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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 1-9983
OEC MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2538512
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
384 WRIGHT BROTHERS DRIVE 84116
SALT LAKE CITY, UTAH (Zip Code)
(Address of principal executive offices)
(801) 328-9300
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Listed on the New York Stock Exchange (NYSE)
Common Stock, $.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
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 short period that the Registrant
was required such reports and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates (based on
the closing sales price on the New York Stock Exchange) on February 20, 1997 was
approximately $204,267,047.
As of February 20, 1997, there were 12,379,821 shares of Common Stock with
$.01 par value outstanding.
Documents Incorporated by Reference: Form 10-K Part
(1) Portions of Definitive Proxy Statement to
be mailed to stockholders in connection with the
Registrant's 1996 Annual Meeting of Stockholders I, III
(2) Portions of the Annual Report to Shareholders for
fiscal year ended December 31, 1996 II
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OEC MEDICAL SYSTEMS, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Item 1. Business 2
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Executive Officers of the Registrant 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 8. Financial Statements and Supplemental Data 8
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 8
PART III
Item 10. Directors and Executive Officers of Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and Management 8
Item 13. Certain Relationships and Related Transactions 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 10
</TABLE>
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OEC MEDICAL SYSTEMS, INC.
1996 FORM 10-K ANNUAL REPORT
PART I
Except for historical information, this discussion contains forward looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those projected. Such risk and uncertainties include:
Product demand and market acceptance; the effect of general economic conditions
and foreign currency fluctuations; the impact of competitive products and
pricing; new product development and commercialization; the effect of the
continuing shift in growth from domestic to international healthcare customers,
and the impact of managed care initiatives in the United States and the ability
to increase operating margins on higher sales.
ITEM 1. BUSINESS
General. OEC develops, manufactures, markets, and services computer-based
X-ray and fluoroscopic imaging systems for use in hospitals, out-patient
clinics, and surgi-centers for intraoperative and interventional procedures.
OEC was originally established in Indiana in 1942. In response to
surgeons' need for improved methods to monitor and guide the implantation of the
various internal fixation devices, OEC entered the medical X-ray imaging market
in 1972. OEC was acquired by Diasonics, Inc. in October 1983 as a separate
operating subsidiary. The Company was merged into Diasonics in September of 1993
as part of the restructuring in which the other operating businesses of
Diasonics were spun off to shareholders and the Diasonics, Inc. name was changed
to OEC Medical Systems, Inc. .
Today, OEC is recognized as the pioneer and continued United States
market leader of intraoperative/ interventional X-ray imaging systems. These
systems combine radiographic and fluoroscopic imaging with digital image
processing capabilities. X-rays are passed through the body and either recorded
on radiographic film or passed through an image intensifier system and displayed
as a real-time fluoroscopic image on a video monitor. Digital image processing
of the fluoroscopic image improves the image quality, lowers X-ray dosage and
results in reduced costs for a number of applications.
OEC seeks to provide cost-effective imaging systems directed towards
medical specialties in which minimally invasive techniques are replacing
expensive open surgical procedures. High quality digital fluoroscopy has become
mandatory in today's modern operating room. Minimally invasive techniques are
expanding into many areas of surgery (vascular, neurological, orthopedic,
urologic, cardiac and general surgery). OEC's products are designed to meet the
needs of these new procedures.
Technical leadership, strong customer relationships, and a cost-effective
product line have earned OEC the United States market share leadership position
in the intraoperative and interventional X-ray imaging markets.
OEC believes its international markets represent a significant growth
opportunity and expects to expand its network of international distributors.
Building on its leadership position in the U.S., OEC's focus is to become the
worldwide leader for intraoperative and interventional fluoroscopy imaging. With
this focus in mind, OEC has been investing in the future through research and
development. The introduction of the Series 9600 Mobile Digital Imaging System
in 1994, the Uroview 2600 urology table, the Mini 6600 and the Compact 7600 all
introduced in 1995, are the results of these investments.
OEC's expanding presence in international markets is another example of
the Company's investment in the future, having strengthened its wholly-owned
subsidiaries in France, Germany, Italy and Switzerland with new personnel and
training, and by designing its new products to be more appealing and acceptable
to international customers. OEC also strengthened its international network in
new markets in 1994, 1995 and 1996 by establishing new distributors or
contracting with existing distributors in South America and the Pacific Rim. OEC
intends to continue to enhance and upgrade these areas during 1997.
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OEC's Products. The products produced by OEC consist of mobile X-ray
imaging systems as well as fixed-room urological X-ray imaging systems.
C-arm Products. In March 1994, OEC introduced the Series 9600 Mobile
Digital Imaging System. This mobile imaging device can be wheeled from operating
room to operating room to provide high quality, real-time fluoroscopic imaging
for a wide variety of surgical and interventional procedures that require X-ray
control.
The modular architecture of the system allows the Series 9600 to be
tailored to meet the needs of the surgeon. For example, the 9600 can be equipped
with an expanded surgical package for general surgery and orthopedics. When
equipped with a vascular special procedures module, it can perform complex
subtraction angiography in the operating room, emergency room, or in radiology.
The most advanced version of the Series 9600 can perform many of the tasks of a
sophisticated, fixed-room digital X-ray system costing several times more than
the Series 9600. Prices of the Series 9600 Mobile Digital Imaging System range
from $100,000 to $230,000.
In response to the changes brought on by managed healthcare, OEC recently
introduced two lower cost digital mobile X-ray machines - the Compact 7600 and
Mini 6600. These smaller, lower cost machines are specifically designed to
address the imaging requirements of outpatient surgery centers as well as other
satellite surgery delivery sites. The move towards less invasive surgeries with
accompanying shorter recovery times is driving the need for easy to operate,
cost effective fluoroscopic guidance systems in all locations of the healthcare
delivery.
The Compact 7600 Digital Mobile C-Arm is a cost effective, simple to
operate full-body imaging system that can be utilized for most routine, less
complicated procedures. It's compact one-piece design (no separate monitor cart)
allows for ease of transport, quick positioning and minimal storage
requirements. Prices of the Compact 7600 range from $75,000 to $85,000.
