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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-4389
THE PERKIN-ELMER CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
New York 06-0490270
(State or Other (I.R.S. Employer
Jurisdiction of Identification Number)
Incorporation or
Organization)
761 Main Avenue,
Norwalk, Connecticut 06859-0001
(Address of Principal Executive Offices, Including Zip Code)
(203) 762-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No ____
Number of shares outstanding of Common Stock, par value $1 per share, as of
November 10, 1998: [49,803,911]
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THE PERKIN-ELMER CORPORATION
INDEX
Part I. Financial Information Page
Condensed Consolidated Statements of Operations for the
Three Months Ended September 30, 1998 and 1997 1
Condensed Consolidated Statements of Financial Position at
September 30, 1998 and June 30, 1998 2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1998 and 1997 3
Notes to Unaudited Condensed Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II. Other Information 21
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THE PERKIN-ELMER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Amounts in thousands except per share amounts)
Three months ended
September 30,
1998 1997
Net revenues $ 375,785 $ 322,707
Cost of sales 184,143 165,311
Gross margin 191,642 157,396
Selling, general and administrative 117,390 100,923
Research, development and engineering 47,002 31,516
Merger-related costs 938
Operating income 26,312 24,957
Gain on investment 845
Interest expense 802 1,275
Interest income 490 2,358
Other income, net 1,707 373
Income before income taxes 27,707 27,258
Provision for income taxes 7,590 5,837
Minority interest 3,108
Net income $ 17,009 $ 21,421
Net income per share
Basic $ .34 $ .45
Diluted $ .34 $ .43
Average shares outstanding
Basic 49,377 48,081
Diluted 50,429 50,165
Dividends per share $ .17 $ .17
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
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THE PERKIN-ELMER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollar amounts in thousands)
At September 30, At June 30,
1998 1998
Assets (unaudited)
Current assets
Cash and cash equivalents $ 71,848 $ 82,865
Short-term investments 1,226
Accounts receivable, net 376,382 374,898
Inventories 257,171 240,031
Prepaid expenses and other current assets 97,881 97,116
Total current assets 803,282 796,136
Property, plant and equipment, net 285,084 258,800
Other long-term assets 274,768 279,538
Total assets $ 1,363,134 $ 1,334,474
.
Liabilities and Shareholders' Equity
Current liabilities
Loans payable $ 58,794 $ 12,099
Accounts payable 125,081 165,289
Accrued salaries and wages 46,602 48,999
Accrued taxes on income 80,598 79,860
Other accrued expenses 200,263 201,898
Total current liabilities 511,338 508,145
Long-term debt 29,650 33,726
Other long-term liabilities 192,981 184,598
Total liabilities 733,969 726,469
Minority interest 49,177 43,757
Shareholders' equity
Capital stock 50,148 50,148
Capital in excess of par value 376,880 379,974
Retained earnings 197,656 190,966
Accumulated other comprehensive income (7,328) (9,513)
Treasury stock, at cost (37,368) (47,327)
Total shareholders' equity 579,988 564,248
Total liabilities and shareholders' equity $ 1,363,134 $ 1,334,474
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
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THE PERKIN-ELMER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollar amounts in thousands)
Three months ended
September 30,
1998 1997
Operating Activities
Net income $ 17,009 $ 21,421
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 13,340 9,702
Long-term compensation programs 939 1,382
Deferred income taxes (1,896) (961)
Changes in operating assets and liabilities:
Decrease in accounts receivable 7,022 774
Increase in inventories (12,043) (13,508)
Increase in prepaid expenses and other assets (2,390) (15,033)
Decrease in accounts payable and other liabilities (42,951) (22,375)
Net cash used by operating activities (20,970) (18,598)
Investing Activities
Additions to property, plant and equipment
(net of disposals of $695 and $1,152, respectively) (43,098) (32,943)
Acquisitions/investments, net (7,238)
Proceeds from the sale of assets, net 14,301 4,195
Proceeds from the collection of note receivable 9,673
Net cash used by investing activities (28,797) (26,313)
Financing Activities
Net change in loans payable 43,837 4,327
Principal payments on long-term debt (5,297)
Dividends (8,396) (7,454)
Proceeds from stock issued for stock plans 6,375 2,889
Net cash provided (used) by financing activities 36,519 (238)
Elimination of PerSeptive results from
July 1, 1997 to September 30, 1997 2,590
Effect of exchange rate changes on cash 2,231 1,020
Net change in cash and cash equivalents (11,017) (41,539)
Cash and cash equivalents beginning of period 82,865 213,028
Cash and cash equivalents end of period $ 71,848 $ 171,489
See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements.
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THE PERKIN-ELMER CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The interim condensed consolidated financial statements should be
read in conjunction with the financial statements presented in The
Perkin-Elmer Corporation's (the Company's) 1998 Annual Report to
Shareholders. Significant accounting policies disclosed therein
have not changed.
The unaudited condensed consolidated financial statements reflect,
in the opinion of the Company's management, all adjustments which
are necessary for a fair statement of the results for the interim
periods. All such adjustments are of a normal recurring nature.
These results are, however, not necessarily indicative of the
results to be expected for a full year. The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates. Certain amounts in the condensed
consolidated financial statements have been reclassified for
comparative purposes.
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
During the first quarter of fiscal 1999, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." The provisions of this statement
require disclosure of total comprehensive income within the
condensed financial statements of interim periods and additional
disclosures of the components of comprehensive income on an annual
basis. Total comprehensive income includes net income, foreign
currency translation adjustments, unrealized gains and losses on
available-for-sale investments, and minimum pension liability
adjustment.
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The provisions of the statement require the
recognition of all derivatives as either assets or liabilities in
the statement of financial position and the measurement of those
instruments at fair value. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative
and the resulting designation. The Company is required to implement
the statement in the first quarter of fiscal 2000. The Company is
currently analyzing the statement to determine the impact, if any,
on the consolidated financial statements.
