impact on the Company's results of operations or financial
condition.
Contracts
In May 1999, the Company terminated a Clinical Study Agreement with ClinTrials
Research, Inc. The parties are in the process of negotiating the amount of the
final payment, if any, due to ClinTrials Research under the agreement. The
Company has accrued its best estimate of the amount of any such possible final
payment at September 30, 1999 and does not believe that any payment required
will have a material adverse affect on its financial condition or results of
operations.
8
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Medco Research, Inc.
Contingency
There are no legal proceedings pending against the Company. However, on October
3, 1997, Richard A. Wilson, Debra A. Angello, and Paul S. Angello ("Plaintiffs")
filed a complaint against Fujisawa, USA, Inc. ("Fujisawa") in the United States
District Court, District of Oregon, alleging that Fujisawa's sale of Adenoscan
in the United States induces, or contributes to, the infringement of plaintiffs'
U.S. Patent No. 4,824,660 ("the `660 patent"), entitled "Method of Determining
the Viability of Tissue in an Organism" which the Patent Office issued on April
25, 1989.
This action has been settled. The plaintiffs granted Fujisawa a world-wide,
exclusive, paid-up license for the use of adenosine under the `600 patent in
consideration for Fujisawa's agreement to pay fixed sub-license fees over the
seven year remaining life of the`660 patent. Fujisawa sub-licensed the Company
under the `660 patent and the Company agreed to pay Fujisawa sub-license fees
equal to 50%, or an aggregate of $2.25 million, of the `660 patent license fees.
The Company does not believe that payment of these fees will have any material
effect on its financial condition or results of operations. The `660 license and
sub-license are royalty-free.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Third Quarter and Nine Months of 1999 Compared to Third Quarter and Nine Months
of 1998
Net Revenues. The Company's third quarter and first nine months of 1999 royalty
revenues increased to $9.210 million and $25.713 million from $6.426 million and
$19.191 million, an increase of 43% and 34% respectively, due to year-over-year
increases in unit sales of Adenoscan and Adenocard by Fujisawa Healthcare, Inc.
("Fujisawa"), the Company's North American licensee. Substantially all of the
royalty revenue of the Company is generated by Fujisawa from its sales of
Adenoscan and Adenocard in the United States and Canada.
Gross Margin. The Company's third quarter and first nine months of 1999 gross
margin from adenosine revenues increased to $7.400 million and $20.995 million
from $5.363 million and $15.945 million, an increase of 38% and 32%
respectively, due to an increase in the Company's third quarter and first nine
months of 1999 royalty revenues of 43% and 34% respectively. Royalty expense for
the third quarter and first nine months from adenosine sales increased to $1.810
million and $4.718 million from $1.063 million and $3.246 million, an increase
of 70% and 45% respectively, primarily due to a 99% increase in third quarter
1999 net sales of Adenocard, a drug for which the Company pays a royalty of
12.5% of net sales to the University of Virginia Alumni Patents Foundation.
Operating Expenses. The Company's third quarter and first nine months of 1999
total operating expenses increased to $3.185 million and $9.068 million from
$2.014 million and $8.774 million, an increase of 58% and 3% respectively.
Research and development ("R&D") expenditures for the third quarter of 1999
increased to $2.484 million from $1.379 million in 1998, an increase of 80%
related to the initiation of AMISTAD II, a phase III study to further
investigate the safety and efficacy of PallacorTM, as well as the completion of
a phase I study and the initiation of a phase II study of MRE0470, a selective
coronary vasodilator during myocardial perfusion imaging procedures to diagnose
coronary artery disease. R&D expenditures for the first nine months of 1999
decreased to $6.836 million from $6.942 million in 1998, a decrease of 2%, due
9
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Medco Research, Inc.
to a one-time charge of $2.361 million to R&D in the second quarter of 1998 for
the purchase of Fujisawa's commercialization rights and related intellectual
properties for the cardioprotection application of intravenous adenosine offset
by increased expenditures in 1999 related to the initiation of AMISTAD II, as
well as the initiation and completion of a phase I study and the initiation of a
phase II study of MRE0470. General and administrative expenditures for third
quarter and the first nine months of 1999 increased to $.701 million and $2.232
million from $.635 million and $1.832 million, an increase of 10% and 22%,
primarily due to an increase in expenses in third quarter 1999 related to
investor relations and the Company's move to new office space in December 1998.
Other Income. Interest income for the third quarter and first nine months of
1999 increased 8% and 13% over the comparable periods in 1998 primarily due to
higher investment balances. Other income for the first nine months of 1999
decreased $4 million as a result of the Company's receipt of a $4 million
payment in second quarter 1998 from Fujisawa for the assistance provided by the
Company to Fujisawa in connection with the contract manufacturing of Adenoscan
and Adenocard by a third party and the transfer of the Adenoscan and Adenocard
NDAs to Fujisawa.
Provision For Income Taxes. The Company recognized tax expense at a rate of 34%
during the third quarter and first nine months of 1999 versus 9% and 8% in the
third quarter and first nine months of 1998 as a result of the Company fully
utilizing its income tax net operating loss carryforward in the fourth quarter
of 1998.