The Mini 6600 Digital Mobile C-Arm is a small, low-x-ray dose digital
fluoroscopic imaging system that has been designed to provide high quality
images of upper and lower extremities. Areas of use include hospital operating
rooms and emergency rooms, outpatient surgery centers, specialty physician
offices and veterinary clinics. Prices of the Mini 6600 range from $55,000 to
$65,000.
During 1996, 1995 and 1994 the OEC C-arm business represented 77%, 82%
and 84% of total sales respectively.
UroView 2600 Digital Imaging System. Urology is another surgical
specialty requiring intraoperative imaging that is rapidly moving away from the
use of static X-ray films to monitor and guide procedural progress. Diagnostic
and interventional urological procedures are typically performed in a separate
area of the operating room environment known as the Cysto Department. Until
recently, these specialized rooms were equipped with a fixed (bolted down)
urological-specific patient positioning table (motorized in movement) that also
had static X-ray filming capability built into it. These films, once exposed,
would need to be taken to a dark room to be developed prior to being brought
back to the Cysto Department for evaluation by the urologist, resulting in long
procedural delays. Additionally, real-time events could not be recorded since
radiographic film produces a static image. Eventually, real-time fluoroscopic
imaging capabilities began to be added to these systems.
In 1987, OEC introduced the UroView product line. The UroView was the
industry's first urological table with fully integrated digital fluoroscopy,
resulting in significant image improvement, lower X-ray dosages, and reduced
costs. Prices for the UroView system presently range from $210,000 to $230,000.
During 1996, 1995 and 1994 the OEC urology business represented 23%, 18%
and 16% of total sales, respectively.
Quality. In June 1994 the Company's Quality Assurance System received the
Certificate of Compliance with ISO 9001, the international standard for quality
assurance in design, development, production, installation and servicing.
Sales and Service. Domestic sales are made primarily through direct
representatives and exclusive independent distributors with installation and
service performed by OEC.
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In Europe, OEC distributes its products primarily through wholly owned
subsidiaries in Italy, France, Germany and Switzerland. For the remainder of
Europe, the Far East and Latin America, distribution is done through independent
dealers and distributors.
OEC generally provides warranty for its products for a period of six to
twelve months from the date of installation. OEC offers service contracts for
products for which the warranty has expired.
During 1996, 1995 and 1994, service revenue represented 13%, 15% and 13%
of net sales respectively.
Manufacturing. OEC's manufacturing operations are located in Salt Lake
City, Utah, Warsaw, Indiana and as of January 1, 1997 Wendelstein, Germany. OEC
owns sufficient property at its Salt Lake City site to expand its facilities if
needed. OEC's products incorporate microprocessors for which proprietary
software has been designed by OEC. OEC's Warsaw, Indiana facility manufacturers
the sheet metal enclosures, the mechanical C-arm assembly and all major
mechanical components for OEC's products. The electronics and imaging components
are manufactured at OEC's Salt Lake City facility, which also performs final
assembly and test of the finished devices. The Wendelstein, Germany facility
manufactures the Compact 7600 and the Series 7600.
Competition. The market for mobile X-ray and urology products is highly
competitive. Many of OEC's existing and potential competitors have substantially
greater financial, marketing and technological resources. In the market for
products similar to OEC's Series 9600 Mobile C-arm, OEC competes with General
Electric Corporation, Siemens Medical Systems, Inc., Philips Medical Systems,
Inc. and Toshiba Medical Systems, Inc. Competitive companies offering products
similar to the Mini 6600 include Fluoroscan Imaging Systems, Inc. Lunar
Corporation, and XiTec, Inc. The Compact 7600 competes with a similar product
from International Medical Systems, Inc. Competitive companies offering products
similar to the UroView 2600 include Picker International, Inc., Dornier Medical
Systems, Inc., and Liebel-Flarsheim Company. OEC competes on the basis of price,
imaging quality, technological innovation, upgradeability, reliability, and
quality of service and support.
Backlog. At December 31, 1996, OEC's backlog was approximately $24.1
million, as compared with approximately $16.8 million at December 31, 1995. OEC
includes in backlog only firm orders deliverable within 12 months. Backlog also
includes service contract revenue which will be earned over the next twelve
months.
Research and Development. The medical imaging business involves rapid
technological change and innovation. OEC believes the ability to use
technological innovation to advance the clinical utility of diagnostic imaging
has and will continue to be a significant factor in its success in competing in
its marketplaces. OEC has continued to invest in research and development to
identify solutions to the imaging requirements of the area of minimally invasive
medical practices. This has led to a continuous release of both improvements in
existing products and the introduction of the Series 9600 Mobile Digital Imaging
System in 1994 along with the introduction in 1995 of the Uroview 2600, the Mini
6600 and the Compact 7600.
During 1996, 1995, and 1994, OEC's research and development expenses
totaled $8.9 million, $7.7 million and $8.4 million, respectively, representing
6.9%, 7.6% and 8.6% of net sales.
Employees. On December 31, 1996, OEC had approximately 550 employees.
None of OEC's employees are covered by collective bargaining agreements, and OEC
considers its employee relations to be satisfactory.
Acquisitions. During 1995, the Company purchased 19.8% ownership position
in Barwig Medizinische Systeme GmbH (BMS), a German manufacturer of medical
equipment. The Company was granted exclusive worldwide distribution rights for
the 7600 C-Arm manufactured by BMS. On January 1, 1997 the Company purchased the
remaining outstanding shares of BMS, making it a wholly owned subsidiary of the
Company.
Risk Factors. The Company's business involves risks and uncertainties that
could cause actual results to differ materially from those projected. Such risks
and uncertainties include: Product demand and market acceptance; the effect of
general economic conditions and foreign currency fluctuations; the impact of
competitive products and pricing; new product development and commercialization;
the effect of the continuing shift in growth from domestic to international
healthcare customers, and the impact of managed care initiatives in the United
States and the ability to increase operating margins on higher sales.