NOTE 3 - ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
PerSeptive Biosystems, Inc. The merger (the Merger) of Seven
Acquisition Corp., a wholly-owned subsidiary of the Company into
PerSeptive Biosystems, Inc., a Delaware corporation (PerSeptive),
was consummated on January 22, 1998, and PerSeptive became a wholly-
owned subsidiary of the Company on that date. PerSeptive develops,
manufactures, and markets an integrated line of
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proprietary consumable products and advanced instrumentation systems
for the purification, analysis, and synthesis of biomolecules. The
Merger qualified as a tax free reorganization and has been accounted
for as a pooling of interests. Accordingly, the Company's financial
results have been restated to include the combined operations.
Tecan AG. The Company acquired a 14.5% interest and approximately
52% of the voting rights in Tecan AG (Tecan) in December 1997.
Tecan is a world leader in the development and manufacturing of
automated sample processors, liquid handling systems, and microplate
photometry. Used in research, industrial, and clinical markets,
these products provide automated solutions for pharmaceutical drug
discovery, molecular biology, genomic testing, and clinical
diagnostics. The acquisition cost was $53.2 million in cash and was
accounted for as a purchase with a minority interest of $41.3
million. The excess purchase price over the fair market value of
the underlying assets was $46.2 million and is being amortized over
15 years. The net assets and results of operations have been
included in the consolidated financial statements since the date of
acquisition. The pro forma effect of the acquisition on the
Company's consolidated financial statements was not significant.
Hyseq, Inc. The Company entered into a strategic partnership with
Hyseq, Inc. (Hyseq), acquiring a minority equity interest for an
initial cash investment of $5.0 million, during the fourth quarter
of fiscal 1997. Hyseq applies proprietary DNA array technology to
develop gene-based therapeutic product candidates and diagnostic
products and tests. In the first quarter of fiscal 1998, the
Company increased its investment by $5.0 million.
DISPOSITIONS (SALE OF INVESTMENTS)
Millennium Pharmaceuticals, Inc. During the first quarter of fiscal
1998, the Company recorded a before-tax gain of $.8 million in
connection with the release of a previously existing contingency on
shares of Millennium Pharmaceuticals, Inc. (Millennium) common
stock.
NOTE 4 - COMPREHENSIVE INCOME
Accumulated other comprehensive income on the statements of
financial position consists of foreign currency translation
adjustments, unrealized gains and losses on available-for-sale
investments, and minimum pension liability adjustments. Total
comprehensive income for the three month period ended September 30,
1998 and 1997 is presented in the following table:
(Dollar amounts in millions) Three months ended
September 30,
1998 1997
Net income $ 17.0 $ 21.4
Other comprehensive income:
Foreign currency translation adjustment 6.2 (2.7)
Unrealized loss on investments, net (4.0)
Other comprehensive income 2.2
Comprehensive income $ 19.2 $ 18.7
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NOTE 5 - EARNINGS PER SHARE
The following table presents a reconciliation of basic and diluted
income per share for the three month period ended September 30, 1998
and 1997:
(Amounts in thousands Three months ended
except per share amounts) September 30,
1998 1997
Weighted average number of common
shares used in the calculation of
basic earnings per share 49,377 48,081
Common stock equivalents 1,052 2,084
Shares used in the calculation of
diluted earnings per share 50,429 50,165
Net income used in the calculation
of basic and diluted earnings per share $ 17,009 $ 21,421
Net income per share
Basic $ .34 $ .45
Diluted $ .34 $ .43
Options and warrants to purchase 1.4 million and .1 million shares
of the Company's common stock were outstanding at September 30,
1998 and 1997, respectively, but were not included in the
computation of diluted earnings per share because the effect was
antidilutive.
NOTE 6 - INVENTORIES
Inventories are stated at the lower of cost (on a first-in, first-
out basis) or market. Inventories included the following
components:
(Dollar amounts in millions) September 30, June 30,
1998 1998
Raw materials and supplies $ 59.4 $ 62.6
Work-in-process 14.3 16.9
Finished products 183.5 160.5
Total inventories $ 257.2 $ 240.0
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NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes was as follows:
(Dollar amounts in millions) Three months ended
September 30,
1998 1997
Interest $ .6 $ 1.6
Income taxes $ 5.7 $ 10.8
NOTE 8 - FINANCIAL INSTRUMENTS
The Company utilizes foreign exchange forward, option, and synthetic
forward contracts and an interest rate swap agreement to manage
foreign currency and interest rate exposures. The principal
objective of these contracts is to minimize the risks and/or costs
associated with global financial and operating activities. The
Company does not use derivative financial instruments for trading or
other speculative purposes, nor is the Company a party to leveraged
derivatives.
At September 30, 1998 and June 30, 1998, the Company had forward,
option, and synthetic forward contracts outstanding for the sale and
purchase of foreign currencies at fixed rates as summarized in the
table below:
(Dollar amounts in millions) September 30, 1998 June 30, 1998
Sale Purchase Sale Purchase
Japanese Yen $ 115.5 $ 7.1 $ 109.2 $ -
French Francs 23.3 28.3 .2
Australian Dollars 8.9 10.8
German Marks 23.2 1.5 28.3 1.9
Italian Lira 34.6 38.0 1.4
British Pounds 27.4 14.9 29.2 19.6
Swiss Francs 9.1 3.5 10.5 4.0
Swedish Krona 9.5 11.9
Danish Krona 7.4 10.3
Other 38.0 3.8 44.7 5.1
Total $ 296.9 $ 30.8 $ 321.2 $ 32.2
NOTE 9 - RESTRUCTURING AND OTHER MERGER COSTS
Fiscal 1998. During fiscal 1998, the Company recorded a $48.1
million before-tax charge for restructuring and other merger costs
to integrate PerSeptive into the Company following the acquisition.
