UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarter ended March 31, 1999
Commission File Number 0-19943
PROTOCOL SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Oregon 93-0913130
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8500 SW Creekside Place, Beaverton, OR 97008
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(Address of principal executive offices) (Zip Code)
(503) 526-8500
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(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.
[X] Yes [ ] No
Number of shares of common stock outstanding as of
May 7, 1999:
8,323,638 shares, $.01 par value per share
------------------------------------------
<PAGE>2
PROTOCOL SYSTEMS, INC.
Index to Form 10-Q
PART I FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements
Condensed Consolidated Statements of
Operations and Comprehensive Income for
the three months ended March 31, 1999 and 1998 3
Condensed Consolidated Balance Sheets
as of March 31, 1999 and December 31, 1998 4
Consolidated Statements of Cash Flows for
the three months ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12-13
PART II OTHER INFORMATION
- --------------------------
Item 2. Changes in Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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PAGE<3>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
PROTOCOL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands except per share amounts)
(unaudited)
Three months ended March 31,
1999 1998
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<S> <C> <C>
Sales $14,299 $14,920
Cost of sales 7,344 8,007
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Gross profit 6,955 6,913
Operating expenses:
Research and development expenses 1,505 1,859
Selling, general and administrative
expenses 4,745 5,015
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Total operating expenses 6,250 6,874
------- -------
Income from operations 705 39
Other income 262 280
------- -------
Income before income taxes 967 319
Provision for income taxes 242 89
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Net income $ 725 $ 230
======= =======
Comprehensive income $ 499 $ 237
======= =======
Basic earnings per share $ 0.09 $ 0.03
======= =======
Diluted earnings per share $ 0.09 $ 0.03
======= =======
Weighted average number of shares
used in the computation of:
Basic earnings per share 8,241 8,794
Diluted earnings per share 8,385 9,134
See accompanying notes to condensed consolidated financial statements
</TABLE>
PAGE<4>
<TABLE>
PROTOCOL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, December 31,
1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $12,848 $ 8,023
Short-term investments 1,000 6,680
Accounts receivable - net 13,398 17,971
Inventories - net 11,596 12,218
Prepaid expenses and other current assets 1,790 2,469
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Total current assets 40,632 47,361
Long-term investments 9,675 4,045
Property and equipment - net 3,874 4,041
Other assets 617 404
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$54,798 $55,851
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,543 $ 2,584
Accrued liabilities 3,558 5,481
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Total current liabilities 6,101 8,065
Deferred taxes 3 40
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value. Authorized 30,000 shares;
issued and outstanding 8,274 at 1999 and 8,207 at 1998 83 82
Additional paid-in capital 28,505 28,105
Unearned compensation -- (48)
Accumulated other comprehensive income (loss) (21) 205
Retained earnings 20,127 19,402
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Total shareholders' equity 48,694 47,746
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$54,798 $55,851
======= =======
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>5
<TABLE>
PROTOCOL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended March 31,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 725 $ 230
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 560 535
Amortization of bond premium 31 53
Provision for deferred taxes 144 91
Other non-cash items 71 -
Increase (decrease) in cash resulting from
changes in:
Accounts receivable 4,501 1,621
Inventories 563 1,404
Prepaid expenses and other assets 130 (51)
Accounts payable and accrued liabilities (1,304) (670)
------- -------
Net cash provided by operating activities 5,421 3,213
Cash flows from investing activities:
Purchase of investments (10,030) (3,886)
Proceeds from maturity of investments 9,980 1,978
Acquisition of property and equipment (357) (629)
Expenditures for other assets (250) (443)
------- -------
Net cash used in investing activities (657) (2,980)
Cash flows from financing activities:
Proceeds from exercise of stock options
and stock purchase plan 506 743
Repurchase of common stock (128) (4,293)
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Net cash provided by (used in) financing activities 378 (3,550)
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Effect of exchange rates on cash and cash equivalents (317) (5)
------- -------
Net increase (decrease) in cash and cash equivalents 4,825 (3,322)
Cash and cash equivalents at beginning of period 8,023 12,257
------- -------
Cash and cash equivalents at end of period $12,848 $ 8,935
======= =======
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ - $ 545
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>6
PROTOCOL SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit and in conformity with generally
accepted accounting principles for interim financial information.