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Future operating results are dependent on the Company's' ability to develop,
manufacture and market innovative products that meet customers' needs. Inherent
in this process are a number of risks that the Company must successfully manage
in order to achieve favorable operating results. The process of developing new
high technology medical products is complex and uncertain and requires
innovative designs that anticipate customer needs, technological trends and
healthcare shifts. There can be no assurance that the Company will be able to
develop and market new products on a cost-effective and timely basis, that such
products will compete favorably with products developed by others or that
technology will not be superseded by new discoveries or breakthroughs, for
example, the delay in introduction of the Series 9600 in 1994 which negatively
impacted revenue and earnings for the year.
Because of the substantial length of time and expense associated with
bringing new products through development and regulatory approval to the
marketplace, the medical device industry places considerable importance on
obtaining patent, trademark, copyright and trade secret protection for new
technologies, products and processes. A loss of protection could have a material
adverse effect on the Company's business.
Major items that OEC currently purchases from others include video
monitors, X-ray tubes, image intensifiers, CCD cameras and power supplies. Some
of these parts and components are available from a limited number of
single-source manufacturers or suppliers. While the Company believes any of
these single-source items could be replaced over time, abrupt disruption in the
supply of a part for a product could have a material adverse effect on the
Company's production in cases where the existing inventory of the components is
not adequate to meet the Company's demand for the component during such
disruption and could have a material adverse effect on its financial condition
and results of operations.
The testing, marketing and sale of human healthcare products entails an
inherent risk of product liability, and there can be no assurance that product
liability claims will not be asserted against OEC. Although OEC has product
liability insurance coverage, there can be no assurance that such coverage will
provide adequate coverage against all potential claims.
As a manufacturer of medical devices, OEC is subject to extensive and
rigorous governmental regulation, principally by the FDA and corresponding state
and foreign agencies. Failure to comply with FDA regulations could result in
sanctions being imposed, including restrictions on the marketing of or recall of
the affected products.
OEC's facilities and manufacturing processes have been periodically
inspected by the FDA and other agencies, but remain subject to audit from time
to time. OEC continues to devote substantial human and financial resources to
regulatory compliance and believes that it remains in substantial compliance
with all applicable federal and state regulations. Nevertheless, there can be no
assurance that the FDA or a state agency will agree with OEC's positions, or
that its GMP compliance will not be challenged at some subsequent point in time.
OEC has received approval from the FDA and foreign regulatory authorities in the
past, when required, to market its products. In general, the length of time for
all reviews and approvals, most particularly from the FDA, has been lengthening
and the review or approval process for medical devices has become substantially
more difficult and expensive. Moreover, regulatory approvals, when granted, may
contain significant limitations on the standards due to unforeseen problems. To
date, product reviews for medical imaging technologies have been obtained within
three to twelve months. There can be no assurance that OEC will be able to
obtain necessary regulatory approvals in the future, and delays in the receipt
of or failure to receive such approvals, the loss of existing approvals or
failure to comply with regulatory requirements could have a material adverse
effect on the business, financial condition and results of operation of OEC.
A portion of the Company's research and development activities, its
corporate headquarters and other critical business operations are located near a
major earthquake fault. The ultimate impact on the Company, significant
suppliers and the general infrastructure is unknown, but operating results could
be materially affected in the event of a major earthquake.
Although OEC believes that it has the product offerings and resources
needed for continuing success, future revenue and margin trends cannot be
reliably predicted and may cause the Company to adjust its operations. Factors
external to the Company can result in volatility of the Company's common stock
price.
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ITEM 2. PROPERTIES.
OEC owns its corporate headquarters and manufacturing facility of 105,000
square feet in Salt Lake City, Utah, and leases another 80,000 square feet of
manufacturing in Warsaw, Indiana. The lease expires on June 30, 2000. The
Company leases 10,000 square feet of manufacturing in Wendelstein, Germany for
the BMS operations. The lease expires in October 1998.
ITEM 3. LEGAL PROCEEDINGS.
Litigation was instituted against the Company by a terminated
distributor in 1986. An unfavorable decision in the amount of $3.1 million was
rendered by the trial court in 1992. As a result of that decision, the Company
established a reserve for the judgment. The Company appealed the trial court
decision on a number of grounds, and in November, 1993, the appellate court
reversed the trial court and held for the Company on the ground that the
distributor had released his claims against the Company in the settlement of
other litigation and did not reach the other issues raised on appeal. The
distributor filed a petition in the Indiana Supreme Court requesting that the
court vacate the appellate court ruling and remand the case to the appellate
court for consideration of the other issues raised on appeal. On December
31,1996, the Indiana Supreme Court reversed the ruling of the Indiana Circuit
Court of Appeals and held that the trial court correctly determined that the
release executed by the distributor did not release the Company. The case has
been remanded back to the appellate court for consideration of the remaining
issues raised on the appeal. While the Company believes that it will ultimately
prevail, no determination can be made as to whether some or all of the reserve
should be reversed. As of December 31, 1996, the reserve with accrued interest
totaled approximately $4.1 million.
All but one of the pending lawsuits relating to the former MRI Division
have been favorably resolved by dismissals, summary judgment or directed
verdicts in favor of the Company. With respect to the sole exception, an action
filed by Lenox Hills Leasing Associates, Toshiba America Medical Systems, Inc.
("Toshiba") has agreed to defend and indemnify the Company. All of the pending
actions, and any future actions related to the MRI Division, are the subject of
an arbitration award in favor of the Company and against Toshiba. That
arbitration award holds that, with certain limited exceptions not applicable to
any of the pending actions, Toshiba is obligated to indemnify the Company for
compensatory and punitive damages, if any, awarded against the Company in any
action related to the former MRI Division and to reimburse the Company for its
attorney's fees and expenses incurred in defending such actions, regardless of
whether such actions allege intentional misconduct or fraud. This arbitration
award was affirmed by a California trial court. Toshiba appealed, and the
California Court of Appeals affirmed the ruling of the trial court in 1996. The
California Supreme Court has declined to hear Toshiba's appeal of the favorable
Court of Appeal's ruling.
