-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FmPD+9BS3ZWB8b/wwZ0XQZaqjZCHt5Fed0ty4CdmrYFnNaLsIcQKcvBOB1lMJ3rL JBmXkT1gh6IzFc/y8jnGqQ== /in/edgar/work/0000950148-00-002322/0000950148-00-002322.txt : 20001114 0000950148-00-002322.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950148-00-002322 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000929 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MINIMED INC CENTRAL INDEX KEY: 0000945801 STANDARD INDUSTRIAL CLASSIFICATION: [3842 ] IRS NUMBER: 954408171 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26268 FILM NUMBER: 761114 BUSINESS ADDRESS: STREET 1: 12744 SAN FERNANDO RD CITY: SYLMAR STATE: CA ZIP: 91342 BUSINESS PHONE: 8183625958 MAIL ADDRESS: STREET 1: 12744 SAN FERNANDO RD CITY: SYLMAR STATE: CA ZIP: 91342 10-Q 1 v67014e10-q.txt FORM 10-Q 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 September 29, 2000 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 0-26268 MINIMED INC. (Exact Name of Registrant as Specified in its Charter) ---------------- Delaware 95-4408171 (State or other jurisdiction of (I.R.S. Employer Incorporated or organization) Identification No.) 18000 Devonshire Street, Northridge, CA 91325 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (818) 362-5958 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: TITLE OF EACH CLASS OUTSTANDING AT NOVEMBER 3, 2000 ------------------- ------------------------------- Common Stock, $.01 par value 64,512,610 ================================================================================ 2 INDEX MINIMED INC.
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements and Notes (Unaudited) 3 Consolidated Balance Sheets -- December 31, 1999 and September 29, 2000 (Unaudited) 3 Consolidated Statements of Income (Unaudited) -- Three months and nine months ended October 1, 1999 and September 29, 2000 4 Consolidated Statements of Cash Flows (Unaudited) - Nine months ended October 1, 1999 and September 29, 2000 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II. OTHER INFORMATION 16 Item 1. Legal Proceedings 16 Item 2. Changes in Securities and Use of Proceeds 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURE 18 INDEX TO EXHIBITS 19
2 3 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES MINIMED INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND SEPTEMBER 29, 2000 (UNAUDITED) ASSETS
1999 2000 ------------ ---------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents ................................................. $ 92,718,000 $ 89,155,000 Short-term investments .................................................... 77,716,000 86,485,000 Accounts receivable, net of allowance for doubtful accounts of $13,108,000 and $11,286,000 at December 31, 1999 and September 29, 2000, respectively .............................. 65,938,000 75,064,000 Inventories ............................................................... 19,338,000 36,660,000 Deferred income taxes ..................................................... 9,973,000 8,982,000 Income taxes receivable ................................................... 5,761,000 4,010,000 Prepaid expenses and other current assets ................................. 7,602,000 8,774,000 ------------ ------------ Total current assets .......................................... 279,046,000 309,130,000 LONG-TERM INVESTMENTS ....................................................... 8,552,000 21,970,000 DEFERRED INCOME TAXES - LONG-TERM ........................................... -- 18,860,000 NOTE RECEIVABLE FROM AFFILIATE .............................................. 3,600,000 3,600,000 OTHER ASSETS ................................................................ 17,969,000 19,029,000 LAND, BUILDINGS, PROPERTY AND EQUIPMENT - Net ............................... 44,631,000 65,175,000 ------------ ------------ TOTAL ....................................................................... $353,798,000 $437,764,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of notes payable .......................................... $ 1,000,000 $ 1,000,000 Accounts payable .......................................................... 3,573,000 7,329,000 Accrued salaries and related benefits ..................................... 7,749,000 7,241,000 Accrued sales commissions ................................................. 2,964,000 908,000 Accrued warranties ........................................................ 3,859,000 3,460,000 Accrued software refurbishment costs ...................................... 1,200,000 -- Accrued related party purchase commitment obligations ..................... 3,500,000 3,500,000 Other accrued expenses .................................................... 1,310,000 832,000 ------------ ------------ Total current liabilities ...................................... 25,155,000 24,270,000 ------------ ------------ DEFERRED INCOME TAXES - LONG-TERM ........................................... 1,545,000 -- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, par value $.01; 100,000,000 shares authorized; 62,300,594 and 64,497,680 shares issued and outstanding as of December 31, 1999 and September 29, 2000, respectively ................................... 634,000 660,000 Additional capital ....................................................... 280,508,000 334,352,000 Accumulated other comprehensive income ................................... 2,931,000 11,061,000 Retained earnings ........................................................ 43,025,000 67,421,000 ------------ ------------ Total stockholders' equity .................................... 327,098,000 413,494,000 ------------ ------------ TOTAL ....................................................................... $353,798,000 $437,764,000 ============ ============
See Notes to Consolidated Financial Statements 3 4 MINIMED INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------------- -------------------------------- OCTOBER 1, SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, 1999 2000 1999 2000 ------------- -------------- ------------- ----------- (UNAUDITED) NET SALES .......................................... $ 51,400,000 $ 72,138,000 $ 141,394,000 $ 201,887,000 COST OF SALES ...................................... 16,502,000 22,459,000 46,620,000 64,205,000 ------------- ------------- ------------- ------------- GROSS PROFIT ....................................... 34,898,000 49,679,000 94,774,000 137,682,000 OPERATING EXPENSES: Selling, general and administrative .............. 22,809,000 30,208,000 60,344,000 85,312,000 Research and development ......................... 6,394,000 8,381,000 18,262,000 23,599,000 Research and development contract ................ (1,500,000) -- (4,500,000) -- ------------- ------------- ------------- ------------- Total operating expenses ............... 27,703,000 38,589,000 74,106,000 108,911,000 ------------- ------------- ------------- ------------- OPERATING INCOME ................................... 7,195,000 11,090,000 20,668,000 28,771,000 OTHER INCOME, including interest income ............ 2,110,000 2,920,000 2,847,000 7,679,000 ------------- ------------- ------------- ------------- INCOME BEFORE INCOME TAXES ........................ 9,305,000 14,010,000 23,515,000 36,450,000 PROVISION FOR INCOME TAXES ......................... 3,489,000 4,485,000 9,044,000 12,054,000 ------------- ------------- ------------- ------------- NET INCOME ......................................... $ 5,816,000 $ 9,525,000 $ 14,471,000 $ 24,396,000 ============= ============= ============= ============= BASIC EARNINGS PER SHARE ........................... $ 0.09 $ 0.15 $ 0.25 $ 0.38 ============= ============= ============= ============= BASIC WEIGHTED AVERAGE SHARES OUTSTANDING .......... 61,788,000 64,102,000 58,332,000 63,501,000 ============= ============= ============= ============= DILUTED EARNINGS PER SHARE ......................... $ 0.09 $ 0.14 $ 0.23 $ 0.36 ============= ============= ============= ============= DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING ........ 65,516,000 67,824,000 62,056,000 67,102,000 ============= ============= ============= =============
See Notes to Consolidated Financial Statements 4 5 MINIMED INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED OCTOBER 1, 1999 AND NINE MONTHS ENDED SEPTEMBER 29, 2000
1999 2000 ------------- ------------ (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................................................................ $ 14,471,000 $ 24,396,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation .................................................................... 5,097,000 8,444,000 Directors' fees paid in common stock ............................................ 71,000 61,000 Deferred income taxes ........................................................... (880,000) (24,217,000) Tax benefit from exercise of non-qualified stock options ........................ 18,943,000 38,567,000 Changes in operating assets and liabilities: Accounts receivable, net ...................................................... (8,901,000) (9,519,000) Inventories ................................................................... (9,747,000) (17,456,000) Prepaid expenses and other current assets ..................................... (2,867,000) (1,204,000) Other assets .................................................................. 64,000 56,000 Accounts payable .............................................................. 711,000 3,802,000 Accrued salaries and related benefits ......................................... 596,000 (454,000) Accrued sales commissions ..................................................... (1,455,000) (2,056,000) Accrued warranties ............................................................ 633,000 (399,000) Accrued software refurbishment costs .......................................... -- (1,200,000) Income taxes receivable/payable ............................................... (12,130,000) 1,751,000 Other accrued expenses ........................................................ (1,107,000) (454,000) ------------- ------------- Net cash provided by operating activities ..................................... 3,499,000 20,118,000 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES - Short-term investments ........................................................ (55,924,000) (8,769,000) Long-term investments ......................................................... -- 101,000 Purchase of technology license ................................................ (7,000,000) (1,500,000) Purchase of land, buildings, property and equipment ........................... (14,905,000) (28,603,000) ------------- ------------- Net cash used in investing activities ......................................... (77,829,000) (38,771,000) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES - Repayment of notes payable .................................................... (278,000) -- Proceeds from public offering, net of expenses ................................ 140,588,000 -- Proceeds from stock option exercises .......................................... 5,011,000 13,985,000 Proceeds from issuance of common stock under employee stock purchase plan ........................................................ 825,000 1,257,000 ------------- ------------- Net cash provided by financing activities ................................... 146,146,000 15,242,000 ------------- ------------- Effect of cumulative foreign currency translation Adjustment .................................................................. (75,000) (152,000) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............................. 71,741,000 (3,563,000) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................................... 27,303,000 92,718,000 ------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD .......................................... $ 99,044,000 $ 89,155,000 ============= ============= SUPPLEMENTAL CASH FLOW INFORMATION - Cash paid during the period for: Interest ........................................................................ $ 2,000 $ -- Income taxes .................................................................... $ 3,624,000 $ --
