<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended: MARCH 31, 1999
------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 0-16937
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SUMMIT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2897945
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21 Hickory Drive, Waltham, Massachusetts 02451
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(Address of principal executive offices) (Zip Code)
(781) 890-1234
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock and Common Share Purchase Rights
---------------------------------------------
(Title of Class)
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.
[X] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
On May 10, 1999, 42,381,200 shares of common stock, par value $0.01 per share
were outstanding.
<PAGE> 2
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS; UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,113 $ 31,314
Short-term investments 30,474 33,295
Receivables, net of allowances 13,127 12,764
Inventories 15,644 17,403
Other current assets 6,555 5,965
-------------------------
Total current assets 105,913 100,741
Long-term investments 40,025 25,253
Property and equipment, net 8,574 8,802
Patents and other intangibles, net 7,485 7,497
Other assets 2,823 2,632
- -------------------------------------------------------------------------------------------
TOTAL ASSETS $164,820 $144,925
===========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,466 $ 4,132
Accrued expenses 6,097 5,081
Current maturities of long-term debt 5,173 6,431
Deferred revenue 5,529 6,144
-------------------------
Total current liabilities 20,265 21,788
Deferred revenue - noncurrent 4,004 3,653
Long-term debt, less current maturities 111 150
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Total liabilities 24,380 25,591
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Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. Authorized
5,000,000 shares; none issued -- --
Common stock, $.01 par value. Authorized 60,000,000
shares; issued 31,352,641 shares in 1999
and 31,322,880 in 1998; outstanding 31,187,926
in 1999 and 31,153,765 in 1998 314 314
Additional paid-in capital 149,534 149,482
Accumulated deficit (17,833) (20,219)
Accumulated other comprehensive income (loss) 9,233 (9,411)
Treasury stock, at cost, 164,715 shares
in 1999 and 169,115 shares in 1998 (808) (832)
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Total stockholders' equity 140,440 119,334
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $164,820 $144,925
===========================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
(as restated)
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<S> <C> <C>
Revenues:
Systems $ 3,335 $ 3,288
License fees, service and other 10,185 6,835
Contact lens and related products 12,164 11,917
----------------------
Total revenues 25,684 22,040
----------------------
Cost of revenues:
Systems 3,300 2,865
License fees, service and other 2,717 2,794
Contact lens and related products 7,361 7,649
----------------------
Total cost of revenues 13,378 13,308
----------------------
Gross profit 12,306 8,732
----------------------
Operating expenses:
Selling, general and administrative 8,625 7,175
Research, development and regulatory 2,086 1,838
----------------------
Total operating expenses 10,711 9,013
----------------------
Operating income (loss) 1,595 (281)
Interest income 1,086 928
Interest expense (114) (240)
Other income (expense) (116) (6)
----------------------
Income before provision for income taxes 2,451 401
Provision for income taxes 65 24
----------------------
Income before cumulative effect of
accounting principle change 2,386 377
Cumulative effect of accounting principle
change, net of tax -- (10,103)
- --------------------------------------------------------------------------------
Net income (loss) $ 2,386 $ (9,726)
================================================================================
Basic and diluted earnings per share:
Income before cumulative effect of
accounting principle change $ 0.08 $ 0.01
Cumulative effect of accounting principle
change, net of tax -- (0.32)
----------------------
Net income (loss) $ 0.08 $ (0.31)
- --------------------------------------------------------------------------------
Weighted average number of common shares:
Basic 31,165 31,082
Effect of dilutive options outstanding 293 --
----------------------
Diluted 31,458 31,082
================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
(as restated)
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ 2,386 $(9,726)
Net unrealized gain on investments, net of tax 18,644 4,702
- --------------------------------------------------------------------------------
Comprehensive income (loss) $ 21,030 $(5,024)
================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
(as restated)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,386 $ (9,726)
Cumulative effect of accounting principle change -- 10,103
Other non-cash items 24 --
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 1,126 837
Provision for losses on accounts receivables 13 55
Changes in operating assets and liabilities:
Receivables (376) (2,113)
Inventories 1,759 745
Other current assets (280) (550)
Accounts payable (666) (1,256)
Accrued expenses 1,016 (125)
Deferred revenue (264) (670)
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Net cash provided (used) by operating activities 4,738 (2,700)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (754) (15,399)
Purchases of long-term investments (1,797) (9,295)
Maturities of short-term investments 3,575 12,233
Maturities of long-term investments 5,669 1,403
Sales of short-term investments -- 983
Additions to property and equipment (583) (943)
Purchase of intangibles (303) --
Decrease in restricted cash -- 1,264
Loan to Autonomous and deferred acquisition costs (352) --
Note receivable and other (149) --
- ------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 5,306 (9,754)
- ------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (1,250) (2,500)
Payments of capital lease obligations (47) (38)
Proceeds from exercise of stock options 52 --
Proceeds from other shares issued -- 3
Purchases of treasury stock -- (1,360)
- ------------------------------------------------------------------------------------------------
Net cash used by financing activities (1,245) (3,895)
- ------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 8,799 (16,349)
Cash and cash equivalents at beginning of period 31,314 33,720
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 40,113 $ 17,371
==============================================================================================
Supplemental cash flow information:
Interest paid $ 96 $ 336
Income taxes paid $ 35 $ 24
==============================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS; UNAUDITED)
1. NATURE OF BUSINESS
The operations of Summit Technology, Inc. and subsidiaries (the
"Company")presently consist of two operating segments: (i) laser vision
correction which includes manufacturing, selling and servicing laser systems and
related products to correct vision disorders and collecting per procedure
license fees from users of its systems and (ii) contact lenses and related
products which are sold via mail order through its wholly-owned subsidiary, Lens
Express, Inc. ("Lens").