The objectives of this plan are to lower PerSeptive's cost structure
by reducing excess manufacturing capacity, achieve broader worldwide
distribution of PerSeptive's products, and combine sales, marketing,
and administrative functions. This charge included: $33.9 million
for restructuring the combined operations; $8.6 million for
transaction costs; and $4.1 million of inventory-related write-offs,
recorded in cost of sales, associated with the rationalization of
certain product lines. Additional non-recurring acquisition costs
of $1.5 million for training, relocation, and
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communication were recognized as period expenses in the third and
fourth quarters of fiscal 1998, and classified as other merger-
related costs. During fiscal 1999, the Company recorded $.9 million
of additional merger-related costs as part of this plan. The Company
expects to incur approximately $5.5 million to $7.5 million of
additional merger-related costs for training, relocation, and
communication over the remaining quarters of fiscal 1999. These
costs will be recognized as period expenses when incurred and will
be classified as other merger-related costs.
The $33.9 million restructuring charge includes $13.8 million for
severance-related costs and workforce reductions of approximately
170 employees, consisting of 114 employees in production labor and
56 employees in sales and administrative support. The remaining
$20.1 million represents facility consolidation and asset-related
write-offs and includes: $11.7 million for contract and lease
terminations and facility related expenses in connection with the
reduction of excess manufacturing capacity; $3.2 million for dealer
termination payments, sales office consolidations, and consolidation
of sales and administrative support functions; and $5.2 million for
the write-off of certain tangible and intangible assets and the
termination of certain contractual obligations. These restructuring
actions are expected to be substantially completed by the end of
fiscal 1999. Transaction costs of $8.6 million include acquisition-
related investment banking and professional fees. As of September
30, 1998 approximately 32 employees were separated under the plan,
and the actions are proceeding as planned.
The following table details the major components of the fiscal 1998
restructuring plan:
Facility
Consolidation
and Asset
(Dollar amounts in millions) Related
Personnel Write-offs Total
Provision
Reduction of excess
European manufacturing capacity $ 5.1 $ 11.7 $ 16.8
Consolidation of sales
and administrative support 8.7 3.2 11.9
Other 5.2 5.2
Total provision $ 13.8 $ 20.1 $ 33.9
Fiscal 1998 activity
Reduction of excess
European manufacturing capacity $ - $ .4 $ .4
Consolidation of sales
and administrative support .3 1.2 1.5
Other 5.1 5.1
Total fiscal 1998 activity $ .3 $ 6.7 $ 7.0
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Fiscal 1999 activity
Reduction of excess
European manufacturing capacity $ - $ 3.6 $ 3.6
Consolidation of sales
and administrative support 2.1 .5 2.6
Other - .1 .1
Total fiscal 1999 activity $ 2.1 $ 4.2 $ 6.3
Balance at September 30, 1998
Reduction of excess
European manufacturing capacity $ 5.1 $ 7.7 $ 12.8
Consolidation of sales
and administrative support 6.3 1.5 7.8
Other - - -
Balance at September 30, 1998 $ 11.4 $ 9.2 $ 20.6
Fiscal 1997. During the fourth quarter of fiscal 1997, the Company
announced a follow-on phase to the Analytical Instrument Division's
profit improvement program begun by the Company in fiscal 1996. The
cost for this action was $24.2 million before-tax and included
$19.4 million for costs focused on further improving the operating
efficiency of manufacturing facilities in the United States,
Germany, and the United Kingdom. These actions were designed to
help transition the Analytical Instruments Division from a highly
vertical manufacturing operation to one that relies more on
outsourcing functions not considered core competencies. The
restructuring charge also included $4.8 million to finalize the
consolidation of sales and administrative support, primarily in
Europe, where seventeen facilities were closed.
The workforce reductions under this plan totaled approximately 285
employees in production labor and 25 employees in sales and
administrative support. The charge included $11.9 million for
severance-related costs. The $12.3 million provided for facility
consolidation and asset-related write-offs included $1.2 million for
lease termination payments and $11.1 million for the write-off of
machinery, equipment, and tooling associated with those functions to
be outsourced.
The following table details the major components of the fiscal 1997
restructuring provision:
Facility
Consolidation
and Asset
(Dollar amounts in millions) Related
Personnel Write-offs Total
Provision
Changes in manufacturing operations $ 9.6 $ 9.8 $ 19.4
Consolidation of sales and
administrative support 2.3 2.5 4.8
Total provision $ 11.9 $ 12.3 $ 24.2
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Fiscal 1997 activity
Changes in manufacturing operations $ .1 $ 4.6 $ 4.7
Consolidation of sales and
administrative support
Total fiscal 1997 activity $ .1 $ 4.6 $ 4.7
Fiscal 1998 activity
Changes in manufacturing operations $ 7.8 $ 4.9 $ 12.7
Consolidation of sales and
administrative support 1.3 1.1 2.4
Total fiscal 1998 activity $ 9.1 $ 6.0 $ 15.1
Fiscal 1999 activity
Changes in manufacturing operations $ 1.4 $ - $ 1.4
Consolidation of sales and
administrative support .1 .1 .2
Total fiscal 1999 activity $ 1.5 $ .1 $ 1.6
Balance at September 30, 1998
Changes in manufacturing operations $ .3 $ .3 $ .6
Consolidation of sales and
administrative support .9 1.3 2.2
Balance at September 30, 1998 $ 1.2 $ 1.6 $ 2.8
NOTE 10 - GOODWILL
At September 30, 1998 and June 30, 1998, other long-term assets
included goodwill, net of accumulated amortization, of $83.1 million
and $84.5 million, respectively. Accumulated amortization of
goodwill was $18.8 and $17.4 million at September 30, 1998 and June
30, 1998, respectively.
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THE PERKIN-ELMER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
condensed consolidated financial statements and related notes
included on pages 1-10 of this report, and "Management's Discussion
and Analysis" appearing on pages 30 - 38 of the Company's 1998
Annual Report to Shareholders. Historical results and percentage
relationships are not necessarily indicative of operating results
for any future periods.
