-----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, PO9RM1ETT3O5922aRyvWNTWSCjYeGFBlsnE5izqYc2NjnDhMPY3TiqVBHPGymEfw 1uzZdX6xVr4RqLzVjgb9IA== 0001012870-97-002192.txt : 19971111 0001012870-97-002192.hdr.sgml : 19971111 ACCESSION NUMBER: 0001012870-97-002192 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971110 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACUSON CORP CENTRAL INDEX KEY: 0000717014 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 942784998 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10068 FILM NUMBER: 97711441 BUSINESS ADDRESS: STREET 1: 1220 CHARLESTON RD STREET 2: PO BOX 7393 CITY: MOUNTAIN VIEW STATE: CA ZIP: 94039 BUSINESS PHONE: 4159699112 MAIL ADDRESS: STREET 1: P O BOX 7393 STREET 2: 1220 CHARLESTON RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 74039 10-Q 1 FORM 10-Q 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 27, 1997 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 0-14953 ACUSON CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 94-2784998 ------------------------ -------------------------------- (State of Incorporation) (IRS Employer Identification No.) 1220 CHARLESTON ROAD P. O. BOX 7393 MOUNTAIN VIEW, CA 94039-7393 (Address of principal executive offices) Registrant's telephone number, including area code, is (650) 969-9112 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 ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $0.0001 par value 28,819,101 shares -------------------------------- ------------------------------- (Class) Outstanding at November 1, 1997 ________________________________________________________________________________ FORM 10-Q ACUSON CORPORATION INDEX
PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of September 27, 1997 and December 31, 1996 1 Condensed Consolidated Statements of Operations for the Three Months Ended September 27, 1997 and September 28, 1996 and for the Nine Months Ended September 27, 1997 and September 28, 1996 2 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 27, 1997 and September 28, 1996 3 Notes to Condensed Consolidated Financial Statements 4 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 9 ITEM 6. Exhibits and Reports on Form 8-K 9 Signature 10
________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
September 27, December 31, 1997 1996 - ----------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 14,815 $ 14,413 Accounts receivable, net 119,288 93,647 Inventories 73,552 83,196 Deferred income taxes 22,267 22,316 Other current assets 13,611 22,388 -------- -------- Total current assets 243,533 235,960 -------- -------- PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $130,873 and $118,518 in 1997 and 1996, respectively 69,983 65,884 -------- -------- OTHER ASSETS, NET 18,644 18,857 -------- -------- Total Assets $332,160 $320,701 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 7,000 $ 13,000 Accounts payable 21,610 20,235 Other accrued liabilities 85,709 92,410 -------- -------- Total current liabilities 114,319 125,645 -------- -------- COMMITMENTS AND CONTINGENCIES (NOTE 5) STOCKHOLDERS' EQUITY Preferred stock, par value $0.0001: authorized, 10,000 shares; outstanding, none -- -- Common stock and additional paid-in capital, common stock par value $0.0001: authorized, 50,000 shares; outstanding, 29,034 shares and 28,246 shares in 1997 and 1996, respectively 126,318 102,756 Cumulative translation adjustment (1,112) 527 Retained earnings 92,635 91,773 -------- -------- Total stockholders' equity 217,841 195,056 -------- -------- Total Liabilities and Stockholders' Equity $332,160 $320,701 ======== ========
- -------------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 1
_________________________________________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) THREE MONTHS ENDED NINE MONTHS ENDED ----------------------------- ----------------------------- SEPTEMBER 27, September 28, SEPTEMBER 27, SEPTEMBER 28, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------- NET SALES Product $ 79,126 $71,839 $257,945 $189,481 Service 20,964 21,466 62,418 63,005 -------- ------- -------- -------- Total net sales 100,090 93,305 320,363 252,486 -------- ------- -------- -------- COST OF SALES Product 42,118 39,427 138,278 99,575 Service 10,433 10,358 31,946 30,493 -------- ------- -------- -------- Total cost of sales 52,551 49,785 170,224 130,068 -------- ------- -------- -------- Gross profit 47,539 43,520 150,139 122,418 -------- ------- -------- -------- OPERATING EXPENSES Selling, general and administrative 27,749 28,199 86,512 90,673 Product development 14,544 14,227 42,156 47,342 -------- ------- -------- -------- Total operating expenses 42,293 42,426 128,668 138,015 -------- ------- -------- -------- Income (loss) from operations 5,246 1,094 21,471 (15,597) INTEREST INCOME, NET 418 476 752 2,387 -------- ------- -------- -------- Income (loss) before income taxes 5,664 1,570 22,223 (13,210) PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,135 (78) 6,105 (5,536) -------- ------- -------- -------- Net income (loss) $ 4,529 $ 1,648 $ 16,118 $ (7,674) ======== ======= ======== ======== EARNINGS (LOSS) PER SHARE $ 0.15 $ 0.06 $ 0.53 $ (0.28) ======== ======= ======== ======== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 30,863 27,524 30,728 27,286 ======== ======= ======== ========
- -------------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 2