OEC is also a defendant in other ordinary commercial litigation. In light
of available insurance and reserves, management believes that such litigation
will not have a material effect on OEC's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's Security Holders
during the fourth quarter of fiscal year 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Position
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<S> <C> <C>
Barry K. Hanover 42 Chief Technical Officer and Executive Vice President
Larry E. Harrawood 49 Vice President, Marketing
Gary N. Kilman 52 Vice President, Sales
Ruediger Naumann-Etienne 50 President and Chief Executive Officer
Randy W. Zundel 41 Chief Operating Officer, Chief Financial Officer &
Executive Vice President
</TABLE>
Barry K. Hanover is the Chief Technical Officer and Executive Vice
President, Engineering of the Company. He was appointed Chief Technical Officer
in September 1996. He has been the Vice President, Engineering since December
1992. Previously, he was Director, Mechanical Engineering from October 1992 to
December 1992. Prior to that, he was President of Hanover Engineering Services,
an engineering consulting firm, from June 1992 to October 1992, and Vice
President, Technical Development and member of the Board of Directors of Sarcos,
Inc., a biomedical technology company from 1988 through 1992.
Larry E. Harrawood has been Vice President, Marketing and Business
Development of the Company since July 1987. Previously, he was Vice President,
Business Development from October 1986 to July 1987, Vice President, Sales and
Marketing from July 1985 to October 1986, and General Manager of X-ray
operations from December 1972 to July 1985.
Gary N. Kilman has been Vice President, Sales of the Company since
February 1987. Previously, he was National Sales Manager for ADAC Laboratories,
a medical imaging company. Prior to that, he held progressively titles of Sales
Rep, Regional Sales Manager, and Area Sales Manager at that company. Prior to
that he was Area Sales Manager, IBM, BioMedical Systems.
Ruediger Naumann-Etienne was named CEO and President of OEC in February
1995. He has been a director of the Company since January 1989, and was named
Chairman of the Board in September 1993. He has been Managing Director of
Intertec since July 1990. He was President and Chief Operating Officer of the
Company from December 1987 to July 1990 and Executive Vice President and Chief
Financial Officer from April 1984 to September 1988.
Randy W. Zundel is an Executive Vice President and the Chief Operating
Officer and the Chief Financial Officer of the Company. He was appointed Chief
Operating Officer in September 1996. He has been the Chief Financial Officer of
the Company since October 1993. He was the Chief Operating Officer from February
1990 to September 1993. Prior to that he was Vice President, Operations from May
1987 to February 1990. Mr. Zundel has held various other positions with OEC
since 1981. He is also a director of Orbtek, a start-up opthamalogy company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is presently traded on the New York Stock
Exchange under the trading symbol OXE. Prices shown are the range of high and
low closing prices per share on the New York Stock Exchange -- Composite
Transactions, as reported by the Wall Street Journal. On February 20, 1997 the
number of holders of record of common stock was 2,133.
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<TABLE>
<CAPTION>
Prices
Quarter Ended: High Low Close
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March 31, 1995......................................... 6 5/8 5 5/8 5 7/8
June 30, 1995.......................................... 8 5 5/8 7 3/4
September 30, 1995..................................... 8 7/8 7 1/8 8 1/8
December 31, 1995...................................... 10 3/8 7 7/8 9 3/4
March 31, 1996......................................... 13 3/4 9 1/2 11 3/4
June 30, 1996.......................................... 13 5/8 11 1/4 13 5/8
September 30, 1996..................................... 13 1/2 10 3/4 12 1/2
December 31, 1996...................................... 16 7/8 12 1/4 15
</TABLE>
The Company has not paid any dividend on its common stock. The Company
presently intends to retain all earnings for use in the business and, therefore,
does not anticipate paying any cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The table labeled "Five Year Summary" appearing as page 20 of Exhibit 13
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The section labeled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing as pages 21 through 24 of Exhibit
13 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The Consolidated Financial Statements and Notes thereto appearing at
pages 25 through 37 of Exhibit 13 is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Information concerning the directors of the Company is incorporated by
reference to the sections titled "Information with Respect to Nominees" and in
the definitive Proxy Statement to be filed in connection with the Annual Meeting
of Stockholders (the "1996 Proxy Statement"). Information regarding executive
officers is set forth in Part I of this report.
Pursuant to Section 16(b) of the Securities Act of 1934, the Company's
directors, its executive (and certain other) officers, and any persons holding
more than 10 percent of the Company's stock are required to report their
ownership and any changes in beneficial ownership of the Company's stock to the
Securities and Exchange Commission and to the New York Stock Exchange. Specific
due dates for these reports have been established and the Company is required to
report any failure to file by these dates.
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ITEM 11. EXECUTIVE COMPENSATION
Information concerning management compensation is incorporated by
reference to the section titled "Cash Compensation of Executive Officers" in the
1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the stock ownership of each person known to the
Company to be a beneficial owner of five percent or more of the Company's Common
Stock and management is incorporated by reference to the sections titled
"Information with Respect to Nominees" and "Principal Stockholders" in the 1996
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning relationships and related transactions is
incorporated by reference to the section titled "Transactions with Management
and Others" in the 1996 Proxy Statement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements
The following consolidated financial statements of the Company are
included in Exhibit 13 of this Form 10-K:
<TABLE>
<CAPTION>
Page in
Exhibit 13
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<S> <C>
Consolidated statements of operations for each of the three years in the
period ended December 31, 1996....................................................................... 25
Consolidated balance sheets at December 31, 1996 and 1995............................................. 26
Consolidated statements of stockholders' equity for each of the three years in
the period ended December 31, 1996.................................................................. 27
Consolidated statements of cash flows for each of the three years in the
period ended December 31, 1996...................................................................... 28
Notes to consolidated financial statements............................................................ 29
Independent Auditors' Report.......................................................................... 37
</TABLE>
2. Index to Financial Statement Schedule
All schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.
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3. Index to Exhibits
The following exhibits (numbered in accordance with Item 601 of SEC
Regulation S-K) are filed as part of this report or are incorporated by
reference as indicated below:
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
3.1 Certificate of Incorporation, as amended. Incorporated by
reference to the OEC Medical Systems, Inc. Form 10-K, filed March
30, 1994.