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY - The Company recorded an unrealized holding gain of $1,143,000 and $9,529,000, net of estimated deferred income taxes on marketable securities classified as long-term investments available for sale during the nine months ended October 1, 1999 and September 29, 2000, respectively. See Notes to Consolidated Financial Statements 5 6 MINIMED INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NINE MONTHS ENDED OCTOBER 1, 1999 AND NINE MONTHS ENDED SEPTEMBER 29, 2000 The fiscal years referenced herein are as follows: FISCAL YEAR YEAR ENDED ----------- ---------- 1999 December 31, 1999 2000 December 29, 2000 NOTE 1. BASIS OF PRESENTATION The accompanying unaudited financial statements of MiniMed Inc. ("MiniMed" or the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal, recurring adjustments considered necessary for a fair presentation have been included. The financial statements should be read in conjunction with the audited financial statements included in the Annual Report of MiniMed Inc. filed on Form 10-K with the Securities and Exchange Commission for the year ended December 31, 1999. The results of operations for the nine months ended September 29, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2000. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Income taxes - Net income and earnings per share reflect income taxes which have been recorded at the Company's estimated effective tax rate for the year. This estimated income tax rate has been determined by giving consideration to the pretax earnings and losses applicable to foreign and domestic tax jurisdictions. Revenue recognition - In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," that summarizes certain of the SEC's views on applying generally accepted accounting principles to revenue recognition in the financial statements. It requires that an entity recognize revenue only when all of the following criteria are met: o Persuasive evidence of an arrangement exists, o Delivery has occurred or services have been rendered, o The seller's price to the buyer is fixed or determinable, and o Collectibility is reasonably assured. The Company recognizes revenue in accordance with the provisions of SAB No. 101. For most sales transactions, revenues are recognized when products are shipped. In other instances, where customers maintain the right to return the product, revenues are recognized as non-refundable payments are received and the revenue recognition process is complete when the customer no longer has the right to return the products. An allowance for doubtful accounts has been recorded to account for the difference between recorded revenues and anticipated collections from the Company's customers. The allowance for bad debts is adjusted periodically based upon the Company's evaluation of historical collection experience, industry reimbursement trends and other relevant information. Stock split - On July 19, 2000, the Company announced a 2-for-1 stock split, in the form of a stock dividend, to result in the issuance of one additional share of common stock for every share of common stock outstanding. The stock split was effective August 2, 2000 for holders of record at the close of business on that date and was distributed on August 18, 2000. In accordance with Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share," the Company has recorded the effects of this stock split on share and per share amounts at September 29, 2000 and all prior periods have been restated. 6 7 MINIMED INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NINE MONTHS ENDED OCTOBER 1, 1999 AND NINE MONTHS ENDED SEPTEMBER 29, 2000 NOTE 3. WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING In accordance with SFAS No. 128, "Earnings Per Share," basic earnings per share for the three and nine month periods ended October 1, 1999 and September 29, 2000, were computed by dividing net income by weighted average common shares outstanding during the periods presented. Diluted earnings per share for the periods presented were computed by dividing net income by weighted average common and common equivalent shares outstanding, computed in accordance with the treasury stock method. The computation of basic and diluted EPS is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED OCTOBER 1, SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, 1999 2000 1999 2000 ------------ ------------ ------------ ----------- (UNAUDITED) BASIC EPS COMPUTATION Numerator: Net income applicable to common stock $ 5,816,000 $ 9,525,000 $14,471,000 $24,396,000 ----------- ----------- ----------- ----------- Denominator: Weighted average common shares outstanding 61,788,000 64,102,000 58,332,000 63,501,000 ----------- ----------- ----------- ----------- Basic earnings per share $ 0.09 $ 0.15 $ 0.25 $ 0.38 =========== =========== =========== =========== DILUTED EPS COMPUTATION Numerator: Net income applicable to common stock $ 5,816,000 $ 9,525,000 $14,471,000 $24,396,000 ----------- ----------- ----------- ----------- Denominator: Weighted average common shares outstanding 61,788,000 64,102,000 58,332,000 63,501,000 Effect of dilutive securities Stock options 3,728,000 3,722,000 3,724,000 3,601,000 ----------- ----------- ----------- ----------- Diluted weighted average shares outstanding 65,516,000 67,824,000 62,056,000 67,102,000 ----------- ----------- ----------- ----------- Diluted earnings per share $ 0.09 $ 0.14 $ 0.23 $ 0.36 =========== =========== =========== ===========
7 8 MINIMED INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NINE MONTHS ENDED OCTOBER 1, 1999 AND NINE MONTHS ENDED SEPTEMBER 29, 2000 NOTE 4. CONSOLIDATED BALANCE SHEET COMPONENTS Certain balance sheet components are as follows:
DECEMBER 31, SEPTEMBER 29, 1999 2000 --------------- ------------ (UNAUDITED) Inventories: Raw materials .............................................................. $ 9,380,000 $ 16,012,000 Work-in-progress ........................................................... 2,315,000 2,028,000 Finished goods ............................................................. 7,643,000 18,620,000 ------------ ------------ Total ...................................................................... $ 19,338,000 $ 36,660,000 ============ ============ Property, plant and equipment: Land, buildings and improvements .......................................... $ 15,817,000 $ 17,926,000 Machinery and equipment .................................................... 25,963,000 39,734,000 Tooling and molds .......................................................... 3,355,000 6,115,000 Computer software .......................................................... 7,423,000 11,231,000 Furniture and fixtures ..................................................... 8,062,000 14,323,000 ------------ ------------ 60,620,000 89,329,000 Less accumulated depreciation .............................................. (15,989,000) (24,154,000) ------------ ------------ Total ...................................................................... $ 44,631,000 $ 65,175,000 ============ ============ Other assets: Technology license ......................................................... $ 7,094,000 $ 8,556,000 Goodwill ................................................................... 10,606,000 10,220,000 Other ...................................................................... 269,000 253,000 ------------ ------------ Total ...................................................................... $ 17,969,000 $ 19,029,000 ============ ============ Long-term investments: Investment in Trimeris common stock - at fair value ........................ $ 7,412,000 $ 20,830,000 Investment in PDC common stock - at cost ................................... 1,140,000 1,140,000 ------------ ------------ Total ........................................................................ $ 8,552,000 $ 21,970,000 ============ ============
NOTE 5. COMPREHENSIVE INCOME The Company's total comprehensive income is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED OCTOBER 1, SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, 1999 2000 1999 2000 ------------- ------------- ------------- ------------ (UNAUDITED) Net income $ 5,816,000 $ 9,525,000 $ 14,471,000 $ 24,396,000 Other comprehensive income: Foreign currency translation adjustments 42,000 (528,000) (74,000) (587,000) Unrealized holding gain on securities: Unrealized gain on securities 745,000 158,000 1,843,000 14,332,000 Less: reclassification adjustment for gain included in net income -- (204,000) -- (812,000) ------------ ------------ ------------ ------------ Other comprehensive income (loss), before income tax 787,000 (574,000) 1,769,000 12,933,000 Income tax expense related to items of other comprehensive income 283,000 (15,000) 700,000 4,803,000 ------------ ------------ ------------ ------------ Other comprehensive income (loss) 504,000 (559,000) 1,069,000 8,130,000 ------------ ------------ ------------ ------------ Total comprehensive income $ 6,320,000 $ 8,966,000 $ 15,540,000 $ 32,526,000 ============ ============ ============ ============
