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 Quarter Ended September 30, 1998
OR
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 1-12714
OSMONICS, INC
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0955759
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5951 CLEARWATER DRIVE
MINNETONKA, MN 55343
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 933-2277
NOT APPLICABLE
Former name, former address and former
fiscal year, if changed since last report
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 at least the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date. At September 30,
1998, 13,999,240 shares of the issuer's Common Stock, $0.01 par value, were
outstanding.
OSMONICS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE(S)
ITEM I. FINANCIAL STATEMENTS
Consolidated Statements of Operations for the three and 2
nine months ended September 30, 1998 and 1997
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 3
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 6-10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS 11
ITEM 2. CHANGES IN SECURITIES 11
ITEM 3. DEFAULTS UPON SENIOR SECURITES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
OSMONICS, INC.
PART I
FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
-------- -------- -------- --------
Sales $ 44,606 $ 42,420 $134,109 $126,522
Cost of sales 28,100 25,466 86,051 76,361
Gross profit 16,506 16,954 48,058 50,161
Less:
Selling, general
and administrative 11,258 10,461 31,491 30,383
Research, development
and engineering 2,636 2,676 7,483 8,235
Special charges - - 25,706 -
-------- -------- -------- --------
Income (loss) from operations 2,612 3,817 (16,622) 11,543
Other income (expense) (1,054) (616) (2,611) (694)
-------- -------- -------- --------
Income (loss) from continuing
operations before
income taxes 1,558 3,201 (19,233) 10,849
Income taxes 467 905 (3,671) 3,526
-------- -------- -------- --------
Income (loss) from continuing
operations 1,091 2,296 (15,562) 7,323
Recovery on discontinued
operations - - - 325
-------- -------- -------- --------
Net income (loss) $ 1,091 $ 2,296 $ (15,562) $ 7,648
======== ======== ========= ========
Earnings per share - basic
Income (loss) from
continuing operations $ 0.08 $ 0.16 $ (1.11) $ 0.52
Net income $ 0.08 $ 0.16 $ (1.11) $ 0.51
Earnings per share - assuming
dilution
Income (loss) from
continuing operations $ 0.08 $ 0.16 $ (1.11) $ 0.54
Net income $ 0.08 $ 0.16 $ (1.11) $ 0.53
Average shares outstanding
Basic 13,982 13,920 13,964 14,064
Assuming dilution 14,192 14,285 13,964 14,360
OSMONICS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands, Except Share Data)
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 2,666 $ 4,872
Marketable securities 14,415 17,004
Trade accounts receivable, net of
allowance for doubtful accounts of
$1,127 in 1998, and $888 in 1997 33,129 28,969
Inventories 32,031 35,228
Deferred tax assets 7,127 1,413
Other current assets 2,023 1,639
-------- --------
Total current assets 90,391 89,125
-------- --------
Property and equipment, at cost
Land and land improvements 5,581 5,535
Building 30,455 29,278
Machinery and equipment 68,474 62,770
-------- --------
104,510 97,583
Less accumulated depreciation (49,055) (42,550)
-------- --------
55,455 55,033
Other assets 37,124 20,325
-------- --------
Total assets $182,970 $164,483
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,296 $ 9,728
Notes payable and current portion
of long-term debt 31,734 16,174
Other accrued liabilities 17,105 17,950
-------- --------
Total current liabilities 58,135 43,852
-------- --------
Long-term debt 33,316 13,792
Other liabilities 47 25
Deferred income taxes 4,148 4,439
Shareholders' equity
Common stock, $0.01 par value
Authorized -- 50,000,000 shares
Issued -- 1998: 13,999,240 and
1997: 13,943,544 shares 140 140
Capital in excess of par value 20,888 20,261
Retained earnings 64,566 80,128
Unrealized gain on marketable securities 1,786 2,180
Foreign currency translation adjustments (56) (334)
-------- --------
Total liabilities and shareholders' equity $182,970 $164,483
======== ========
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars In Thousands)
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
-------- --------
CASH FLOWS FROM OPERATIONS:
Net income (loss) $(15,562) $ 7,648
Non-cash items included in net income:
Depreciation and amortization 5,627 4,118
Deferred income taxes (6,611) 434
Gain on sale of investments (171) (628)
Special charges 27,706 -
Changes in assets and liabilities
(net of business acquisitions)
Accounts receivable (1,136) (3,005)
Inventories and other current assets 3,418 2,785
Accounts payable and accrued liabilities (7,165) (2,634)
-------- --------
Net cash provided by operations 6,106 8,718
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions
(net of cash acquired including purchased R&D) (40,713) (11,970)
Purchase of investments (576) (1,658)
Sale of investments 2,729 2,271
Purchase of property and equipment (4,879) (5,167)
Sales of property and equipment 110 374
Other 193 120
-------- --------
Cash used in investing activities (43,136) (16,030)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and debt 38,000 12,204
Reduction of debt (4,081) (2,169)
Issuance of common stock 627 800
Purchase of company stock - (5,249)
-------- --------
Net cash provided by financing activities 34,546 5,586
-------- --------
Effect of exchange rate changes on cash 278 311
Decrease in cash and cash equivalents (2,206) (1,415)
Cash and cash equivalents -
beginning of year 4,872 5,392
------- --------
Cash and cash equivalents -
end of quarter $ 2,666 $ 3,977
======== ========
OSMONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars In Thousands)
The accompanying unaudited condensed financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
These statements should be read in conjunction with the financial statements
and related notes included in the Company's Annual Report to shareholders and
Form 10-K for the year ended December 31, 1997.