On April 29, 1999, the Company completed its acquisition of Orlando, FL-based
Autonomous Technologies Corporation ("Autonomous") for approximately 11.2
million shares of the Company's common stock and $46.8 million in cash. The
Company had entered into a definitive merger agreement with Autonomous to
acquire all of Autonomous' outstanding shares in October 1998. As part of the
agreement, the Company provided Autonomous an $8.0 million revolving line of
credit under which Autonomous could borrow up to $1.5 million in any calendar
month. One half of the amount outstanding under the revolver on the closing date
of the transaction reduced the cash consideration paid by the Company. As of
March 31, 1999, other current assets include $4,184 of costs related to this
acquisition, of which $3,000 represents borrowings by Autonomous under the
revolver and $1,184 represents deferred costs incurred in connection with this
acquisition.
The Company is continuing to evaluate its operations and strategies, which may
result in the acquisition by the Company of one or more additional businesses,
or additional dispositions of all or part of one or more of the Company's
businesses.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying condensed consolidated financial
statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of the
Company, these condensed consolidated financial statements contain all
adjustments (consisting of only normal, recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations,
comprehensive income (loss) and cash flows of the Company for the interim
periods.
The accompanying consolidated financial statements and related notes should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. The results of operations for the three months ended
March 31, 1999 are not necessarily indicative of the results to be expected for
the full year.
Earnings Per Share: Basic earnings per share amounts are based on the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share amounts include the effect of all potential common shares, if
dilutive, that were outstanding during the period.
Reclassifications: Certain prior period information has been reclassified to
conform with current period presentation of data.
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3. INVENTORIES
Inventories consist of the following:
March 31, December 31,
(in thousands) 1999 1998
-------------------------------------------------------------------
Raw materials and subassemblies $ 5,634 $ 5,599
Work in process 1,239 1,244
Finished goods 8,771 10,560
-------------------------------------------------------------------
Total $15,644 $17,403
===================================================================
4. CONTINGENCIES
Contingencies
The Company is a party to various litigation matters as described below. The
Company believes that the allegations in all of the complaints against it in the
actions described herein are without merit, and it intends to defend the actions
vigorously. There can be no assurance that the Company will not be served with
additional complaints of a similar nature in the future, that the Company will
ultimately prevail in the pending or any possible additional actions, or that
the actions, individually or in the aggregate, will not have a material adverse
effect on the Company's financial position, results of operations, or cash
flows. No provision for any loss that may result upon resolution of these
matters has been made in the accompanying consolidated financial statements.
Pillar Point Partners Antitrust and Patent Litigation. Pillar Point Partners,
the Company, VISX and certain affiliates of the Company and VISX are presently
involved in a series of patent and antitrust lawsuits which have been
administratively consolidated for pretrial purposes in the United States
District Court for the District of Arizona by the Federal Judicial Panel on
Multidistrict Litigation ("MDL Panel"). These cases are presently pending as IN
RE: PILLAR POINT PARTNERS ANTITRUST AND PATENT LITIGATION (CIVIL ACTION NO. MDL
1202) and are described below.
Patent Litigation. Pillar Point Partners commenced patent infringement
litigation against certain ophthalmologists believed to have used or be using
homemade laser systems not licensed under patents held by Pillar Point Partners,
as well as one alleged manufacturer of such laser systems. These actions were
originally pending as PILLAR POINT PARTNERS, et al. v. DAVID DULANEY, et al.
(U.S. DISTRICT COURT, DISTRICT OF ARIZONA, CIVIL ACTION NO. 96-2051PHXPGR),
PILLAR POINT PARTNERS, et al. v. JON G. DISHLER, et al. (U.S. DISTRICT COURT,
DISTRICT OF COLORADO, CIVIL ACTION NO. 96-N-2351), and PILLAR POINT PARTNERS, et
al. v. JUI-TENG LIN, et al. (U.S. DISTRICT COURT, MIDDLE DISTRICT OF FLORIDA,
CIVIL ACTION NO. 97-54-CV-ORL-22). The Dulaney action was subsequently settled.
The defendant in the Dishler action has asserted counterclaims seeking
declarations that the patents in suit are invalid and unenforceable and has also
raised antitrust counterclaims.
Federal Antitrust Litigation. In June, 1996, a Texas ophthalmologist, Robert G.
Burlingame, sued Pillar Point, VISX, the Company and certain affiliates of VISX
and the Company in the Federal District Court for the Northern District of
California alleging that the defendants have violated and are violating federal
and state antitrust laws and alleging fraud in connection with certain of the
Company's sales and marketing activities.
The plaintiff seeks, among other things, antitrust damages of at least $30 plus
$2 to $3 per month until the date of judgment, trebling of those damages,
compensatory and punitive damages on the fraud claim against the Company of at
least $500 plus $2 to $3 per month until the date of judgment, attorney's fees,
and a permanent injunction against
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future violations. On September 5, 1996, a Nevada ophthalmologist, John R.
Shepherd, through his professional corporation, commenced a similar lawsuit
against the same parties, in the same court, alleging substantially similar
antitrust claims and seeking substantially similar relief, including damages
before trebling of at least $125 plus $12 per month until the date of judgment.
Plaintiff's counsel in the Shepherd case has indicated that he intends to seek
certification of the case as a class action.