EVENTS IMPACTING COMPARABILITY
Acquisitions and investments. On January 22, 1998, The Perkin-Elmer
Corporation (the Company) acquired PerSeptive Biosystems, Inc.
(PerSeptive). The acquisition has been accounted for as a pooling
of interests and, accordingly, the Company's financial results have
been restated to include the combined operations (see Note 3).
The Company acquired a 14.5% interest and approximately 52% of the
voting rights in Tecan AG (Tecan) during the second quarter of
fiscal 1998. The acquisition has been accounted for as a purchase
and, accordingly, the operating results of Tecan have been included
in the Company's consolidated financial statements since the date of
acquisition (see Note 3).
Merger-related costs. The Company incurred merger-related period
costs of $.9 million in the first quarter of fiscal 1999 in
connection with the integration of PerSeptive into the Company (see
Note 9).
Gain on investment. The first quarter of fiscal 1998 included a
before-tax gain of $.8 million, or $.02 per diluted share after-tax,
related to the release of contingencies on a minority equity
investment (see Note 3).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
The Company reported net income of $17.0 million, or $.34 per
diluted share, for the first quarter of fiscal 1999 compared with
net income of $21.4 million, or $.43 per diluted share, for the
first quarter of fiscal 1998. Excluding the $.9 million of merger-
related costs incurred in the first quarter of fiscal 1999, net
income for the quarter decreased 17.4% compared with the prior year.
The effects of foreign currency translation reduced fiscal 1999
first quarter net income by approximately $3.0 million, or $.06 per
diluted share. Excluding the merger-related costs and the effects of
currency translation, net income for the first quarter of fiscal
1999 decreased approximately 3% compared with the first quarter of
fiscal 1998.
Net revenues were $375.8 million for the first quarter of fiscal
1999 compared with $322.7 million for the first quarter of fiscal
1998, an increase of 16%. Excluding the results of Tecan, which
were not included in the first quarter of the prior year, revenues
increased 8%. The effects of foreign currency translation decreased
net revenues by approximately $9 million, or 3%, in the quarter
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compared with the prior year, as the U.S. dollar remained strong
against most Far Eastern currencies. Geographically, excluding
Tecan, the Company reported revenue growth of 17% and 11% in the
United States and Europe, respectively, compared with the prior
year. This growth was partially offset by a decline of 14% in the
Far East and 13% in Latin America and other markets. Excluding the
effects of currency translation and Tecan, revenues in the Far East
would have increased approximately 2%, and Latin America and other
markets would have decreased approximately 4% compared with the
first quarter of the prior year. Economic instability in these
regions, specifically in the Analytical Instruments business, was
the primary contributor to the decline in Latin America and modest
growth in the Far East.
On a business segment basis, net revenues of PE Biosystems increased
31% to $249.3 million in the first quarter of fiscal 1999. Excluding
Tecan and the negative effects of currency translation, revenues
increased 19% compared with the prior year, primarily reflecting the
continued growth in the genetic analysis and polymerase chain
reaction (PCR) product offerings. In particular, revenues for
reagents that support our genetic analysis systems increased 81%.
Increased contract and licensing revenues of $5.4 million also
contributed to the year-to-year growth. Geographically, excluding
Tecan, revenues and orders were particularly strong in the United
States and Europe, as revenues increased 24% and 18% over the prior
year, partly as a result of higher product demand from
pharmaceutical research companies. Revenues in Latin America and
other markets increased 25%, while revenues in the Far East declined
9% compared with the prior year. Excluding Tecan and the negative
effects of currency translation, revenues in the Far East would have
increased approximately 7% compared with the prior year. The
Company introduced several significant new products and systems
during the first quarter. Among these introductions were the ultra
high-throughput ABI PRISM(TM) 3700 DNA Analyzer. Shipments of the
system to early - access customers and Celera Genomics
are expected to begin during the second quarter of
fiscal 1999. Other significant new instrument systems and services
introduced during the quarter included: several applied genetic
analysis kits, including one for HIV profiling; high-throughput drug
discovery screening services through Tropix; and FMAT, a new
bioassay system to detect cells in vitro for drug discovery, which
was developed in collaboration with Biometric Imaging, Inc. These
products began generating revenues late in the quarter and the
Company expects these products to contribute to revenues over the
remainder of fiscal 1999.
Net revenues for Analytical Instruments were $126.5 million compared
with $131.7 million reported in the prior year's first quarter. The
effects of foreign currency translation reduced revenues by
approximately $4 million, or 3%. Revenues increased 4% in Europe,
offset by declines of 2% in North America, 21% in the Far East and
27% in Latin America and other markets. Excluding the effects of
currency, revenues in the Far East, and Latin America and other
markets declined approximately 6%, and 18% respectively. Growth
in chromatography products was more than offset by decreased
revenues in inorganic and organic products. Also, softness in the
emerging market of Latin America and continued difficulties in the
Pacific Rim contributed to the sales volume weakness.
During the quarter, the Company announced it had engaged Warburg
Dillon Read LLC to explore strategic alternatives for the Analytical
Instruments Division. Options to be explored include selling the
business, spinning it off as a separate company, or retaining it as
part of the Company. The Company believes this announcement may
have had a negative effect on revenue growth in the quarter.
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Gross margin as a percentage of net revenues was 51.0% in the first
quarter of fiscal 1999 compared with 48.8% in the first quarter of
fiscal 1998. This was primarily the result of a change in product
mix for PE Biosystems. Higher unit sales of reagents to support
genetic analysis systems and increased royalty and contract
licensing revenues were the primary contributors. Continued growth
in instrument sales of higher margin genetic analysis product
offerings was also a factor. These changes helped offset a decline
in Analytical Instruments' gross margin, which was primarily a
result of product mix and volume shortfalls in Latin America and
Pacific Rim markets.