8 9 MINIMED INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NINE MONTHS ENDED OCTOBER 1, 1999 AND NINE MONTHS ENDED SEPTEMBER 29, 2000 NOTE 6. COMMITMENTS AND CONTINGENCIES Leases -- In May 1999, the Company entered into an agreement to lease up to 28 acres of land located on the campus of California State University, Northridge, where it is constructing a corporate headquarters, research and development and manufacturing facility. The ground lease has an initial term of 40 years with renewal options for up to an additional 40 years. Pursuant to the terms of the ground lease, the Company made payments of $400,000 during 1999 and is committed to average annual payments in future periods of approximately $450,000 plus periodic cost of living adjustments. In May 1999, the Company also entered into a financing transaction pursuant to which it will lease certain buildings constructed on the land described above. The lessors of the buildings originally committed to fund up to a maximum of $65.0 million for the first phase of construction of the buildings. During November 2000, the Company successfully negotiated an increase of this debt arrangement to $80.0 million in order to expand the development of this facility. Under the terms of the financing transaction, a special purpose trust subleases the land, buildings and improvements to the Company. The lease has an initial term of five years, with two one-year renewal options. Under the revised financing arrangement, the Company is committed to annual rent payments under this operating lease ranging from $5.5 million to $6.2 million commencing no later than April 1, 2001. The Company began relocating portions of its operations to the Northridge site late in the third quarter of 2000. Construction on the unfinished buildings at Northridge will continue during the fourth quarter of 2000 and portions of 2001. In connection with these financing transactions, the Company pledged substantially all of its assets as collateral security, and is subject to various affirmative and negative covenants regarding the conduct of its business including restrictions on the payment of dividends and the incurrence of additional debt. These arrangements could adversely affect the Company's ability to acquire additional capital resources or engage in certain strategic transactions. In September 2000, the Company entered into an agreement to lease certain computer software and hardware in conjunction with its implementation of a new enterprise resource planning ("ERP") system. The lessors have agreed to fund up to $16.0 million for this lease. Upon full funding of this lease, the Company will be committed to annual payments not to exceed $4.0 million, depending upon the amounts drawn under this operating lease. Full funding of this lease is not expected until late 2001 with an initial estimated payment of approximately $900,000 under this lease scheduled for the fourth quarter of 2000. Legal Proceedings -- On February 9, 1999, the Company was served with a complaint filed in the Civil District Court For the Parish of Orleans, State of Louisiana, by Diabetes Resources, Inc., which is also known as Insulin Infusion Specialties ("IIS"). The Company and IIS entered into an Educational Dealer Agreement in July, 1997, relating to the distribution of certain MiniMed products by IIS. The Company declined to renew that agreement, pursuant to its terms as of December 31, 1998. IIS is alleging that MiniMed is engaged in unfair competition, breached the agreement, violated applicable trade secret laws and defamed IIS. IIS did not specify the amount of damages it is seeking in its complaint. The Company believes that it has meritorious defenses to IIS's claims. The action was removed to Federal Court, and the Company has filed an answer denying the material allegations, and filed a counterclaim seeking damages for unfair trade practices. The Company has filed an amended counterclaim seeking damages based on IIS's failure to pay amounts due and owing. The Company believes that it has meritorious defenses to the claims asserted by IIS. Trial in the matter is scheduled for September 2001. Discovery in this litigation is continuing. During the normal course of business, the Company may be subject to litigation involving various business matters. Management believes that an adverse outcome of any such known matters would not have a material adverse impact on the Company. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this quarterly report. Some of the information in this quarterly report contains forward-looking statements, including statements relating to anticipated operating results, margins, growth, financial resources, capital requirements, adequacy of the Company's capital resources, trends in spending on research and development, the development of new markets, the development, regulatory approval, manufacture, distribution, and commercial acceptance of new products, future product development efforts including the development of an "artificial pancreas", our manufacture, distribution and commercialization of a new disposable pump, the exercise of an option to purchase certain technologies or paid-up licenses and new applications for our existing product lines are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties which may affect our business and prospects, including changes in economic and market conditions, acceptance of our products by the health care and reimbursement communities, health care legislation and regulation, new developments in diabetes therapy, administrative and regulatory approval and related considerations, competitive developments, maintenance of strategic alliances, and other factors discussed in our filings with the Securities and Exchange Commission. GENERAL Our sales and profits have been generated primarily through the sale of external pumps and related disposable products used to deliver insulin in the intensive management of diabetes. Additionally, through our acquisition of two distribution business, we have broadened our product offerings to include other diabetes supplies and pharmacy products generally used in the treatment of this disease. Product development and manufacturing operations have focused on four product lines: external pumps and related disposables, implantable insulin pumps and continuous glucose monitoring systems. Future development of the external pump and disposable product lines will focus upon improving the existing technology for its current use in diabetes treatment and the utilization of this technology for the treatment of other medical conditions. On September 1, 1998, we sold assets and transferred technology related to our implantable pump program to Medical Research Group, Inc., which we call MRG. MRG was founded by Alfred E. Mann, founder, Chairman, CEO and our largest stockholder. Mr. Mann continues to hold a substantial equity interest in MRG. We have retained exclusive marketing rights to the implantable pump product line for specific medical conditions, including diabetes. Under the arrangements, MiniMed is obligated to purchase minimum numbers of implantable pump units for the initial periods under the contract. Over the next two years, MiniMed is obligated under the contracts to make minimum purchases in the amount of approximately $20.8 million. Maintaining exclusive distribution rights in future periods will require the Company to make minimum purchases subsequent to 2001. We are currently in negotiations with MRG in an effort to revise the terms of our existing agreements with MRG, which may include a delay or elimination of the minimum purchase commitments for implantable pumps, among other potential terms. No assurance can be given that any new arrangement will in fact be entered into or, if entered into, that the terms will be as described or be favorable to us. Sales of continuous glucose monitoring systems commenced in 1999, as we launched a physician version of this product line after receiving regulatory approval in June, 1999. Our continuous glucose monitoring system has been characterized as a first of its kind technology, and full commercialization will be subject to successful implementation of manufacturing, sales, marketing and reimbursement plans. Our long-term goal is to link data obtained from our continuous glucose monitoring systems to our insulin delivery systems and develop an "artificial pancreas," capable of controlling glucose levels in patients without significant patient intervention. During 1999, we entered into two strategic relationships that will affect future product development, manufacturing, sales and marketing efforts, as well as financial performance. In February 1999, we entered into an agreement with Eli Lilly & Co., which we call Lilly giving us a worldwide license to package and sell a new formulation of Lilly's insulin lyspro for use with our programmable insulin infusion pumps. We will offer this insulin to our patients in pre-filled cartridges to be used exclusively in our external programmable insulin infusion pumps. In June 1999, we entered into agreements with a division of Elan Corporation, plc, which we call Elan, to manufacture and market exclusively under our name for insulin delivery a disposable, constant-flow infusion system developed by Elan. Our current plans are to offer this disposable infusion system to patients with Type 2 diabetes, further broadening our potential markets. We will also manufacture this infusion system for Elan and its other licensees for use with a variety of other pharmaceutical compounds. Our ability to market products related to each of these agreements is subject to regulatory approval (including separate regulatory approval of the insulin to be used in connection with the disposable infusion system), the timing and certainty of which are not predictable. 10 11 RESULTS OF OPERATIONS The following table sets forth, for the three and nine month periods ended October 1, 1999, and September 29, 2000, the percentage relationship to net sales of certain items in our consolidated statements of income and the percentage change in the dollar amount of these items on a comparative basis.
PERCENTAGE OF NET SALES --------------------------------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------------- ------------------------------------ OCT. 1, SEPT. 29, % INCREASE OCT. 1, SEPT. 29, % INCREASE 1999 2000 (DECREASE) 1999 2000 (DECREASE) --------- ---------- ----------- --------- -------- ---------- (UNAUDITED) Net sales 100.0% 100.0% 40.3% 100.0% 100.0% 42.8% Cost of sales 32.1 31.1 36.1 32.9 31.8 37.7 ----- ----- ----- ----- ----- ----- Gross profit 67.9 68.9 42.4 67.1 68.2 45.3 Operating expenses: Selling, general and administrative 44.4 41.9 32.4 42.7 42.3 41.4 Research and development 12.4 11.6 31.1 12.9 11.7 29.2 Research and development contract (2.9) -- -- (3.2) -- -- ----- ----- ----- ----- ----- ----- Total operating expenses 53.9 53.5 39.3 52.4 54.0 47.0 ----- ----- ----- ----- ----- ----- Operating income 14.0% 15.4% 54.1% 14.7% 14.2% 39.2% ===== ===== ===== ===== ===== =====
The following table sets forth domestic and international net sales and gross profits for our significant business activities for the three and nine month periods ended October 1, 1999 and September 29, 2000.