On November 5, 1997, Antoine Garabet, M.D., Inc. and Abraham Shammas, M.D.,
Inc., d/b/a Laser Eye Center, sued Pillar Point, VISX, the Company and certain
affiliates of VISX and the Company in the Federal District Court for the
Northern District of California seeking a declaratory judgment that the patents
held by Pillar Point are invalid and unenforceable on account of alleged
antitrust violations and alleging fraud in connection with certain of the
Company's sales and marketing activities. The plaintiffs seek, among other
compensatory damages on the fraud claim against the Company of at least $49,
disgorgement of revenues and profits, punitive damages of an unspecified amount,
injunctions against enforcement of the Pillar Point patents and against alleged
continuing violations of the antitrust laws, attorneys' fees and costs. The
Company has withdrawn its motion to dismiss and has filed a counterclaim for
patent infringement against the plaintiffs and Antoine Garabet and Abraham
Shammas, individually. On April 29, 1999, Antoine L. Garabet, M.D., Inc. and
Abraham V. Shammas, M.D., Inc., both doing business as the Laser Eye Center,
filed suit in the United States District Court for the Central District of
California against the Company and Autonomous Technologies Corporation. The suit
alleges violations of Section 7 of the Clayton Act, 15 U.S.C. ss. 18, Section 1
of the Sherman Act, and California unfair competition law, among other things,
in connection with the Company's acquisition of Autonomous. The complaint seeks,
among other things, unspecified treble damages, a permanent injunction barring
consummation of the Company's acquisition of Autonomous, divestiture in the
event that the acquisition is consummated, restitutionary relief, including
disgorgement of alleged unlawful profits and the imposition of a constructive
trust over alleged ill gotten gains, and attorneys' fees and costs. Plaintiffs
also have threatened to seek a temporary restraining order, preliminary
injunction, and other unspecified preliminary injunctive relief directed at the
acquisition.
In May, 1998, The Eye Professionals, P.A. of Millville, New Jersey commenced an
action in the Federal District Court for the District of New Jersey against the
Company and VISX. The case purports to be a class action on behalf of all
individuals or entities that have paid a per-procedure fee directly to either
defendant for use of a Summit or VISX laser to perform laser vision correction
surgery. The complaint alleges, inter alia, price-fixing in violation of Section
1 of the Sherman Act. The action seeks, inter alia, treble damages, costs of
suit, attorneys' fees, and various forms of declaratory and injunctive relief.
Similar actions were also filed in May, 1998 by Metropolitan Eye Center and
Outpatient Surgical Facility, Inc. in the U.S. District Court for the Northern
District of California against the Company, VISX, Summit Partner, Inc., and VISX
Partner, Inc., and by New England Laser Vision, Inc. in the U.S. District Court
for the District of New Jersey against the Company and VISX. In August, 1998,
David R. Shapiro, M.D., filed another similar purported class action against the
Company and VISX in the United States District Court for the District of
Arizona. Plaintiffs in each of these cases have agreed to consolidation of the
four purported class actions and filed and served a single consolidated amended
complaint. It purports to be a class action on behalf of all persons and
entities (excluding governmental entities, defendants, subsidiaries and
affiliates of defendants) in the United States who paid a per-procedure royalty
to any defendant or any alleged co-conspirator or any subsidiary or affiliate
thereof, at any time after September 1995. The Consolidated Amended Complaint
seeks, among other things, unspecified treble damages on behalf of plaintiffs
and the alleged class, along with attorneys' fees, costs, and injunctive and
declaratory relief.
In September, 1998, Laser Eye Center of Texas, L.L.P. and Warren D. Cross, M.D.,
filed a purported class action against the Company, Summit Partner, Inc., VISX,
VISX, Partner, Inc., and Pillar Point Partners in the U.S. District Court for
the Southern District of Texas. The suit purports to be a class action on behalf
of all persons and entities who have paid money to defendants, or any of their
subsidiaries, on a per procedure basis for the ability to use defendants' laser
equipment or technology to perform laser vision
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<PAGE> 9
correction surgery. Plaintiffs allege, among other things, violations of
Sections 1 and 2 of the Sherman Act. They seek, among other things, treble
damages on behalf of the alleged class, costs of suit, including attorneys'
fees, and declaratory and injunctive relief. This case has now been transferred
to the District of Arizona.
Carolina Eye Associates, P.A. and Carolina-South Eye Associates filed suit
against VISX and the Company in the U.S. District Court for the District of New
Jersey on February 4, 1999. This action, like the consolidated federal actions
described above. purports to be a class action on behalf of all persons and
entities (excluding governmental entities, defendants, subsidiaries and
affiliates of defendants) in the United States who paid a per-procedure royalty
to any defendant or any alleged co-conspirator or any subsidiary or affiliate
thereof, at any time after September, 1995. The complaint alleges, among other
things, price-fixing in violation of Section 1 of the Sherman Act and seeks,
among other things, compensatory damages of at least $100,000 plus $8,300 per
month from the filing of the complaint until the date of judgment, trebling of
those damages, attorneys' fees, costs, and declaratory and injunctive relief.
The Judicial Panel on Multidistrict Litigation has transferred this case to
Federal District Court in Arizona.
In late March, 1998, Janice Camp of Atlanta, Georgia commenced an action in
Federal District Court for the District of Massachusetts against the Company and
VISX. As amended in April, 1998, the complaint adds as a named plaintiff Jon
Singer of Congers, New York. The case has been transferred to Federal District
Court for the District of Arizona for consolidated pretrial proceedings. The
case purports to be a class action on behalf of all similarly situated
individuals who have undergone laser vision correction surgery. The complaint
alleges, inter alia, price-fixing, monopolization, conspiracy to monopolize,
violations of the Clayton Act, violations of the RICO Act, and violations of
state consumer protection statutes. The action seeks, inter alia, treble
damages, punitive or exemplary damages, costs of suit, attorneys' fees, and
various forms of equitable relief, including disgorgement of ill-gotten gains
and restitution. In response to defendants' motion to dismiss, plaintiffs have
abandoned their federal antitrust claims. A Magistrate Judge has recommended
that defendants' motion to dismiss the RICO and state law claims be granted.
