-----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, TaT5IItYIuoTteFMDUeACb8rXihKld37b4I16V5rEYbKmnfDyVyRbpQfYGKVXOm7 0x6NLwVr+me4k4et7oaONA== 0001012870-98-001348.txt : 19980518 0001012870-98-001348.hdr.sgml : 19980518 ACCESSION NUMBER: 0001012870-98-001348 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980515 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: 98623551 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 FOR QUARTER ENDED 04/04/98 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 APRIL 4, 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 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 28,097,583 shares -------------------------------- ----------------------------- (Class) Outstanding at May 9, 1998 ________________________________________________________________________________ FORM 10-Q ACUSON CORPORATION INDEX
PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of April 4, 1998 and December 31, 1997 1 Condensed Consolidated Statements of Operations for the Three Months Ended April 4, 1998 and March 29, 1997 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 4, 1998 and March 29, 1997 3 Notes to Condensed Consolidated Financial Statements 4 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 10 ITEM 6. Exhibits and Reports on Form 8-K 10 Signature 11
________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
APRIL 4, DECEMBER 31, 1998 1997 - ----------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 19,538 $ 22,735 Accounts receivable, net of allowance for doubtful accounts of $3,471 in 1998 and $3,475 in 1997 129,822 131,067 Inventories 79,082 75,517 Deferred income taxes 25,987 25,244 Other current assets 15,899 16,771 -------- -------- Total current assets 270,328 271,334 PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $140,562 and $136,888 in 1998 and 1997, respectively 71,981 70,631 OTHER ASSETS, NET 22,992 20,863 -------- -------- Total Assets $365,301 $362,828 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 42,000 $ 32,000 Accounts payable 23,633 21,975 Other accrued liabilities 88,253 98,754 -------- -------- Total current liabilities 153,886 152,729 -------- -------- Commitments and contingencies (Note 6) 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, 28,101 shares and 28,244 shares in 1998 and 1997, respectively 127,053 123,968 Accumulated other comprehensive loss (1,685) (1,472) Retained earnings 86,047 87,603 -------- -------- Total stockholders' equity 211,415 210,099 -------- -------- Total Liabilities and Stockholders' Equity $365,301 $362,828 ======== ========
________________________________________________________________________________ The accompanying notes are an integral part of these statements. 1 ________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
THREE MONTHS ENDED --------------------------------------- APRIL 4, MARCH 29, 1998 1997 - ------------------------------------------------------------------------------------------------------------ NET SALES Product $ 93,579 $ 87,503 Service 22,199 20,078 -------- -------- Total net sales 115,778 107,581 -------- -------- COST OF SALES Product 48,451 46,753 Service 12,013 10,067 -------- -------- Total cost of sales 60,464 56,820 -------- -------- Gross profit 55,314 50,761 -------- -------- OPERATING EXPENSES Selling, general and administrative 32,030 28,961 Product development 14,890 13,224 -------- -------- Total operating expenses 46,920 42,185 -------- -------- Income from operations 8,394 8,576 INTEREST INCOME (EXPENSE), NET (184) 84 -------- -------- Income before income taxes 8,210 8,660 PROVISION FOR INCOME TAXES 2,463 2,815 -------- -------- Net income $ 5,747 $ 5,845 ======== ======== EARNINGS PER SHARE Basic $ 0.20 $ 0.20 ======== ======== Diluted $ 0.20 $ 0.19 ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 28,274 28,636 ======== ======== Diluted 29,131 30,668 ======== ======== - ------------------------------------------------------------------------------------------------------------ NET INCOME 5,747 5,845 OTHER COMPREHENSIVE LOSS, NET OF TAX Foreign currency translation adjustments (213) (1,071) -------- -------- Comprehensive income $ 5,534 $ 4,774 ======== ========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements. - -------------------------------------------------------------------------------- 2 ACUSON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTHS ENDED ----------------------------- APRIL 4, MARCH 29, 1998 1997 - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,747 $ 5,845 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 5,636 6,026 Tax benefit of employee stock transactions 312 2,976 Changes in: Accounts receivable 1,288 (18,091) Inventories (3,527) 5,190 Deferred income taxes (626) 968 Other current assets (257) 861 Leases receivable (2,095) (237) Accounts payable 1,695 455 Other accrued liabilities (7,233) (2,193) -------- -------- Net cash provided by operating activities 940 1,800 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Investment in property and equipment (7,800) (3,886) Sale of fixed assets 602 1,868 Decrease in other assets 512 198 -------- -------- Net cash used in investing activities (6,686) (1,820) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings 19,000 5,000 Repayment of short-term borrowings (9,000) -- Repurchase of common stock (12,330) (7,807) Issuance of common stock under stock option and stock purchase plans 5,026 10,665 -------- -------- Net cash provided by financing activities 2,696 7,858 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (147) (264) -------- -------- Net increase (decrease) in cash and cash equivalents (3,197) 7,574 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,735 14,413 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,538 $ 21,987 ======== ======== - --------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these 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 April 4, 1998 and its condensed consolidated results of operations and cash flows for the three- month periods ended April 4, 1998 and March 29, 1997. The results of operations for the three months ended April 4, 1998 are not necessarily indicative of the results to be expected for the entire year ending December 31, 1998. Certain information reported in the prior year has been reclassified to conform to the 1998 presentation. The Company's principle accounting policies are set forth in the financial statements for the year ended December 31, 1997 and notes thereto, contained in the Company's Annual Report filed with the Securities and Exchange Commission. NOTE 2. COMPREHENSIVE INCOME (LOSS) Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 requires that items defined as other comprehensive income, such as changes in foreign currency translation adjustments, be separately reported in the financial statements and that the accumulated balance of other comprehensive income be reported separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The following tables present the components, and related tax effect, of accumulated other comprehensive income: The following is a summary of the accumulated other comprehensive loss balance (In thousands)
Accumulated Foreign Other Currency Comprehensive Items Loss ----------------------------------------- Quarter Ended April 4, 1998 Beginning balance $(1,472) $(1,472) Current-period change (213) (213) ------- ------- Ending balance $(1,685) $(1,685) ======= =======
The following is a summary of the related tax effect allocated to each component of other comprehensive loss (In thousands)
Tax Before-Tax (Expense) Net-of-Tax Amount or Benefit Amount ----------------------------------------------------------- Quarter ended March 29, 1997 Foreign currency translation adjustments $(1,587) $516 $(1,071) ------- ---- ------- Other comprehensive loss $(1,587) $516 $(1,071) ======= ==== ======= Quarter ended April 4, 1998 Foreign currency translation adjustments $ (304) $ 91 $ (213) Other comprehensive loss $ (304) $ 91 $ (213) ======= ==== =======
4 NOTE 3. EARNINGS PER SHARE Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if the Company's outstanding, "in the money," stock options were exercised. Diluted earnings per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares are calculated using the treasury stock method and represent incremental shares issuable upon the exercise of the Company's outstanding options. The following table provides reconciliations of the numerators and denominators used in calculating basic and diluted earnings per share for the quarters ended March 29, 1997 and April 4, 1998:
(In thousands, except per share amounts) Dilutive Effect of Options Basic Outstanding Diluted --------------------------------------------------------- Quarter Ended March 29, 1997 Net income (numerator) $ 5,845 $ 5,845 Weighted average number of shares outstanding (denominator) 28,636 2,032 30,668 Earnings per share $ 0.20 $ 0.19 ================ =============== Quarter Ended April 4, 1998 Net income (numerator) $ 5,747 $ 5,747 Weighted average number of shares outstanding (denominator) 28,274 857 29,131 Earnings per share $ 0.20 $ 0.20 ================ ===============
At April 4, 1998 approximately 700,000 weighted average options to purchase shares of common stock were antidilutive and were therefore not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares. Approximately 30,000 antidilutive weighted average options were outstanding at March 29, 1997. NOTE 4 - INVENTORIES The components of inventories were as follows (in thousands):
APRIL 4, DECEMBER 31, 1998 1997 ---------------------------------------- Raw materials $27,074 $29,057 Work-in-process 16,919 16,379 Finished goods 35,089 30,081 ------- ------- Total inventories $79,082 $75,517 ======= =======