DOLLARS IN THOUSANDS % OF NET SALES THREE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED ------------------------ ----------------------- ------------------- ------------------- OCT. 1, SEPT. 29, OCT. 1, SEPT. 29, OCT. 1, SEPT. 29, OCT. 1, SEPT. 29, 1999 2000 1999 2000 1999 2000 1999 2000 --------- --------- --------- ---------- --------- -------- -------- -------- (UNAUDITED) NET SALES: External pumps and related disposables: External pumps: Domestic $ 25,892 $ 34,851 $ 70,311 $ 101,561 50.4% 48.3% 49.7% 50.3% International 2,026 2,329 6,088 7,546 3.9 3.2 4.3 3.7 --------- --------- --------- --------- ----- ----- ----- ----- Subtotal 27,918 37,180 76,399 109,107 54.3 51.5 54.0 54.0 Disposable products: Domestic 18,335 28,052 50,173 72,796 35.7 38.9 35.5 36.1 International 1,295 2,564 4,218 7,065 2.5 3.6 3.0 3.5 --------- --------- --------- --------- ----- ----- ----- ----- Subtotal 19,630 30,616 54,391 79,861 38.2 42.5 38.5 39.6 Total external pumps and related disposable products 47,548 67,796 130,790 188,968 92.5 94.0 92.5 93.6 Implantable insulin pumps 393 176 945 726 0.8 0.2 0.7 0.4 Other diabetes supplies 2,510 2,726 6,405 7,846 4.9 3.8 4.5 3.9 Glucose monitoring systems -- 817 -- 2,306 -- 1.1 -- 1.1 Pharmacy products 949 623 3,254 2,041 1.8 0.9 2.3 1.0 --------- --------- --------- --------- ----- ----- ----- ----- Total net sales $ 51,400 $ 72,138 $ 141,394 $ 201,887 100.0% 100.0% 100.0% 100.0% ========= ========= ========= ========= ===== ===== ===== ===== GROSS PROFIT: External pumps and related disposables: External pumps: Domestic $ 21,387 $ 28,024 $ 57,228 $ 81,113 41.6% 38.8% 40.5% 40.2% International 1,468 1,069 4,033 4,552 2.9 1.5 2.9 2.3 --------- --------- --------- --------- ----- ----- ----- ----- Subtotal 22,855 29,093 61,261 85,665 44.5 40.3 43.4 42.5 Disposable products: Domestic 10,590 17,871 28,993 44,480 20.6 24.8 20.5 22.0 International 532 1,497 2,049 4,090 1.0 2.1 1.4 2.0 --------- --------- --------- --------- ----- ----- ----- ----- Subtotal 11,122 19,368 31,042 48,570 21.6 26.9 21.9 24.0 Total external pumps and related disposable products 33,977 48,461 92,303 134,235 66.1 67.2 65.3 66.5 Implantable insulin pumps (357) (351) (718) (740) (0.7) (0.5) (0.5) (0.4) Other diabetes supplies 1,267 1,042 2,514 2,876 2.5 1.5 1.8 1.4 Glucose monitoring systems -- 353 -- 973 -- 0.5 -- 0.5 Pharmacy products 11 174 675 338 -- 0.2 0.5 0.2 --------- --------- --------- --------- ----- ----- ----- ----- Total gross profit $ 34,898 $ 49,679 $ 94,774 $ 137,682 67.9% 68.9% 67.1% 68.2% ========= ========= ========= ========= ===== ===== ===== =====
NET SALES Net sales increased 40.3% during the three months ended September 29, 2000 over the three months ended October 1, 1999 to $72,138,000 from $51,400,000, and increased 42.8% to $201,887,000 in the first nine months of 2000 from $141,394,000 for the first nine months of 1999. This sales growth is principally the result of an increase in the sales of external pumps and related disposable products. Sales of external pumps grew 33.2% during the third quarter of 2000 with external pump domestic sales growing 34.6% and 11 12 external pump international sales increasing 15.0%. For the nine months ended September 29, 2000 sales of external pumps grew 42.8% with external pump domestic sales growing 44.4% and external pump international sales increasing 23.9%. The domestic increase is primarily related to an increase of 42.6% in unit volume during the nine months ended September 29, 2000 over the comparable period in 1999 combined with a slight increase in average selling prices on external pump sales processed through our traditional sales models. The domestic price increase was a function of our continued efforts to increase the percentage of pump sales processed directly with third-party payors rather than selling pumps at larger discounts to independent dealers and market acceptance of price increases on our pumps related to technological enhancements introduced during the third quarter of 1999. However, market acceptance of this price increase has been slower than acceptance of our previous price increases. Commencing in the second quarter of 2000, we began selling our programmable insulin pumps to qualified Medicare beneficiaries in accordance with the approval granted by Health Care Financing Administration in 1999. We expect shipments of external pumps to patients who have Medicare as their primary source of reimbursement to adversely impact future external pump average sales prices, as revenue for the Medicare patients is recognized over a payment period ranging from 13 to 15 months. The patient also has the right to return the pump at any time during the first 10 months of the payment period. This is contrasted to our traditional sales model, where MiniMed recognizes income at the point of shipment to the patient and when the patient does not have an inherent right of return. During the first nine months of 2000 approximately 3.3% of our domestic external pump shipments were billed under the Medicare program. If the Medicare pumps shipped during the first nine months of 2000 had been reimbursed in our more traditional models, revenues would have increased by approximately $2.6 million with a corresponding increase in gross profits and operating results. The financial impact to our operating results of the Medicare reimbursement program is more pronounced as we start up Medicare sales activity. Over time, assuming Medicare sales volumes remain relatively consistent, the impact of the Medicare reimbursement program upon our short-term operations should diminish. The increase in external pump international sales was unit volume driven, as realized international average sales prices were slightly lower during the first nine months of 2000 compared to the first nine months of 1999. International average sales prices of external pumps have decreased during 2000 due to increased sales in emerging foreign markets where independent dealers are utilized, compared to the prices realized in the markets where we have direct operations. Sales of disposable products increased 56.0% during the third quarter of 2000 over the third quarter of 1999 and 46.8% during the nine months ended September 29, 2000 over the comparable period in 1999. Disposable products domestic sales grew 53.0% during the third quarter of 2000 and 45.1% during the first nine months of 2000. International sales of these products increased 98.0% during the third quarter of 2000 and 67.5% during the first nine months of 2000. Similar to our external pumps, this increase in sales of disposable products was primarily volume driven in both the domestic and international markets combined with an increase in domestic average sales prices resulting from processing more sales directly with third-party payors, as contrasted to selling disposable products at larger discounts to independent dealers. We also experienced an increase in international average selling prices on disposable products due to a shift in our sales product mix to relatively higher priced infusion sets. Sales of implantable pumps decreased 55.2% or $217,000 during the third quarter of 2000 compared to the third quarter of 1999. Sales of these products decreased by 23.2% or $219,000 during the first nine months of 2000 compared to the first nine months of 1999. Sales activity of this product line remains limited due to the lack of required regulatory approvals, and to date, sales of implantable pumps have been generated mainly in connection with clinical trials and compassionate use of the pumps for patients with particularly difficult cases. The implantable pump and the special insulin remain subject to regulatory review and approval in the United States, while the implantable pump has been approved for commercial sale in the European Union, which we call the EU. No assurance can be given as to when any of these approvals will be received, if at all. Sales of other diabetes supplies increased by 8.6% or $216,000 from the third quarter of 1999 to the third quarter of 2000, while sales of these products for the first nine months of 2000 increased by 22.5% or $1,441,000 over the first nine months of 1999. This increase resulted from overall market growth, the continuation of internal efforts to market these products to our external pump patient base and a shift in our business from lower paying Medicare patients to more private insurance patients. Pharmacy products sales decreased by 34.4% or $326,000 from the third quarter of 1999 to the third quarter of 2000, while sales of these products for the first nine months of 2000 decreased by 37.3% or $1,213,000 compared to the first nine months of 1999. The decrease in pharmacy sales is a further continuation of our narrowing and restructuring of the pharmacy operations to better support our future business activities. Sales of continuous glucose monitoring systems were $817,000 during the third quarter of 2000 and $2,306,000 during the first nine months of 2000. 12 13 OPERATING RESULTS Cost of Sales and Gross Profits--Cost of sales increased 36.1% during the three months ended September 29, 2000 over the three months ended October 1, 1999 to $22,459,000 from $16,502,000, and increased 37.7% to $64,205,000 from $46,620,000 for the nine months ended September 29, 2000 as compared to the nine months ended October 1, 1999. As a percentage of net sales, cost of sales in the 2000 third quarter decreased to 31.1% from 32.1% in the comparable period of 1999, while cost of sales as a percentage of net sales for the first nine months of 2000 decreased to 31.8% from 32.9% for the comparable period of 1999. Our overall improvement in gross margin percentage during the third quarter of 2000 was achieved through an increase in margins realized on disposable products that was partially offset by lower margins realized on external pumps, implantable pumps and other diabetes supplies product lines. For the nine months ended September 29, 2000, our overall improvement in gross margin percentage was due to increased margins on disposable products that was partially offset by lower margins realized on external pumps, implantable pumps, other diabetes supplies and pharmacy products product lines. Gross margins realized on disposable products increased during 2000 due to the higher average selling prices that we attained on these products in both the domestic and international markets combined with lower product costs achieved through volume discounts from several contract manufacturers. External pump gross margins decreased during the 2000 third quarter due to the impact of the Medicare