-----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, OVgwIGnmZu5B207htWFjgYFqYnaFmO6PGIUXDC49oA0FpDt+CUAtdD7Udz4Aqmhb rL+9sxwPAZR0NpWG1iBP1g== 0000806086-97-000016.txt : 19971110 0000806086-97-000016.hdr.sgml : 19971110 ACCESSION NUMBER: 0000806086-97-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970926 FILED AS OF DATE: 19971107 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATL ULTRASOUND 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: SEC FILE NUMBER: 000-15160 FILM NUMBER: 97710769 BUSINESS ADDRESS: STREET 1: 22100 BOTHELL EVERETT HWY SE STREET 2: PO BOX 3003 CITY: BOTHELL STATE: WA ZIP: 98041-3003 BUSINESS PHONE: 2064877000 MAIL ADDRESS: STREET 1: 22100 BOTHELL EVERETT HWY STREET 2: PO BOX 3003 CITY: BOTHELL STATE: WA ZIP: 98041-3003 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED TECHNOLOGY LABORATORIES INC DATE OF NAME CHANGE: 19960329 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 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 26, 1997 [ ] 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 ATL ULTRASOUND, INC. (Exact name of registrant as specified in its charter) Washington 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) (425) 487-7000 (Telephone number) Common stock, $0.01 par value; 14,252,760 shares outstanding as of October 24, 1997 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 [ ] ATL ULTRASOUND, INC. TABLE OF CONTENTS PART I Financial Information Page No. - ------ --------------------- -------- Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 26, 1997 (Unaudited) and December 31, 1996.....3 Condensed Consolidated Statements of Operations (Unaudited) - Three Months and Nine Months Ended September 26, 1997 and September 27,1996.................4 Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 26, 1997 and September 27, 1996...................................5 Notes to Condensed Consolidated Financial Statements........6 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations.........................8 ----------------------------------- PART II Other Information - ------- ----------------- Item 1. Legal Proceedings..........................................14 ----------------- Item 2. Changes in Securities......................................14 --------------------- Item 3. Defaults Upon Senior Securities............................14 ------------------------------- Item 4. Submission of Matters to a Vote of Security Holders........14 --------------------------------------------------- Item 5. Other Information..........................................14 ----------------- Item 6. Exhibits and Reports on Form 8-K...........................14 -------------------------------- 2 PART I Financial Information - ------ --------------------- Item 1. Financial Statements -------------------- ATL ULTRASOUND, INC. CONDENSED CONSOLIDATED BALANCE SHEETS - ----------------------------------------------------------------------------- (In thousands) 9/26/97 12/31/96 - ----------------------------------------------------------------------------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 68,296 $ 63,262 Receivables, net 102,229 126,924 Inventories 100,344 89,911 Prepaid expenses 3,669 2,777 Deferred income taxes, net 18,340 18,246 ------------------------- Total current assets 292,878 301,120 PROPERTY, PLANT AND EQUIPMENT, NET 71,872 72,400 OTHER ASSETS, NET 6,415 6,681 ------------------------- $ 371,165 $ 380,201 ========================= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 788 $ 507 Current portion of long-term debt 443 584 Accounts payable and accrued expenses 71,438 69,855 Accrual for litigation claim 37,148 35,636 Deferred revenue 15,014 19,351 Taxes on income 4,949 8,893 ------------------------- Total current liabilities 129,780 134,826 LONG-TERM DEBT 12,430 12,936 OTHER LONG-TERM LIABILITIES 23,176 21,189 SHAREHOLDERS' EQUITY 205,779 211,250 ------------------------- $ 371,165 $ 380,201 ========================= - ----------------------------------------------------------------------------- Common shares outstanding 14,201 14,023 - ----------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 3 ATL ULTRASOUND, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended Nine months ended - ----------------------------------------------------------------------------- (In thousands, except per share data) 9/26/97 9/27/96 9/26/97 9/27/96 - ----------------------------------------------------------------------------- REVENUES Product sales $ 69,898 $ 77,916 $225,760 $227,843 Service 23,090 22,349 68,154 65,814 ---------------------------------------- 92,988 100,265 293,914 293,657 ---------------------------------------- COST OF SALES Cost of product sales 35,112 38,076 112,585 113,246 Cost of service 13,233 12,935 39,480 38,307 ---------------------------------------- 48,345 51,011 152,065 151,553 ---------------------------------------- GROSS PROFIT 44,643 49,254 141,849 142,104 OPERATING EXPENSES, NET Selling, general and administrative 32,711 29,754 94,057 89,271 Research and development 13,848 14,223 43,828 39,346 Provision for litigation claim - - - 29,557 Other expense, net 688 488 1,104 1,145 --------------------------------------- 