NOTE 5 - 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. For the quarter ended April 4, 1998, the weighted average borrowings were $33.8 million and the weighted average 5 interest rate was 6.8%. On April 4, 1998, borrowings under this facility, which are subject to certain debt covenants, totaled $42.0 million and the effective rate was 6.5%. NOTE 6 - 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 7 - DISCLOSURE OF THE IMPACT THAT RECENTLY ISSUED FINANCIAL STANDARDS WILL HAVE ON THE FINANCIAL STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures About Segments of an Enterprise and Related Information." This statement is effective for fiscal years beginning after December 15, 1997 but need not be applied to interim financial statements in the initial year of application; however, comparative information for interim periods in the initial year of application will be reported in the financial statements for interim periods in fiscal year 1999. The adoption of SFAS 131 will not have a material effect on the Company's financial statements. ________________________________________________________________________________ 6 ________________________________________________________________________________ ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales increased 7.6 percent to $115.8 million for the quarter ended April 4, 1998, compared with $107.6 million for the quarter ended March 29, 1997. The increase was primarily due to increased shipments of the Sequoia(R) ultrasound systems and the Aspen(TM) ultrasound system. Worldwide service revenue increased 10.6 percent to $22.2 million for the first quarter of 1998, compared with $20.1 million for the first quarter of 1997. Domestic net sales for the first quarter of 1998 increased 12.4 percent over the first quarter of 1997 to $79.2 million while international net sales decreased 1.5 percent from the first quarter of 1997 to $36.6 million. International revenues were negatively impacted by weakness in certain markets in Asia and Europe and by the current strength of the U.S. dollar. The Company expects these trends to continue at least through the second quarter of 1998. Gross profit increased slightly for the first quarter of 1998 to 47.8 percent, compared with 47.2 percent for the first quarter of 1997. The increase was primarily due to a shift to relatively higher margin products, partially offset by lower service margins. Selling, general and administrative expenses for the quarter ended April 4, 1998 were $32.0 million, compared with $29.0 million for the quarter ended March 29,1997. As a percentage of net sales, these expenses increased slightly to 27.7 percent for the first quarter of 1998, compared with 26.9 percent for the first quarter of 1997. The increase was primarily due to higher selling expenses resulting from planned additions to the Company's sales infrastructure. Product development spending was $14.9 million for the quarter ended April 4, 1998, compared with $13.2 million for the quarter ended March 29, 1997. As a percentage of net sales, product development spending increased slightly to 12.9 percent, compared with 12.3 percent for the first quarter of 1997. The increase was primarily due to an increase in contracted services in support of new product development. The provision for income taxes was $2.5 million for the quarter ended April 4, 1998, compared with a provision of $2.8 million for the quarter ended March 29, 1997. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," which is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS 130 did not have a material effect on the results of operations or financial position of the Company. See Note 2 to the condensed consolidated financial statements for further discussion. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures About Segments of an Enterprise and Related Information." This statement is effective for fiscal years beginning after December 15, 1997 but need not be applied to interim financial statements in the initial year of application; however, comparative information for interim periods in the initial year of application will be reported in the financial statements for interim periods in fiscal year 1999. The adoption of SFAS 131 will not have a material effect on the Company's financial statements. 