-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, M6j4ZQCiPajHH8E0IUYYZ49suX25Xk04CGd4eT7Mk8iyQsxc7Fp64hOkz5zNbKg4 b0kuZro9vs8WfmhsrmzncQ== 0000806086-94-000010.txt : 19941116 0000806086-94-000010.hdr.sgml : 19941116 ACCESSION NUMBER: 0000806086-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED TECHNOLOGY LABORATORIES INC/ CENTRAL INDEX KEY: 0000806086 STANDARD INDUSTRIAL CLASSIFICATION: 3845 IRS NUMBER: 911353386 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15160 FILM NUMBER: 94558959 BUSINESS ADDRESS: STREET 1: 22100 BOTHELL EVERETT HWY SE STREET 2: PO BOX 3003 CITY: BOTHELL STATE: WA ZIP: 98041-3003 BUSINESS PHONE: 2064877000 10-Q 1 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 September 30, 1994 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 0-15160 ADVANCED TECHNOLOGY LABORATORIES, INC. (Exact name of registrant as specified in its charter) Delaware 91-1353386 (State of incorporation) (IRS Employee Identification No.) 22100 Bothell-Everett Highway Post Office Box 3003 Bothell, Washington 98041-3003 (Address of principal executive offices) (Zip Code) (206) 487-7000 (Telephone number) Common stock, $0.01 par value; 13,250,000 shares outstanding as of October 28, 1994 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 Page 1 ADVANCED TECHNOLOGY LABORATORIES, INC. TABLE OF CONTENTS PART I Financial Information: Page No. Item 1. Financial Statements: Condensed Consolidated Balance Sheets (Unaudited) - September 30, 1994 and December 31, 1993 3 Condensed Consolidated Statements of Operations (Unaudited) - Three Months and Nine Months Ended September 30, 1994 and October 1, 1993 4 Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 1994 and October 1, 1993 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II Other Information: Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Page 2 PART I Financial Information Item 1. Financial Statements ADVANCED TECHNOLOGY LABORATORIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) 9/30/94 12/31/93 ASSETS CURRENT ASSETS Cash and short-term investments $34,327 $ 54,758 Receivables 95,581 102,811 Inventories 98,821 88,692 Prepaid expenses 4,392 2,180 Deferred income taxes 9,134 8,974 ------- ------- 242,255 257,415 MARKETABLE DEBT SECURITY 4,988 4,988 PROPERTY, PLANT AND EQUIPMENT, NET 56,198 59,811 OTHER ASSETS 7,661 7,183 -------- -------- $311,102 $329,397 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $1,516 $ 5,279 Current installments of long-term debt 1,842 470 Accounts payable and accrued expenses 61,816 60,928 Deferred revenue 32,671 30,711 Taxes on income 4,713 4,946 ------- ------- 102,558 102,334 DEFERRED INCOME TAXES 4,656 4,628 LONG-TERM DEBT 7,188 11,600 SHAREHOLDERS' EQUITY 196,700 210,835 -------- -------- $311,102 $329,397 ======== ======== COMMON SHARES OUTSTANDING 13,251 13,101 See accompanying notes to condensed consolidated financial statements. Page 3 ADVANCED TECHNOLOGY LABORATORIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended Nine Months ended (In thousands, except per 9/30/94 10/1/93 9/30/94 10/1/93 share data) REVENUES Product sales $ 67,472 $ 60,966 $ 203,550 $ 208,755 Service 19,873 17,644 57,950 53,258 ------ ------ ------- ------- 87,345 78,610 261,500 262,013 COST OF SALES Product sales 36,106 31,882 110,133 107,751 Service 11,746 10,481 35,742 34,235 ------ ------ ------- ------- 47,852 42,363 145,875 141,986 GROSS PROFIT 39,493 36,247 115,625 120,027 OPERATING EXPENSES Selling, general and administrative 28,529 26,493 81,329 82,258 Research and development 15,105 12,654 41,553 37,810 Merger and other costs -- -- 5,391 -- Restructuring charge -- 4,275 -- 4,275 Other expense, net 488 993 1,306 3,190 ------ ------ ------- ------- 44,122 44,415 129,579 127,533 INCOME (LOSS) FROM OPERATIONS (4,629) (8,168) (13,954) (7,506) INTEREST, NET 258 220 590 1,066 -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES (4,371) (7,948) (13,364) (6,440) INCOME TAX EXPENSE 387 577 1,039 1,232 -------- -------- --------- -------- NET INCOME (LOSS) $(4,758) $(8,525) $(14,403) $(7,672) ======== ======== ========= ======== NET INCOME (LOSS) PER SHARE $(0.36) $(0.63) $(1.10) $(0.56) WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING 13,215 13,436 13,151 13,690 See accompanying notes to condensed consolidated financial statements. Page 4 ADVANCED TECHNOLOGY LABORATORIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended (In thousands) 9/30/94 10/1/93 OPERATING ACTIVITIES Net income (loss) $(14,403) $(7,672) Non-cash charges (credits) to income (loss): Depreciation and amortization 11,729 10,940 Gain on sale of property (105) -- Changes in: Receivables 6,960 10,533 Inventories (6,677) (16,951) Accounts payable and accrued expenses (3,216) (4,490) Deferred revenue 1,640 (144) Taxes on income (305) (114) Other (1,027) 151 ------- ------- Cash used in