Selling, general and administrative (SG&A) expenses were $117.4
million in the first quarter of fiscal 1999 compared with $100.9
million in the first quarter of fiscal 1998. The 16.3% increase in
expenses, or 8.1% excluding Tecan, was due to higher planned
expenses for PE Biosystems and expenses associated with establishing
facilities and staff for Celera Genomics. As a percentage of net
revenues, SG&A expense was 31% in both fiscal periods.
Research, development and engineering (R&D) expenses of $47.0
million increased 49% over the prior year from $31.5 million.
Excluding Tecan, R&D expenses increased 39% compared with the prior
year reflecting a 47% increase at PE Biosystems and an 18% increase
at Analytical Instruments. Excluding Tecan, PE Biosystems' R&D
expense accounted for 72% of the Company's R&D expense. R&D
investments were increased to a higher level during the quarter, in
part to support new life science product launches in fiscal 1999 and
to accelerate new product development. Comparative increases in
these expenses should moderate over future quarters. As a
percentage of net revenues, the Company's R&D expenses increased to
12.5% compared with 9.8% for the prior year.
The Company incurred merger-related costs of $.9 million in the
first quarter of fiscal 1999 for training, relocation, and
communication in connection with the integration of PerSeptive into
the Company (see Note 9). Additional merger-related period costs of
$5.5 million to $7.5 million are expected to be incurred through the
remaining quarters of fiscal 1999.
Operating income increased to $26.3 million for the first quarter of
fiscal 1999 compared with $25.0 million for the prior year.
Excluding Tecan, the merger-related costs of $.9 million, and the
effects of currency translation, operating income increased 7%
compared with the prior year. The effects of currency translation
decreased operating income by approximately $4 million compared with
the prior year.
Operating profits for PE Biosystems, excluding Tecan, increased 26%.
Excluding the effects of currency translation, operating income
increased 36%, benefiting from higher gross margin and lower SG&A
expenses as a percentage of net revenues, as progress continues on
the integration of businesses acquired during fiscal year 1998. The
PE Biosystems increase was partially offset by $3.6 million in
operating expenses associated with Celera Genomics. Analytical
Instruments reported a small loss for the first quarter of fiscal
1999 compared with modest profit for the prior year. The Company
believes the decision to explore strategic alternatives for the
division may have had a negative effect on revenue growth, and the
decline in gross margin contributed to the decrease in profitability
during the quarter.
Interest expense was $.8 million for the first quarter of fiscal
1999 compared with $1.3 million for the prior year.This decrease was
primarily due to the refinancing of PerSeptive's 8 1/4% Convertible
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<PAGE>
Subordinated Notes together with slightly lower outstanding debt
balances and lower average interest rates.Interest income was
$.5 million for the first quarter of fiscal 1999 compared with $2.4
million for the prior year, primarily because of lower cash balances,
as well as from lower interest rates.
Other income, net for the first quarter of fiscal 1999 was $1.7
million, primarily related to a legal settlement, compared with
other income, net of $.4 million for the prior year.
The Company's effective tax rate was 27.4% for the first quarter of
fiscal 1999 compared with 21.4% for the prior year. Excluding Tecan
in fiscal 1999, the effective income tax rate was 26%. The income
tax rate for the first quarter of fiscal 1998 was favorably affected
by finalization of certain outstanding tax matters resulting in a
one-time rate decrease.
Minority interest expense of $3.1 million was recognized in the
first quarter of fiscal 1999 relating to the Company's 14.5%
financial interest in Tecan.
MARKET RISK
The Company operates internationally, with manufacturing and
distribution facilities in various countries throughout the world.
The Company derived approximately 53% of its revenues from countries
outside of the United States for the quarter ended September 30,
1998. Results continue to be affected by market risk, including
fluctuations in foreign currency exchange rates and changes in
economic conditions in foreign markets.
As more fully described in Note 8 and the Company's 1998 Annual
Report to Shareholders, the Company's risk management strategy
utilizes derivative financial instruments, including forwards,
swaps, purchased options, and synthetic forward contracts to hedge
certain foreign currency and interest rate exposures, with the
intent of offsetting gains and losses that occur on the underlying
exposures with gains and losses on the derivatives. The Company
does not use derivative financial instruments for trading or other
speculative purposes, nor is the Company a party to leveraged
derivatives.
The Company performed a sensitivity analysis assuming a hypothetical
10% adverse movement in foreign currency exchange rates applied to
its outstanding hedge contracts and associated exposures. As of
September 30, 1998, the analysis indicated that such a market
movement would not have had a material effect on the Company's
consolidated financial position, results of operations, or cash
flows. Actual gains and losses in the future could, however, differ
materially from this analysis, based on changes in the timing and
amount of foreign currency exchange rate movements and the Company's
actual exposures and hedges.
Interest rate swaps are used to hedge underlying debt obligations.
In fiscal 1997, the Company executed an interest rate swap in
conjunction with its entering into a five-year Japanese Yen debt
obligation. Based on the Company's overall interest rate exposure
at September 30, 1998, including derivative and other interest rate
sensitive instruments, a near-term change in interest rates would
not materially affect the consolidated financial position, results
of operations, or cash flows of the Company.
-14-
<PAGE>
FINANCIAL RESOURCES AND LIQUIDITY
Significant Changes in The Condensed Consolidated Statements of
Financial Position. Cash and cash equivalents were $71.8 million at
September 30, 1998 compared with $82.9 million at June 30, 1998, and
total debt of $88.4 million at September 30, 1998 compared with
$45.8 million at June 30, 1998. Working capital was $291.9 million
at September 30, 1998 compared with $288.0 million at June 30, 1998.
Debt to total capitalization increased to 13% at September 30, 1998
from 8% at June 30, 1998 as a result of an increase in loans payable
to fund current operating requirements.