3.2 By-Laws, as amended. Incorporated by reference to the OEC Medical
Systems, Inc. Form 10-K, filed March 30, 1994.
4 Rights Agreement, dated as of June 20, 1988, between Diasonics,
Inc. and Bank of America NT&SA. Incorporated by reference to
Exhibit 4.3 of the Diasonics, Inc. Form 8-K, filed August 1, 1988
10.1 Diasonics, Inc. 1979 Stock Option Plan, amended and restated as of
June 1, 1982. Incorporated by reference to Exhibit 10.6 of the
Diasonics, Inc. Registration Statement on Form S-8, filed May 2,
1983.
10.4 Diasonics, Inc. 1990 Stock Option/Stock Purchase Plan.
Incorporated by reference to Exhibit 10.79 of the Diasonics, Inc.
Form S-8, filed on May 1, 1991.
10.5 Warrant for the Purchase of Common Shares issued to PaineWebber
R&D Partners II, L.P., as amended. Incorporated by reference to
the OEC Medical Systems, Inc. Form 10-K, filed on March 30, 1994.
10.14 Form of Option Agreement used in connection with options having
service vesting provisions. Incorporated by reference to the OEC
Medical Systems, Inc. Form 10-K, filed March 30, 1994.
10.15 Form of Option Agreement used in connection with options having
milestone provisions. Incorporated by reference to the OEC Medical
Systems, Inc. Form 10-K, filed March 30, 1994.
10.16 Form of Option Agreement used in connection with automatic
option grant program for non-employee directors. Incorporated
by reference to the OEC Medical Systems, Inc. Form 10-K, filed
March 30, 1994.
10.19 Note and Stock Pledge Agreement between Ruediger Naumann-Etienne
and OEC Medical Systems, Inc., dated September 5, 1995.
Incorporated by reference to the OEC Medical Systems, Inc. Form
10-K, filed April 1, 1996.
10.20 Form of Warrant Agreement used in connection with Warrants given
to independent contractors for the purchase of common shares.
10.21 Agreement, dated December 17, 1996, to acquire full ownership of
Barwig Medizinische Systeme GmbH (BMS).
13 Portions of the 1996 Annual Report to Shareholders, including Five
Year Summary, Management's Discussion & Analysis of Financial
Condition and Results of Operations, and Consolidated Financial
Statements and Notes thereto.
21 List of Subsidiaries.
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C>
23 Independent Auditors' Consent.
27 Financial Data Schedule (FDS) for Edgar Filing.
(b) Reports on Form 8-K:
Not applicable
</TABLE>
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
OEC MEDICAL SYSTEMS, INC.
By: /s/ Randy W. Zundel
---------------------------------
Randy W. Zundel
Executive Vice President &
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ruediger Naumann-Etienne and Allan W. May and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Report and form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ Ruediger Naumann-Etienne Chairman of the Board, President & March 26, 1997
- ----------------------------------------- Chief Executive Officer
Ruediger Naumann-Etienne
/s/ Gregory K. Hinckley Director March 26, 1997
- -----------------------------------------
Gregory K. Hinckley
/s/ Benno P. Lotz Director March 26, 1997
- -----------------------------------------
Benno P. Lotz
/s/ Allan W. May Director March 26, 1997
- -----------------------------------------
Allan W. May
/s/ Chase N. Peterson Director March 26, 1997
- -----------------------------------------
Chase N. Peterson
/s/ Randy W. Zundel Principal Financial & March 26, 1997
- ----------------------------------------- Accounting Officer
Randy W. Zundel
</TABLE>
13
<PAGE> 15
EXHIBIT INDEX
Exhibit
No. Document
3.1 Certificate of Incorporation, as amended. Incorporated by
reference to the OEC Medical Systems, Inc. Form 10-K, filed March
30, 1994.
3.2 By-Laws, as amended. Incorporated by reference to the OEC Medical
Systems, Inc. Form 10-K, filed March 30, 1994.
4 Rights Agreement, dated as of June 20, 1988, between Diasonics,
Inc. and Bank of America NT&SA. Incorporated by reference to
Exhibit 4.3 of the Diasonics, Inc. Form 8-K, filed August 1, 1988
10.1 Diasonics, Inc. 1979 Stock Option Plan, amended and restated as of
June 1, 1982. Incorporated by reference to Exhibit 10.6 of the
Diasonics, Inc. Registration Statement on Form S-8, filed May 2,
1983.
10.4 Diasonics, Inc. 1990 Stock Option/Stock Purchase Plan.
Incorporated by reference to Exhibit 10.79 of the Diasonics, Inc.
Form S-8, filed on May 1, 1991.
10.5 Warrant for the Purchase of Common Shares issued to PaineWebber
R&D Partners II, L.P., as amended. Incorporated by reference to
the OEC Medical Systems, Inc. Form 10-K, filed on March 30, 1994.
10.14 Form of Option Agreement used in connection with options having
service vesting provisions. Incorporated by reference to the OEC
Medical Systems, Inc. Form 10-K, filed March 30, 1994.
10.15 Form of Option Agreement used in connection with options having
milestone provisions. Incorporated by reference to the OEC Medical
Systems, Inc. Form 10-K, filed March 30, 1994.
10.16 Form of Option Agreement used in connection with automatic
option grant program for non-employee directors. Incorporated
by reference to the OEC Medical Systems, Inc. Form 10-K, filed
March 30, 1994.
10.19 Note and Stock Pledge Agreement between Ruediger Naumann-Etienne
and OEC Medical Systems, Inc., dated September 5, 1995.
Incorporated by reference to the OEC Medical Systems, Inc. Form
10-K, filed April 1, 1996.
10.20 Form of Warrant Agreement used in connection with Warrants given
to independent contractors for the purchase of common shares.
10.21 Agreement, dated December 17, 1996, to acquire full ownership of
Barwig Medizinische Systeme GmbH (BMS).
13 Portions of the 1996 Annual Report to Shareholders, including Five
Year Summary, Management's Discussion & Analysis of Financial
Condition and Results of Operations, and Consolidated Financial
Statements and Notes thereto.