Consolidated California State Litigation. Beginning in late March, 1998, a
number of actions brought by individuals under the Cartwright Act and California
unfair competition laws were commenced against the Company, VISX, and related
defendants in Superior Court of Santa Clara County. In May, 1998, these actions
were consolidated as IN RE PRK/LASIK CONSUMER LITIGATION. In June, 1998,
plaintiffs B.J. Snyder, Donna McMahan, Paula Mobsby, Helen Thomas, Carmen
Ocariz, Martin Hermans, Ken Bartlett, Jackie Kirk, Grace Geniusz, Jocelyn
Joseph, Andrew Stoddard, and Cynthia Brubecker filed an Amended Consolidated
Master Complaint for Damages ("Amended Complaint") in this matter against the
Company, Summit Partner, Inc., VISX, and VISX Partner, Inc. The Amended
Complaint purports to be filed on behalf of a nationwide class of persons who
have undergone excimer laser surgery with a laser manufactured by the Company or
VISX. The Amended Complaint seeks, inter alia, unspecified compensatory damages,
restitution and/or disgorgement of alleged ill-gotten gains, prejudgment and
postjudgment interest, costs of suit, and attorneys' fees, as well as various
forms of declaratory and injunctive relief, including an order permitting any
person or entity with which the Company or VISX or both have entered into any
agreement since June 3, 1992, for the purchase, license, or use of any of the
Pillar Point Patents to withdraw from such agreement without penalty or
obligation. The Company and Summit Partner, Inc. have filed an answer denying
generally the allegations of the Amended Complaint in this litigation. James
Ballard filed a similar suit against the Company, Summit Partner, Inc., VISX,
VISX Partner, Inc., Pillar Point Partners, and other individual defendants in
Superior Court of San Diego County. This suit has been transferred to Santa
Clara County and consolidated as part of IN RE PRK/LASIK CONSUMER LITIGATION.
The parties have stipulated to the conditional certification of a class of
natural persons in California, Alabama, Arizona, the District of Columbia,
Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New Mexico, New York,
North Carolina, North Dakota, South Dakota, Tennessee, West Virginia, and
Wisconsin who have undergone ophthalmic refractive surgery with an excimer laser
manufactured by the Company or VISX.
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Other Antitrust and Patent Cases. In April, 1998, Penny Marks, an individual who
allegedly has had laser vision correction surgery performed, commenced an action
in Florida state court against the Company and VISX. The case purports to be a
class action on behalf of all individuals similarly situated in the State of
Florida. The complaint alleges various violations of the Florida Deceptive Trade
and Unfair Practices Act. The complaint seeks unspecified damages, costs,
expenses, and attorneys' fees, as well as declaratory and injunctive relief.
Plaintiff has filed a motion seeking class certification.
In June, 1998, Barbara Worcester, an individual who allegedly has had laser
vision correction surgery performed, filed an action in Wisconsin state court
against the Company, Summit Partner, Inc., VISX, VISX Partner, Inc., and Pillar
Point Partners. The case purports to be a class action on behalf of all
Wisconsin purchasers of refractive laser surgery procedures. The complaint
alleges violations of Chapter 133 of the Wisconsin Statutes. The complaint seeks
unspecified treble damages, attorneys' fees and costs, and declaratory and
injunctive relief. Defendants removed this action to federal court, and it has
been transferred to the District of Arizona. Plaintiff has filed a motion
seeking class certification. In January, 1999, Karen Frankson, Virginia Harmes,
and Beth Luetschwager, three individuals who allegedly have had laser vision
correction surgery performed, filed a similar purported class action in
Wisconsin state court. Defendants removed this action to Federal District Court
in Wisconsin, and it has been transferred to Federal District Court in Arizona.
In May, 1999, Linda Brisson, an individual who allegedly has had laser vision
correction surgery performed, commenced an action in Minnesota state court
against the Company, VISX, Pillar Point Partners, and related defendants. The
case purports to be a class action on behalf of all Minnesota purchasers of
refractive laser surgery procedures. The complaint alleges, among other things,
violations of Minnesota antitrust law. The complaint seeks, among other things,
compensatory damages alleged to be at least in the millions of dollars, trebling
of those damages, attorneys' fees and costs, and injunctive and other relief.
Also in May, 1999, John Castino, an individual who allegedly has had laser
vision correction surgery performed, commenced an action in Minnesota state
court against the Company and VISX. The case purports to be a class action under
various state antitrust laws on behalf of a purported class of all residents of
Alabama, the District of Columbia, Hawaii, Kansas, Maine, Michigan, Minnesota,
Mississippi, New Mexico, North Carolina, North Dakota, South Dakota, Tennessee,
and Wisconsin who have paid for laser vision correction surgery. The complaint
seeks, among other things, unspecified actual and multiple damages, attorneys'
fees and costs, and injunctive and other relief.
On December 28, 1998, Summit filed a patent infringement lawsuit in the United
States District Court for the District of Massachusetts against Nidek, whose
laser system recently received FDA approval. The suit alleges that Nidek's
excimer laser system infringes certain of the Company's U.S. patents and seeks
damages and injunctive relief. On January 29, 1999, a district court in Tokyo,
Japan ruled against the Company in a patent infringement lawsuit which the
Company initiated against Nidek in 1996. The Japanese lawsuit involved the
Japanese counterpart of one of the two U.S. patents which the Company has
alleged Nidek infringes in the U.S. lawsuit. The Company intends to appeal the
Tokyo district court decision.