reimbursement program described above. Other diabetes supplies gross margins as a percentage of other diabetes supplies revenues decreased during both the three months and nine months ended September 29, 2000 compared to the three months and nine months ended October 1, 1999. This decline in other diabetes supplies margins was due to significant one-time volume rebates offered by several vendors during the third quarter of 1999 that resulted in unusually high gross margins on these products during that period. During 2000, we continued to receive on-going volume rebates at levels that are in line with industry averages from several vendors of these products. Gross margins on pharmacy products continue to decrease as we restructure this business. Operating Expenses--Selling, general and administrative expenses increased 32.4% during the three months ended September 29, 2000 as compared to the three months ended October 1, 1999 to $30,208,000 from $22,809,000. For the nine months ended September 29, 2000, selling, general and administrative expenses grew 41.4% to $85,312,000 from $60,344,000 for the nine months ended October 1, 1999. As a percentage of net sales, these expenses decreased to 41.9% during the third quarter of 2000 and to 42.3% during the first nine months of 2000 compared to 44.4% during the third quarter of 1999 and to 42.7% for the first nine months of 1999. These expenses have increased on an overall basis primarily due to our continued spending to support our worldwide sales growth. These increases related to the continued expansion of our direct sales organization through the first quarter of 2000 with the addition of new sales representatives, continued development of our managed care marketing efforts and an expanding commitment to field education and training. We also increased international selling and marketing expenditures to expand our overall international presence, establishing a new European headquarters in Belgium, and in developing new international markets. General and administrative expenses increased to support our growth, primarily in the areas of reimbursement and information systems. Research and development expenses grew 31.1% during the third quarter of 2000 over the third quarter of 1999 to $8,381,000 from $6,394,000, with research and development expenses increasing 29.2% to $23,599,000 for the first nine months of 2000 compared to $18,262,000 for the first nine months of 1999. As a percentage of sales, research and development expenses decreased to 11.6% during the third quarter of 2000 from 12.4% during the comparable period in 1999, and decreased to 11.7% of net sales for the first nine months of 2000 compared to 12.9% during the first nine months of 1999. The 2000 increase in research and development costs resulted from greater resources directed toward the development of continuous glucose monitoring systems and the related pilot manufacturing operations, development efforts related to future generations of external pumps, expansion of the data communication capabilities of our products, support of efforts for the use of our core technology in the treatment of other medical conditions, and product development efforts related to our pre-filled insulin cartridge program and our disposable infusion systems. Research and development expenses will continue to rise during the remainder of 2000, as we plan to introduce several new products over the next two years, including the consumer version of our continuous glucose monitoring system, new generations of external insulin pumps and related disposable products (including pre-filled insulin cartridges), expansion of our core technology for the treatment of other medical conditions and our disposable infusion system, both for the treatment of Type 2 diabetes and under our commitment to supply this product to Elan and its licensees. During the 1998 first quarter, we signed a research and development contract with American Medical Instruments, Inc., a member of The Marmon Group of Companies, which we call AMI. We completed our obligation under the agreement in 1999 and received a total of $12.0 million to fund these research projects. Subject to payment of royalties to AMI, we have the right to sell products utilizing the technology developed pursuant to the agreement on a world-wide basis, with the exception of Japan. We also have the right to purchase the technologies developed at prices ranging from an aggregate of $13.5 million to approximately $18.0 million for the period 13 14 through April 30, 2002. We anticipate that we will pay approximately $9.0 million to the Marmon group to reacquire part of the technologies during the fourth quarter of 2000, and that this technology will be recorded as an intangible asset on our balance sheet. During the first nine months of 1999 we recorded $4.5 million from this research and development contract as a reduction of operating expenses, as costs related to completion of the contractual obligations were included in research and development expense. Other--During the three and nine months ended September 29, 2000 and during the three and nine months ended October 1, 1999, other income consisted primarily of interest income generated from our cash, cash equivalents, and short-term investment balances. These amounts increased due to additional cash from our 1999 offering of common stock which raised $140,588,000 in net proceeds to us. Our effective income tax rate during the nine months ended September 29, 2000 and October 1, 1999 has been computed giving consideration to the pretax earnings and losses applicable to our foreign and domestic tax jurisdictions and various income tax credits for which we are eligible. Inflation has not significantly impacted our results of operations for the past two years. LIQUIDITY AND CAPITAL RESOURCES We generated cash from operations of $20,118,000 during the nine months ended September 29, 2000 compared to cash generated from operations of $3,499,000 during the nine months ended October 1, 1999. Cash flow from operations improved during the first nine months of 2000 compared to the first nine months of 1999 primarily due to increased overall profitability combined with the tax benefits from the exercise of non-qualified stock options and an increase in trade accounts payable. These improvements in the cash flows generated during the first nine months of 2000 were partially offset by increased expenditures for inventories to increase safety stock levels in anticipation of our move to our new corporate headquarters and manufacturing facility in Northridge and to prepare for historically higher sales volumes experienced in the fourth quarter. Additionally, cash expenditures on accrued sales commissions increased during the nine months ended September 29, 2000 as we paid out all of 1999 accrued bonuses and sales commissions during the first quarter of 2000. The increase in capital expenditures during the first nine months of 2000 to $28,603,000 compared to $14,905,000 spent during the comparable period in 1999, resulted primarily from building glucose sensor manufacturing capacity for our current and future product lines, as well as research and development engineering equipment, continued enhancement of our information systems and furniture and fixtures for our new facility. We anticipate that future capital expenditures will continue to increase at an even faster rate in support of our new product activities and to build the infrastructure to accommodate continuing growth. In 1999, we entered into a financing transaction pursuant to which we are constructing a corporate headquarters, research and development and manufacturing facility on the campus of California State University, Northridge, the first phase of which was being financed with a $65.0 million credit transaction. During October 2000, we negotiated with the lessors to increase this financing arrangement to $80.0 million to further expand this facility. The transaction was structured as a synthetic lease financing for the facility development and, in a related transaction, we obtained a revolving line of credit to borrow up to $15.0 million. Under the terms of the financing, a special purpose trust subleases the land to us and leases the improvements to us. In connection with these financing transactions, we pledged substantially all of our assets as collateral security and are subject to various affirmative and negative covenants regarding the conduct of our business including restrictions on the payment of dividends and the incurrence of additional debt. These arrangements could adversely affect our ability to acquire additional capital resources or engage in certain strategic transactions. The synthetic lease has an initial term of five years, with two one-year renewal options. The underlying ground lease has a term of 40 years with renewal options for up to an additional 40 years. Under these arrangements, we are committed to annual payments ranging from $5.5 million to $6.2 million commencing no later than April 1, 2001. Additionally, we are committed to average annual payments in future periods of approximately $450,000 plus periodic cost of living adjustments, per the terms of the ground lease for the Northridge property. When the synthetic lease terminates, we will be able to assume the obligations of the special purpose trust as the lessee under the ground lease if we exercise our option to purchase. In September 2000, the Company entered into an agreement to lease certain computer software and hardware in conjunction with its implementation of a new enterprise resource planning ("ERP") system. The lessors have agreed to fund up to $16.0 million under this operating lease. Upon full funding of this lease, the Company will be committed to annual payments not to exceed $4.0 million, depending upon the amounts drawn under this operating lease. Full funding of this lease is not expected until late 2001 with an initial estimated payment of $900,000 under this lease scheduled for the fourth quarter of 2000. As part of our transactions with MRG, as described above, we have entered into an agreement acquiring an option to purchase the exclusive worldwide marketing rights to a long-term glucose sensor and related products being developed by MRG for $30.0 million. The option must be exercised within 90 days after a fully implanted version of the sensor is first successfully implanted by MRG in human patients in a clinical trial performed in 14 15 accordance with applicable regulatory requirements. The first such implant occurred in October 2000 and if the data obtained from this patient meets the criteria specified in our contract, it is our intention to exercise this option in the first quarter of fiscal 2001. If we exercise such option, we will then be responsible for funding 50% of the expenses relating to the clinical trials for this device until worldwide regulatory approval is obtained. Additionally, we have entered into a distribution and license agreement with MRG providing us with the exclusive rights to market and distribute the implantable pump for specified applications (including the delivery of compounds to treat diabetes). We are required to purchase minimum quantities of implantable pump products from MRG through 2001. Future minimum mandatory purchases for implantable pump units from MRG based upon current prices are: Through approximately December 31, 2000... $ 9,568,000 2001...................................... 11,280,000 ------------- Total..................................... $ 20,848,000 =============