21 List of Subsidiaries.
23 Independent Auditors' Consent.
27 Financial Data Schedule (FDS) for Edgar Filing.
<PAGE> 1
EXHIBIT 10.21
SUMMARY TRANSLATION FROM THE GERMAN LANGUAGE DOCUMENTS OF AGREEMENT, DATED
DECEMBER 17, 1996, BETWEEN OEC MEDICAL SYSTEMS, INC. AND BARWIG MEDIZINISCHE
SYSTEME GMBH.
The Agreement consists of three documents, all dated December 17, 1996.
a) The "Uebernahmearkiaerung" or the exercise by OEC Medical Systems (Europa) AG
("OEC") of a subscription right to 33,000 shares of capital of Barwig
Medizinische Systeme GmbH ("BMS").
b) The "Gesellschafterbeschluss" or shareholders resolution to make the capital
increase of BMS effective January 1, 1997.
c) The "Uebertragung von Geschaeftsanteilen" or purchase of the shares of BMS
from Manfred Barwig and HTC High Tech Consulting AG ("HTC") by OEC effective
January 1, 1997
a) UEBERNAHMEARKIAERUNG
This notarized document dated December 17, 1996 is the exercise by OEC of
its right to purchase an additional 33,000 shares of BMS at the par value
of DM 33.000 plus an incremental amount of DM 923.700. The BMS manager, Mr.
Barwig, confirms in the document that both amounts had been paid to the
company by December 17, 1996.
b) GESELLSCHAFTERBESCHLUSS
This document dated December 17, 1996 is a resolution signed by the three
shareholders of BMS - Manfred Barwig, HTC and OEC - making the DM 33.000
share capital increase of BMS effective January 1, 1997.
c) UEBERTRAGUNG VON GESCHAEFTSANTEILEN
This notarized document dated December 17, 1996 is the agreement by OEC to
purchase 25,000 shares of BMS from Manfred Barwig and 15,100 shares of BMS
from HTC.
The purchase price paid for Mr. Barwig's shares is DM 200.000 and the
granting of 18,000 options to purchase shares of OEC Medical Systems, Inc.
The vesting of the shares is tied to shipments of the mobile C-arm system
7600.
The consideration paid for the HTC shares is a grant 50,000 options to
purchase shares of OEC Medical Systems, Inc.
HTC and Mr. Hubert Anders agree to a two year non-compete clause for the
development, manufacturing, marketing and sales of mobile C-arms.
<PAGE> 2
URNr. K 2213/1996 Kr
IK1296,Barwig
Ubernahmeerklarung
Heute, den 17. Dezember 1996
erschienen vor mir,
Dr. Heinz K o l l m a r ,
Notar in Schwabach, in meinen Amtsraumen in 91126 Schwabach, Konigsplatz 23:
1. Herr Manfred B a r w i g, Elektroingenieur, geb. am 09.12.1961,
wohnhaft Am Steinbruch 2 in 90530 Wendelstein,
hier handelnd
fur die Firma
"Barwig Medizinische Systeme GmbH
mit dem Sitz in Wendelstein
-nachstehend "BMS" genannt-
in seiner Eigenschaft als alleinvertretungsberechtigter
Geschaftsfuhrer.
Vertretungsbescheinigung erfolgt gesondert.
2. Herr Heinz G l o o r, geschaftsansassig: Kanalstrasse 31
in CH-8152 Glattbrugg
hier handelnd fur die Firma
"OEC Medical Systems (Europa) AG"
mit dem Sitz in Glattbrugg/Schweiz
<PAGE> 3
-2-
-nachstehend "OEC" genannt-
in seiner Eigenschaft als Vize-Prasident des Verwaltungsrates.
Vertretungsbescheinigung erfolgt gesondert.
Die Erschienenen sind personlich bekannt.
Sie ersuchten mich um die Beurkundung folgender Erklarungen:
1.
Gemass Urkunde vom 31.05.1995 des Notars Dr. Heinz Kollmar in Schwabach wurde
das Stammkapital der Firma "Barwig Medizinische Systeme GmbH" mit dem Sitz in
Wendelstein von DM 50.000,--um DM 33.000,--auf DM 83.000,-- erhoht.
Hierzu wurde ein neuer Geschaftsanteil von DM 33.000,-- gebildet. Zur Ubernahme
des neuen Geschaftsanteils von DM 33.000,-- wurde die Gesellschafterin "OEC"
zugelassen.
Nach dieser genannten Urkunde kann die Ubernahme nicht vor dem 01.06.1995 und
nicht nach dem 31.12.1996 erklart werden. Sie kann ausschliesslich zur
Erklarung gegenuber dem beurkundenden Notar erklart werden.
<PAGE> 4
- 3 -
Dies vorausgeschickt erklart hiermit die Firma "OEC Medical Systems (Europa) AG"
mit dem Sitz in Glattbrugg/Schweiz die Ubernahme des neu gebildeten
Geschaftsanteils in Hohe von DM 33.000,-- zu den in der
Gesellschafterversammlung festgelegten Bedingungen.
Die Firma "Barwig Medizinische Systeme GmbH" mit dem Sitz in Wendelstein,
vertreten durch den Geschaftsfuhrer, Herrn Manfred Barwig, versichert, dass
der Nennbetrag in Hohe von DM 33.000,-- in bar bei der Gesellschaft einbezahlt
wurde.
Ferner versichert die vorgenannte Firma "Barwig Medizinische Systeme GmbH" mit
dem Sitz in Wendelstein, dass die Firma "OEC" zum heutigen Tage das in der
Urkunde bezeichnete Agio in Hohe von DM 923.700,-- bar einbezahlt hat.
2.
Die Kosten tragt die Firma "OEC".
Begl. Abschriften erhalten:
das Registergericht
und die Firmen
"Barwig Medizinische Systeme GmbH"
<PAGE> 5
- 4 -
"OEC Medical Systems (Europa) AG".