operating activities (5,404) (7,747) INVESTING ACTIVITIES Decrease in short-term investments 20 38,174 Investment in long-term marketable debt security -- (4,988) Investment in property, plant and equipment (9,001) (10,502) Proceeds from sale of property 3,224 -- Other (389) (1,088) ------- ------- Cash provided by (used in) investing activities (6,146) 21,596 FINANCING ACTIVITIES Decrease in short-term borrowings (5,013) (320) Repayment of long-term debt (3,003) (348) Repurchase of common shares (369) (10,719) Exercise of stock options 361 287 ------- -------- Cash used in financing activities (8,024) (11,100) Effect of exchange rate changes (837) (6) ------- ------- Net increase (decrease) in cash and cash equivalents (20,411) 2,743 Cash and cash equivalents, beginning of period 52,713 34,770 ------- ------- Cash and cash equivalents, end of period $32,302 $37,513 ======= ======= See accompanying notes to condensed consolidated financial statements. Page 5 ADVANCED TECHNOLOGY LABORATORIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 1. Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Advanced Technology Laboratories, Inc. and its wholly owned subsidiaries, collectively referred to as the "Company." The Company develops, manufactures, markets and services diagnostic medical ultrasound systems worldwide. These systems are used primarily in radiology, cardiology, obstetrics/gynecology, and peripheral vascular applications. The accompanying condensed consolidated financial statements and related notes have been prepared pursuant to the Securities and Exchange Commission rules and regulations for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1993 Form 10-K Annual Report to Shareholders. The information furnished reflects, in the opinion of the management, all adjustments necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. Certain amounts reported in prior periods have been reclassified to conform to the 1994 presentation. 2. Acquisition of Interspec, Inc. On May 17, 1994, the Company completed its merger with Interspec, Inc. ("Interspec"). Interspec develops, manufactures, markets, and services diagnostic medical ultrasound imaging systems and related supplies and accessories for physicians' offices, clinics and hospitals. To effect the merger, the Company issued approximately 2.6 million shares of common stock for all of the outstanding common stock of Interspec, based on an exchange ratio of 0.413 share of ATL stock for each share of Interspec stock. The merger has been accounted for as a pooling of interests business combination; therefore, the Company's financial statements and information as reported prior to the merger have been restated to include Interspec as if the companies had been combined for all periods presented. Prior to the merger, Interspec reported its financial statements based on a November 30 fiscal year end. In 1994, the fiscal year end of the combined companies will end December 31, consistent with ATL's year end. To conform the financial reporting periods of the combined companies, Interspec's results of operations for the one month period ended March 31, 1994 have Page 6 ADVANCED TECHNOLOGY LABORATORIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 2. Acquisition of Interspec, Inc. (continued) been excluded from the consolidated statements of operations and cash flows and accounted for as an adjustment to retained earnings. Interspec's results for the one month ended March 31, 1994 included $2.1 million of expenses related primarily to the termination of dealer arrangements in countries outside the United States. The Interspec March 1994 results are summarized as follows: Revenues $3,320 Net loss (4,180) In the second quarter of 1994, the newly combined company recorded a $5.4 million non-recurring charge with $3.9 million for merger related costs and expenses and $1.5 million associated with the bankruptcy of Interspec's former distributor in Italy as accounts receivable were garnished in the bankruptcy proceeding. Of the $3.9 million merger expenses, $2.3 million was for legal, accounting, investment advisory, printing and other professional services with the remaining $1.6 million related primarily to facility and personnel consolidations of Interspec operations into the newly combined company. The $5.4 million total is reported separately as "Merger and Other Costs" in the Consolidated Statements of Operations. 