Johnson & Johnson is a global American pharmaceutical and consumer goods company with headquarters in New Brunswick, New Jersey. The company is listed in the Dow Jones Industrial Average.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to - ----------------------------------------------------------------- Commission file number 1-3215 JOHNSON & JOHNSON (Exact name of registrant as specified in its charter) NEW JERSEY 22-1024240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) New Brunswick, New Jersey 08933 (Address of principal executive offices, including zip code) 732-524-0400 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On July 24, 1998, 1,344,888,669 shares of Common Stock, $1.00 par value, were outstanding. - 1 - JOHNSON & JOHNSON AND SUBSIDIARIES TABLE OF CONTENTS Part I - Financial Information Page No. Consolidated Balance Sheet - June 28, 1998 and December 28, 1997 3 Consolidated Statement of Earnings for the Fiscal Quarter Ended June 28, 1998 and June 29, 1997 5 Consolidated Statement of Earnings for the Fiscal Six Months Ended June 28, 1998 and June 29, 1997 6 Consolidated Statement of Cash Flows for the Fiscal Six Months Ended June 28, 1998 and June 29, 1997 7 Notes to Consolidated Financial Statements 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Signatures 19 Part II - Other Information Item 4 - Submission of Matters to a Vote of Security Holders 17 Item 6 - Exhibits and Reports on Form 8-K 18 Items 1, 2, 3 and 5 are not applicable - 2 - Part I - FINANCIAL INFORMATION Item 1 - FINANCIAL STATEMENTS JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited; Dollars in Millions) ASSETS June 28, December 28, 1998 1997 Current Assets: Cash and cash equivalents $ 3,114 2,753 Marketable securities, at cost 116 146 Accounts receivable, trade, less allowances $360 (1997 - $358) 3,514 3,329 Inventories (Note 4) 2,703 2,516 Deferred taxes on income 823 831 Prepaid expenses and other receivables 1,070 988 Total current assets 11,340 10,563 Marketable securities, non-current 385 385 Property, plant and equipment, at cost 9,687 9,444 Less accumulated depreciation and amortization 3,895 3,634 5,792 5,810 Intangible assets, net (Note 5) 3,280 3,261 Deferred taxes on income 411 332 Other assets 1,100 1,102 Total assets $ 22,308 21,453 See Notes to Consolidated Financial Statements - 3 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited; Dollars in Millions) LIABILITIES AND SHAREOWNERS' EQUITY June 28, December 28, 1998 1997 Current Liabilities: Loans and notes payable $ 565 714 Accounts payable 1,517 1,753 Accrued liabilities 2,373 2,258 Accrued salaries, wages and commissions446 332 Taxes on income 238 226 Total current liabilities 5,139 5,283 Long-term debt 1,112 1,126 Deferred tax liability 193 175 Certificates of extra compensation 128 126 Other liabilities 2,424 2,384 Shareowners' Equity: Preferred stock - without par value (authorized and unissued 2,000,000 shares) - - Common stock - par value $1.00 per share (authorized 2,160,000,000 shares; issued 1,534,824,000 shares) 1,535 1,535 Note receivable from employee stock ownership plan (45) (51) Accumulated other comprehensive income (Note 2) (490) (378) Retained earnings 13,744 12,661 14,744 13,767 Less common stock held in treasury, at cost (189,879,000 & 189,687,000 shares) 1,432 1,408 Total shareowners' equity 13,312 12,359 Total liabilities and shareowners' equity $22,308 21,453 See Notes to Consolidated Financial Statements - 4 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Unaudited; dollars & shares in millions except per share figures) Fiscal Quarter Ended June 28, Percent June 29, Percent 1998 to Sales 1997 to Sales Sales to customers (Note 6) $5,783 100.0 5,698 100.0 Cost of products sold 1,803 31.2 1,749 30.7 Selling, marketing and administrative expenses 2,114 36.5 2,142 37.6 Research expense 532 9.2 520 9.1 Interest income (64) (1.1) (57) (1.0) Interest expense, net of portion capitalized 26 .5 35 .6 Other (income)expense, net 1 - 15 .3 4,412 76.3 4,404 77.3 Earnings before provision for taxes on income 1,371 23.7 1,294 22.7 Provision for taxes on income (Note 3) 366 6.3 385 6.7 NET EARNINGS $1,005 17.4 909 16.0 NET EARNINGS PER SHARE (Notes 1 and 8) Basic $ .75 .68 Diluted $ .74 .67 CASH DIVIDENDS PER SHARE $ .25 .22 AVG. SHARES OUTSTANDING Basic 1,344.8 1,332.5 Diluted 