After 2001, we are required to purchase minimum quantities of implantable pump products to retain exclusive marketing rights for this product. The implantable pump and related insulin have not been approved for commercial distribution in the United States. The implantable pump has been approved for commercial distribution in the EU, but sales have been and will continue to be limited until the special insulin used with the pump is approved. As a result of the delay in these regulatory approvals and other factors, the minimum purchase commitments substantially exceed the amount of sales that will be generated on this product line in 2000 or 2001. We have accrued $3,500,000 as of December 31, 1999 and September 29, 2000 related to implantable pump purchase commitment obligations in excess of expected usage. Depending on the outcome of current negotiations with MRG (See Item 5. Other Information), we may record charges ranging up to $20.0 million in future periods, net of current reserves, for this contractual provision in the event that sales for this product do not exceed the mandatory purchase commitment. We are involved in certain litigation, which is incidental to our business, the financial impact of which is uncertain (see Notes to Consolidated Financial Statements). Management believes that our current level of cash and cash equivalents and short-term investments will be sufficient to meet our needs for working capital and capital expenditures for the next 24 to 36 months. The requirements for additional capital and working capital, however, are subject to change and will depend upon numerous factors, including: o the level of capital expenditures, especially relating to the new corporate headquarters and the development of our new insulin cartridge and disposable pump businesses; o research and development activities and results; o competitive and technological developments; o health care reimbursement trends; and o the availability for our acquisition of complementary additional distribution channels, products, and technologies. During future periods, we may require significant amounts of cash to pursue opportunities and promote continued growth and expansion. 15 16 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We invest excess cash in short-term debt securities that are classified as available for sale. Two of the main risks associated with these investments are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of the debt securities. Fluctuations in interest rates should not have a material effect on our financial statements because of the short-term nature of the securities in which we invest. Credit risk refers to the possibility that the issuer of the debt securities will not be able to make principal and interest payments. We have limited our investments to investment grade or comparable securities and have not experienced any losses on our investments to date due to credit risk. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION We are currently in negotiations with MRG in an effort to revise the terms of our existing agreements. The definitive terms of any new arrangement are uncertain at this time, but the negotiations to date have included discussions of a transaction which may include a delay or elimination of the minimum purchase commitments on implantable pumps, an equity investment by us in MRG to provide funding for their operations and further product development efforts and an extension or delay of our option period on the marketing rights for the MRG long-term glucose sensor. In the event that we do not reach an agreement with MRG for a modification of the minimum purchase commitments for implantable pumps, we may need to record charges of up to $20.0 million, net of current reserves, for these contractual provisions in the event that sales for this product do not exceed the mandatory purchase commitment. Although we are in discussions with MRG regarding potential modifications to our existing contractual arrangements, no assurance can be given that any new arrangement will in fact be entered into or, if entered into, that the terms will be as described or be favorable to us. 16 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Exhibit ----------- ------- 3(ii).1 Amendment to Bylaws of MiniMed Inc. 3(ii).2 Amendment to Bylaws of MiniMed Inc. 10.1 First Amendment to Participation Agreement and Related Documents among MiniMed Development Corp. as Construction Agent and Lessee, MiniMed Inc. and First Security Bank, N.A. as Trustee, et. Al. dated October 30, 2000. 27.1 Financial Data Schedule (b) Reports on Form 8-K Current Report on Form 8-K filed July 19, 2000, announcing the declaration of a stock split in the form of a stock dividend and the financial results of operations for the second quarter of 2000. 17 18 SIGNATURE 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. MiniMed Inc. Date: November 13, 2000 /s/ KEVIN R. SAYER ------------------------------ Kevin R. Sayer Senior Vice President, Finance & Chief Financial Officer 18 19 INDEX TO EXHIBITS Exhibit No. Description ----------- ----------- 3(ii).1 Amendment to Bylaws of MiniMed Inc. 3(ii).2 Amendment to Bylaws of MiniMed Inc. 10.1 First Amendment to Participation Agreement and Related Documents among MiniMed Development Corp. as Construction Agent and Lessee, MiniMed Inc. and First Security Bank, N.A. as Trustee, et. Al. dated October 30, 2000. 27.1 Financial Data Schedule 19 EX-3.(II).1 2 v67014ex3-ii_1.txt EX-3(II).1 1 EXHIBIT 3(II).1 MINIMED INC. AMENDMENT TO BYLAWS ADOPTED JULY, 2000 SECTION 3.02 Number; Election and Terms. Except as otherwise provided for or fixed pursuant to the provisions of Article IV of the Restated Certificate of Incorporation of the Corporation and until otherwise fixed by the Board of Directors pursuant to the Restated Certificate of Incorporation, the Board of Directors shall consist of nine (9) persons. Directors need not be stockholders. Other than with respect to those directors elected by the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article IV of the Restated Certificate of Incorporation, there shall be three classes of directors (each, a "Class"), as equal in number as possible, known as Class 1, Class 2 and Class 3. The terms of office for the initial Class 1, Class 2 and Class 3 directors shall be as follows: the term of office of the initial Class 1 directors will expire at the 2000 annual meeting of stockholders; the term of office of the initial Class 2 directors will expire at the 2001 annual meeting of stockholders; and the term of office of the initial Class 3 directors will expire at the 2002 annual meeting of stockholders. At each annual meeting of stockholders following such initial classification and election, each director elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after his election unless, by intervening changes in the authorized number of directors, the Board shall designate the vacant directorship as a directorship of another Class in order more nearly to achieve equality in the number of directors among Classes. Notwithstanding the foregoing, each of the directors shall hold office until his successor shall have been duly elected and shall qualify or until he shall die, resign or have been removed in the manner hereafter provided. EX-3.(II).2 3 v67014ex3-ii_2.txt EXHIBIT 3(II).2 1 EXHIBIT 3(ii).2 MINIMED INC. AMENDMENT TO BYLAWS ADOPTED AUGUST 16, 2000 Section 4.07. Office of the Chief Executive. The Office of the Chief Executive of the Corporation shall consist of Chairman of the Board of Directors and the President/Chief Operating Officer of the Corporation. Such officers shall, together, be the chief executive officer of the corporation and shall have, subject to the control of the Board, general and active supervision and management over officers, assistants, agents and employees of the Corporation. Section 4.08. The Chairman of the Board of Directors. The Chairman of the Board of Directors of the Corporation shall preside at all meetings of the Board of Directors and all meetings of stockholders of the Corporation. In the absence of the Chairman of the Board of Directors, the Chairman may designate a person to serve in such capacity, or the Board of Directors may designate a person to serve in such capacity for purposes of any such meeting. The remainder of the numerical references for Article IV shall be adjusted as appropriate. EX-10.1 4 v67014ex10-1.txt EXHIBIT 10.1 1 Exhibit 10.1 FIRST AMENDMENT TO PARTICIPATION AGREEMENT AND RELATED DOCUMENTS dated as of October 30, 2000 among MINIMED DEVELOPMENT CORP. as the Construction Agent and as the Lessee, MINIMED INC. AND CERTAIN OF ITS SUBSIDIARIES FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the MiniMed Real Estate Trust 1999-1, THE HOLDERS OF CERTIFICATES ISSUED BY THE AFOREMENTIONED TRUST, as the Certificateholders, THE LENDERS PARTY HERETO, as the Lenders, THE REVOLVING CREDIT LENDERS PARTY HERETO, as the Revolving Credit Lenders, THE BANK OF NOVA SCOTIA, as Documentation Agent, ING BARINGS LLC (formerly ING Baring Furman Selz LLC) as Syndication Agent, and ING (U.S.) CAPITAL LLC, as the Agent for the Lenders and the Revolving Credit Lenders and as the Collateral Agent for the Owner Trustee, the Lenders, the Revolving Credit Lenders, and the Certificateholders to the extent of their interests 2 FIRST AMENDMENT TO PARTICIPATION AGREEMENT AND RELATED DOCUMENTS THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT AND RELATED DOCUMENTS (the "Amendment"), dated as of October 30, 2000, among MINIMED DEVELOPMENT CORP., a Delaware corporation (the "Lessee" or the "Construction Agent"); the various parties hereto as