Earnings Per Share. In the third quarter and first nine months of 1999, the
Company had net income of $3.318 million and $9.421 million or $0.31 and $0.88
diluted earnings per share compared to $3.709 million and $12.102 million or
$0.34 and $1.11 diluted earnings per share for the year earlier period. This
apparent decline in earnings is due to the non-recurring increase in income in
the second quarter of 1998 of $1.639 million and the Company recognizing tax
expense at a rate of 34% during the third quarter and first nine months of 1999
versus 9% and 8% in the third quarter and first nine months of 1998 as a result
of the Company fully utilizing its income tax net operating loss carryforward in
the fourth quarter of 1998. On a pro forma basis, excluding the non-recurring
increase in income and assuming that the Company had fully utilized its net
operating loss carryforward prior to the first quarter of 1998, diluted earnings
per share for the third quarter and first nine months of 1998 would have been
$0.25 and $0.70 respectively. Third quarter and first nine months earnings per
share increased 24% and 26%, respectively, compared to the third quarter and
first nine months of 1998 on a pro forma basis. Weighted average common shares
and common share equivalents outstanding for third quarter and the first nine
months of 1999 were 10.758 million and 10.747 million, respectively, versus
10.982 million and 10.894 million for the comparable periods of the prior year.
10
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Medco Research, Inc.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had total cash and investments of $55.077
million made up of $4.407 million of cash and cash equivalents and $50.670
million of investments in U.S. Treasury Notes, debt securities of various
federal governmental agencies, and high quality corporate debt securities. The
Company's working capital as of September 30, 1999 was $29.343 million, compared
to $29.813 million as of December 31, 1998.
The Company will not generate revenues, other than license and milestone
payments, from its other products unless and until it or its licensees receive
marketing clearance from the FDA and appropriate governmental agencies in other
countries. The Company cannot predict the timing of any potential marketing
clearance nor can assurances be given that the FDA or such agencies will approve
any of the Company's products. For the near term the Company expects to receive
substantially all of its royalty revenues from sales of its products in the U.S.
by Fujisawa.
IMPACT OF INFLATION
Although it is difficult to predict the impact of inflation on costs and
revenues of the Company in connection with the Company's products, the Company
does not anticipate that inflation will materially impact its costs of operation
or the profitability of its products when marketed.
IMPACT OF YEAR 2000
Readiness
- ---------
The Year 2000 ("Y2K") issue results from programmers using only two digits to
indicate the century, decade and year in date fields. This generally affects
older software and embedded systems of the Company and third parties with which
it does business, thereby threatening operations and the existence and validity
of data. The team that the Company assembled to address the Y2K issue brings to
bear knowledge from all areas of the Company and helps minimize the potential
impact to the Company.
The Company has categorized the Y2K issue into three parts: internal business
systems software; internal non-business software/embedded systems; and external
vendors. The Company's reliance on an outsourcing philosophy, which encourages
the use of partnering agreements with third parties to accomplish many business
functions, eases the Y2K issue as the Company does not have a large number of
internal business systems applications or embedded systems. However, given that
the Company receives substantially all of its royalty revenues from Fujisawa,
the Y2K issue is still a threat and is being given full attention by the
Company, especially in assessing the Company's third party relationships.
11
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Medco Research, Inc.
Internal Business Systems
- -------------------------
The Company does not rely on custom developed solutions for its business
systems. The software that it uses is mass-produced and has been inventoried.
The providers have advised the Company that it has been made Y2K compliant
through normal manufacturer upgrades and updates to the software. Accordingly,
all software and hardware is Y2K compliant.
Internal Non-Business Software/Embedded Systems
- -----------------------------------------------
All internal non-business software and embedded systems have been inventoried.
The providers have been queried regarding Y2K compliance. At this time all
software and systems are Y2K compliant.
External Vendors
- ----------------
A database has been established to track progress the Company's vendors are
making in becoming Y2K compliant. The Company has closely monitored the progress
and potential impact of vendors that may fail to become Y2K compliant by
year-end 1999. The Company has submitted questionnaires to its licensees and
material vendors, including Fujisawa, relative to their Y2K compliance. To date,
Fujisawa represents that it has completed replacement of non-compliant web
server equipment and operating systems and installation of a compliant system
for trading with outside customers. Fujisawa has completed replacement of its
servers and upgrade of its operating systems including business system hardware
and software. Fujisawa has completed all server upgrades, migration of all its
R&D applications and upgrade of its telephone switch. Fujisawa represented it
would complete testing of its R&D applications and rollover testing of its
corporate business applications by October 1999, and continues to apply all Y2K
Microsoft patches to its laptop and desktop PCs. The Company has completed all
of its assessment of Y2K risks relative to its outside vendors. Planning for
contingencies relating to third party relationships has also been completed;
however, depending on factors beyond the Company's control that may affect the
Y2K readiness of its vendors, additional planning may be necessary.