3. Cash, Short-Term Investments, and Long-Term Marketable Debt Security The Company considers short-term investments with maturity dates of three months or less at the date of purchase to be cash equivalents for purposes of the statement of cash flows. All investments are expected to be held to maturity and are recorded at cost. 9/30/94 12/31/93 Cash and cash equivalents $32,302 $52,713 Short-term investments 2,025 2,045 ------- ------- 34,327 54,758 Long-term marketable debt security 4,988 4,988 ------- ------- $39,315 $59,746 ======= ======= Page 7 ADVANCED TECHNOLOGY LABORATORIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 4. Inventories 9/30/94 12/31/93 Materials and work in process $33,392 $27,995 Finished products 19,616 17,497 Demonstration 27,406 23,354 Customer service 18,407 19,846 ------- ------- $98,821 $88,692 ======= ======= 6. Per Share Data Per share data is based on the weighted average number of common shares and dilutive common share equivalents outstanding during each period. Dilutive common share equivalents are calculated under the treasury stock method and consist of unexercised employee stock options. Page 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Three months ended Nine months ended (In millions except 9/30/94 10/1/93 % Change 9/30/94 10/1/93 % Change per share data) Revenues $87.3 $78.6 11% $261.5 $262.0 0% Gross Profit $39.5 $36.2 9% $115.6 $120.0 (4%) Operating Expenses * $44.1 $44.4 (1%) $129.6 $127.5 2% Net Income (Loss) * $(4.8) $(8.5) $(14.4) $(7.7) Net Income (Loss) per $(0.36) $(0.63) $(1.10) $(0.56) Share * * The 1994 nine month results include non-recurring expenses of $5.4 million primarily associated with the acquisition of Interspec during the second quarter. The 1993 third quarter and nine month results include a one-time restructuring charge of $4.3 million related to the August 1993 restructuring of operations which resulted in an 11% reduction in the Company's workforce. The Company reported a net loss of $4.8 million or $0.36 per share in the third quarter of 1994 compared with a net loss of $8.5 million or $0.63 per share in the third quarter of 1993. The third quarter of 1993 results include a charge of $4.3 million related to the August 1993 restructuring of operations which resulted in an 11% reduction in the Company's workforce. For the first nine months, the Company reported a net loss of $14.4 million in 1994 compared with a net loss of $7.7 million in 1993. The 1994 results include a non-recurring charge of $5.4 million primarily associated with the acquisition of Interspec completed during the second quarter. See Note 2 of the Notes to Condensed Consolidated Financial Statements for further discussion regarding the Interspec acquisition and the non-recurring charge. The Company's worldwide revenues increased 11% to $87.3 million in the third quarter of 1994 compared with $78.6 million in the third quarter of 1993. A shift of product mix from older to newer product lines and higher service revenues contributed to the increase in revenues. The Company's U.S. business continued to reflect a constrained U.S. market due to ongoing restructuring of health care delivery systems, potential federal health care legislation, and associated competitive pressures. International revenues reflected the distribution synergies for Interspec imaging products created by the second quarter merger and the continued expansion of the Company's Asia/Pacific/Latin America region with new direct operations in Argentina and Singapore. For the first nine months, total revenues were flat at $261.5 million compared with $262.0 million in the prior year. Page 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Gross profit was $39.5 million in the third quarter of 1994 compared with $36.2 million in the same quarter of the prior year. As a percent of total revenues, gross margin decreased to 45.2% compared with 46.1% in the prior year. The decline in gross margin primarily reflects the impact of competitive pressures in the U.S. as discussed above and competitive pricing in Europe, partially offset by slightly higher service margins and the continued shift in the Company's product mix with sales of the Ultramark (r) 9 High Definition (tm) Imaging (HDI(tm)) systems increasing as a percent of total product sales. For the first nine months of 1994, gross profit was $115.6 million compared to $120.0 million for the same period of 1993. Year to date, gross margins decreased to 44.2% from 45.8% in 1993, reflecting the impact of the same factors discussed above. On October 10, 1994, the Company announced the introduction of the HDI 3000 system, the Company's fourth generation all- digital ultrasound system. The Company believes this system will provide improved diagnostic performance and increased clinical productivity through a design which expands digital processing power in a lighter, more mobile system. The Company expects to begin customer shipments during the fourth quarter. Total operating expenses for the third quarter of 1994 were $44.1 million compared with $40.1 million (excluding the $4.3 million restructuring charge) in the third quarter of 1993. Selling, general and administrative expenses of $28.5 million increased 8% over the third