47,247 44,465 138,989 159,319 --------------------------------------- INCOME (LOSS) FROM OPERATIONS (2,604) 4,789 2,860 (17,215) Interest income 1,012 886 2,949 2,418 Interest expense (862) (942) (2,512) (1,968) --------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES (2,454) 4,733 3,297 (16,675) Income tax expense (benefit) (492) 946 658 (4,343) --------------------------------------- NET INCOME (LOSS) $(1,962) $3,787 $2,639 $(12,422) ======================================= Net income (loss) per share $ (0.14) $ 0.25 $ .17 $ (0.89) Weighted average common shares and equivalents outstanding 14,207 15,076 15,226 13,992 - ----------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 4 ATL ULTRASOUND, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended - ----------------------------------------------------------------------------- (In thousands) 9/26/97 9/27/96 - ----------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ 2,639 $(12,422) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 12,148 11,032 Deferred income tax benefit (94) (6,982) Changes in operating assets and liabilities, excluding the effects of the sale of image management business: Receivables, net 19,994 14,923 Inventories (15,806) (4,577) Accounts payable and accrued expenses 4,204 (8,833) Accrual for litigation claim 1,512 30,139 Deferred revenue (2,297) (1,987) Taxes on income (3,797) (719) Other (887) 498 -------------------- Cash provided by operations 17,616 21,072 INVESTING ACTIVITIES Investment in property, plant and equipment (11,178) (10,065) Proceeds from sale of image management business 4,500 - Proceeds from maturing short-term investments - 4,988 -------------------- Cash used by investing activities (6,678) (5,077) FINANCING ACTIVITIES Increase (decrease) in short-term borrowings 280 (522) Repayment of long-term debt (647) (520) Repurchase of common shares (11,888) (2,330) Exercise of stock options 6,572 8,357 -------------------- Cash provided (used) by financing activities (5,683) 4,985 Effect of exchange rate changes (221) (237) -------------------- Increase in cash and cash equivalents 5,034 20,743 Cash and cash equivalents, beginning of period 63,262 30,666 -------------------- Cash and cash equivalents, end of period $68,296 $51,409 ==================== - ----------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 5 ATL ULTRASOUND, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 1. Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of ATL Ultrasound, Inc. (ATL), which includes its subsidiaries and is referred to as the "Company." The Company 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, women's health care, vascular, musculoskeletal and intraoperative applications. On July 2, 1997, ATL announced it had completed its name change to ATL Ultrasound, Inc. to better reflect the Company's dedicated focus on diagnostic ultrasound. The Company was formerly known as Advanced Technology Laboratories, Inc. ATL will continue to trade under the NASDAQ symbol ATLI. The action by the Company is a corporate name change only. 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 incorporated by reference in the Company's 1996 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. Cash and Cash Equivalents 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. Inventories 9/26/97 12/31/96 --------- --------- Materials and work in process $37,344 $30,132 Finished products 20,828 20,481 Demonstrator equipment 23,679 19,643 Customer service 18,493 19,655 --------- --------- $100,344 $89,911 6 ATL ULTRASOUND, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 4. Accrual for Litigation Claim The Company accrued a provision for a patent litigation claim of $29,557 in the second quarter of 1996 in addition to $5,000 previously accrued in 1994. The underlying lawsuit was filed by SRI International (SRI) on July 15, 1991 in the U.S. District Court for the Northern District of California and concerns a patent on an electrical circuit allegedly used in three of ATL's discontinued products. The patent expired in 1994 and the circuit in dispute has never been used in any of ATL's current product lines. The court granted a motion by SRI requesting partial summary judgment on liability in November 1992 and the U.S. Court of Appeals for the Federal Circuit affirmed the summary judgment in December 1994. In May 1996, the District Court awarded damages to SRI of $27,948 plus interest and legal fees. The Company appealed the amount of damages awarded and posted a supersedeas bond secured by a letter of credit collateralized by cash and cash equivalents. On October 24, 1997, the Company was informed that the U.S. Court of Appeals affirmed the lower court judgment in favor of SRI in the patent lawsuit. The decision in this lawsuit does not adversely affect current or future product shipments. The Company believes its accrual for litigation claim is adequate to cover the liability to SRI and that the Court's decision will have no impact on its reported results, nor will it have any effect on the sale, use or service of any current or past products. The Company will continue to accrue interest expense on the patent litigation claim until the final claim is paid. 