Accordingly, certain financial information and footnotes have been omitted or
condensed. In the opinion of management, the condensed consolidated financial
statements include all necessary adjustments (which are of a normal and
recurring nature) for the fair presentation of the results of the interim
periods presented. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements for the year
ended December 31, 1998. The results of operations for the interim period
shown in this report are not necessarily indicative of results for any future
interim period or the entire fiscal year.
INVENTORIES
Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out basis (FIFO). The components of inventories, net of
reserve, are as follows:
March 31, December 31,
(in thousands) 1999 1998
- -------------------------------------------------------------------------
Raw materials $ 4,901 $ 4,939
Work in process 2,493 2,838
Finished goods 2,060 2,207
Demonstration instruments 2,142 2,234
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Total inventories $11,596 $12,218
======= ======
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and includes the following:
March 31, December 31,
(in thousands) 1999 1998
- -------------------------------------------------------------------------
Equipment $12,675 $12,111
Furniture and fixtures 1,913 1,910
Leasehold improvements 456 551
------ ------
15,044 14,572
Less accumulated depreciation and amortization 11,170 10,531
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Property and equipment - net $ 3,874 $ 4,041
====== ======
<PAGE>7
ACCRUED LIABILITIES
The components of accrued liabilities are as follows:
March 31, December 31,
(in thousands) 1999 1998
- -------------------------------------------------------------------------
Accrued salaries, wages and
related liabilities $2,322 $2,588
Accrual for special charges 187 1,642
Reserve for warranties 853 915
Deferred revenue and customer deposits 85 98
Other liabilities 111 238
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$3,558 $5,481
====== ======
On December 31, 1998, the Company incurred special charges of $3,188,000 as it
discontinued the development of its defibrillator project and restructured its
worldwide operations, which included the closure of its subsidiary offices and
direct sales organizations in France and Germany and the elimination of 14
positions at the Company's headquarters in Beaverton, Oregon as well as the
resignation of the founder and Chief Technical Officer. Cash payments during
the first quarter of 1999 related to these special charges totaled $1,326,000
and consisted primarily of employee severance benefits and lease termination
costs.
During the third quarter of 1998, the Company incurred special charges of
$2,246,000 to relocate its wholly-owned subsidiary, Pryon Corporation, from
Menomonee Falls, Wisconsin to the Company's Beaverton, Oregon facility in
order to improve operating efficiencies. The relocation resulted in a
reduction of 56 employees from manufacturing, engineering, sales and
administrative functions. Cash payments during the first quarter of 1999
related to these special charges totaled $129,000 and consisted of lease
termination and other costs.
As of March 31, 1999, special charges relating primarily to lease and other
contract terminations of $187,000 were not disbursed. The Company anticipates
that these remaining balances will be expended by the end of 1999.
INCOME TAXES
The provision for income taxes has been recorded based on the current estimate
of the Company's annual effective tax rate. This rate differs from the
Federal statutory rate primarily because of the provision for state income
taxes, utilization of the Company's federal net operating loss carryovers, the
benefit of the Company's research and experimentation tax credits, the benefit
of the Company's foreign sales corporation and tax-exempt interest income
earned on investments.
<PAGE>8
BASIC AND DILUTED EARNINGS PER SHARE
In accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share" both basic earnings per share
and diluted earnings per share are presented. Basic earnings per share is
computed using the weighted average number of common shares outstanding and
diluted earnings per share is computed using the weighted average number of
common shares outstanding and dilutive potential common shares assumed to be
outstanding during the period using the treasury stock method. Dilutive
potential common shares consist of options to purchase common stock.
COMPREHENSIVE INCOME
The following is a reconciliation of net income to comprehensive income:
Three months ended March 31,
(in thousands) 1999 1998
- -----------------------------------------------------------------------
Net income $ 725 $ 230
Other comprehensive income, net of tax
Foreign currency translation
adjustments (158) 10
Unrealized holding loss arising
during the period (68) (3)
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Other comprehensive income (loss) (226) 7
------- -------
Comprehensive income $ 499 $ 237
======= =======
CONTINGENCIES
In 1990, the Company entered into a development and supply agreement with
Gensia, Inc. to develop and supply a closed-loop drug delivery and monitoring
device ("GenESA device"). This agreement was amended in December 1997. Gensia
began shipments of the GenESA device to Europe in 1995 and received FDA
clearance to market the product in the United States in the third quarter of
1997. In April 1998, the Company was informed that Gensia planned no
additional purchases of the GenESA device under the supply agreement with the
Company which provided for the purchase of devices through the year 2002. In
July 1998, the Company commenced litigation against Gensia Sicor, Inc. and
Gensia Automedics alleging that they have breached the supply agreement and is
seeking damages of approximately $10 million.