______________________________________________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) NINE MONTHS ENDED ------------------ SEPTEMBER 27, SEPTEMBER 28, 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 16,118 $ (7,674) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization 16,714 11,713 Tax benefit of employee stock transactions 6,313 2,436 Changes in: Accounts receivable (26,671) (8,933) Leases receivable (482) 7,317 Inventories 9,466 (33,628) Deferred income taxes (62) (6,181) Other current assets 8,623 430 Accounts payable 1,522 5,785 Other accrued liabilities (2,498) (2,957) -------- -------- Net cash provided by (used in) operating activities 29,043 (31,692) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments -- 9,983 Investment in property and equipment (27,315) (25,019) Sale of fixed assets 5,713 2,084 Other 423 1,905 -------- -------- Net cash used in investing activities (21,179) (11,047) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of short-term borrowings (11,000) (2,000) Proceeds from short-term borrowings 5,000 10,000 Repurchase of common stock (21,121) (12,012) Issuance of common stock under stock option and stock purchase plans 19,979 14,013 -------- -------- Net cash (used in) provided by financing activities (7,142) 10,001 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (320) (229) -------- -------- Net increase (decrease) in cash 402 (32,967) CASH, BEGINNING OF PERIOD 14,413 46,135 -------- -------- CASH, END OF PERIOD $ 14,815 $ 13,168 ======== ========
- -------------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 3 ________________________________________________________________________________ ACUSON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - INTERIM STATEMENTS In the opinion of management, the unaudited interim condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to summarize fairly Acuson Corporation's (the "Company's") condensed consolidated financial position as of September 27, 1997, and its condensed consolidated results of operations and cash flows for the nine-month periods ended September 27, 1997 and September 28, 1996. The results of operations for the three and nine-month periods ended September 27, 1997, are not necessarily indicative of the results to be expected for the entire year ending December 31, 1997. Certain information reported in the prior year has been reclassified to conform to the 1997 presentation. The Company's principle accounting policies are set forth in the financial statements for the year ended December 31, 1996, and notes thereto, contained in the Company's Annual Report filed with the Securities and Exchange Commission. NOTE 2 - EARNINGS PER SHARE Earnings per share is computed based on the weighted average number of common and common equivalent shares outstanding during the period. For the quarter ended September 27, 1997, the treasury stock method was used in computing the earnings per share. For the quarter ended September 28, 1996, the modified treasury stock method was used. NOTE 3 - INVENTORIES The components of inventories were as follows (in thousands):
SEPTEMBER 27, DECEMBER 31, 1997 1996 -------------------------------- Raw materials $30,089 $38,224 Work-in-process 16,219 18,740 Finished goods 27,244 26,232 ------- ------- Total inventories $73,552 $83,196 ======= =======
NOTE 4 - SHORT-TERM BORROWINGS The Company has a revolving, unsecured credit agreement for $75.0 million which is in effect through March 2000. Under the terms of the agreement, no compensating balances are required and the interest rate is determined at the time of borrowing based on the London interbank offered rate plus a margin, or prime rate. During the third quarter, the weighted average borrowings were $10.9 million and the weighted average interest rate was 6.7%. For the nine months ended September 27, 1997, the weighted average borrowings were $14.5 million and the weighted average interest rate was 6.4%. At September 27, 1997, borrowings under this facility totaled $7.0 million and the effective rate was 6.7%. Borrowing under this facility is subject to certain debt covenants and the Company is in compliance with these covenants. 4 Note 5 - Legal Contingencies On October 27, 1994, the Company was sued in Ghent, Belgium, by Cormedica NV, in connection with the Company's termination of its distributor relationship with Cormedica. In the suit, Cormedica seeks indemnities and damages in the amount of approximately $2.5 million, plus interest. The Company intends to defend this suit vigorously. NOTE 6 - DISCLOSURE OF THE IMPACT THAT RECENTLY ISSUED FINANCIAL STANDARDS WILL HAVE ON THE FINANCIAL STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, ("SFAS No. 128"), "Earnings Per Share." SFAS No. 128 replaces the presentation of primary earnings per share with a presentation of basic earnings per share, which excludes dilution. SFAS No. 128 also requires dual presentation of basic and diluted earnings per share on the face of the income statement. Diluted earnings per share is computed similarly to fully diluted earnings per share pursuant to existing pronouncements. SFAS No. 128 is effective for financial statements with periods ending after December 15, 1997. This statement requires restatement of all prior-period earnings per share data presented. The Company anticipates that this adoption will not have a material effect on its financial statements. Had earnings per share been calculated under SFAS 128, basic earnings per share would have been $0.16 and $0.56, and diluted earnings per share would have been $0.15 and $0.53, for the three and nine-month periods ended September 27, 1997, respectively. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 129, ("SFAS No. 129"), "Disclosure of Information about Capital Structure," which will be adopted in the fourth quarter of 1997. SFAS No. 129 requires companies to disclose certain information about their capital structure. The Company anticipates that this adoption will not have a material effect on its financial statements. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, ("SFAS No. 130"), "Reporting Comprehensive Income," which is effective for fiscal periods beginning after December 15, 1997. The Company anticipates that this adoption will not have a material effect on its financial statements. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, ("SFAS No. 131"), "Disclosures About Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after December 15, 1997. The Company anticipates that this adoption will not have a material effect on its financial statements. _______________________________________________________________________________ 5 ________________________________________________________________________________ ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales increased 7.3% to $100.1 million for the quarter ended September 27, 1997, compared with $93.3 million for the quarter ended September 28, 1996. For the nine months ended September 27, 1997, net sales were $320.4 million, representing an increase of 26.9% over 1996 nine-month net sales of $252.5 million. The increases were primarily due to shipments of the Sequoia (TM) ultrasound systems and the Aspen (TM) ultrasound system, which began in July and November 1996, respectively. Worldwide service revenue remained relatively constant at $21.0 million compared with $21.5 million for the quarters ended September 27, 1997 and September 28, 1996, respectively. Worldwide service revenue was $62.4 million and $63.0 million for the nine-month periods ended September 27, 1997 and September 28, 1996, respectively. International net sales increased 5.6% and 15.7% over prior year periods to $33.9 million and $108.8 million for the respective three and nine-month periods ended September 27, 1997. Although international net sales have grown over prior year periods, incoming orders have been negatively impacted by weakness in selected markets in Europe and Asia, and by the current strength of the U.S. dollar. The Company expects these trends to continue at least through the fourth quarter of 1997. Cost of sales decreased as a percentage of net sales to 52.5% for the three months ended September 27, 1997, compared with 53.4% for the three months ended September 28, 1996. The higher costs in the prior year period resulted from manufacturing start-up costs for the Sequoia ultrasound systems. For the nine months ended September 27, 1997, cost of sales increased as a percentage of net sales to 53.1%, compared with 51.5% for the same period in 1996. The increase was primarily due to product mix changes and warranty costs on new product installations. Selling, general and administrative expenses for the quarter ended September 27, 1997, declined to $27.7 million or 27.7% of net sales, compared with $28.2 million or 30.2% of net sales for the quarter ended September 28, 1996. For the nine months ended September 27, 1997, selling, general and administrative costs decreased to $86.5 million or 27.0% of net sales, compared with $90.7 million or 35.9% of net sales for the same period in 1996. In the prior year, significant advertising and other launch related expenses were incurred in connection with the second quarter introduction of the Sequoia ultrasound systems. Product development spending for the third quarter of 1997 remained relatively constant at $14.5 million compared with $14.2 million for the third quarter of 1996. As a percentage of net sales, product development spending for the third quarter of 1997 decreased to 14.5% compared with 15.2% for the third quarter of 1996. For the nine months ended September 27, 1997, product development costs were $42.2 million or 13.2% of net sales, compared with $47.3 million or 18.8% of net sales for the same period in 1996. The year-to-date decrease was primarily due to reduced prototype expenses from the 1996 periods when the Company was completing development of the Sequoia and Aspen products. Although year-to-date product development expenses have decreased in 1997, the Company maintains a strong commitment to product development programs to develop proprietary technologies. The provision for income taxes was $1.1 million for the third quarter of 1997, compared with a benefit of $0.1 million for the third quarter of 1996. For the nine months ended September 27, 1997, the provision for income taxes was $6.1 million compared with a benefit of $5.5 million for the nine months ended September 28, 1996. The effective tax rate for the third quarter of 1997 was a provision of 20.0% due to an adjustment of the year-to-date tax rate, compared with a benefit of 4.9% for the third quarter of 1996. The effective tax rate for the nine months ended September 27, 1997, was a provision of 27.5% compared with a benefit of 41.9% for the same period in 1996. The prior year benefits resulted from the carryback of 1996 losses to pre-1996 tax liabilities. In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, ("SFAS No. 128"), "Earnings Per Share;" No. 129, ("SFAS No. 129"), "Disclosure of Information about Capital 6 Structure;" No. 130, ("SFAS No. 130"), "Reporting Comprehensive Income;" and No. 131, ("SFAS No. 131"), "Disclosures About Segments of an Enterprise and Related Information." The Company anticipates that these adoptions will not have a material effect on its financial statements. Please see Note 6 to the condensed consolidated financial statements for further discussion. LIQUIDITY AND CAPITAL RESOURCES The Company's cash balances increased $0.4 million during the nine months ended September 27, 1997, to $14.8 million. During the nine months ended September 27, 1997, the Company generated $29.0 million in cash from operations, as compared with 1996, when operations used $31.7 million in cash. For the nine months ended September 27, 1997, a reduction in inventory provided $9.5 million in cash primarily as a result of reducing the build-up in 1996, of product inventories in preparation for new product introductions. Accounts receivable used $26.7 million in cash primarily due to