1,369.4 1,368.8 See Notes to Consolidated Financial Statements - 5 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Unaudited; dollars & shares in millions except per share figures) Fiscal Six Months Ended June 28, Percent June 29, Percent 1998 to Sales 1997 to Sales Sales to customers (Note 6)$11,566 100.0 11,413 100.0 Cost of products sold 3,580 30.9 3,521 30.9 Selling, marketing and administrative expenses 4,214 36.4 4,280 37.5 Research expense 1,026 8.9 998 8.7 Interest income (125) (1.1) (93) (.8) Interest expense, net of portion capitalized 54 .5 68 .6 Other (income)expense, net 12 .1 43 .4 8,761 75.7 8,817 77.3 Earnings before provision for taxes on income 2,805 24.3 2,596 22.7 Provision for taxes on income (Note 3) 790 6.9 778 6.8 NET EARNINGS $ 2,015 17.4 1,818 15.9 NET EARNINGS PER SHARE (Notes 1 and 8) Basic $ 1.50 1.36 Diluted $ 1.47 1.33 CASH DIVIDENDS PER SHARE $ .47 .41 AVG. SHARES OUTSTANDING Basic 1,345.1 1,332.9 Diluted 1,372.1 1,369.2 See Notes to Consolidated Financial Statements - 6 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited; Dollars in Millions) Fiscal Six Months Ended June 28, June 29, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $2,015 1,818 Adjustments to reconcile net earnings to cash flows: Depreciation and amortization of property and intangibles 613 548 Increase in accounts receivable, trade, less allowances (236) (524) Increase in inventories (240) (227) Changes in other assets and liabilities 50 341 NET CASH FLOWS FROM OPERATING ACTIVITIES 2,202 1,956 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment(527) (460) Proceeds from the disposal of assets 11 68 Acquisition of businesses, net of cash acquired (78) (158) Other, principally intangible assets (125) (182) NET CASH USED BY INVESTING ACTIVITIES (719) (732) CASH FLOWS FROM FINANCING ACTIVITIES Dividends to shareowners (632) (547) Repurchase of common stock (506) (356) Proceeds from short-term debt 159 153 Retirement of short-term debt (163) (153) Proceeds from long-term debt - 5 Retirement of long-term debt (139) (190) Proceeds from the exercise of stock options 171 143 NET CASH USED BY FINANCING ACTIVITIES (1,110) (945) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (12) (53) INCREASE IN CASH AND CASH EQUIVALENTS 361 226 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD2,753 2,011 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,114 2,237 See Notes to Consolidated Financial Statements - 7 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - The accompanying interim financial statements and related notes should be read in conjunction with the Consolidated Financial Statements of Johnson & Johnson and Subsidiaries (the "Company") and related notes as contained in the Annual Report on Form 10-K for the fiscal year ended December 28, 1997. The interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of such statements. At year-end 1997, the Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common shareowners by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Prior periods have been restated to reflect the new standard. NOTE 2 - ADOPTION OF SFAS NO. 130 At March 29, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and display of an alternative income measurement and its components (revenue, expenses, gains and losses) in a full set of general purpose financial statements. The total comprehensive income for the six months ended June 28, 1998 is $1,903 million, compared with $1,633 million for the same period a year ago. Total comprehensive income includes net earnings, net unrealized currency gains and losses on translation and net unrealized gains and losses on securities. - 8 - NOTE 3 - INCOME TAXES The effective income tax rates for 1998 and 1997 are as follows: 1998 1997 First Quarter 29.6% 30.2% Second Quarter 26.7 29.8 First Half 28.2 30.0 The effective income tax rates for the first half of 1998 and 1997 are 28.2% and 30.0%, respectively, as compared to the U.S. federal statutory rate of 35%. The difference from the statutory rate is the result of domestic subsidiaries operating in Puerto Rico under a grant for tax relief expiring on December 31, 2007 and the result of subsidiaries manufacturing in Ireland under an incentive tax rate expiring on December 31, 2010. The decrease in the 1998 worldwide effective tax rate was primarily