Operating results for the three months and nine months ended September 30,
1998, are not necessarily indicative of the results that may be expected for
the full year 1998.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income"
which establishes standards for the reporting of comprehensive income and its
components. The Company has the following components of comprehensive
income:
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
-------- --------
Net income (loss) $(15,562) $ 7,648
OTHER COMPREHENSIVE INCOME (LOSS), BEFORE TAX:
Foreign currency translation adjustments 278 (260)
Unrealized gains/(losses) on securities:
Unrealized holding gains (losses)
during period (565) (596)
Less: reclassified adjustment for
gains included in net income (loss) 171 (394) 628 32
---- ---- ---- ----
Other comprehensive income (loss), before tax (116) (228)
Income tax expense related to items of
other comprehensive income (loss) (35) (74)
-------- --------
Other comprehensive income (loss), net of tax (81) (154)
-------- --------
Comprehensive income (loss) $(15,643) $ 7,494
========= ========
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars In Thousands, Except Share Data)
As an aid to understanding the Company's operating results, the following
table shows the percentage of sales that each income statement item
represents for the three months and nine months ended September 30, 1998 and
1997.
PERCENT OF SALES PERCENT OF SALES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------ ------ ------ ------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 63.0 60.0 64.2 60.4
------ ------ ------ ------
Gross profit 37.0 40.0 35.8 39.6
Selling, general and
administrative 25.2 24.7 23.5 24.0
Research, development and
engineering 5.9 6.3 5.6 6.5
Special charges - - 19.1 -
------ ------ ------ ------
Operating expenses 31.1 31.0 48.2 30.5
Income (loss) from operations 5.9 9.0 (12.4) 9.1
Other income (expense) (2.4) (1.5) (1.9) (0.6)
------ ------ ------ ------
Income (loss) from continuing
operations before income
taxes 3.5 7.5 (14.3) 8.5
Income taxes 1.1 2.1 (2.7) 2.8
------ ------ ------ ------
Income (loss) from continuing
operations 2.4 5.4 (11.6) 5.7
Recovery on discontinued
operations - - - 0.3
------ ------ ------ ------
Net income (loss) 2.4% 5.4% (11.6)% 6.0%
====== ====== ====== ======
SALES
Sales for the third quarter ended September 30, 1998 were $44,606, which is a
5.2% increase from the third quarter of 1997. Year-to-date sales through
September 1998 were $134,109, which is a 6.0% increase over the corresponding
1997 level. Acquisitions accounted for all of the third quarter and year-to-
date sales increases. Internal sales were affected by a slowdown in capital
equipment sales, and in components sold to our OEM customers. Sales also
slowed to customers primarily in the Asian and Eastern European markets and
partially in the United States.
GROSS MARGIN
Gross margin for the third quarter of 1998 was 37.0% of sales versus 40.0%
for the corresponding period in 1997. The gross margin for the nine months
ended September 30, 1998 was 35.8%, compared to 39.6% in 1997. Current year-
to-date gross margins include a 1.5 percentage point unfavorable impact
related to a second quarter special charge for slow moving inventory. The
decrease in gross margins is also due to lower utilization of certain
production facilities, and to selective price reductions on some products to
maintain market share. The Company has taken action to reduce its
manufacturing capacity and improve gross margins. On August 21, 1998, the
Company announced a plan to reduce employment by 10% and close four
manufacturing facilities by the end of the calendar year.