SEGMENT INFORMATION
In accordance with SFAS 131 "Disclosures about Segments of an Enterprise and
Related Information" the Company functions as a single operating segment:
the design, manufacture, sale and servicing of medical instruments and
systems. Sales are made primarily to hospitals and other health-care related
customers.
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales. Sales for the first quarter of 1999 decreased 4.2% to $14.3 million
from $14.9 million for the first quarter of 1998.
Domestic sales, excluding military revenues and Original Equipment
Manufacturer ("OEM") sales of Pryon OEM products and GenESA devices, increased
slightly to $7.8 million (54.2% of total sales) in the first quarter of 1999
from $7.7 million (51.7% of total sales) in the first quarter of 1998.
U.S. military revenues increased 104.1% to $693,000 (4.8% of total sales) in
the first quarter of 1999 from $339,000 (2.3% of total sales) in the first
quarter of 1998. The Company attributes the increase in its military revenues
in the first quarter of 1999 to the unpredictable size and timing of military
patient monitoring equipment procurements.
International sales, excluding international OEM sales of Pryon OEM products
and GenESA devices, decreased 13.8% to $4.1 million (28.5% of total sales) in
the first quarter of 1999 from $4.7 million (31.7% of total sales) in the
first quarter of 1998. This decrease in international sales was principally
due to the continued strength of the U.S. dollar against foreign currencies
and soft international markets, particularly in Europe and Asia, and the
reorganization of the Company's direct sales organization in Europe.
OEM sales of Pryon OEM products and GenESA devices decreased 17.0% to $1.8
million (12.4% of total sales) in the first quarter of 1999 from $2.1 million
(14.3% of total sales) in the first quarter of 1998 primarily due to a
$496,000 decrease in sales of GenESA devices to Gensia Automedics, Inc. In
April 1998, the Company was informed that Gensia planned no additional
purchases of the GenESA device under a supply agreement with the Company which
provided for the purchase of devices through the year 2002. In July 1998, the
Company commenced litigation against Gensia Sicor, Inc. and Gensia Automedics
alleging that they have breached the supply agreement and seeking damages of
approximately $10 million. This decrease was partially offset by an increase
in sales of Pryon OEM products.
Gross profit. As a percentage of sales, gross profit increased to 48.6% in
the first quarter of 1999 from 46.3% in the first quarter of 1998. The
increase in gross profit was due primarily to lower manufacturing overhead
caused by a higher production volume in the first quarter of 1999. Production
volume was low during the first quarter of 1998 as finished good inventory
levels were high at the end of 1997.
Research and development. Research and development expenses decreased 19.1%
to $1.5 million in the first quarter of 1999 from $1.9 million in the first
quarter of 1998. This decrease was primarily the result of the relocation of
the Pryon operations from Menomonee Falls, Wisconsin to the Company's
Beaverton, Oregon facility in 1998 which resulted in a reduction in the total
number of research and development employees. As a percentage of sales,
research and development expenses decreased to 10.5% in the first quarter of
1999 from 12.5% in the first quarter of 1998.
<PAGE>10
Selling, general and administrative. Selling, general and administrative
expenses decreased 5.4% to $4.7 million in the first quarter of 1999 from $5.0
million in the first quarter of 1998. This decrease resulted primarily from
the closure of direct sales organizations in Germany and France initiated in
1998 and the reduction in the number of administrative employees as a result
of the relocation of the Pryon operations from Wisconsin to Oregon in 1998.
As a percentage of sales, selling, general and administrative expenses
decreased to 33.2% in the first quarter of 1999 from 33.6% in the first
quarter of 1998.
Other income. Other income decreased 6.3% to $262,000 in the first quarter of
1999 from $280,000 in the first quarter of 1998 primarily due to a reduction
in the cash and investments balance as the Company utilized $9.1 million of
its available cash to repurchase common stock in 1998 and the first quarter of
1999.
Provision for income taxes. The provision for income taxes increased to
$242,000 in the first quarter of 1999 from $89,000 in the first quarter of
1998 representing effective tax rates of 25.0% and 28.0%, respectively. The
effective tax rate, which reflects the estimate of the Company's annual
effective tax rate, was lower in the first quarter of 1999 than in the first
quarter of 1998 primarily due to the expected utilization of the Company's net
operating loss carryover in 1999.