quarter of 1993 but declined as a percent of revenues to 32.7% from 33.7% in the prior year. The dollar increase reflects primarily higher costs in preparation for the HDI 3000 introduction, marketing costs associated with the introduction of the Interspec products subsequent to the merger, and expansion of international distribution channels. Research and development expenses increased 19% to $15.1 million in the third quarter of 1994 compared with the same quarter of 1993 reflecting increased investment in the Company's new product development programs including the recently introduced HDI 3000 system. This increased level of spending for research and development is expected to continue through the remainder of 1994 as the Company continues its programs of new and sustaining product development. For the first nine months of 1994, operating expenses (excluding the 1994 merger and other costs and 1993 restucturing charge) were $124.2 million compared with $123.3 million for the same period of 1993. Increased research and development expenses were partially offset by reduced selling, general and administrative expenses and other expenses (primarily foreign exchange losses) in 1994. Page 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) CAPITAL RESOURCES AND LIQUIDITY (In millions) 9/30/94 12/31/93 Cash and investments: Cash and short-term investments $34.3 $54.8 Marketable debt security 5.0 5.0 ----- ----- Total $39.3 $59.8 Total Assets $311.1 $329.4 Shareholders' Equity $196.7 $210.8 The Company continues to finance operations primarily with internal resources, including its cash and investment balances. Cash and investments totalled $39.3 million at September 30, 1994 compared with $59.8 million at December 31, 1993 and $45.5 million at the end of the second quarter. The change in the Company's cash and investments position during the year reflects primarily ongoing investment in equipment, the repayment of long-term debt previously held by Interspec, increased inventory levels to support new product introductions,and the nine month operating results. Operating activities, consisting of the net loss adjusted for non-cash depreciation and amortization and net changes in operating assets and liabilities, used $5.4 million of cash during the first nine months of 1994. Cash used in investing activities totaled $6.1 million during the first nine months of 1994, primarily for normal additions to property, plant and equipment of $9.0 million offset by cash proceeds of $3.2 million from the sale in the first quarter of the Company's former manufacturing facility in Germany. Financing activities used $8.0 million during the first nine months of 1994 reflecting the payoff of long-term debt previously held by Interspec and reductions in short-term borrowings by Interspec and the Company's foreign subsidiaries. In addition to its cash and investment balances, the Company has available domestic credit facilities of $25 million and also utilizes various short-term working capital lines of credit at foreign subsidiary locations to facilitate intercompany cash flow. The Company expects its existing capital resources, including cash and investment balances and available credit facilities, together with funds generated from operations should be sufficient to meet the Company's foreseeable operating requirements. On October 12, 1994, the Company announced it had signed a letter of intent to purchase an 86,000 square foot office building and associated 35 acres of property adjoining the Company's corporate headquarters in Bothell, Washington. The transaction and purchase price of $11.3 million are subject to completion of due diligence, final inspections and the approval of the Board of Directors. The Company anticipates this transaction will close prior to the end of the year and expects to finance the acquisition with a mortgage loan. Page 11 PART II Other Information Item 1. Legal Proceedings - None Item 2. Changes in Securities - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Financial Data Schedule (b) Reports on Form 8-K - None Page 12 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. ADVANCED TECHNOLOGY LABORATORIES, INC. (Registrant) DATE: November 10, 1994 BY: ____/s/__Harvey N. Gillis________ Harvey N. Gillis Senior Vice President Finance and Administration and Chief Financial Officer Page 13 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1994 AND THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1994 JAN-1-1994 SEP-30-1994 32,302 2,025 95,581 0 98,821 242,255 56,198 0 311,102 102,558 7,188 0 0 0 0 311,102 203,550 261,500 110,133 145,875 129,579 0 (590) (13,364) 1,039 (14,403) 0 0 0 (14,403) (1.10) (1.10) THE COMPANY ALSO HOLDS A LONG TERM MARKETABLE DEBT SECURITY OF $4,988 WHICH IS REPORTED AS A NON-CURRENT ASSET.
-----END PRIVACY-ENHANCED MESSAGE-----