Vorgelesen vom Notar
von den Beteiligten genehmigt
und eigenhandig unterschrieben
/s/ Heinz Gloor
/s/ Manfred Barwig
/s/ Dr. Kollmar, Notar
<PAGE> 6
Vorstehende mit der Urschrift ubereinstimmende Ausfertigung wird hiermit der
Firma OEC Medical Systems (Europa) AG mit dem Sitz in Glattbrugg/Schwiez
auf Ansuchen erteilt.
Schwabach, den 19.12.1996
Dr. Kollmar, Notar
/s/ Dr. Kollmar
<PAGE> 7
Gesellschafterbeschluss
Wir die Unterzeichneten samtlichen Gesellschafter der Barwig Medizinische Gerate
GmbH sind daruber einig, dass die heute vor dem Notar Dr. Kolmar in Schwabach
erklarte Ubernahme eines neuen Gesellschaftsanteils von nominal DM 33.000 sowohl
im Verhaltnis zwischen den Gesellschaftern als auch im Verhaltnis zu der
Gesellschaft zum 1. Januar 1997 eintritt.
Wendelstein, den 17. Dezember 1996
/s/ Manfred Barwig /s/ Hubert Anders
- ------------------------- -------------------------
Manfred Barwig HTC High Tech Consulting AG
/s/ Heinz Gloor
- -------------------------
OEC Medical Systems (Europa) AG
<PAGE> 8
URNr. K 2216/1996 Kr
IK1296,Barwig, U.
Ubertragung von Geschaftsanteilen
Heute, den 17. Dezember 1996
erschienen vor mir,
Dr. Heinz K o l l m a r ,
Notar in Schwabach, in meinen Amtsraumen in 91126 Schwabach, Konigsplatz 23:
1. Herr Manfred B a r w i g, Elektroingenieur, geb. am 09.12.1951,
wohnhaft Am Steinbruch 2 in 90530 Wendelstein,
hier handelnd
a) im eigenen Namen und
b) fur die Firma
"High Tech Consulting AG"
mit dem Sitz in Dietikon/ Schweiz,
-nachstehend "HTC" genannt-
aufgrund der dieser Urkunde in Urschrift beigefugten
Spezialvollmacht vom 11.12.1996.
c) fur Herrn Hubert A n d e r s, Kaufmann, geschaftsansassig: P.O.
Box 5522 in Carefree, AZ 85377 USA, aufgrund Vollmacht, die in
Urschrift beigefugt ist.
<PAGE> 9
- 2 -
2. Herr Heinz G l o o r, geschaftsansassig: Kanalstrasse 31 in CH-8152
Glattbrugg
hier handelnd f(beta)r die Firma
"OEC Medical Systems (Europa) AG"-
mit dem Sitz in Glattbrugg/Schweiz
-nachstehend "OEC" Genannt-
in seiner Eigenschaft als Vize-Prasident des Verwaltungsrates.
Vertretungsbescheinigung erfolgt gesondert.
Herr Barwig und Herr Gloor sind mir, dem Notar, personlich bekannt.
Auf Ansuchen der Erschienenen beurkunde ich folgendes:
I.
Am Stammkapital von DM 50.000,-- ( nach Vollzug einer beschlossenen aber noch
nicht im Handelsregister eingetragenen Kapitalerhohung von DM 83.000,-- )
derFirma "Barwig Medizinische Systeme GmbH"
mit dem Sitz in Wendelstein
sind
a) Herr Manfred Barwig mit einem Geschaftsanteil von DM 25.000,-- und
<PAGE> 10
- 3 -
b) die Firma "High Tech Consulting AG" mit dem Sitz in Dietikon /
Schweiz mit einem Geschaftsanteil von DM 15.100,-- beteiligt.
Diese Geschaftsanteile wurden mit Urkunde des Notars Dr. Heinz Kollmar in
Schwabach vom 18.01.1995 URNR. K 70/95 erworben.
Beide Inhaber dieser Geschaftsanteile versichern, dass die Geschaftsanteile
voll einbezahlt, sie noch Inhaber der Anteile und diese weder gepfandet noch
verpfandet sind.
II.
Herr Manfred Barwig und die Firma "High Tech Consulting AG" mit dem Sitz in
Dietikon / Schweiz verkaufen und ubertragen mit dinglicher Wirkung die
jeweiligen vorbezeichneten Geschaftsanteile
a n
die Firma
"OEC Medical Systems (Europa) AG"
mit dem Sitz in Glattbrugg/Schweiz.
Die Ubertragung erfolgt mit Wirkung zum 01.01.1997 Uhr 00.00.
<PAGE> 11
- 4 -
Das Gewinnbezugsrecht geht somit ab 01.01.1997 auf den Kaufer uber, bis zum
31.12.1996 verbleibt es beim Verkaaufer.
Der Erwerber nimmt die Ubertragungen an.
III.
Der Erwerber hat folgende Gegenleistungen zu erbringen:
1.
An Herrn Manfred Barwig ist ein barer Geldbetrag in Hohe
von DM 200.000,--
i.W. zweihunderttausend Deutsche Mark
am 31.01.1997 zu zahlen.
Der Geldbetrag ist bis dahin nicht zu verzinsen.
Der Erwerber unterwirft sich wegen der Bezahlung dieses Geldbetrages der
sofortigen Zwangsvollstreckung aus der Urkunde in sein gesamtes Vermogen.
Der Notar wird ermachtigt, ohne jegliche Nachweise, vollstreckbare Ausfertigung
zu erteilen.
Eine Beweislastumkehr liegt darin nicht.
<PAGE> 12
- 5 -
2.
Der Erwerber ubertragt auf Herrn Manfred Barwig 18.000 Optionen fur den Kauf von
Aktien der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City, Utah, USA.
Die Berechtigung auf Ausubung der Optionen errechnet sich nach dem Schlussel von
48 Optionen fur jedes nach dem 31.12.1996 ausgeliefertem mobilen C-Bogen
Roentgengerat "Compact 7600" oder "Series 7600" durch die Firma Barwig
Medizinische Systeme GmbH in Wendelstein. Die Berechtigungsberechnung erfolgt
jeweils zum Quartalsende. Unabhangig von dieser Regelung sind alle 18.000
Optionen am 31.12.2002 fallig und handelbar. Als Optionspreis gilt der
Abschlusskurs fur die OEC Medical Systems Inc. in Salt Lake City am 1.