OPERATING EXPENSES
Operating expenses in the third quarter were 31.1% of sales compared to 31.0%
in the third quarter of 1997. For the nine months ended September 30, 1998
operating expenses, excluding a special charge in the second quarter, were
29.1% of sales, compared to 30.5% for the same period of 1997. The increase
in third quarter operating expenses relates primarily to the implementation
of the SAP information system and consulting fees that are being expensed as
incurred, as required by recent accounting rule changes, instead of being
capitalized as they had been in previous quarters.
SPECIAL CHARGES
In second quarter 1998, the Company recorded special charges of $27,706
($21,217 net-of-tax or $1.52 per share assuming dilution). Charges included a
$23,940 charge to operating expense for purchased research and development
related to the acquisitions of Micron Separations, Inc. ($8,620) and Membrex
Corp. ($15,320) and a $2,000 charge to cost of sales for slow moving
inventory. The special charges also included operating expense charges of
$875 for corporate restructuring and consolidation of operations, and $891
for re-engineering costs and write-downs of assets in connection with the
Company's implementation of a global information system. The special charges
are summarized below:
In-process R&D $ 23,940
Corporate restructuring 875
SAP / Re-engineering costs 891
Slow moving inventory 2,000
--------
Gross special charges $ 27,706
Less slow moving inventory - in COS (2,000)
--------
Special charge in Operating Expense $ 25,706
OTHER EXPENSE
Other expense in the third quarter was $1,054, versus $616 for the third
quarter of 1997. The increase is primarily the result of interest expense of
$375 and $325 on the additional borrowing of $20,000 and $18,000 for the
acquisitions of Micron Separations, Inc. during the first quarter of 1998 and
Membrex Corp. during the second quarter of 1998.
INCOME TAXES
The effective tax rate for third quarter 1998 was 30.0%. The effective tax
rate for the nine months ended September 30, 1998 was 19.1%. In the same
period of 1997 the effective tax rate was 32.5%. The difference is primarily
the result of purchased R&D that was written off in the second quarter of 1998.
RECOVERY ON DISCONTINUED OPERATIONS
The Company recognized $325 ($0.02 per share assuming dilution) in after tax
income in the first quarter of 1997 from a reduction in the reserve for
discontinued operations from the Autotrol merger. There was no similar
recovery in 1998.
NET INCOME
Net income for the quarter ended September 30, 1998 was $1,091 or $0.08 per
basic and diluted share. For the comparable 1997 quarter, net income was
$2,296 or $0.16 per basic and diluted share. The September 30, 1998 year-to-
date net loss was $(15,562) or $(1.11) per basic and diluted shares, compared
to net income of $7,648 or $0.54 per basic share and $.053 per diluted share
for the same period of 1997. The current year net loss is due to a second
quarter special charge. Without the charge, year-to-date net income would
have been $5,655 or $0.40 per basic and diluted shares.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had cash, cash equivalents and
marketable securities of $17,081 versus $21,876 at December 31, 1997. The
current ratio was 1.6 at September 30, 1998 as compared to 2.0 at year-end
1997.
The Company's long-term debt increased from $13,792 at December 31, 1997 to
$33,316 at September 30, 1998. This increase was the result of entering into
a new $20,000 long-term loan from an insurance company in March 1998. The
Company's current debt increased from $16,174 at December 31, 1997 to $31,734
at September 30, 1998. The increase was the result of the Company using its
revolving line of credit to fund the Membrex Corp. acquisition during the
second quarter.
The Company believes that its current cash and investments position, its cash
flow from operations, and amounts available from bank credit will be adequate
to meet its anticipated cash needs for working capital, capital expenditures,
and potential acquisitions during the foreseeable future.
YEAR 2000 READINESS DISCLOSURE
STATE OF READINESS
Osmonics is currently working to fully determine and resolve the potential
impact of the Year 2000 on the processing of date-sensitive information by
its computerized information systems. The Year 2000 problem is the result
of computer programs being written using two digits (rather than four) to
define the applicable year. Any of Osmonics' programs that have time-
sensitive software may recognize a date using "00" as the year 1900 rather
than the Year 2000, which could result in miscalculations or system
failures.