Seriani Litigation. On October 26, 1992, Joseph Seriani brought suit against
Lens and certain of its former shareholders in the Florida Circuit Court. The
suit alleged violations of the Florida Civil Remedies for Criminal Practices
Act- - - the Florida civil RICO statute -- based on events which allegedly
occurred in the mid-1980s. Seriani's claims against Lens were dismissed several
times for failure to state a viable claim, but in each instance with leave to
amend and refile. On May 15, 1996, the date of the Company's acquisition of
Lens, Seriani and his wife Rhonda Seriani filed an amended complaint which
included the Company as an additional defendant. On November 25, 1996, the
Serianis voluntarily dismissed their action against the Company and on March 7,
1997 voluntarily dismissed their action against the remaining defendants, in
each case without prejudice. On March 24, 1997, the Serianis commenced a new
lawsuit against Lens and
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others in the United States District Court for the Southern District of
Illinois, alleging substantially similar claims. The Company believes that the
Serianis' suits against the Company and Lens are and were without merit.
Shareholder Actions. Between August, 1996 and February, 1997 various shareholder
actions were commenced against the Company and certain of its officers in the
United States District Court for the District of Massachusetts (the "District of
Massachusetts") claiming, among other things, violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 arising out of public statements
made by defendants. The actions were consolidated, by order of the Court entered
December 2, 1996, as IN RE SUMMIT TECHNOLOGY SECURITIES LITIGATION, Civil Action
No. 96-11589-JCT (the "Securities Litigation"). Plaintiffs seek certification of
the action as a class action on behalf of all purchasers of the Company's common
stock, other than defendants and certain affiliated persons and entities,
between March 31, 1995 and July 3, 1996. They seek unspecified damages,
interest, costs and expenses.
On October 1, 1996 an additional action was commenced in the District of
Massachusetts against the Company, its directors, certain of its officers and
the four underwriters of the Company's October, 1995 Common Stock offering
claiming violations of Sections 11, 12(2) and 15 of the Securities Act of 1933
arising out of alleged material misstatements of fact in the Registration
Statement issued in connection with the offering. The action was coordinated
with the Securities Litigation by order of the Court dated December 2, 1996. It
also seeks unspecified damages, interest, costs and expenses.
On December 20, 1996, a shareholder of the Company filed in the District of
Massachusetts a derivative action, purportedly on behalf of the Company, against
the Company as nominal defendant, its directors and certain of its present or
former officers. This action was consolidated with the Securities Litigation by
order of the Court entered July 22, 1997. The complaint alleges that the conduct
of the individual defendants has exposed the Company to the expense and
inconvenience of defending the Securities Litigation and has harmed the
Company's reputation, thereby limiting its access to capital markets. It also
alleges that the individual defendants improperly traded in the Company's Common
Stock based upon material non-public information.
5. Business Segments
The Company is internally organized and operates in two operating segments:
laser vision correction and contact lens and related products. The Company's
laser vision correction business consists of manufacturing, selling and
servicing laser systems and related products to correct vision disorders and
collecting per procedure license fees from users of its systems. The Company's
mail order contact lens business operates under its wholly-owned subsidiary,
Lens. Lens is primarily a retailer and wholesaler of contact lens and related
products.
The category "Other" includes the Company's investments, interest income,
interest expense and other non-operating income (expense).
<TABLE>
<CAPTION>
Laser vision Contact lens and
correction related products Other Total
------------- ---------------- ------- ---------
<S> <C> <C> <C> <C>
Revenues:
Three Months Ended March 31, 1999 $ 13,520 $ 12,164 $ - $ 25,684
Three Months Ended March 31, 1998 (as restated) 10,123 11,917 - 22,040
Income (loss) from continuing operations
before provision for income taxes:
Three Months Ended March 31, 1999 $ 678 $ 917 $ 856 $ 2,451
Three Months Ended March 31, 1998 (as restated) (1,583) 1,302 682 401
Total assets:
March 31, 1999 $ 48,831 $ 11,280 $104,709 $ 164,820
December 31, 1998 47,744 10,048 87,133 144,925
</TABLE>
-11-
<PAGE> 12
6. Restatement
During the fourth quarter of 1998, the Company changed its method of accounting
for membership fee revenues which were previously recognized when received.
Under the new accounting method, the Company recognizes membership fee revenues
ratably over the term of the membership, which is one to five years. Adoption of
the new method resulted in a one-time charge of $10,103, or $.32 per basic and
diluted share, representing the cumulative effect of adopting the new accounting
principle as of January 1, 1998. The Company has restated the first three
quarters of 1998 in accordance with SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements".
-12-
<PAGE> 13
PART I: FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The operations of Summit Technology, Inc. and subsidiaries (the "Company")
presently consist of two operating segments: (i) laser vision correction which
includes manufacturing, selling and servicing laser systems and related products
to correct vision disorders and collecting per procedure license fees from users
of its systems and (ii) contact lenses and related products which are sold via
mail order through its wholly-owned subsidiary, Lens Express, Inc. ("Lens").
On April 29, 1999, the Company completed its acquisition of Orlando, FL-based
Autonomous Technologies Corporation ("Autonomous") for approximately 11.2
million shares of the Company's common stock and $46.8 million in cash. The
Company had entered into a definitive merger agreement with Autonomous to
acquire all of Autonomous' outstanding shares in October 1998. As part of the
agreement, the Company provided Autonomous an $8.0 million revolving line of
credit under which Autonomous could borrow up to $1.5 million in any calendar
month. One half of the amount outstanding under the revolver on the closing date
of the transaction reduced the cash consideration paid by the Company. As of
March 31, 1999, other current assets include $4.2 million of costs related to
this acquisition, of which $3.0 million represents borrowings by Autonomous
under the revolver and $1.2 million represents deferred costs incurred in
connection with this acquisition.