Accounts payable decreased $40.2 million to $125.1 million at
September 30, 1998 from $165.3 million at June 30, 1998. Payments
for higher purchases incurred during the fourth quarter of fiscal
1998, which were made to support increased production and operating
requirements, contributed to the decrease.
Condensed Consolidated Statements of Cash Flows. Net cash used by
operating activities was $21.0 million for the first three months of
fiscal 1999 compared with $18.6 million for the same period in
fiscal 1998. For the first three months of fiscal 1999, lower net
income related cash flow and higher payments to suppliers were
partially offset by lower accounts receivable and prepaid expenses,
primarily from the collection of non-trade receivables.
Net cash used by investing activities was $28.8 million for the
first three months of fiscal 1999 compared with $26.3 million for
the first three months of fiscal 1998. In the first quarter of
fiscal 1999, the Company generated $14.3 million in net cash
proceeds from the sale of certain non-operating assets, compared
with $13.9 million in the prior year from the sale of certain non-
operating assets and the collection of a note receivable. The
fiscal 1999 cash proceeds were more than offset by capital
expenditures of $43.8 million, which included $9.5 million related
to improvement of the Company's information technology
infrastructure, and $17.5 million for the acquisition of a corporate
airplane. The fiscal 1998 cash proceeds were more than offset by
capital expenditures of $34.1 million, primarily related to
improvement of the Company's information technology infrastructure,
and $7.2 million related to various investments and collaborations.
Net cash provided by financing activities was $36.5 million in the
first quarter of fiscal 1999 compared with a net cash use of $.2
million in the prior period. In the first quarter of fiscal 1999,
the Company received $6.4 million in proceeds from employee stock
option plan exercises compared with $2.9 million in fiscal 1998.
Loans payable increased $43.8 million in the first quarter of fiscal
1999 compared with an increase of $4.3 million for the prior year.
YEAR 2000
In fiscal 1997, the Company initiated a worldwide program to assess
the expected impact of the Year 2000 date recognition problem on its
existing internal computer systems, including embedded and process-
control systems, product offerings, and significant suppliers. The
purpose of this program is to ensure the event does not have a
material adverse effect on the Company's business operations.
-15-
<PAGE>
Regarding the Company's existing internal computer systems, the
program involves a mix of purchasing new systems and modifying
existing systems, with the emphasis on replacement of applications
developed in-house. Replacement projects are currently underway,
and are anticipated to be substantially completed for all business-
critical systems in the United States by December 31, 1998, and
worldwide by December 31, 1999. The program includes
replacement of applications that, for reasons other than Year 2000
noncompliance, had been previously selected for replacement. The
replacement projects, which began in fiscal 1997, are expected to
offer improved functionality and commonality over current systems,
while at the same time addressing the Year 2000 problem.
With respect to the Company's current product offerings, the program
involves performing an inventory of current products, assessing
their compliance status, and constructing a remediation plan where
appropriate. Significant progress has been made in each of these
three phases and the Company expects its current product offerings
to be Year 2000 compliant by December 31, 1999. A substantial
portion of the Company's current product offerings are Year 2000
compliant.
The program also addresses the Year 2000 compliance efforts of the
Company's significant suppliers, vendors, and third-party interface
systems. As part of this analysis, the Company is seeking written
assurances from these suppliers, vendors, and third parties that
they will be Year 2000 compliant. While the Company has begun such
efforts, there can be no assurance that the systems of other
companies with which the Company deals, or on which the Company's
systems rely will be timely converted, or that any such failure to
convert by another company could not have a material adverse effect
on the Company. The Company has not fully determined the extent to
which the Company's interface systems may be impacted by third
parties' systems, which may not be Year 2000 compliant.
The Company's preliminary estimate of the total cost for this multi-
year program covering 3-4 years is approximately $150 million. This
includes amounts previously budgeted for information technology
infrastructure improvements and estimates of remediation costs on
components not yet fully assessed. Incremental spending has not
been and is not expected to be material because most Year 2000
compliance costs will be met with amounts that are normally budgeted
for procurement and maintenance of the Company's information
systems, production and facilities equipment. The redirection of
spending to implement Year 2000 compliance plans may in some
instances delay productivity improvements.
The Company has also engaged a consulting firm to provide periodic
assessments of the Company's Year 2000 project plans and progress.
Because of the importance of addressing the Year 2000 problem, the
Company has created a Year 2000 business continuity planning team to
review and develop, by April 1999, business contingency plans to
address any issues that may not be corrected by implementation of
the Company's Year 2000 compliance plan in a timely manner. If the
Company is not successful in implementing its Year 2000 compliance
plan, or there are delays in and/or increased costs associated with
implementing such changes, the Year 2000 problem could have a
material adverse effect on the Company's consolidated results of
operations and financial condition.
At this stage of the process, the Company believes that it is
difficult to specifically identify the cause of the most reasonable
worst case Year 2000 scenario. A reasonable worst case Year 2000
scenario would be the failure of significant suppliers and vendors
to have corrected their own Year 2000 issues which could cause
disruption of the Company's operations and have a material adverse
effect on the Company's financial condition. The impact of such
disruption cannot be estimated at this time. In the event the
Company believes that any of its significant suppliers or vendors
are unlikely to be able to resolve their own Year 2000 issues, the
Company's contingency plan would include seeking additional sources
of supply.
-16-
<PAGE>
EURO CONVERSION
A single currency called the euro will be introduced in Europe on
January 1, 1999. Eleven of the fifteen member countries of the
European Union have agreed to adopt the euro as their common legal
currency on that date. Fixed conversion rates between these
participating countries' existing currencies (the "legacy
currencies") and the euro will be established as of that date. The
legacy currencies are scheduled to remain legal tender as
denominations of the euro until at least January 1, 2002 (but not
later than July 1, 2002). During this transition period, parties
may settle transactions using either the euro or a participating
country's legal currency.