Net income. Net income in the first quarter of 1999 was $725,000 or $0.09 per
diluted share compared to net income of $230,000 or $0.03 per diluted share in
the first quarter of 1998. The increase in net income is primarily due to
reduced operating expenses as a result of the relocation of the Pryon
manufacturing facility and the world-wide restructuring in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained its strong financial position as of March 31, 1999 with
working capital balances of $34.5 million and a current ratio of 6.7:1 as
compared to working capital of $39.3 million and a current ratio of 5.9:1 at
December 31, 1998. Cash flow from operating activities for the first three
months of 1999 was $5.4 million as compared to $3.2 million for the first
three months of 1998. The increase in cash flow from operations was primarily
due to an increase in collections of accounts receivable.
In January 1998 the Company's Board of Directors adopted a resolution
authorizing the repurchase of up to 1,000,000 outstanding shares of the
Company's common stock. During the first quarter of 1999, the Company
repurchased 18,000 shares of its common stock, for a total of 974,000 shares
repurchased under the stock repurchase plan. Management believes that current
cash and investment balances and future cash flows from operations will be
sufficient to meet the Company's liquidity and capital needs for the
foreseeable future.
<PAGE>11
YEAR 2000 ISSUES
The Company has substantially completed its assessment of its computer
software programs and operating systems used in its internal operations,
including applications used in its financial, manufacturing equipment, and
engineering design tools to determine its readiness for the Year 2000. The
inability of computer software programs and operating systems to accurately
recognize, interpret and process date codes designating the Year 2000 and
beyond could result in a system failure or miscalculations which could have a
material impact on the Company's ability to conduct its business. Costs
incurred by the Company to date in its assessment of internal systems were not
material.
The Company has completed its assessment of Year 2000 compliance of each of
its product lines. All configurations of instruments (instruments include
Propaq and Propaq Encore monitors and all options) and their component parts
have been tested and are Year 2000 compliant. Acuity software versions
3.15.05 and all Networked Acuity software versions have been tested and are
Year 2000 compliant. Acuity software versions prior to 3.15.05 have a minor
connectivity issue related to the Year 2000 between the Acuity central station
and the monitors that can be fixed through an upgrade to the Acuity central
station provided by the Company. The operation of the Acuity central station
and the Propaq monitors in the Year 2000 and beyond should not be adversely
affected by this connectivity issue.
The Company has also contacted most critical suppliers of products and
services to determine that the suppliers' operations and the products and
services they provide are Year 2000 compliant. The Company has received
responses from approximately 70% of the suppliers contacted, all of which have
indicated that their products and operations either are, or expect to be, Year
2000 compliant. The Company will continue to follow up with suppliers who
have not yet responded to determine if there are any critical suppliers who
may not be Year 2000 compliant.
Based on its assessments to date, the Company believes it will not experience
any material disruption as a result of Year 2000 issues in its computer
software programs and other systems used in its operations. However, there
can be no assurances that unanticipated Year 2000 issues will not have a
material adverse effect on the Company's business, financial condition or
results of operations. Furthermore, there can be no assurance that Year 2000
issues of certain critical third party suppliers, including those supplying
electricity, water or telephone service will not experience difficulties
resulting in the disruption of service or delivery of supplies to the Company,
which could adversely affect the Company's business, financial condition or
results of operations. The Company will develop contingency plans for dealing
with the most reasonably likely worst case scenario that would occur in the
event that the Company and critical third parties fail to complete efforts to
achieve Year 2000 compliance on a timely basis by the end of the third quarter
of 1999.
<PAGE>12
FORWARD-LOOKING STATEMENTS
This Quarterly Report contains statements, including the anticipated effects
of the Year 2000 issue, that are forward-looking statements within the meaning
of the Securities Litigation Reform Act of 1995. These statements are based
on current expectations, estimates and projections about the Company's
business, management's beliefs and assumptions made by management. Words such
as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements due to numerous factors, including, but not limited
to factors that could cause unforeseen increases or decreases in the expenses
expected to be incurred in connection with the operations of the Pryon
subsidiary in Oregon, the closure of direct sales organizations in France and
Germany, the timely introduction of new products, the Company's ability to
identify and remediate Year 2000 issues or the reliability of third party
assessments and certifications relating to Year 2000 issues. In addition,
such statements could be affected by other factors discussed in this Quarterly
Report and from time to time in the Company's other Securities and Exchange
Commission filings and reports and by general industry and market conditions
and growth rates, and general domestic and international economic conditions.