due to a greater proportion of taxable income derived from lower tax rate countries. The Omnibus Budget Reconciliation Act of 1993 included a change in the tax code which will reduce the benefit the Company receives from its operations in Puerto Rico by 60% gradually over a five year period. NOTE 4 - INVENTORIES (Dollars in Millions) June 28, 1998 Dec. 28, 1997 Raw materials and supplies $ 778 655 Goods in process 378 417 Finished goods 1,547 1,444 $ 2,703 2,516 NOTE 5 - INTANGIBLE ASSETS (Dollars in Millions) June 28, 1998 Dec. 28, 1997 Intangible assets $ 4,005 3,885 Less accumulated amortization 725 624 $ 3,280 3,261 The excess of the cost over the fair value of net assets of purchased businesses is recorded as goodwill and is amortized on a straight-line basis over periods of 40 years or less. The cost of other acquired intangibles is amortized on a straight-line basis over their estimated useful lives. - 9 - NOTE 6 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC AREAS (Dollars in Millions) SALES BY SEGMENT OF BUSINESS Second Quarter Six Months Percent Percent Increase/ Increase/ 1998 1997 (Decrease) 1998 1997 (Decrease) Consumer Domestic $ 753 767 (1.8) 1,593 1,598 (.3) International 818 845 (3.2) 1,616 1,698 (4.8) 1,571 1,612 (2.5)% 3,209 3,296 (2.6)% Pharmaceutical Domestic 1,178 935 26.0 2,347 1,895 23.9 International 984 999 (1.5) 1,908 1,982 (3.7) 2,162 1,934 11.8% 4,255 3,877 9.7% Professional Domestic 1,071 1,179 (9.2) 2,157 2,335 (7.6) International 979 973 .6 1,945 1,905 2.1 2,050 2,152 (4.7)% 4,102 4,240 (3.3)% Domestic 3,002 2,881 4.2 6,097 5,828 4.6 International 2,781 2,817 (1.3) 5,469 5,585 (2.1) Worldwide $ 5,783 5,698 1.5% 11,566 11,413 1.3% SALES BY GEOGRAPHIC AREAS Second Quarter Six Months Percent Percent Increase/ Increase/ 1998 1997(Decrease) 1998 1997 (Decrease) Domestic $3,002 2,881 4.2 6,097 5,828 4.6 Europe 1,586 1,551 2.3 3,125 3,105 .6 Western Hemisphere excluding U.S. 533 511 4.3 1,040 1,007 3.3 Asia-Pacific, Africa 662 755 (12.3) 1,304 1,473 (11.5) Worldwide $5,783 5,698 1.5% 11,566 11,413 1.3% NOTE 7 - ACQUISITIONS During the first quarter, the Company completed the acquisition of IsoStent, Inc. The Company acquired intellectual property and specific assets, including the BX Stent, a new flexible interventional medical device in development for treatment of coronary artery disease. Pro forma results of the acquisition, assuming that the transaction was consummated at the beginning of each year presented, would not be materially different from the results reported. - 10 - NOTE 8 - EARNINGS PER SHARE The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the six months ended June 28, 1998 and June 29, 1997: Fiscal Fiscal Quarter Ended Six Months Ended June 28, June 29, June 28, June 29, 1998 1997 1998 1997 Basic net earnings per share$ .75 .68 1.50 1.36 Average shares outstanding - basic 1,344.8 1,332.5 1,345.1 1,332.9 Potential shares exercisable under stock option plans 68.0 70.5 70.6 72.5 Less: shares which could be repurchased under treasury stock method (43.4) (34.2) (43.6) (36.2) Adjusted averages shares outstanding - diluted 1,369.4 1,368.8 1,372.1 1,369.2 Diluted earnings per share $ .74 .67 1.47 1.33 NOTE 9 - PENDING LEGAL PROCEEDINGS The Company, along with numerous other pharmaceutical manufacturers and distributors, is a defendant in a large number of individual and class actions brought by retail pharmacies in state and federal courts under the antitrust laws. These cases assert price discrimination and price-fixing violations resulting from an alleged industry-wide agreement to deny retail pharmacists price discounts on sales of brand name prescription drugs. The Company believes the claims against the Company in these actions are without merit and is defending them vigorously. Further, the Company together with another contact lens manufacturer, a trade association and various individual defendants, is a defendant in several consumer class actions and an action brought by multiple State Attorneys General on behalf of consumers alleging violations of federal and state antitrust laws. These cases assert that enforcement of the Company's long- standing policy of selling contact lenses only to licensed eye care professionals is a result of an unlawful conspiracy to eliminate alternative distribution channels from the