The Company is continuing to evaluate its operations and strategies, which may
result in the acquisition by the Company of one or more additional businesses,
or additional dispositions of all or part of one or more of the Company's
businesses.
FIRST QUARTER RESULTS OF OPERATIONS
Revenues: Revenues for the three months ended March 31, 1999 increased 17% to
$25.7 million from $22.0 million for the three months ended March 31, 1998.
Revenues from the Company's laser vision correction business were $13.5 million
in the first quarter of 1999 compared to $10.1 million in the first quarter of
1998, a 34% increase. This increase was primarily related to a substantial
increase in license fee revenues. In the first quarter of 1999, the number of
procedures in the U.S. performed on the Company's laser systems increased 31%
over the fourth quarter of 1998 and 81% over the first quarter of 1998. Revenues
from system sales, which include new placements as well as upgrades of laser
systems, increased 1% in the first quarter of 1999 compared to the first quarter
of 1998. System sales in the first quarter of 1999 also include revenues from
the Company's microkeratome product line, which was acquired in the fourth
quarter of 1998. In the first quarter of 1999, revenues from contact lens and
related products increased 2% to $12.2 million from $11.9 million in the same
period a year ago.
Cost of Revenues: Cost of revenues as a percentage of revenues decreased to 52%
in the first quarter of 1999 from 60% in the first quarter of 1998. This
decrease was primarily attributable to the favorable impact from lower cost of
revenues associated with license fee revenues and contact lens and related
products. Cost of system revenues as a percentage of its revenue was 99% and 87%
in the first quarter of 1999 and 1998, respectively. In the first quarter of
1999, cost of system revenues was negatively affected by unabsorbed
manufacturing costs.
-13-
<PAGE> 14
Operating Expenses: Selling, general and administrative expenses in the first
quarter of 1999 were $8.6 million compared to $7.2 million in the first quarter
of 1998, a 20% increase. Selling, general and administrative expenses as a
percentage of revenues were 34% and 33% in the first quarter of 1999 and 1998,
respectively. The Company has continued to incur significant expenditures in
sales and marketing in order to grow laser vision correction procedure volume,
which included increased promotions and development of product marketing
materials for users of the Company's lasers.
Research, development and regulatory expenses in the first quarter of 1999
increased to $2.1 million from $1.8 million in the same period a year ago,
primarily as a result of increased spending on the Company's regulatory efforts
to obtain additional FDA approvals for the use of the Apex Plus to treat a wider
range of common refractive vision disorders.
Other Income (Expense): Interest income in the first quarter of 1999 increased
slightly to $1.1 million in the first quarter of 1999 from $.9 million in the
first quarter of 1998, primarily due to higher average balances of cash and cash
equivalent balances and short and long-term investments. Interest expense
decreased to $.1 million in the first quarter of 1999 from $.2 million in the
first quarter of 1998 as a result of lower borrowings.
Net Income: Income before the cumulative effect of accounting change was $2.4
million, or $0.08 per basic and diluted share, in the first quarter of 1999
compared to $.4 million, or $0.01 per basic and diluted share, in the first
quarter of 1998. Net income in the first quarter of 1999 was $2.4 million, or
$0.08 per basic and diluted share, compared to a net loss of $9.7 million, or
$0.31 per basic and diluted share in the first quarter of 1998. The 1998 first
quarter results include a one-time non-cash charge of $10.1 million, or $0.32
per basic and diluted share, representing the cumulative effect of adopting a
new accounting principle as of January 1, 1998. Under the new accounting method,
the Company recognizes membership fee revenues ratably over the term of the
membership, which is one to five years. Customers of Lens pay membership fees,
which entitle members to purchase contact lens, and related products at member
prices. The Company believes that this method is preferable because it spreads
revenue over the period that benefits are provided to members.
Income Taxes: The effective tax rate for the first quarter of 1999 was 3%
compared to 6% for the first quarter of 1998. The income tax provision for the
first quarter of 1999 was determined using an estimated annual effective tax
rate for the full year, which will include the operating results of Autonomous.
The income tax provision for the first quarter of 1998 reflects the usage of net
operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements have been met through external debt and
equity financing. As of March 31, 1999, the Company's cash and cash equivalent
balances and short and long-term investments increased to $110.6 million from
$89.9 million as of December 31, 1998. Shares of LCA common stock included in
long-term investments as of March 31, 1999 and December 31, 1998 were valued at
$28.4 million and $9.8 million, respectively. Working capital increased to $85.6
million as of March 31, 1999 from $79.0 million as of December 31, 1998. In the
first quarter of 1999, net cash provided by operating activities was $4.7
million compared to net cash used by operating activities of $2.7 million in the
first quarter of 1998. Net income before depreciation and amortization and
cumulative effect of accounting principle change was $3.5 million and $1.2
million in the first quarter of 1999 and 1998, respectively.
-14-
<PAGE> 15
In the first quarter of 1999, net cash provided by investing activities of $5.3
million resulted primarily from a net decrease in short and long-term
investments of $6.7 million offset by capital expenditures of $.6 million,
deferred acquisition costs of $.4 million, purchase of intangibles of $.3
million and issuance of a note for $.1 million. In the first quarter of 1998,
net cash used by investing activities of $9.8 million resulted primarily from an
increase in short and long-term investments of $10.1 million and capital
expenditures of $.9 million offset by a decrease in restricted cash of $1.3
million.