The Company's quarterly operating results have fluctuated in the past and may
continue to fluctuate in the future depending on factors such as increased
competition, timing of new product announcements, pricing changes by the
Company or its competitors, length of sales cycles, market acceptance or
delays in the introduction of new products or enhanced versions of existing
products, timing of significant orders, regulatory approval requirements,
product mix and economic factors and conditions generally and in the market
for the Company's products specifically. In particular, the Company's
quarterly operating results have fluctuated as a result of the unpredictable
size and timing of military patient monitoring equipment procurements, and
seasonal or other changes in customer buying patterns. A substantial portion
of the Company's revenue in each quarter results from orders booked in that
quarter. Accordingly, revenue from quarter to quarter is difficult to
forecast. The Company's expense levels are based, in part, on its
expectations as to future revenue. If revenue levels are below expectations,
operating results are likely to be adversely affected. In particular, net
income may be disproportionately affected by a reduction in revenue because
only a small portion of expenses vary with revenue. Results of operations in
any period should not be considered indicative of the result to be expected
for any future period, and fluctuations in operating results may also result
in fluctuations in the price of the Company's common stock. No assurance can
be given that the Company will be able to grow in future periods or that its
operations will remain profitable.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to the impact of foreign currency fluctuations due to a
small portion of its international sales. The Company minimizes its risk to
foreign currency fluctuations as international sales through independent
distributors are made in U.S. dollars which has helped reduce any foreign
currency risk.
<PAGE>13
As of March 31, 1999, the Company had an investment portfolio of fixed income
securities, including those classified as cash equivalents, short-term
investments and long-term investments of $18.3 million. These securities are
subject to interest rate fluctuations. An increase in interest rates could
adversely affect the market value of the Company's fixed income securities.
The Company does not use derivative financial instruments in its investment
portfolio to manage interest rate risk. The Company does, however, limit its
exposure to interest rate and credit risk by establishing and strictly
monitoring clear policies and guidelines for its investment portfolio. The
weighted average maturity of the investment portfolio may not exceed 360 days
and no single investment may have a maturity date of greater than two years.
The guidelines also establish credit quality standards and limit the exposure
to one issue, issuer, or type of instrument. Due to these factors the exposure
to market and credit risk is not expected to be material.
<PAGE>14
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 1999, the Company sold securities without
registration under the Securities Act of 1933, as amended (the "Securities
Act") upon the exercise of certain stock options granted under the Company's
stock option plans. An aggregate of 28,412 shares of Common Stock were issued
at an exercise prices ranging from $1.62 to $6.00. These transactions were
effected in reliance upon the exemption from registration under the Securities
Act provided by Rule 701 promulgated by the Securities and Exchange Commission
pursuant to authority granted under Section 3 (b) of the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the quarter
ended March 31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: 27.1 Financial Data Schedule
(b) No reports were filed on Form 8-K during the quarter for which
this report is filed.
<PAGE>15
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.
PROTOCOL SYSTEMS, INC.
(Registrant)
Date: May 14, 1999 By /s/ David F. Bolender
---------------------
David F. Bolender
Chief Executive
Officer, President
and Chairman of the
Board of Directors
By /s/ Craig M. Swanson
---------------------
Craig M. Swanson
Vice-President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Protocol
Systems, Inc. Condensed Consolidated Balance Sheet as of March 31, 1999 and
Condensed Consolidated Statement of Operations and Comprehensive Income for the
three months ended March 31, 1999 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,848
<SECURITIES> 10,675
<RECEIVABLES> 13,398<F1>
<ALLOWANCES> 335
<INVENTORY> 11,596
<CURRENT-ASSETS> 40,632
<PP&E> 15,044
<DEPRECIATION> 11,170
<TOTAL-ASSETS> 54,798
<CURRENT-LIABILITIES> 6,101
<BONDS> 0
0
0
<COMMON> 83
<OTHER-SE> 48,611
<TOTAL-LIABILITY-AND-EQUITY> 54,798
<SALES> 14,299
<TOTAL-REVENUES> 14,299
<CGS> 7,344
<TOTAL-COSTS> 7,344
<OTHER-EXPENSES> 5,988
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 967
<INCOME-TAX> 242
<INCOME-CONTINUING> 725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 725
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<FN>
<F1>Net of allowance
<F2>The amount of loss provision is not significant and has been included in other
expenses.
</FN>
</TABLE>