higher revenues in 1997. The Company's investing and financing activities for the nine months ended September 27, 1997, used $28.3 million in cash. The Company purchased $27.3 million of equipment during the year, primarily consisting of computer and test equipment. Included in the financing activities for the first nine months of 1997 was $20.0 million raised through employee participation in the Company's stock option and stock purchase plans and $21.1 million used for share repurchases. In the same period a year ago, employee participation in the Company's stock plans generated $14.0 million while the repurchases of common stock used $12.0 million. On October 15, 1996, the Board of Directors authorized the repurchase of 4,000,000 shares of common stock over an unspecified period of time. During the third quarter of 1997, the Company repurchased 110,000 shares at a total cost of $2.9 million. As of September 27, 1997, the Company had repurchased 421,100 shares toward the 4,000,000 share repurchase authorization. As with all purchases thus far, the Company intends to fund future purchases by utilizing the Company's cash balances. Working capital for the nine months ended September 27, 1997, increased $13.6 million over the corresponding prior-year period primarily due to increased cash flow from operations. At September 27, 1997, the company's working capital totaled $129.2 million. The Company has a revolving, unsecured credit agreement for $75.0 million which is in effect through March 2000. Under the terms of the agreement, no compensating balances are required and the interest rate is determined at the time of borrowing based on the London interbank offered rate plus a margin, or prime rate. During the third quarter, the weighted average borrowings were $10.9 million and the weighted average interest rate was 6.7%. For the nine months ended September 27, 1997, the weighted average borrowings were $14.5 million and the weighted average interest rate was 6.4%. At September 27, 1997, borrowings under this facility totaled $7.0 million and the effective rate was 6.7%. Borrowing under this facility is subject to certain debt covenants and the Company is in compliance with these covenants. Based on its current operating plan, the Company believes that the liquidity provided by its existing cash, cash generated from operations, and the borrowing arrangement described above will be sufficient to meet the Company's operating and capital requirements for fiscal 1997. INVESTMENT RISKS The Management's Discussion and Analysis of Financial Condition and Results of Operations section in this report contains forward-looking statements regarding the Company and its products. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. The Company's actual results could differ materially from those discussed in this document. In evaluating the forward-looking statements contained in this document, prospective investors and shareholders should carefully consider the factors set forth below. The success of Acuson's products depends on the timely completion of additional product capabilities and software updates; actual and perceived levels of product performance in a clinical environment compared to other imaging modalities and competitive ultrasound systems; continued market acceptance of the products and their pricing; 7 and competitor responses including recently introduced competitive products, pricing, intellectual property allegations and product positioning counterstrategies. The realizable value of inventory and/or fixed assets for all of the Company's products is dependent on the timing and success of product introductions to the marketplace and market acceptance. Also, the Company's business is subject to further risks from developments in other imaging modalities, changes in government regulation of the marketing of ultrasound equipment, potential negative impacts from weakness in selected markets in Europe and Asia, and by the current strength of the U.S. dollar. For a description of the general investment considerations and risks surrounding Acuson's overall business and financial prospects, refer to the Company's Form 10-K filed with the Securities and Exchange Commission on March 31, 1997. Acuson is a registered trademark and Aspen and Sequoia are trademarks of Acuson Corporation. ________________________________________________________________________________ 8 ________________________________________________________________________________ PART II ITEM 1 LEGAL PROCEEDINGS On October 27, 1994, the Company was sued in Ghent, Belgium, by Cormedica NV, in connection with the Company's termination of its distributor relationship with Cormedica. In the suit, Cormedica seeks indemnities and damages in the amount of approximately $2.5 million, plus interest. The Company intends to defend this suit vigorously. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits -------- 27.1 Financial Data Schedule b) Reports on Form 8-K ------------------- The Company filed no reports on Form 8-K during the quarter ended September 27, 1997. ________________________________________________________________________________ 9 ________________________________________________________________________________ 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. ACUSON CORPORATION (Registrant) November 10, 1997 By /s/ Stephen T. Johnson ----------------------- Stephen T. Johnson Vice President, Chief Financial Officer (duly authorized Officer and Principal Financial and Accounting Officer) 10 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-27-1997 14,815 0 122,754 3,466 73,552 243,533 200,856 130,873 332,160 114,319 0 0 0 126,318 91,523 332,160 257,945 320,363 138,278 170,224 128,668 0 (752) 22,223 6,105 16,118 0 0 0 16,118 0.53 0.53
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