In the first quarter of 1999, net cash used by financing activities of $1.2
million was primarily attributable to repayments of long-term debt of $1.3
million. In the first quarter of 1998, net cash used by financing activities of
$3.9 million included repayments of long-term debt of $2.5 million and
repurchases of 250,000 shares of the Company's common stock for $1.4 million.
In 1996, the Company entered into a loan agreement consisting of a $20.0 million
unsecured revolving credit facility ("facility") and a $20.0 million unsecured
term loan ("term loan"). The $20.0 million facility expired in March 1999 and
there were no borrowings under the facility. The term loan requires quarterly
principal payments of $1.3 million and monthly interest payments calculated at
prime rate.
The acquisition of Autonomous placed the Company in technical default of a loan
agreement covenant. This default permits the lenders to accelerate payment of
the remaining balance of the term loan. The outstanding balance of the term loan
of $5.0 million as of March 31, 1999 has been included in current maturities of
long-term debt. The interest rate of the term loan at March 31, 1999 was 7.75%.
The Company believes that the Autonomous acquisition will place a significant
strain on the Company's liquidity. The cash consideration paid to Autonomous
stockholders on April 29, 1999 of $46.8 million represented approximately 73% of
the Company's cash and cash equivalent balances and short and long-term
investments excluding the value of LCA common stock and net of the term loan at
March 31, 1999. The Company is currently negotiating with its existing and other
institutions for a new line of credit of approximately $20 million to $25
million. The Company is currently evaluating its options regarding debt and
borrowing capacity. The Company believes that its existing corporate resources
are adequate for at least the next twelve months to meet working capital needs
and to fund corporate requirements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, in the normal course of doing business, is exposed to the risks
associated with fluctuations in the market value of its available-for-sale
investment securities, changes in foreign currency exchange rates and changes in
interest rates. The Company's market risk sensitive instruments are entered into
for other than trading purposes.
The Company's available-for-sale investment securities consist of debt
securities, primarily corporate bonds and mortgage-backed securities, and 7.2
million shares of LCA common stock. The fair value of these investment
securities at March 31, 1999 was $70.5 million, which included $42.1 million of
debt securities and $28.4 million of LCA common stock with a corresponding
accumulated unrealized gain of $9.2 million. Substantially all of the unrealized
gain relates to the LCA common stock, which is subject to much more market risk
than the Company's debt securities and which has been more volatile than most
market indices. A 10 percent change in the quoted market price of one share of
LCA common stock would have an impact of approximately $1 million on the fair
value of the Company's investment in LCA common stock. This impact would be
recognized in the Company's statement of comprehensive income. At March 31,
1999, the Company's debt securities consist of highly rated debt instruments.
The Company's investment goal surrounding debt securities is to meet liquidity
needs and to preserve the principal.
-15-
<PAGE> 16
The functional currency of the Company's foreign operations is the U.S. dollar.
The Company enters into forward exchange contracts to reduce exposure to
exchange rate risk associated with transactions in the ordinary course of
business, primarily payments to vendors and employees in foreign currency. The
forward exchange contracts establish a specific exchange rate at which the
Company will sell U.S. dollars at a future date and have maturities not
exceeding twelve months. Exchange gains or losses on forward exchange contracts
are recognized in other income (expense) when the contracts are settled. In the
first quarter of 1999, the Company recorded a loss of $45,000 for outstanding
forward exchange contract at March 31, 1999 that did not hedge firm commitments
to third parties. Outstanding forward exchange contracts at March 31, 1999 had a
notional value of $2.3 million. A 10% change in the currency exchange rates
associated with these contracts would have a $.2 million impact on the Company's
operating results.
The Company has a variable rate term loan with an unpaid principal balance of
$5.0 million at March 31, 1999. The term loan requires quarterly principal
payments of $1.3 million and monthly interest payments calculated at prime rate.
A one-percentage point change in the prime rate would impact interest expense in
1999 by approximately $19,000.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. Under SFAS No. 133, companies will be required to recognize
derivative instruments on the balance sheet at their fair value and report
corresponding gains or losses either in the statement of operations or as a
component of comprehensive income, depending on the type of hedging relationship
that exists. The Company has not completed its assessment of the consolidated
financial statement impact of adopting the new standard.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue is the result of computer programs that are not able to
differentiate between the year 1900 and the year 2000 because they were written
using two digits instead of four digits to define the applicable year.
Internal Operation: A review of the Company's internal computer systems and
software packages has been performed to identify the systems and software that
could be affected by this issue. Discovery of these systems and software is done
through surveys and research of third party suppliers and manufacturers. The
Company will also be performing independent testing through the use of testing
applications and scripting to simulate and test for Year 2000 related issues.
Those hardware devices, which include, but are not limited to, desktops,
laptops, file servers, LAN and WAN hardware, PBX and voicemail, found not to be
compliant have been or will be either replaced or upgraded to meet compliance.
The Company currently believes that by either upgrading its software packages to
currently available versions or replacing them, the Year 2000 problem will not
pose a significant operational problem to the Company. These software packages
include, but not limited to, financials, manufacturing, payroll, customer
service, email and local area network operating system. A survey of vendors
providing electronic information will be conducted and addressed. Installation
of and testing of Year 2000 compliant hardware and software is currently
expected to be completed within the next six months. The costs related to
software upgrades are not anticipated to be material and have been incurred in
the normal course of operations.