disposable contact lens market. The Company believes that these actions are without merit and is defending them vigorously. - 11 - NOTE 9 - PENDING LEGAL PROCEEDINGS The Company believes that the above proceedings in the aggregate would not have a material adverse effect on its results of operations, cash flows or financial position. NOTE 10 - SUBSEQUENT EVENT On July 21, 1998, Johnson & Johnson and DePuy, Inc. announced the signing of a definitive agreement under which Johnson & Johnson will acquire DePuy for $35.00 per share, for an aggregate transaction value of $3.5 billion. Pursuant to the agreement, Johnson & Johnson began a cash tender offer for all outstanding shares of DePuy for $35.00 per share. DePuy has approximately 99,000,000 shares outstanding. The offer commenced on July 27, 1998 and will remain open for a minimum of 20 business days. Any shares not purchased in the offer will be acquired for the same price in cash in a second step merger. The Company anticipates that there will be a one- time charge against earnings for in-process R&D and restructuring expenses, following the close of the acquisition. DePuy is one of the world's leading orthopaedic products companies. The company's products are used by orthopaedic surgeons and medical specialists to reconstruct damaged or diseased joints, to facilitate fusion of elements of the spine and correct spinal deformities, to repair bone fractures, and to rehabilitate sports-related injuries. The boards of directors of Johnson & Johnson and DePuy have given approval to the acquisition. The acquisition is subject to clearance under the Hart-Scott-Rodino Anti-Trust Improvements Act and under the European Union merger control regulation. - 12 - NOTE 11 - NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge transactions in which the Company is hedging changes in an asset's, liability's, or firm commitment's fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash- flow hedge transactions, in which the Company is hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current-period earnings. The Company is in the process of evaluating the new standard and does not expect it to have a material effect on the Company's results of operations, cash flow or financial position. - 13 - Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SALES AND EARNINGS Consolidated sales for the first six months of 1998 were $11,566 million, which exceeded sales of $11,413 million for the first six months of 1997 by 1.3%. The strength of the U.S. dollar relative to the foreign currencies, particularly in the Asia-Pacific region, decreased sales for the first six months of 1998 by 4.0%. Excluding the effect of the stronger U.S. dollar relative to foreign currencies, sales increased 5.3% on an operational basis for the first six months of 1998. Consolidated net earnings for the first six months of 1998 were $2,015 million, compared with net earnings of $1,818 million for the first six months of 1997. Worldwide basic net earnings per share for the first six months of 1998 were $1.50, compared with $1.36 for the same period in 1997, an increase of 10.3%. Worldwide diluted net earnings per share for the first six months of 1998 were $1.47, compared with $1.33 for the same period in 1997, an increase of 10.5% Consolidated sales for the second quarter of 1998 were $5,783 million, an increase of 1.5% over 1997 second quarter sales of $5,698 million. The effect of the stronger U.S. dollar relative to foreign currencies, especially in the Asian markets, decreased second quarter sales by 3.6%. Consolidated net earnings for the second quarter of 1998 were $1,005 million, compared with $909 million for the same period a year ago, an increase of 10.6%. Worldwide basic net earnings per share for the second quarter of 1998 rose 10.3% to $.75, compared with $.68 in the 1997 period. Worldwide diluted net earnings per share for the second quarter of 1998 rose 10.4% to $.74, compared with $.67 in 1997. Domestic sales for the first six months of 1998 were $6,097 million, an increase of 4.6% over 1997 domestic sales of $5,828 million for the same period a year ago. Sales by international subsidiaries were $5,469 million for the first six months of 1998 compared with $5,585 million for the same period a year ago, a decrease of 2.1%. Excluding the impact of the