-----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, AJ+Ous/EcrkTT4uHfJ5Nw2QW8TVtPuRH5R0G+GvAJTzVChCPikdUGH7lVrfYP/LA WidG1DSND/gZf9CFv5P66A== 0000806086-96-000009.txt : 19960514 0000806086-96-000009.hdr.sgml : 19960514 ACCESSION NUMBER: 0000806086-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED TECHNOLOGY LABORATORIES INC CENTRAL INDEX KEY: 0000806086 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 911353386 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15160 FILM NUMBER: 96560910 BUSINESS ADDRESS: STREET 1: 22100 BOTHELL EVERETT HWY SE STREET 2: PO BOX 3003 CITY: BOTHELL STATE: WA ZIP: 98041-3003 BUSINESS PHONE: 2064877000 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED TECHNOLOGY LABORATORIES INC/ DATE OF NAME CHANGE: 19930414 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 29, 1996 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) Washington 91-1353386 (State of incorporation) (IRS Employer Identification No.) 22100 Bothell-Everett Highway Post Office Box 3003 98041-3003 Bothell, Washington (Zip Code) (Address of principal executive offices) (206) 487-7000 (Telephone number) Common stock, $0.01 par value; 14,017,877 shares outstanding as of April 26, 1996 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 1 ADVANCED TECHNOLOGY LABORATORIES, INC. TABLE OF CONTENTS PART I Financial Information Page No. - ------ --------------------- -------- Item 1. Financial Statements -------------------- Condensed Consolidated Balance Sheets - March 29, 1996 (Unaudited) and December 31, 1995 3 Condensed Consolidated Statements of Operations (Unaudited) - Three Months Ended March 29, 1996 and March 31, 1995 4 Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months ended March 29, 1996 and March 31, 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operation 8 ---------------------------------- 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 -------------------------------- 2 PART I Financial Information - ------ --------------------- ITEM 1. Financial Statements -------------------- ADVANCED TECHNOLOGY LABORATORIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS - ----------------------------------------------------------------- (In thousands) 3/29/96 12/31/95 - ----------------------------------------------------------------- (Unaudited) ASSETS CURRENT ASSETS Cash and short-term investments $ 52,223 $ 35,654 Receivables, net 109,985 129,226 Inventories 91,390 94,877 Prepaid expenses 2,705 3,007 Deferred income taxes, net 9,070 9,048 ---------------------- Total current assets 265,373 271,812 PROPERTY, PLANT AND EQUIPMENT, NET 70,514 71,130 OTHER ASSETS, NET 10,348 10,506 ---------------------- $346,235 $353,448 ====================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 3,397 $ 2,911 Current portion of long-term debt 560 555 Accounts payable and accrued expenses 66,462 79,903 Deferred revenue 21,514 21,038 Taxes on income 5,016 5,824 ---------------------- Total current liabilities 96,949 110,231 LONG-TERM DEBT 13,408 14,837 OTHER LONG-TERM LIABILITIES 19,068 17,457 SHAREHOLDERS' EQUITY 216,810 210,923 ---------------------- $346,235 $353,448 ====================== - ----------------------------------------------------------------- Common shares outstanding 13,884 13,610 - ---------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 3 ADVANCED TECHNOLOGY LABORATORIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended - ---------------------------------------------------------------- (In thousands, except per share data) 3/29/96 3/31/95 - ----------------------------------------------------------------- REVENUES Product sales $73,477 $74,200 Service 21,322 20,162 ------------------- 94,799 94,362 ------------------- COST OF SALES Cost of product sales 37,098 38,426 Cost of service 12,604 12,525 ------------------- 49,702 50,951 ------------------- GROSS PROFIT 45,097 43,411 OPERATING EXPENSES, NET Selling, general and administrative 29,482 28,607 Research and development 11,770 12,612 Restructuring expenses -- 2,500 Other expense (income), net 354 (557) ------------------- 41,606 43,162 ------------------- INCOME FROM OPERATIONS 3,491 249 Interest income 668 363 Interest expense (447) (538) ------------------- INCOME BEFORE INCOME TAXES 3,712 74 Income tax expense 742 348 ------------------- NET INCOME (LOSS) $2,970 $(274) =================== Net income (loss) per share $0.20 $(0.02) Weighted average common shares and equivalents outstanding 14,615 13,340 - ----------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 4 ADVANCED TECHNOLOGY LABORATORIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended - ------------------------------------------------------------------------- (In thousands) 3/29/96 3/31/95 - ------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ 2,970 $ (274) Adjustments to reconcile net income (loss) to cash provided (used) by operating activities: Depreciation and amortization 3,638 4,126 Changes in: Receivables, net 18,521 673 Inventories 3,024 (761) Accounts payable and accrued expenses (13,127) (9,067) Deferred revenue 1,268 3,766 Taxes on income (822) 491 Other 192 (716) ------------------ Cash provided (used) by operations 15,664 (1,762) INVESTING ACTIVITIES Investment in property, plant and equipment (2,586) (3,063) Proceeds from maturing short-term investments 4,988 -- ------------------ Cash provided (used) by investing activities 2,402 (3,063) FINANCING ACTIVITIES Increase (decrease) in short-term borrowings 486 (399) Repayment of long-term debt (211) (78) Exercise of stock options 2,377 360 ----------------- Cash provided (used) by financing activities 2,652 (117) Effect of exchange rate changes 839 (47) ----------------- Increase (decrease) in cash and cash equivalents 21,557 (4,989) Cash and cash equivalents, beginning of period 30,666 22,901 ----------------- Cash and cash equivalents, end of period $52,223 $17,912 ================== - -------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 5 ADVANCED TECHNOLOGY LABORATORIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements contain the accounts of Advanced Technology Laboratories, Inc. (ATL), which includes its subsidiaries and is referred to as the "Company." ATL develops, manufactures, markets and services diagnostic medical ultrasound systems worldwide. The Company sells its products to hospitals, clinics and physicians for use in radiology, cardiology, obstetrics and gynecology, vascular, musculoskeletal and intraoperative 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 included in the Company's 1995 Form 10-K. The information furnished reflects, in the opinion of 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. 2. RESTRUCTURING EXPENSES During 1995, the Company implemented a new corporate structure which consolidated the Company's operations located in Ambler, Pennsylvania with the Company's headquarters operations in Bothell, Washington. The consolidation has been implemented as planned and resulted in the relocation of Ambler manufacturing, administrative and research and development (R&D) functions to Bothell and a net reduction of approximately 100 full-time positions. The Company incurred restructuring expenses for severance, outplacement and employee retention incentives of $2,500 during the first quarter of 1995. At March 29, 1996, substantially all amounts accrued for restructuring expenses have been paid and no further expenses are expected. 6 ADVANCED TECHNOLOGY LABORATORIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 3. CASH AND SHORT-TERM EXPENSES 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. 3/29/95 12/31/95 ---------- ---------- Cash and cash equivalents $52,223 $30,666 Short-term investment -- 4,988 ---------- ---------- $52,223 $35,654 ========== ========== 4. INVENTORIES 3/29/96 12/31/95 ---------- ---------- Materials and work in progress $33,136 $33,198 Finished products 17,904 22,007 Demonstrator equipment 19,133 19,825 Customer service 21,217 19,847 ---------- ---------- $91,390 $94,877 ========== ========== 5. 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 as presented in the condensed consolidated Statements of Operations. Dilutive common share equivalents are calculated under the treasury stock method and consist of unexercised employee stock options. Primary and fully diluted earnings per share are equivalent for all periods presented. 6. LONG-TERM DEBT On February 1, 1996, the remaining 11% subordinated convertible debentures totaling $1,213 were converted by the Company into 71,577 shares of the Company's common stock in accordance with the conversion ratio stated in the debenture agreements. 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- RESULTS OF OPERATIONS --------------------- Three months ended - ------------------------------------------------------------------------ (In millions, except per share data) 3/29/96 3/31/95 % Change - ------------------------------------------------------------------------ Revenues $94.8 $94.4 0.5% Gross profit $45.1 $43.4 4% % of Revenues 47.6% 46.0% Operating expenses; excluding restructuring expenses and benefit for state tax audit $41.6 $42.0 (1%) Restructuring expenses -- $ 2.5 Benefit related to state tax audit -- $(1.3) Net income (loss) $3.0 $(0.3) Net income (loss) per share $0.20 $(0.02) - ------------------------------------------------------------------------- The Company reported net income of $3.0 million or $0.20 per share in the first quarter of 1996, compared with a net loss of $0.3 million or $0.02 per share in the first quarter of 1995. The 1995 net loss included a $2.5 million non-recurring restructuring charge related to the consolidation of the Company's operations in Ambler, Pennsylvania with the Company's headquarters in Bothell, Washington and a $1.3 million non-recurring operating expense benefit for a Washington State Business and Occupation tax refund. Excluding non-recurring items, net income in the first quarter of 1995 was $926,000 or $0.07 per share. The Company's total revenues increased 0.5% to $94.8 million in the first quarter of 1996 compared with $94.4 million in the first quarter of 1995. Compared with the same period in the prior year, product revenues were down slightly to $73.5 million and service revenues increased by $1.2 million to $21.3 million. Product sales reflect the continued success of the Company's fourth generation, all-digital HDI(R) 3000 system, partially offset by the transitioning of some of the Company's older products, most notably the Ultramark(R) 4, which has been phased out of production. Service revenues increased in the first quarter of 1996 due to growth in international markets and an increased installed base. International revenues were strong in first quarter of 1996 compared with the first quarter of 1995, while the Company's U.S. revenues continue to be effected by slow market conditions. On April 12, 1996, the Company announced that the U.S. Food and Drug Administration (FDA) approved the Company's premarket approval (PMA) submission for use of High Definition(TM) Imaging (HDI) in diagnosing breast tumors. The newly approved breast ultrasound procedure, when used as an adjunct to mammography and physical examinations, may reduce the number of breast biopsies performed by 40%. The Company is the first medical imaging company to receive PMA approval for a clinical application and will file a PMA supplement to add this new application to the HDI 3000 system. The Company has 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (Continued) - --------------------- begun marketing the HDI product for use under this application. Gross profit increased $1.7 million to $45.1 million in the first quarter of 1996, compared with $43.4 million in the first quarter of 1995. Gross margin increased to 47.6% compared with 46.0% in the prior year. The increase in gross margin is due to the continuing shift in product mix to the higher margin HDI 3000 and Apogee(R) product lines. The improved gross margin also reflects the results of consolidation of the Company's manufacturing operations and progress with cost reduction programs. The favorable change in gross margin is partially offset by the lower unit volumes due to the phase-out of the Company's older product lines, including the Ultramark 4 and the Ultramark 9DP systems. Operating expenses, excluding the non-recurring items in 1995 discussed below, decreased 1% in the first quarter of 1996 to $41.6 million from $42.0 million and decreased as a percentage of revenues to 43.9% from 44.5%. Including non-recurring items, operating expenses in the first quarter of 1995 were $43.2 million. Research and development expenses decreased to $11.8 million, or 12.4% of total revenues, from $12.6 million, or 13.4% of total revenues. The decrease in R&D expenses is partially a result of the consolidation of Ambler operations in 1995. During first quarter of 1996, R&D expenses incurred on an R&D joint venture project were offset by funding received from Hitachi Medical Corporation upon the achievement of a defined development milestone. The benefit of the consolidation of Ambler operations was offset by normal inflation and timing of certain programs causing selling, general and administrative expenses, excluding non-recurring items, to increase 2% to $29.5 million. On February 27, 1996, the Company, together with the University of Washington, announced plans to develop a handheld ultrasound device to be used on battlefields and in other emergency situations. The U.S. Department of Defense selected the project for matched funding, contributing approximately half of the estimated costs with the remaining funding coming from the project consortium which includes the Company, the University of Washington, Harris Semiconductor and VLSI Technology. During 1995, the Company implemented a new corporate structure which consolidated the Company's operations located in Ambler, Pennsylvania with the Company's headquarters operations in Bothell, Washington. The consolidation was implemented as planned and resulted in the relocation of Ambler manufacturing, administrative and R&D functions to Bothell and a net reduction of approximately 100 full-time positions. The Company incurred non-recurring restructuring expenses for severance, outplacement and employee retention incentives of $2.5 million during the first quarter of 1995. The Company incurred no corresponding expense in the first quarter of 1996. Other expense (income), net, in the first quarter of 1995 includes a non-recurring credit of $1.0 million for a Washington State Business and Occupation (B&O) tax refund which resulted from a favorable tax audit. B&O tax is imposed on gross receipts for products manufactured in the State of Washington and is included in other operating expenses. 