-16-
<PAGE> 17
Products: The Company currently offers two products which have the ability to
process and store date/time data the Apex excimer laser and the Apex Plus
excimer laser. These lasers meet Year 2000 compliance requirements although
their capability to record date/time does not impact clinical output. The
Company has not surveyed third parties to inquire into their Year 2000
compliance status. There can be no assurance that the Company will not
experience unexpected costs and delays in achieving Year 2000 compliance, which
could result in a material adverse effect on the Company's results of
operations, financial position or cash flow.
Year 2000 Risks: Efforts are continually being made to ensure proper operation
of the Company's systems during the transition from 1999 to 2000 and beyond. As
well, internal testing, and Year 2000 testing tools will be used to test the
readiness of software applications for the Year 2000. In the event of unforeseen
or unanticipated issues related to the Year 2000, these issues may have material
adverse effect on the Company's results of operations, financial position, or
cash flow.
Year 2000 Contingency Plans: The Company has not created a formal contingency
plan for Year 2000 problems. The Company intends to take appropriate actions to
mitigate the effects of third parties' failure to remediate their Year 2000
issues and for unexpected failures in its own systems. The Company expects to
make arrangements for some alternate suppliers and will continue to identify
potential alternate suppliers. If it becomes necessary for the Company to take
these corrective actions, it is uncertain whether this would result in
significant interruptions in service or delays in business operations or whether
it would have a material adverse effect on the Company's results of operations,
financial position or cash flow.
EURO CONVERSION
On January 1, 1999, eleven of fifteen member countries of the European Union
adopted the conversion of their national currencies to the European Union's
common currency (Euro). A permanent fixed conversion rate between the existing
national currencies of these countries and the Euro was established on that
date. The Euro may be used in business transactions, however, national
currencies will still remain legal tender through June 30, 2002. The Company has
not completed its assessment of the consolidated financial statement impact of
adopting the new standard.
CAUTIONARY STATEMENTS AND RISK FACTORS AFFECTING FUTURE OPERATING RESULTS
Cautionary Statement under "Safe harbor" Provisions of the Private Securities
Litigation Reform Act of 1995: Statements made in this filing contain
information about the Company's future business prospects. These statements may
be considered "forward looking". These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in or implied by such forward looking statements. Among these risks
and uncertainties are: competition from other manufacturers and vision
correction technologies, delays in obtaining regulatory approvals, challenges to
patents owned and licensed by the Company affecting per procedure revenues and
adverse litigation results. For additional information and risks associated with
the Company's business prospects, and future operating results, please refer to
the Company's annual report on Form 10-K for the year ended December 31, 1998.
PART I: FINANCIAL INFORMATION (CONTINUED)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information relating to quantitative and qualitative disclosure about market
risk is included in Item 2 of Part I of this Report, entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
-17-
<PAGE> 18
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
a) See Note 4 to Notes to Condensed Consolidated Financial Statements
above (Part I, Item 1 of this filing), for description of pending
material litigation
b) Material developments:
(i) Early in the second quarter of 1999, the Company settled in
principle the remaining Lens Express employee litigation matters.
These cases, brought by a current employee and a former employee
of Lens Express, included allegations of sexual discrimination
and harassment arising out of the alleged conduct of a former
Lens Express employee and shareholder. As of the date of this
report, one such settlement has been fully consummated and the
other has been documented in a settlement agreement that has been
circulated among the parties for execution. The amount of these
settlements was accrued in the first quarter of 1999 and will
have no material adverse effect on subsequent periods.
(ii) Early in the second quarter of 1999, Kathy Tedesco voluntarily
agreed to dismiss her action against the Company. This case,
which arises out of allegedly negligent laser eye surgery
performed by Dr. Antoine Garabet, is proceeding against Dr.
Garabet.
(iii) Pursuant to a settlement stipulation previously lodged with the
Court, on January 27, 1999, the Federal District Court for the
District of Arizona entered an Order dismissing the
BARNET-DULANEY litigation.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits:
27 Financial Data Schedule (For EDGAR Filing Purposes Only)
b.) Reports of Form 8-K:
(i) On March 23, 1999, the Company filed a report on Form 8-K in
order to permit certain of its financial statements and related
management discussions and analyses to be incorporated by
reference in the Company's Form S-4 Registration Statement.
(ii) On January 14, 1999, the Company filed a report on Form 8-K/A to
update an Exhibit to its Settlement and Dissolution Agreement
with VISX following discussions with the SEC staff concerning the
Company's request for confidential treatment of certain portions
of the Exhibit.
-18-
<PAGE> 19
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.
SUMMIT TECHNOLOGY, INC.
Date: May 17, 1999 By: /s/ Robert J. Palmisano
------------------------------
Robert J. Palmisano
Chief Executive Officer
Date: May 17, 1999 By: /s/ Robert J. Kelly
------------------------------
Robert J. Kelly
Executive Vice President,
Chief Financial Officer and
Treasurer
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 40,113
<SECURITIES> 30,474
<RECEIVABLES> 14,488
<ALLOWANCES> 1,361
<INVENTORY> 6,555
<CURRENT-ASSETS> 105,913
<PP&E> 23,624
<DEPRECIATION> 15,050
<TOTAL-ASSETS> 164,820
<CURRENT-LIABILITIES> 20,265
<BONDS> 111
0
0
<COMMON> 314
<OTHER-SE> 140,126
<TOTAL-LIABILITY-AND-EQUITY> 164,820
<SALES> 25,684
<TOTAL-REVENUES> 25,684
<CGS> 13,378
<TOTAL-COSTS> 24,089
<OTHER-EXPENSES> 116
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 114
<INCOME-PRETAX> 2,451
<INCOME-TAX> 65
<INCOME-CONTINUING> 2,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,386
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