Osmonics' Year 2000 Project (the Project) began in 1994 with reviews of the
Company's business information systems. The objective was to improve access
to business information through an integrated, company-wide system which is
also Year 2000 compliant.
The Company is using a multi-step approach in conducting the Project. These
steps include: needs analysis, resource requirements, remediation and
testing, and implementation. The Project plan identified the major issues
and alignment of priorities, resources, and contingency plans. The
remediation and testing phases will continue through third quarter 1999.
The Project scope includes all computing systems hardware, software, IT
infrastructure (such as networks and telecommunications), and all third-
party suppliers and vendors. The Company has completed the needs analysis
phase of the Project. The Company has not yet completed, corrected and/or
tested for all possible Year 2000 compliance issues. The Company is
utilizing the services of consulting firms to assist in dealing with Year
2000 issues.
An integral part of the Project is the implementation of SAP, a company-wide
integrated business information and accounting system. The Company began
implementing SAP as its primary information system in 1996. SAP is being
implemented in a two-phase approach. Phase I, the conversion of the
previous primary computing system at the Company's headquarters and primary
manufacturing facility, in Minnetonka, MN was completed in 1997. Phase II
is the business process re-engineering within SAP, and the rollout to other
plants. The existing software at three other plants has also been upgraded
with Year 2000 compliant versions on an interim basis. As of September 30,
1998, the Company is approximately 75% complete on converting or upgrading
its systems to be Year 2000 compliant. The remaining three plants are
scheduled to be completed by September 30, 1999.
Very few of the Company's products contain software or embedded
microprocessors. The Company has reviewed all of these products and
identified only a very few that will be impacted by the year 2000. In all
cases, the effect will be in the retrieval and display of logged data and
not in the correct operation of the product. A solution for each of the
products identified has either been made available, or will made available
to our customers prior to the year 2000.
Customers and vendors could be disrupted with their own Year 2000 issues,
which could affect their ability to buy Osmonics products or supply Osmonics
with raw materials. However, the Company believes this is unlikely, since
no single customer or vendor represents more than 5% percent of the
Company's present business. Alternative sources of supply are also
currently available and the Company believes will be available if needed.
However, the demand upon such alternative suppliers could result in the
unavailability of some products. The Company is in the process of seeking
assurances from its material suppliers that their ability to sell to the
Company will not be materially impacted by any Year 2000 issue. The
Company does not at this time see the need to develop additional contingency
plans to deal with this aspect of the Year 2000 problem.
COST
As of September 30, 1998, the Company has invested over $5,000 during the
years 1995-1998 to upgrade its information systems. The remaining cost
associated with required modifications just to become Year 2000 compliant is
not expected to be material to the Company's financial position. The
estimated total external cost to accelerate the replacement of certain
hardware, software, and infrastructure is not expected to exceed $500. The
remaining SAP implementation costs and the related business process
improvements, which would be incurred in any case, are excluded from the
figure above.
RISKS
Although the Company believes that it will be able to correct all material
Y2K problems prior to January 1, 2000, the failure to correct a material
Year 2000 problem could result in an interruption in, or a failure of,
certain normal business activities or operations. Such failures could
materially and adversely affect the company's results of operations,
liquidity and financial condition. For example, the failure to update its
business information system could result in delayed performance on
contracts, loss of contracts, or lawsuits for failure to perform.
The Project is expected to significantly reduce the Company's level of
uncertainty regarding the Year 2000 problem. The Company believes that,
with the implementation of new business systems and completion of the
Project as scheduled, the possibility of significant interruptions of normal
operations should be minimal.
The failure of the Company's customers to be Year 2000 Compliant could
materially reduce or delay the Company sale of water systems because of
budget constraints and the diversion of customer resources to fixing the
customers' Year 2000 problems. At this time, the Company does not believe
that its customers' Year 2000 problems will materially impact the Company's
business.
Readers are cautioned that forward-looking statements contained in the Year
2000 update should be read in conjunction with the company's disclosures
under the heading - "Private Securities Litigation Reform Act" - that
follows.