The Company is currently evaluating the impact the euro conversion
may have on its computer and financial systems, business processes,
market risk, and price competition. The Company does not expect
this conversion to have a material impact on its results of
operations, financial position, or cash flows.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
The provisions of the statement require the recognition of all
derivatives as either assets or liabilities in the statement of
financial position and the measurement of those instruments at fair
value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation. The Company is required to implement the statement in
the first quarter of fiscal 2000. The Company is currently
analyzing the statement to determine the impact, if any, on the
consolidated financial statements.
The FASB issued the following Statement of Financial Accounting
Standards, which will become effective for the Company's fiscal 1999
annual financial statements: SFAS No. 132, "Employers' Disclosures
about Pensions and other Postretirement Benefits," which requires
additional disclosures relating to a company's pension and
postretirement benefit plans; and SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," which requires
certain financial and descriptive information about a company's
reportable operating statements. The adoption of these new
accounting standards may require additional disclosures but should
not have a material effect, if any, on the consolidated financial
statements of the Company.
OUTLOOK
PE Biosystems is expected to continue to grow and maintain
profitability for fiscal 1999 on the strength of robust demand and
several new products. Excluding Tecan, orders for PE Biosystems
products increased by 35% over the first quarter a year ago, and the
backlog in orders for the first quarter was $119 million compared
with $98 million at the end of fiscal 1998. Orders were particularly
strong for genetic analysis systems, sequence detection systems, and
products for applied markets, such as forensics, that are driven by
molecular biology-based reagents. PE Biosystems also began taking
orders for its ABI PRISM(TM) 3700 DNA Analyzer, which was introduced
late in the first quarter. Excluding orders from Celera Genomics,
the division accepted orders for more than 70 units
of the 3700 in the first two weeks following its
introduction. Shipments of the 3700 DNA Analyzer to
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<PAGE>
early-access customers and Celera Genomics are expected to begin
during the second quarter. Other significant new PE Biosystems
instrument systems and services introduced during the quarter
include: several applied genetic analysis kits, including one for
HIV profiling; high-throughput drug discovery screening services
through Tropix; and FMAT, a new bioassay system to detect cells in
vitro for drug discovery,which was developed in collaboration with
Biometric Imaging, Inc. These products began generating revenues
late in the quarter and are expected to contribute to revenues
over the balance of the year.
The Company is on schedule in establishing operations at Celera
Genomics. About 50 employees were employed as of September 30, 1998
and construction is under way on laboratories and related facilities.
A strategic alliance has been formed with Compaq Computer Corporation
for integrated hardware, software, networking, and support services.
During the quarter, the Company announced, that, subject to
shareholder and final Board approval, it plans to distribute a
new class of common stock intended to track the separate performance
of Celera Genomics. The Company believes a number of objectives
relate to this targeted stock structure including: allowing each
business autonomy while capitalizing on synergies with its sister
business; accommodating investor interests by creating an equity
that closely monitors the performance of a focused business;
providing an efficient acquisition currency; and maintaining the
financial benefits of a single organization, such as tax
efficiency and credit availability. The Company also intends to
begin segment reporting of Celera Genomics in the second quarter
of this fiscal year.
For Analytical Instruments, revenue growth is expected to be in the
low single digits for fiscal 1999. The Company has engaged Warburg
Dillon Read LLC to explore strategic alternatives for the analytical
instruments business. Options to be explored include selling the
business, spinning it off as a separate company, or retaining it as
part of the Company. The Company expects to announce the conclusion
of this process by early 1999.
Adverse currency effects remain a concern for the Company because
approximately 53% of its revenues were derived from regions outside
the United States as of September 30, 1998. Recently, the U.S.
dollar has weakened, which should moderate the effects of currency
translation for fiscal 1999. If currency rates are maintained at
current levels, the negative effects of currency translation may
be eliminated by the third quarter of this fiscal year.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report, including the Outlook
section, are forward looking and are subject to a variety of risks
and uncertainties. These statements may be identified by the use of
forward looking words or phrases such as "believe," "expect,"
"anticipate," "should," "planned," "estimated," and "potential,"
among others. These forward looking statements are based upon the
Company's current expectations. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for such forward looking
statements. In order to comply with the terms of the safe harbor,
the Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from
the anticipated results or other expectations expressed in such
forward looking statements. The risks and uncertainties that may
affect the operations, performance, development, and results of the
Company's business include, but are not limited to:
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<PAGE>
Dependence on New Products and Rapid Technological Change. The
Company's products are based on complex technology which is subject
to rapid change as new technologies are developed and introduced in
the marketplace. The Company's future success will depend on its
ability to continually improve its current products and to develop
and introduce, on a timely and cost effective basis, new products
that address the evolving needs of its customers. In addition,
unanticipated difficulties or delays in replacing existing products
with new products could adversely affect the Company's future
operating results.
Substantial Competition. The Company expects substantial
competition in the future in its existing and planned products and
especially in its efforts to develop and introduce products in new
markets. New product announcements, pricing changes, strategic
alliances, and other actions by competitors could reduce the
Company's market share or render its products obsolete or non-
competitive.
Sales Dependent on Customers' Capital Spending Policies. The Company's
customers include pharmaceutical, environmental, research, and
chemical companies. Any decrease in capital spending or change in
spending policies of these companies could significantly reduce the
demand for its products.
Patents, Proprietary Technology, and Trade Secrets. The Company's
ability to compete may be affected by its ability to protect
proprietary technology and intellectual property rights, and to
obtain necessary licenses on commercially reasonable terms. Changes
in the interpretation of copyright or patent law could expand or
reduce the extent to which the Company and its competitors are able
to protect intellectual property or require changes in the designs
of products, which could have an adverse effect on the Company.