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 substantially equal for all periods presented. 6. Sale of Image Management Business Effective May 12, 1997, the Company sold its image management business, Nova MicroSonics, to Eastman Kodak. The sale did not result in a material financial impact to the consolidated operating results of the Company. 7. Reclassifications Certain amounts reported in previous years have been reclassified to conform to the 1997 presentation. 7 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 per share data) 9/26/97 9/27/96 %Change 9/26/97 9/27/96 %Change - ------------------------------------------------------------------------------ Revenues $93.0 $100.3 (7.3)% $293.9 $293.7 0.1% Gross Profit $44.6 $49.3 (9.4)% $141.8 $142.1 (0.2)% Operating Expenses; excluding non-recurring items $47.2 $44.5 6.3% $139.0 $129.8 7.1% Provision for litigation claim - - - $29.6 Net Income (Loss) $(2.0) $3.8 $2.6 $(12.4) Net Income (Loss) per Share $(0.14) $0.25 $0.17 $(0.89) - ------------------------------------------------------------------------------ Net Income (Loss), excluding non-recurring items $(2.0) $3.8 $2.6 $10.2 Net Income (Loss) per Share, excluding non-recurring $(0.14) $0.25 $0.17 $0.68 items - ------------------------------------------------------------------------------ The Company reported a net loss of $2.0 million or $0.14 per share in the third quarter of 1997 compared with net income of $3.8 million or $0.25 per share in the third quarter of 1996. The results were consistent with guidance provided by the Company in a press release dated July 14, 1997. For the first nine months, the Company reported net income of $2.6 million or $0.17 per share in 1997 compared with a net loss of $12.4 million or $0.89 per share in 1996. Excluding non-recurring items, net income for the first nine months of 1996 would have been $10.2 million or $0.68 per share. There were no non-recurring items during the first nine months of 1997. REVENUES AND GROSS PROFIT - ------------------------- The Company's worldwide revenues decreased 7.3% to $93.0 million in the third quarter of 1997 compared with $100.3 million in the third quarter of 1996. Product sales decreased by $8.0 million or 10.3% in the third quarter of 1997 compared to the same period in the prior year. The decline in product sales is largely attributable to delays in customer order placements associated with the introduction of the Company's new HDI(R) 5000 system, the foreign exchange impact of the stronger U.S. dollar on international business, primarily in Europe, and the loss of revenues caused by the sale of the Company's image management business to Eastman Kodak. The transition of older products (Apogee(R) CX/CX200 and UM9 HDI) from the product line also impacted product revenues in comparison to the third quarter of 1996. 8 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations (Continued) ----------------------------------- Service revenues increased $.7 million or 3.3% compared with the third quarter of 1996, primarily due to growth in the worldwide installed base of ATL's products. Despite the factors noted above, worldwide revenues were essentially level with the prior year at $293.9 million for the first nine months of 1997, primarily due to the continued success of the Company's HDI 3000 product family in both the U.S.and international markets. Gross profit was $44.6 million in the third quarter of 1997, a decrease of $4.7 million compared with gross profit of $49.3 million in the same quarter of the prior year. Total gross margin for the third quarter of 1997 decreased to 48.0% compared with 49.1% in the prior year. These decreases reflect the impact of a stronger U.S. dollar as well as delays in customer order placements associated with the introduction of new products as discussed above. For the first nine months of 1997, gross profit was $141.8 million compared to $142.1 million for the same period of 1996. Year-to-date gross margin decreased to 48.3% from 48.4% in 1996 for the reasons noted above. OPERATING EXPENSES, NET - ----------------------- Operating expenses, excluding non-recurring items, increased to $47.2 million in the third quarter of 1997 from $44.5 million in the same period of 1996. Selling, general and administrative expenses were $32.7 million, an increase of 9.9% over the third quarter of 1996. The increase in selling, general, and administrative expenses reflects product launch costs associated with the introduction of the Company's premium performance HDI 5000 system, partially offset by a favorable foreign exchange impact in Europe and the sale of the Company's image management business. Research and development expenses decreased 2.6% to $13.8 million in the third quarter of 1997 compared with $14.2 million in the third quarter of 1996. The decrease in R&D expenses is primarily due to the timing of new product development programs, including costs related to both the HDI 5000 and HDI 1000 systems, as well as the sale of the Company's image management business. For the first nine months of 1997, operating expenses, excluding non-recurring items, increased to $139.0 million or 47.3% of total revenues compared to $129.8 million or 44.2% of total revenues in 1996. 