9 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (Continued) - --------------------- The Company earned net interest income during the quarter of $0.2 million, compared with net interest expense of $0.2 million in the first quarter of 1995. Net interest income increased primarily due to higher cash balances available for investment. Income tax expense for the first quarter of 1996 was $0.7 million, representing a 20% effective tax rate for U.S. federal, state and foreign income taxes. For the first quarter of 1995, income tax expense of $0.3 million included primarily foreign and state income taxes. CAPITAL RESOURCES AND LIQUIDITY ------------------------------- ------------------------------------------------------------------- (In millions) 3/29/96 12/31/95 ------------------------------------------------------------------- Cash and short-term investments $52.2 $35.7 Total Assets $346.2 $353.4 Long-term Debt $13.4 $14.8 Shareholders' Equity $216.8 $210.9 -------------------------------------------------------------------- Cash and short-term investments totaled $52.2 million at March 29, 1996 compared with $35.7 million at December 31, 1995. The increase in cash and short-term investments resulted from net income during the quarter, the Company's asset management programs and a receipt of $2.3 million from Hitachi Medical Corporation based on the achievement of a product development milestone under an R&D joint venture project. As shown in the Statements of Cash Flows, during the first quarter of 1996, the Company generated cash from operating activities of $15.7 million. At March 29, 1996, accounts receivables decreased $18.5 million and accounts payable and accrued expenses decreased $13.1 million from those amounts as of December 31, 1995. These decreases reflect the seasonally high activity levels in the fourth quarter of 1995. On February 1, 1996, the Company converted the remaining $1.2 million of its 11% subordinated convertible debentures into 71,577 shares of the Company's common shares. In addition to its cash balances, the Company has available domestic unsecured credit facilities of $25 million, including a committed line of credit of $15 million. Barring any unforeseen circumstances or events, management expects existing cash and available credit lines and funds from operations to be sufficient to meet the Company's operating requirements for 1996. 10 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (Continued) - --------------------- FORWARD LOOKING INFORMATION As an update to the forward looking information provided in the Company's 1995 Annual Report to the Shareholders, the Company provides the following information. The Company expects revenues for the second quarter of 1996 to be in the same range as revenues reported for the first quarter of the year. The Company anticipates a continuation of improvement in its gross margin in the second quarter. Operating expenses are expected to rise in the second quarter over those of the first quarter of 1996 as scheduled growth in R&D programs takes place and the Company embarks on planned marketing programs. The above statements are forward looking statements that involve a number of risks and uncertainties and should be read in conjunction with the 1995 Annual Report which is incorporated by reference on the Company's 1995 Form 10-K. There are certain important factors that could cause actual results to differ materially from those anticipated by the Company, which include the following factors. The U.S. ultrasound market remains sluggish and may cause revenue growth to fall short of expectations. Several of the Company's competitors have announced new ultrasound products in the past six months, including two competitors who announced new ultrasound products in April 1996. These factors could increase competition in the ultrasound market, which may adversely impact the Company's sales order volume or timing or selling prices or all of these factors. Unanticipated events, such as delays in the Company's product development and cost reduction programs, the unavailability of components critical to the Company's products due to natural disasters, changes in vendor relationships or otherwise, a stronger U.S. dollar, delays or disruptions resulting from delays in obtaining regulatory approvals or from other regulatory actions, or a patent litigation judgment in excess of the provision accrued by the Company could adversely impact the Company's financial results for the second quarter and the year. Changes in the Company's strategy resulting from competitive pressures, reallocation of research and development or other priorities and resources, or reallocation of resources for unanticipated opportunities also may affect operating results. 11 PART II OTHER INFORMATION - ------ ----------------- Item 1. LEGAL PROCEEDINGS - None ----------------- Item 2. CHANGES IN SECURITIES - None --------------------- Item 3. DEFAULTS UPON SENIOR SECURITES - None ------------------------------ Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIY 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 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: May 10, 1996 BY: /s/ Harvey N. Gillis ------------------------------- Harvey N. Gillis Senior Vice President Finance and Administration and Chief Financial Officer 12 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 29, 1996 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-1-1996 MAR-29-1996 52,223 0 109,985 0 91,390 265,373 70,514 0 346,235 96,949 13,408 0 0 0 0 346,235 73,477 94,799 37,098 49,702 41,606 0 447 3,712 742 2,970 0 0 0 2,970 0.20 0.20
-----END PRIVACY-ENHANCED MESSAGE-----