Government Sponsored Research Dependent on Funding. A substantial
portion of the Company's sales are to universities or research
laboratories whose funding is dependent on both the level and timing
of funding from government sources. The timing and amount of revenues
from these sources may vary significantly due to budgetary
pressures, particularly in the United States and Japan, that may
result in reduced allocations to government agencies that fund
research and development activities.
Dependence on Key Employees. The Company is highly dependent on the
principal members of its management and scientific staff. The Company
believes that its future success will depend in large part on its
ability to attract and retain highly skilled personnel.
Currency Exchange Risks; Other Risks of International Sales and
Operations. The Company's reported and anticipated operating results
and cash flows are subject to fluctuations due to material changes
in foreign currency exchange rates that are beyond the Company's
control. International sales and operations may also be adversely
affected by many factors, including the imposition of governmental
controls, export license requirements, restrictions on the export of
critical technology, political and economic instability, trade
restrictions, changes in tariffs and taxes, difficulties in staffing
and managing international operations, and general economic conditions.
Potential Difficulties in Implementing Business Strategy. The
Company's strategy to integrate and develop acquired businesses or
strategic investments involves a number of elements that management
may not be able to implement as expected. For example, it may
encounter operational difficulties in the integration of
manufacturing or other facilities, and it may not achieve advances
resulting from the integration of technologies as successfully or as
rapidly as anticipated, if at all.
-19-
<PAGE>
Year 2000. In fiscal 1997, the Company initiated a world-wide
program to assess the expected impact of the Year 2000 date
recognition problem on its existing computer systems, including
embedded and process-control systems, product offerings and
significant suppliers. If the Company is not successful in
implementing its Year 2000 compliance plan, or there are delays
in and/or increased costs associated with implementing those changes,
the Year 2000 problem could have a material adverse impact on the
Company's results of operations and financial condition. In
addition, the Company has not fully determined the likely impact of
third parties' compliance efforts on its interface systems and
business.
Other Risks. Other risks and uncertainties that may affect the
operations, performance, development, and results of the business
include the impact of earthquakes on the Company, because a
significant portion of the Company's life science operations are
located near major California earthquake faults.
Future Performance. Although the Company believes it has the
product offerings and resources needed for continuing success, the
Company cannot reliably predict future revenue and margin trends and
they may cause the Company to adjust its operations. Factors
external to the Company can result in volatility of the market prices
of the Company's common stock. Because of the foregoing factors,
recent trends should not be considered reliable indicators of future
stock prices or financial results.
-20-
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on October
15, 1998. At that meeting, the shareholders of the Company elected
all of the nominees for director and approved all other proposals
submitted by the Company to shareholders for approval at the
meeting, each as described in the Notice of Annual Meeting and Proxy
Statement dated September 9, 1998. The results of the voting of the
shareholders with respect to these matters is set forth below.
I. Election of Directors.
Total Vote
Total Vote Withheld
For Each From Each
Director Director
Joseph F. Abely, Jr. 44,891,625 193,331
Richard H. Ayers 44,909,950 175,006
Jean-Luc Belingard 44,912,337 172,619
Robert H. Hayes 44,899,565 185,391
Georges C. St.Laurent, Jr. 44,907,380 177,576
Carolyn W. Slayman 44,912,105 172,851
Orin R. Smith 44,909,222 175,734
Tony L. White 44,902,254 182,702
II. Ratification of the selection of PricewaterhouseCoopers LLP
as the Company's independent accountants for the fiscal year
ending June 30, 1999.
FOR AGAINST ABSTAIN NON-VOTE
44,961,620 32,101 91,234 0
III. Approval of amendments to the Company's 1996 Employee
Stock Purchase Plan.
FOR AGAINST ABSTAIN NON-VOTE
44,629,253 274,140 181,562 0
IV. Approval of the Company's 1998 Stock Incentive Plan.
FOR AGAINST ABSTAIN NON-VOTE
42,703,688 2,188,175 193,092 0
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<PAGE>
Item 5. Other Information.
At a meeting of the Board of Directors of the Company held
immediately following the Annual Meeting of Shareholders referred to
in Item 4, above, the Board of Directors elected the following
persons as officers of the Company:
Tony L. White Chairman, President and Chief Executive Officer
Noubar B. Afeyan Senior Vice President and Chief Business Officer
Manuel A. Baez Senior Vice President and President, Analytical
Instruments Division
Peter Barrett Vice President
Ugo D. DeBlasi Corporate Controller
Ronald Edelstein Vice President
Elaine J. Heron Vice President
Michael W. Hunkapiller Senior Vice President and President, PE
Biosystems Division
Thomas P. Livingston Assistant Secretary
Joseph E. Malandrakis Vice President
John S. Ostaszewski Treasurer
William B. Sawch Senior Vice President, General Counsel and
Secretary
Dennis L. Winger Senior Vice President and Chief Financial Officer
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K.
During the quarter ended September 30, 1998, the
Company filed a Current Report on Form 8-K dated and filed
July 10, 1998 to file under Item 7 thereof restated
Financial Data Schedules for the most recent three fiscal
years and interim periods of the most recent two fiscal
years in accordance with the provisions of Item 601 of
Regulation S-K.
The Company also filed a Current Report on Form 8-K
dated September 23, 1998 and filed on September 24, 1998 to
report under Item 5 thereof the issuance of a press release
in which the Company announced that, subject to shareholder
and final approval of the Company's Board of Directors, it
plans to distribute a new class of common stock intended to
track the separate performance of the Company's newly
created Celera Genomics business unit.
.
-22-
<PAGE>
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.
THE PERKIN-ELMER CORPORATION
By: /s/ Dennis L. Winger
Dennis L. Winger
Senior Vice President and Chief
Financial Officer
By: /s/ Ugo D. DeBlasi
Ugo D. DeBlasi
Corporate Controller (Chief
Accounting Officer)
Dated: November 16, 1998
-23-
<PAGE>
Exhibit No. Exhibit
27. Financial Data Schedule.
-24-
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND THE CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION AT SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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