Costs
- -----
The costs of addressing the Y2K issue are not expected to be material to the
operation of the Company. The costs of software and hardware inventories are
currently being absorbed in the normal course of business. The Company has
incurred less than $2,000 for mailing and reviewing Y2K status reports for
external vendors. The costs anticipated by the Company to replace or upgrade
software or hardware are not being accelerated due to Y2K compliance. These
costs totaled approximately $36,000 at September 30, 1999.
Risks
- -----
At this stage of its assessment, the Company does not anticipate that Y2K issues
will materially impact any of its operations, including research and
development, manufacturing, supply and distribution and financial control. All
internal systems are expected to be operational at the Century Date Change
(CDC). However, due to the large number of the Company's vendors (including
utility companies and governmental bodies) and their reliance, in turn, on other
vendors (including hospitals and distributors), it is impossible for the impact
of the CDC to be fully known. The Company is unable to determine at this time
whether it will be materially impacted by unknown factors beyond the Company's
control affecting third parties or their vendors including royalties the Company
receives from Fujisawa. The Company's Y2K plan is expected to significantly
reduce the Company's level of uncertainty about Y2K issues and, in particular,
about Y2K compliance and readiness of its material vendors. The Company believes
that, with the completion of the plan as scheduled, the possibility of
significant interruptions of normal operations should be reduced.
12
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Medco Research, Inc.
Contingency Plans
- -----------------
Contingency plans have been put in place relative to the Company's material
vendors, banking operations and governmental bodies. Such plans have been
reviewed and updated based on information received from vendors on their Y2K
readiness. The Company's contingency planning takes into account the fact that
the Company's agreements obligate Fujisawa to maintain six months of finished
product and six months of work-in-process inventories of Adenocard and Adenoscan
based on orders received. In addition, in the event Fujisawa cannot fulfill
orders for such drugs on a timely basis consistent with U.S. industry practice
for any period in excess of 30 calendar days, Fujisawa is obligated to pay
royalties to the Company during such "outage" periods based on the average daily
net sales of the drug during the prior twelve months, except if such outage
results from force majeure events.
Disclaimer
- ----------
The discussion of the Company's efforts and management's expectations relating
to the Year 2000 are forward-looking statements. The Company's ability to
achieve Y2K compliance, to verify external vendors' Y2K compliance, and the
costs associated with those activities are subject to change as the Company's
Y2K plan is implemented. Completion of the plan is dependent on the Company's
ability to discover and correct the potential Y2K sensitive problems which could
have a serious impact on operations and the ability of third party vendors to
bring their systems into Y2K compliance.
CAUTIONARY STATEMENT
The Company operates in a highly competitive environment that involves a number
of risks, some of which are beyond the Company's control. The following
statement highlights some of these risks.
Statements contained in Management's Discussion and Analysis of Financial
Conditions and Results of Operations which are not historical facts are or may
constitute forward looking statements under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although the Company believes
the expectations reflected in such forward looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
attained. Forward looking statements involve known and unknown risks that could
cause the Company's actual results to differ materially from expected results.
Factors that could cause actual results to differ materially from the Company's
expectations include, among others, the high cost and uncertainty of the
research, clinical trials and other development activities involving
pharmaceutical products; the Company's ability to fund its activities internally
or through additional financing, if necessary; the unpredictability of the
duration and results of regulatory review of New Drug Applications and
Investigational New Drug Applications; the possible impairment of, or inability
to obtain, intellectual property rights and the cost of obtaining such rights
from third parties; intense competition; the uncertainty of obtaining, and the
Company's dependence on, third parties to manufacture and sell its products;
13
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Medco Research, Inc.
results of pending or future litigation and other risk factors detailed from
time to time in the Company's Securities and Exchange Commission filings. The
Company does not undertake any obligation to release publicly any revisions to
these statements to reflect later events or circumstances or to reflect the
occurrence of unanticipated events.
Part II: OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
Incorporated herein by reference is the contingency described in the Notes to
the Financial Statements set forth in Item 1 of Part I of this Report, set forth
on pages 7 and 8 hereof.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
None.
b. Reports on Form 8-K:
None.
14
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Medco Research, Inc.
SIGNATURES
Pursuant to 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.
Medco Research, Inc.
Date: November 12, 1999 By: /s/ Glenn C. Andrews
- ----------------------- --------------------
Glenn C. Andrews
Executive Vice President,
Finance and Administration
Chief Financial Officer and Treasurer
Date: November 12, 1999 By: /s/ Adam C. Derbyshire
- ----------------------- ----------------------
Adam C. Derbyshire
Vice President, Corporate Controller
and Secretary
15
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,407
<SECURITIES> 18,508
<RECEIVABLES> 11,705
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,620
<PP&E> 1,201
<DEPRECIATION> 594
<TOTAL-ASSETS> 69,783
<CURRENT-LIABILITIES> 5,277
<BONDS> 0
<COMMON> 55,288
0
0
<OTHER-SE> 9,218
<TOTAL-LIABILITY-AND-EQUITY> 69,783
<SALES> 0
<TOTAL-REVENUES> 27,962
<CGS> 0
<TOTAL-COSTS> 13,786
<OTHER-EXPENSES> 13,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,176
<INCOME-TAX> 4,755
<INCOME-CONTINUING> 9,421
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,421
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.88
</TABLE>