guarantors (individually, a "Guarantor" and collectively, the "Guarantors"); FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually (in its individual capacity, the "Trust Company"), but solely as the Owner Trustee under the MiniMed Real Estate Trust 1999-1 (in such capacity the "Owner Trustee" or the "Lessor"); the various parties hereto as holders of certificates issued by the Owner Trustee with respect to the MiniMed Real Estate Trust 1999-1 (individually, a "Certificateholder" and collectively, the "Certificateholders"); the various parties hereto as Lenders (individually, a "Lender" and collectively, the "Lenders"); the various parties hereto as Revolving Credit Lenders (individually a "Revolving Credit Lender" and collectively the "Revolving Credit Lenders"), ING BARING LLC (formerly ING Baring Furman Selz LLC), a Delaware limited liability company, as syndication agent (the "Syndication Agent"), and ING (U.S.) CAPITAL LLC, a Delaware limited liability company, as the agent for the Lenders and the Revolving Credit Lenders (in such capacities, the "Agent") and as the collateral agent for the Owner Trustee, Lenders, Revolving Credit Lenders and Certificateholders, to the extent of their interests (in such capacity, the "Collateral Agent"). W I T N E S S E T H: RECITALS: A. The Lessee, Construction Agent, Guarantors, Trust Company, Owner Trustee, Lessor, Certificateholders, Lenders, Revolving Credit Lenders, Syndication Agent, Agent and the Collateral Agent have entered into a Participation Agreement dated as of May 18, 1999 (as heretofore amended, restated, modified or otherwise supplemented, the "Participation Agreement"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in Appendix A to the Participation Agreement. B. The Lessee, Construction Agent and Guarantors desire to amend the Participation Agreement and those Related Documents necessary to (i) increase the Total Funding Commitments, and (ii) permit specified additional capital expenditures in accordance with the terms herein set forth, and the Trust Company, Owner Trustee, Lessor, Certificateholders, Lenders, Revolving Lenders, Syndication Agent, Agent and Collateral Agent have agreed to so amend the Participation Agreement and such Related Documents on the terms and conditions set forth herein. 3 NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Amendments to the Participation Agreement. A. Appendix A to the Participation Agreement is hereby amended by replacing the definitions of "Certificateholder Commitment", "Consolidated Capital Expenditures", "Construction Period Termination Date", "Rent Commencement Date", "Total Certificateholder Commitment", "Total Lender Commitment", "Total Tranche A Commitment" and "Total Tranche B Commitment" with the following: "Certificateholder Commitment" shall mean, as to each Certificateholder, the obligation of such Certificateholder to make Certificateholder Advances pursuant to Section 3.01 of the Trust Agreement, in an aggregate amount up to the amount set forth opposite such Certificateholder's name on Schedule I of the Trust Agreement under the caption "Certificateholder Commitment" or in an assignment agreement executed and delivered by such Certificateholder pursuant to Section 11.08 of the Trust Agreement (as the same may be reduced or increased pursuant to Section 3.05B of the Trust Agreement). "Consolidated Capital Expenditures" shall mean, for any period, without duplication, the sum of (a) the gross dollar amount of additions during such period to property, plant, equipment and other fixed assets of MiniMed and its Subsidiaries, including those additions made in the ordinary course of business, plus (b) the aggregate amount of Capitalized Lease Obligations incurred during such period by MiniMed and its Subsidiaries, provided, however, that for purposes of calculating Consolidated Capital Expenditures for any period, Consolidated Capital Expenditures shall exclude Expansion Capital Expenditures. "Construction Period Termination Date" shall mean March 31, 2001. "Rent Commencement Date" shall mean the earlier of (a) Completion Date, or (b) March 31, 2001. "Total Certificateholder Commitment" shall mean, at any time, an amount equal to the aggregate amount of Certificateholder Commitments at such time. The Total Certificateholder Commitment is subject to reduction and increase pursuant to Section 3.05B of the Trust Agreement. As of the First Amendment Effective Date, the Total Certificateholder Commitment is $2,400,000. "Total Lender Commitment" shall mean, at any time an amount equal to the aggregate amount of Tranche A Commitments and Tranche B Commitments of all Lenders at such time. The Total Lender Commitment is subject to reduction 2 4 and to increase pursuant to the Credit Agreement. As of the First Amendment Effective Date, the Total Lender Commitment is $77,600,000. "Total Tranche A Commitment" shall mean, at any time, an amount equal to the aggregate amount of the Tranche A Commitments of all of the Tranche A Lenders at such time. The Total Tranche A Commitment is subject to reduction pursuant to Sections 4.05(a) and 9.02 of the Credit Agreement and to increase pursuant to Section 4.05(b) of the Credit Agreement. As of the First Amendment Effective Date, the Total Tranche A Commitment is $65,600,000. "Total Tranche B Commitment" shall mean, at any time, an amount equal to the aggregate amount of the Tranche B Commitments of all of the Tranche B Lenders at such time. The Total Tranche B Commitment is subject to reduction pursuant to Sections 4.05(a) and 9.02 of the Credit Agreement and to increase pursuant to Section 4.05(b) of the Credit Agreement. As of the First Amendment Effective Date, the Total Tranche B Commitment is $12,000,000. B. Appendix A to the Participation Agreement is hereby amended by inserting in alphabetical order the following new definitions: "Expansion Capital Expenditures" shall mean any Consolidated Capital Expenditures made during the Expansion Period and described on Schedule 2 to the Participation Agreement in an aggregate amount in any Fiscal Quarter not exceeding the respective "Total" amount for such Fiscal Quarter set forth on Schedule 2 to the Participation Agreement; provided however that the amount of Expansion Capital Expenditures permitted in any Fiscal Quarter during the Expansion Period in excess of Expansion Capital Expenditures made during such Fiscal Quarter shall be added to the amount of Expansion Capital Expenditures permitted to be made in any immediately succeeding Fiscal Quarter during the Expansion Period. For the avoidance of doubt, Consolidated Capital Expenditures made for any of the purposes (i.e., line items) described on Schedule 2 to the Participation Agreement up to the "Total" amount for any Fiscal Quarter shall constitute Expansion Capital Expenditures notwithstanding that the aggregate amount of such Consolidated Capital Expenditures for any specified purpose (i.e., line item) exceeds the amount set forth on Schedule 2 to the Participation Agreement for such purpose (i.e., line item). "Expansion Period" shall mean the period commencing on the first day of the third Fiscal Quarter of the 2000 Fiscal Year and ending on the last day of the 2001 Fiscal Year. "First Amendment" shall mean First Amendment to Participation Agreement and Related Documents, dated as of October 30, 2000, among the 3 5 Lessee, the Construction Agent, the Guarantors, the Trust Company, the Owner Trustee and Lessor, the Certificateholders, the Lenders, the Revolving Credit Lenders, the Syndication Agent, the Agent and the Collateral Agent. "First Amendment Effective Date" shall mean the "Amendment Effective Date" as such term is defined in Section 6 of the First Amendment. "First Amendment Fee Letter" shall mean the letter agreement, dated as of October 30, 2000, among the Lessee, the Parent Guarantor and the Collateral Agent. C. The Participation Agreement is hereby amended (i) by replacing Schedule 1 thereto in its entirety with Schedule 1 attached to this Amendment, (ii) by inserting Schedule 2 attached to this Amendment as Schedule 2 to the Participation Agreement, and (iii) by replacing Exhibit I to the Participation Agreement in its entirety with Exhibit I attached to this Amendment. SECTION 2. Amendment to the Trust Agreement. The Trust Agreement is hereby amended by replacing Schedule I thereto in its entirety with Schedule I attached to this Amendment. SECTION 3. Amendment to the Credit Agreement. The Credit Agreement is hereby amended by replacing the Tranche A Commitment, Tranche A Commitment Percentage, Tranche B Commitment and Tranche B Commitment Percentage of each Lender listed on the signature pages thereto with the respective Tranche A Commitment, Tranche A Commitment Percentage, Tranche B Commitment and Tranche B Commitment Percentage of such Lender listed on the signature pages to this Amendment. SECTION 4. Continuing Effectiveness of Participation Agreement and other Related Documents. The Participation Agreement and each of the other Related Documents shall remain in full force and effect in accordance with their respective terms, except as expressly amended or modified by this Amendment. Without limitation to the foregoing, (i) the Parent Guarantor hereby consents to the terms and provisions set forth in this Amendment and agrees and reaffirms that the Parent Guaranty will continue in full force and effect in accordance with its terms, except as expressly amended by this Amendment, (ii) each of the Subsidiary Guarantors consents to the terms and provisions set forth in this Amendment and agrees and reaffirms that the Subsidiary Guaranty will continue in full force and effect in accordance with its terms, except as expressly amended by this Amendment, (iii) the Lessee hereby consents to the terms and provisions set forth in this Amendment and agrees and reaffirms that the Master Lease will continue in full force and effect in accordance with its terms, except as expressly amended by this Amendment, and (iv) each of the parties to this Amendment acknowledges and agrees that, upon effectiveness of this Amendment and from and after the date thereof, each reference in any Related Document to the Participation Agreement (or Appendix A thereto), the Trust Agreement, the Credit Agreement, the Revolving Credit Agreement, the Master Lease and each other Related 4 6 Document shall mean and be a reference to the Participation Agreement (or Appendix A thereto), the Trust Agreement, the Credit Agreement, the Master Lease and each such other Related Document, in each case as amended by this Amendment. SECTION 5. Cost and Expenses. The