stronger value of the dollar, international sales increased by 6.0%. - 14 - Worldwide Consumer segment sales for the second quarter of 1998 were $1.6 billion, a decrease of 2.5% versus the same period a year ago. Domestic sales declined by 1.8% in the quarter. International sales declined by 3.2%. International sales gains in local currency of 5.7% were offset by a negative currency impact of 8.9%. Consumer sales were led by continued strength in the skin care franchise, which includes the NEUTROGENA, RoC and CLEAN & CLEAR product lines, as well as strong performances from the adult and children's MOTRIN line of analgesic products. Worldwide Pharmaceutical sales of $2.2 billion for the quarter increased 11.8% versus the same period in 1997, including 26% growth in domestic sales. International sales declined by 1.5%. International sales gains in local currency of 5.3% were offset by a negative currency impact of 6.8%. This growth reflects the strong performance of RISPERDAL, an antipsychotic medication; PROCRIT, for the treatment of anemia; DURAGESIC, a transdermal patch for chronic pain; LEVAQUIN, an anti-infective; and ULTRAM, an analgesic for moderate to severe pain. Worldwide sales of $2.1 billion in the Professional segment declined by 4.7% versus the second quarter of 1997. Domestic sales were down 9.2% in the quarter. International sales gains in local currency of 7.0% were largely offset by the strength of the U.S. dollar. Strong sales growth of Ethicon Endo-Surgery's laparoscopy and mechanical closure products and Johnson & Johnson Professional's orthopaedic products were offset by a decline in sales of Cordis' coronary stents. Average shares of common stock outstanding in the first half of 1998 were 1,345.1 million, compared with 1,332.9 million for the same period a year ago. - 15 - LIQUIDITY AND CAPITAL RESOURCES Cash and current marketable securities increased $331 million during the first six months of 1998 to $3,230 million at June 28, 1998. Total borrowings decreased $163 million during the six months of 1998 to $1,677 million. Net cash (cash and current securities net of borrowings) was $1,553 million at June 28, 1998 compared with $1,059 million at the end of 1997. Total debt represented 11.2% of total capital (shareowners' equity and total borrowings) at quarter end compared with 13.0% at the end of 1997. Additions to property, plant and equipment were $527 million for the first six months of 1998, compared with $460 million for the same period in 1997. On July 20, 1998, the Board of Directors approved a regular quarterly dividend rate of 25 cents per share payable on September 8, 1998 to shareowners of record as of August 18, 1998. - 16 - Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of the shareowners of the Company was held on April 23, 1998. (b) The shareowners elected all the Company's nominees for director, approved the appointment of Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers L.L.P.) as the Company's independent auditors for 1998 and defeated a shareowner proposal relating to Cumulative Voting. The votes were as follows: 1. Election of Directors: For Withheld G. N. Burrow 1,129,143,508 5,750,473 J. G. Cooney 1,127,871,539 7,022,442 J. G. Cullen 1,128,891,902 6,002,079 M. J. Folkman 1,128,297,990 6,595,991 A. D. Jordan 1,128,753,704 6,140,277 A. G. Langbo 1,128,959,161 5,934,820 R. S. Larsen 1,129,071,472 5,822,509 J. S. Mayo 1,128,804,981 6,089,000 P. J. Rizzo 1,127,875,561 7,018,420 H. B. Schacht 1,128,808,645 6,085,336 M. F. Singer 1,128,718,524 6,175,457 J. W. Snow 1,123,887,236 11,006,745 R. N. Wilson 1,129,015,338 5,878,643 2.Approval of Appointment of PricewaterhouseCoopers L.L.P. For 1,129,097,681 Against 2,420,336 Abstain 3,375,964 3. A shareowner proposal on Cumulative Voting was defeated. The vote on this proposal was as follows: For 245,062,829 Against 702,537,752 Abstain 19,274,272 No Vote 168,019,128 - 17 - Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Numbers (1) Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the three month period ended June 28, 1998. - 18 - 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. JOHNSON & JOHNSON (Registrant) Date: August 7, 1998 By /s/ R. J. DARRETTA R. J. DARRETTA (Vice President, Finance) Date: August 7 1998 By /s/ C.E. LOCKETT C. E. LOCKETT (Corporate Controller) - 19 -