7 LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents balance decreased $3.2 million during the three months ended April 4, 1998, to $19.5 million. The Company's short- term borrowings increased $10.0 million during the first quarter of 1998 to $42.0 million. During the first quarters of 1998 and 1997, the Company generated $0.9 million and $1.8 million in cash from operations, respectively. The primary source of cash from operations was net income of $5.7 million and the primary use of cash was a $7.2 million decrease in other accrued liabilities. The decrease in other accrued liabilities was primarily due to payments of previously accrued compensation. The Company's investing and financing activities for the three months ended April 4, 1998, used $4.0 million in cash. The Company purchased $7.8 million of equipment during the quarter, primarily consisting of computer equipment. Included in the financing activities for the first quarter of 1998, was $5.0 million raised through employee participation in the Company's stock option and stock purchase plans. The Company used $12.3 million, including $2.7 million accrued in 1997, for share repurchases. During the first quarter of 1997, employee participation in the Company's stock plans generated $10.7 million while the repurchases of common stock used $7.8 million. Also included in the financing activities for the first quarter of 1998 were net short-term borrowings of $10.0 million. During the first quarter of 1997, the Company received net short-term borrowings of $5.0 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 first quarter of 1998, the Company repurchased 500,000 shares at a total cost of $9.6 million. As of April 4, 1998, the Company had repurchased 1,762,800 shares toward the 4,000,000 share repurchase authorization at a cumulative cost of $34.8 million. Working capital at April 4, 1998 decreased $2.2 million from the corresponding prior-year period. On April 4, 1998, the Company's working capital totaled $116.4 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. For the quarter ended April 4, 1998, the weighted average borrowings were $33.8 million and the weighted average interest rate was 6.8%. On April 4, 1998, borrowings under this facility, which are subject to certain debt covenants, totaled $42.0 million and the effective rate was 6.5%. 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 the next twelve months. 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; and competitor responses including recently introduced competitive products, pricing, intellectual property allegations and product positioning counter-strategies. The Company's business is also subject to risks from potential negative impacts of weakness in certain markets in Asia and Europe and by the current strength of the U.S. dollar. As the Company's international business has grown, the Company has an increasing percentage of its receivables in other countries. In both Italy and Brazil the amount of receivables exceeds $11,000,000. In France the 8 amount of receivables exceeds $5,000,000 and in China the amount of receivables exceeds $4,000,000. Political instability or other issues may impact the ability of the Company to collect receivables in foreign countries. The Company uses a centralized computing environment to control its order administration, financial and manufacturing processes. During 1997, the Company decided to replace its existing computing environment with an enterprise-wide business information system in two phases. A portion of the first phase of this project is currently scheduled to become operational during the third quarter of 1998. The new system will control many of the significant aspects of the Company's operations and the Company has retained an experienced consulting organization to assist in the conversion. However, the Company's future shipments and results could be adversely impacted if, following the conversion, there are significant problems with the system. When this new system is fully operational, the Company believes its computer systems will be year 2000 compliant. 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 for the year ended December 31, 1997. Acuson and Sequoia are registered trademarks and Aspen is a trademark of Acuson Corporation. ________________________________________________________________________________ 9 ________________________________________________________________________________ PART II ITEM 1 LEGAL PROCEEDINGS The current status is the same as previously reported in the Company's Form 10-K for the fiscal year ended December 31, 1997. 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 April 4, 1998. ________________________________________________________________________________ 10 ________________________________________________________________________________ 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) May 15, 1998 By /s/ Robert J. Gallagher ------------------------------------- Robert J. Gallagher Vice Chairman and Chief Operating Officer (duly authorized Officer and Principal Financial Officer) 11 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 3-MOS DEC-31-1998 JAN-01-1998 APR-04-1998 19,538 0 133,293 3,471 79,082 270,328 212,543 140,562 365,301 153,886 0 0 0 127,053 84,362 365,301 93,579 115,778 48,451 60,464 46,920 0 184 8,210 2,463 5,747 0 0 0 5,747 0.20 0.20
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