CONTINGENCY PLANS
The Company has developed and put in place contingency plans to address
internal and external issues specific to the Year 2000 problem, to the
extent practicable. The Company believes that due to the widespread nature
of potential Year 2000 issues, the contingency planning process may require
further modifications as the Company obtains additional information
regarding: (1) the Company's internal systems and equipment during the
remediation and testing phases of its Year 2000 program; and (2) the status
of third party Year 2000 readiness.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act provides a "safe harbor" for
forward-looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed with the Securities and Exchange
Commission (as well as information included in statements made or to be made
by the Company) contains statements that are forward looking. Such
statements may relate to plans for future expansion, the Company's cost and
expectations as to when it will complete the testing and remediation phases
of the Year 2000 readiness project, business acquisition and development
activities, capital spending, financing, or the effects of regulation and
competition. Such information involves important risks and uncertainties
that could significantly affect results in the future. Such results may
differ from those expressed in any forward-looking statements made by the
Company. These risks and uncertainties include, but are not limited to,
those relating to product development, computer systems development,
dependence on existing management, global economic and market conditions,
and changes in federal or state laws.
OSMONICS, INC.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEDINGS
Not Applicable
Item 2. CHANGE IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION (Dollars in Thousands)
A. RESEARCH GRANT TO DEVELOP MEMBRANE SYSTEMS
In the third quarter, the National Institute of Standards and
Technology (NIST) awarded Osmonics and Cargill, Inc. jointly a five-
year, $3.75 million research grant from its Advanced Technology
Program (ATP). The grant will fund the development of solvent-
resistant membrane systems for separation applications that currently
rely on energy-intensive distillation.
The grant will allow Osmonics to develop new polymeric membranes and
system designs with widespread applications in food, pharmaceutical,
and petrochemical processing. Because membranes typically require 90%
less energy than distillation, these new membrane applications, if
commercialized, could help U.S companies save tens of millions in
energy costs annually. They may also reduce costs associated with
controlling airborne and wastewater emissions.
Osmonics will focus on technology development, and collaborate with
Cargill on commercial applications. Cargill is an international
marketer, processor, and distributor of agricultural, food, financial,
and industrial products with 80,600 people at offices and facilities
in 1,000 locations in 65 countries.
B. SUBSEQUENT EVENT
In October, Osmonics announced that it signed an agreement with Johns
Manville to purchase its HYPURE liquid cartridge filter business.
The sale includes a cash purchase of the assets to manufacture the
products, as well as a long-term supply agreement for the basic glass
fiber. Johns Manville's 1997 sales of cartridges were less than
$5 million.
The HYPURE fiberglass disposable filters are high performance,
replaceable cartridges with excellent dirt holding capacity. They
are used for general industrial liquid filtration, coatings, high-
temperature and high-viscosity applications, and organic solvent
purification.
With the addition of HYPURE disposable filters to the existing
Hytrex, Purtrex, and Selex lines, Osmonics will offer one of the
broadest selections of replaceable depth filter cartridges in the
industry. HYPURE filters will be manufactured at Osmonics'
Minnetonka, MN facility.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) During the quarter ended September 30, 1998 the Registrant did
not file a Form 8-K report.
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.
Dated: November 13, 1998
-----------------
OSMONICS, INC.
-----------------------------------
(Registrant)
/s/ L. Lee Runzheimer
------------------------------------
L. Lee Runzheimer
Chief Financial Officer
/s/ Howard W. Dicke
------------------------------------
Howard W. Dicke
Treasurer and Vice President
Corporate Development
/s/ D. Dean Spatz
------------------------------------
D. Dean Spatz
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the quarter ended September 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,666
<SECURITIES> 14,415
<RECEIVABLES> 34,256
<ALLOWANCES> 1,127
<INVENTORY> 32,031
<CURRENT-ASSETS> 90,391
<PP&E> 104,510
<DEPRECIATION> 49,055
<TOTAL-ASSETS> 182,970
<CURRENT-LIABILITIES> 58,135
<BONDS> 33,316
0
0
<COMMON> 140
<OTHER-SE> 87,184
<TOTAL-LIABILITY-AND-EQUITY> 182,970
<SALES> 134,109
<TOTAL-REVENUES> 134,109
<CGS> 86,051
<TOTAL-COSTS> 86,051
<OTHER-EXPENSES> 64,680
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,611
<INCOME-PRETAX> (19,233)
<INCOME-TAX> (3,671)
<INCOME-CONTINUING> (15,562)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,562)
<EPS-PRIMARY> (1.11)
<EPS-DILUTED> (1.11)
</TABLE>