Construction Agent, Lessee, Parent Guarantor and Subsidiary Guarantors each agree to pay all out-of-pocket expenses of the Collateral Agent for the negotiation, preparation, execution and delivery of this Amendment and all documents executed in connection therewith (including fees and expenses of counsel to the Collateral Agent). SECTION 6. Conditions Precedent to Effectiveness. This Amendment shall become effective upon the satisfaction of each of the conditions precedent set forth in this Section 6 (the date on which such conditions are satisfied shall be the "Amendment Effective Date"): A. The Collateral Agent shall have received, in form and substance acceptable to the Collateral Agent, an original counterpart of this Amendment duly executed and delivered by each of the parties hereto; B. The Collateral Agent shall have received, in form and substance acceptable to the Collateral Agent, new Notes and Certificates, in each case duly executed and delivered by the Trustee and reflecting the Tranche A Commitment, Tranche B Commitment and Certificateholder Commitment of each Lender and Certificateholder, as modified by this Amendment; C. The Collateral Agent shall have received, in form and substance acceptable to the Collateral Agent, (i) such amendments to the Security Documents, including, without limitation, the Deed of Trust, (ii) such endorsements to leasehold title and mortgagee title insurance policies delivered pursuant to Section 5.3 of the Participation Agreement or otherwise on the Effective Date as the Collateral Agent shall reasonably require in connection with the modification of the Commitments and Commitment Percentages of the Lenders and the Certificateholders pursuant to this Amendment and (iii) the Lessee and the Parent Guarantor shall have paid all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration or any and all such amendments to the satisfaction of the Collateral Agent; D. The Collateral Agent shall have received in form and substance acceptable to the Collateral Agent, a duly executed counterpart of the First Amendment Fee Letter, and the Lessee shall have paid or caused to be paid to the Collateral Agent, for the account of the Lenders and Certificateholders, all fees payable thereunder on the Amendment Effective Date; 5 7 E. Each of the representations and warranties set forth in the Participation Agreement and in each of the other Related Documents and each certificate delivered pursuant to any Related Document (including without limitation the Incorporated Representations and Warranties) shall be true and correct on and as of the Effective Date; F. The Collateral Agent shall have received (i) a certificate of the Secretary, an Assistant Secretary, Trust Officer or Vice President of the Trust Company in such other form as is acceptable to the Collateral Agent, attaching and certifying as to (A) the signing resolutions duly authorizing the execution, delivery and performance by the Lessor of each of the Related Documents to which it is or will be a party, (B) its articles of association or other equivalent charter documents and its by-laws, as the case may be, certified as of a recent date by an appropriate officer of the Trust Company and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Related Documents to which it is a party and (ii) a good standing certificate from the Office of the Comptroller of the Currency; G. The Collateral Agent shall have received (i) a certificate from the Secretary of State of the state of incorporation of each of the Guarantor certifying that such Guarantor is in good standing in such state and certificates from the Secretary of State of each state in which a Guarantor is required to be in good standing, certifying that such Guarantor is authorized to do business in such state; and (ii) a certificate from the Secretary or an Assistant Secretary of each Guarantor certifying (A) as to the incumbency and signature of the officer of such Guarantor authorized to execute and deliver the Related Documents to which such Guarantor is a party and any certificate to be furnished thereto, (B) that attached thereto are true and complete of the charter and by-laws of such Guarantor and (C) that attached thereto is a true and complete copy of the Resolutions of the Board of Directors of such Guarantor authorizing the execution, delivery and performance of the Related Documents to which such Guarantor is a party and the transactions contemplated thereby, together with a certification by another officer of such Guarantor as to the incumbency and signature of such Secretary or Assistant Secretary; H. The Collateral Agent shall have received legal opinions, in form and substance acceptable to the Collateral Agent and addressing such matters relating to this Amendment as the Collateral Agent shall reasonably request, addressed to the Collateral Agent, the Agent, the Lenders, the Certificateholders and the Revolving Credit Lenders from (i) Brobeck Phleger & Harrison LLP, California and New York counsel for Lessee, Construction Agent and each Guarantor, and (ii) Eric Kentor, Esq., General Counsel to the Lessee, Construction Agent and each Guarantor; I. The Collateral Agent shall have received such other documents (certified if requested) as the Collateral Agent may reasonably request, with respect to this Amendment, the Participation Agreement, any other Related Document, the transactions contemplated hereby and thereby; and J. There shall not have occurred and be continuing any Potential Default or Event of 6 8 Default under any of the Related Documents, and no Potential Default or Event of Default under any of the Related Documents will have occurred after giving effect to the Funding requested by such Requisition. SECTION 7. Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provision hereof. SECTION 8. Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 9. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. SECTION 10. Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that the Borrower may not assign or transfer its rights or obligations hereunder or under the Credit Agreement except in accordance with the terms of the Credit Agreement. [SIGNATURES ON FOLLOWING PAGE] 7 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. ING (U.S.) CAPITAL LLC, as Collateral Agent, Agent, Revolving Credit Lender, Lender and Certificateholder Tranche A Commitment: 11,689,565 Tranche A Commitment Percentage: 17.82% Tranche B Commitment: 2,182,698 Tranche B Commitment Percentage: 18.19% By: /s/ DOUG S. CLARIDA Certificateholder Commitment: 1,122,319 ---------------------------- Certificateholder Commitment Percentage: 46.76% Name: Doug S. Clarida Title: Vice President CIBC INC., as Lender Tranche A Commitment: 3,331,250 Tranche A Commitment Percentage: 5.08% Tranche B Commitment: 609,375 Tranche B Commitment Percentage: 5.08% By: /s/ TERENCE MOORE Certificateholder Commitment: $0 ---------------------------- Certificateholder Commitment Percentage: 0% Name: Terence Moore Title: Executive Director THE BANK OF NOVA SCOTIA, as Lender Tranche A Commitment: 12,174,598 Tranche A Commitment Percentage: 18.56% Tranche B Commitment: 2,182,698 Tranche B Commitment Percentage: 18.19% By: /s/ R. P. REYNOLDS Certificateholder Commitment: $0 ---------------------------- Certificateholder Commitment Percentage: 0% Name: R. P. Reynolds Title: Director MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., as Lender and Certificateholder Tranche A Commitment: 6,834,588 Tranche A Commitment Percentage: 10.42% Tranche B Commitment: 1,250,230 Tranche B Commitment Percentage: 10.42% By: /s/ JEREMY M. DHEIN Certificateholder Commitment: $274,557 ---------------------------- Certificateholder Commitment Percentage: 11.44% Name: Jeremy M. Dhein Title: Vice President 10 COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as Lender Tranche A Commitment: 8,744,531 Tranche A Commitment Percentage: 13.33% Tranche B Commitment: 1,599,609 Tranche B Commitment Percentage: 13.33% By: /s/ IAN REECE Certificateholder Commitment: $0 ---------------------------- Certificateholder Commitment Percentage: 0% Name: Ian Reece Title: Senior Vice President By: /s/ MICHAEL FABIANO ---------------------------- Name: Michael Fabiano Title: Vice President SANWA BANK CALIFORNIA, as Lender and Certificateholder Tranche A Commitment: 5,829,687 Tranche A Commitment Percentage: 8.89% Tranche B Commitment: 1,066,406 Tranche B Commitment Percentage: 8.89% By: /s/ CHUCK WEERASOORIYA Certificateholder Commitment: $213,281 ---------------------------- Certificateholder Commitment Percentage: 8.89% Name: Chuck Weerasooriya Title: Vice President COMERICA WEST INCORPORATED, as Lender Tranche A Commitment: 5,791,250 Tranche A Commitment Percentage: 8.83% Tranche B Commitment: 1,059,375 Tranche B Commitment Percentage: 8.83% By: /s/ EMMANUEL M. SKEVOFILAX Certificateholder Commitment: $0 ---------------------------- Certificateholder Commitment Percentage: 0% Name: Emmanuel M. Skevofilax Title: Vice President 11 CITY NATIONAL BANK, as Lender Tranche A Commitment: 11,204,531 Tranche A Commitment Percentage: 17.08% Tranche B Commitment: 2,049,609 Tranche B Commitment Percentage: 17.08% By: /s/ ARTHUR J. CARETTE Certificateholder Commitment: $469,921 ---------------------------- Certificateholder Commitment Percentage: 19.58% Name: Arthur J. Carette Title: Vice President SCOTIABANC, INC., as Certificateholder Tranche A Commitment: $0 Tranche A Commitment Percentage: 0% Tranche B Commitment: $0 Tranche B Commitment Percentage: 0% By: /s/ W. J. BROWN Certificateholder Commitment: $319,922 ---------------------------- Certificateholder Commitment Percentage: 13.33% Name: W. J. Brown Title: Managing Director 12 MINIMED INC, as the Parent Guarantor and as Borrower under the Revolving Credit Agreement By: /s/ TERRENCE H. GREGG ----------------------------------------- Name: Terrence H. Gregg Title: President MINIMED DEVELOPMENT CORP., as the Construction Agent and as the Lessee By: /s/ TERRENCE H. GREGG ----------------------------------------- Name: Terrence H. Gregg Title: President EACH OF THE SUBSIDIARIES OF THE PARENT GUARANTOR LISTED ON SCHEDULE 1 HERETO, as the Subsidiary Guarantors By: /s/ TERRENCE H. GREGG ----------------------------------------- Name: Terrence H. Gregg Title: President EX-27.1 5 v67014ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-29-2000 JAN-01-2000 SEP-29-2000 89,155 108,455 86,350 11,286 36,660 309,130 89,329 24,154 437,764 24,270 0 0 0 660 412,834 437,764 201,887 209,611 64,205 172,727 389 1,000 45 36,450 12,054 24,396 0 0 0 24,396 0.38 0.36
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