9 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations (Continued) ----------------------------------- ACCRUAL FOR LITIGATION CLAIM - ---------------------------- ATL accrued a non-recurring provision for a patent litigation claim of $29.6 million in the second quarter of 1996 in addition to $5.0 million which had been accrued in 1994. The underlying lawsuit was filed by SRI International (SRI) on July 15, 1991 in the U.S. District Court for the Northern District of California and concerns a patent on an electrical circuit allegedly used in three of ATL's discontinued products. The patent expired in 1994 and the circuit in dispute has never been used in any of ATL's current product lines. The court granted a motion by SRI requesting partial summary judgment in November 1992 and the U.S. Court of Appeals for the Federal Circuit affirmed the summary judgment in December 1994. In May 1996, the District Court awarded damages to SRI of $27.9 million plus interest and legal fees. The Company appealed the amount of damages awarded and posted a supersedeas bond in June, 1996 secured by a letter of credit collateralized by cash and cash equivalents. On October 24, 1997, the Company was informed that the U.S. Court of Appeals affirmed the lower court judgment in favor of SRI in the patent lawsuit. The decision in this lawsuit does not adversely affect current or future product shipments. The Company believes its accrual for litigation claim is adequate to cover the liability to SRI and that the Court's decision will have no impact on its reported results, nor will it have any effect on the sale, use or service of any current or past products. INTEREST INCOME AND EXPENSE - --------------------------- The Company earned net interest income of $0.2 million during the third quarter of 1997 compared with net interest expense of $0.1 million during the same period in 1996. Net interest income includes interest income earned on cash balances available for investment and extended term receivables, offset by post-judgment interest expense accrued on the damages awarded for the patent litigation claim discussed above as well as interest expense on long-term debt. Interest expense will continue to be accrued on the patent litigation claim until the final claim is paid. TAXES AND NET INCOME (LOSS) - --------------------------- For the third quarter of 1997, the Company reported an income tax benefit of $0.5 million, which represents a 20% effective tax rate for U.S. federal, state and foreign income. For the third quarter of 1996, the Company reported income tax expense of $0.9 million. 10 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations (Continued) ----------------------------------- CAPITAL RESOURCES AND LIQUIDITY ------------------------------- ----------------------------------------------------- (In millions) 9/26/97 12/31/96 ----------------------------------------------------- Cash and cash equivalents $68.3 $ 63.3 Total Assets $371.2 $380.2 Long-term debt $ 12.4 $ 12.9 Shareholders' Equity $205.8 $211.3 ----------------------------------------------------- Cash and cash equivalents totaled $68.3 million at September 26, 1997 compared with $63.3 million at December 31, 1996. As shown in the Condensed Consolidated Statement of Cash Flows, during the first nine months of 1997, the Company generated $17.6 million from operating activities and used $5.7 million for financing activities. At September 26, 1997, receivables, net, decreased $20.0 million from December 31, 1996 reflecting seasonally high activity levels in the fourth quarter of 1996. Inventory levels increased by $15.8 million primarily in anticipation of increasing sales activity levels in the fourth quarter and for the shipments of the new HDI 5000 and HDI 1000 products. During the first nine months of 1997, the Company used $11.9 million to repurchase shares of its common stock, which was partially offset by $6.6 million generated from the exercise of employee stock options. On May 7, 1997, the Company's Board of Directors authorized a new repurchase program to acquire up to 1,000,000 shares of common stock. During the third quarter of 1997, the Company repurchased 195,200 shares of its own stock under this new program. Under a previous authorization, the Company repurchased a total of 436,800 shares as of the first half of 1997. A combined total of 632,000 shares have been repurchased under both authorizations as of September 26, 1997. The Company has an accrued liability of $37.1 million as of September 26, 1997 for the patent litigation claim discussed previously. The supersedeas bond posted by the Company during the appeal process is secured by a letter of credit collateralized by cash and cash equivalents. The Company will utilize its cash and cash equivalents to pay the damages from the patent litigation claim (see Accrual for Litigation Claim). In addition to its cash balances, the Company has available domestic credit facilities of $25 million, including a committed line of credit of $15 million. Barring any unforeseen circumstances or events, management expects existing cash, available credit lines and funds from operations to be sufficient to meet the Company's operating requirements for 1997 (see Forward Looking Information). 11 Item 2. Management's Discussion and Analysis of Financial -------------------------------------------------- Condition and Results of Operations (Continued) ----------------------------------- The Company began construction of a new 101,000 square foot building on its corporate campus in August 1997. The building's projected completion date is scheduled for July 1998 and has an estimated cost of $15-16 million. Initial funding for the project will come from working capital with a transition to long- term debt as the building reaches completion in 1998. FORWARD LOOKING INFORMATION - --------------------------- As an update to the forward looking information provided in the Company's 1996 Annual Report to Shareholders and the Form 10-Q filings for the first and second quarters of 1997, the Company provides the following information. The Company expects revenues in the fourth quarter of 1997 to fall within an approximate range of $140-145 million with a gross margin at or above 50%. Total operating expenses are anticipated to be about $50-52 million. Total earnings per share for the full year is expected to be in line with, or somewhat below, figures reported for fiscal year 1996, excluding non-recurring items in 1996. The Company believes it will continue to make progress towards its goal of achieving a return on equity of 15.0% by the end of 1998. The above statements and other statements in this report identified by cross reference to this section are forward looking statements that involve a number of risks and uncertainties and should be read in conjunction with the Company's 1996 Annual Report to Shareholders, which is incorporated by reference to the Company's 1996 Form 10-K, the Company's news releases, and the Company's SEC filings during 1997. 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 Company and several of the Company's competitors announced new ultrasound products and features in 1996 and 1997, which may cause potential customers to alter or defer their buying plans and intentions. Increased competition in the ultrasound market 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, the unavailability of vendor supplied components critical to the Company's products, a stronger U.S. dollar, delays or disruptions in obtaining regulatory approvals or from other regulatory actions, delays in contractual payments due the Company, or 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 could affect operating results. The estimated cost and/or completion date of the building under construction depends to a large degree on contractor performance and could be adversely affected by factors such as construction delays or cost overruns, adverse weather conditions, contractor labor disputes or other factors inherent in construction projects. 12 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations (Continued) ----------------------------------- IMPACT OF NEW ACCOUNTING STANDARD - --------------------------------- In February 1997, the Financial Accounting Standards Board issued FAS 128, Earnings Per Share, which establishes standards for the computation, presentation, and disclosure of earnings per share (EPS). FAS 128 is designed to improve the EPS information provided in financial statements by simplifying the existing computational guidelines, revising the disclosure requirements and increasing the comparability of EPS data. FAS 128 is effective for financial statements for periods ending after December 15, 1997. The adoption of FAS 128 is not expected to have a material effect on the Company's consolidated financial statements. 13 PART II Other Information - ------- ----------------- Item 1. Legal Proceedings - On October 24, 1997, the Company was ----------------- informed that the U.S. Court of Appeals affirmed the lower court judgment in favor of SRI in the patent lawsuit. See Part 1-Item 2 above, ACCRUAL FOR LITIGATION CLAIM. The decision in this lawsuit does not adversely affect current or future product shipments. The Company believes its accrual for litigation claim is adequate to cover the liability to SRI and that the Court's decision will have no impact on its reported results, nor will it have any effect on the sale, use or service of any current or past products. The Company will continue to accrue interest expense on the patent litigation claim until the final claim is paid. 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 of 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. ATL ULTRASOUND, INC. (Registrant) Date: November 6, 1997 BY:/s/ Harvey N. Gillis ---------------------------- Harvey N. Gillis Senior Vice President Finance and Administration and Chief Financial Officer 14 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 26, 1997 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 26, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-26-1997 68,296 0 102,229 0 100,344 292,878 71,872 0 371,165 129,780 12,430 0 0 0 0 371,165 225,760 293,914 112,585 152,065 138,989 0 2,512 3,297 658 2,639 0 0 0 2,639 .18 .17
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