Borsentag nach Wirksamwerden dieses Vertrages.
3.
Der Erwerber ubertragt auf die Firma
"HTC" Optionen fur den Kauf von 30.000 Aktien der OEC Medical Systems Inc. mit
dem Sitz in Salt Lake City. Die Berechtigung fur die Ausubung der Optionen
beginnt ein Jahr nach Wirksamwerden dieses Vertrages und kann bis zum 31.12.2001
ausgeubt werden. Als Optionspreis gilt der Abschlusskurs der OEC Medical
Systems Inc. mit dem Sitz in Salt Lake City Aktien am 1. Borsentag nach
Wirksamwerden dieses Vertrages.
<PAGE> 13
- 6 -
4.
Der Erwerber ubertragt auf Herrn Hubert Anders Optionen fur den Kauf von 20.000
Aktien der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City. Die
Berechtigung fur die Ausubung der Optionen beginnt ein Jahr nach Wirksamwerden
dieses Vertrages und kann bis zum 31.12.2001 ausgeubt werden.
Als Optionspreis gilt der Abschlusskurs der OEC Medical Systems Inc. mit dem
Sitz in Salt Lake City Aktien am 1. Borsentag nach Wirksamwerden dieses
Vertrages.
5.
Festgestellt wird, dass an die Firma "HTC" und an Herrn Hubert Anders ein bar zu
zahlender Kaufpreis nicht geschuldet wird.
IV.
Soweit nach Satzung oder Gesetz Zustimmungen zu diesem Vertrag erforderlich
sind, werden diese die Vertragsteiles selbst beibringen.
<PAGE> 14
- 7 -
V.
Weiter ist vereinbart:
Die Firma "HTC" verzichtet zum 31.12.1996 auf das Vertriebsrecht fur "OEC" und
"BMS" (Barwig Medizinische Systeme GmbH) Produkte in Skandinavien.
Die HTC und Herr Hubert Anders verpflichten sich, fur den Zeitraum von 2 Jahren
ab Wirksamwerden dieses Vertrages nicht als Konkurrent in der Entwicklung,
Fertigung, Vermarktung und Vertrieb von mobilen C-Bogen Roentgengeraten tatig zu
werden.
VI.
Der Erwerber tragt die durch diese Urkunde veranlassten Kosten. Von dieser
Urkunde erhalt das Registergericht eine beglaubigte Abschrift, ebenso das
zustandige Zentralfinanzamt Nurnberg. Die Vertragsteile erhalten je eine
Ausfertigung.
Die Gesellschaft hat keinen Grundbesitz.
VII.
Es wird eine Gesellschafterversammlung der Firma "Barwig Medizinische Systeme
GmbH" mit dem Sitz in Wendelstein abgehalten.
<PAGE> 15
- 8 -
Da das gesamte Stammkapital vertreten ist, wird auf alle Formen und Fristen
verzichtet und einstimmig folgendes beschlossen:
1.
Herr Manfred Barwig wird mit Wirkung zum 31.12.1996 als Geschaftsfuhrer
abberufen.
2.
Mit Wirkung zum 01.01.1997 wird zum Geschaftsfuhrer neu bestellt: Herr Ted
Parrot, Kaufmann, in Salt Lake City, Utah, USA.
Er vertritt die Gesellschaft einzeln, auch soweit andere Geschaftsfuhrer
hinzutreten.
Von den gesetzlichen Beschrankungen des Section 181 BGB ist er befreit.
Vorgelesen vom Notar
von den Beteiligten genehmigt
und eigenhandig unterschrieben
/s/ Heinz Gloor
/s/ Manfred Barwig
/s/ Dr. Kollmar, Notar
<PAGE> 1
FINANCIAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
Five Year Financial Summary .................. Page 20
Management's Discussion & Analysis ........... Page 21
Consolidated Financial Statements ............ Page 25
Notes to Consolidated Financial Statements ... Page 29
Independent Auditors' Report ................. Page 37
</TABLE>
[GRAPHIC]
REVENUE
(IN MILLIONS)
[LINE GRAPH]
<TABLE>
<S> <C>
1994 ....................... $ 98
1995 ....................... $102
1996 ....................... $128
</TABLE>
19
<PAGE> 2
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
NET SALES
Product $ 111,383 $ 86,415 $ 85,206 $ 89,215 $ 88,225
Service 16,602 15,121 12,952 10,799 8,653
--------- --------- -------- --------- --------
Total net sales 127,985 101,536 98,158 100,014 96,878
--------- --------- -------- --------- --------
COST OF SALES
Product 65,334 51,408 52,734 50,290 49,443
Service 11,372 8,922 7,942 8,278 5,023
--------- --------- -------- --------- --------
Total cost of sales 76,706 60,330 60,676 58,568 54,466
--------- --------- -------- --------- --------
Gross margin 51,279 41,206 37,482 41,446 42,412
--------- --------- -------- --------- --------
OPERATING EXPENSES
Research and development 8,854 7,728 8,416 8,689 7,067
Marketing and sales 21,494 17,668 16,487 17,001 15,524
Administrative, general and other 7,260 5,498 5,776 8,149 5,337
Litigation judgment -- -- -- -- 3,100
--------- --------- -------- --------- --------
Total operating expenses 37,608 30,894 30,679 33,839 31,028
--------- --------- -------- --------- --------
Operating income 13,671 10,312 6,803 7,607 11,384
Interest income 786 676 346 529 743
Interest expense (9) (11) (257) (105) (19)
--------- --------- -------- --------- --------
Income from continuing operations
before income taxes 14,448 10,977 6,892 8,031 12,108
Income tax benefit (expense) (1,536) 856 1,816 1,776 (362)
--------- --------- -------- --------- --------
Income from continuing operations 12,912 11,833 8,708 9,807 11,746
Loss from discontinued operations -- -- -- (13,060) (30,793)
--------- --------- -------- --------- --------
Net income (loss) 12,912 $ 11,833 $ 8,708 $ (3,253) $(19,047)
========= ========= ======== ========= ========
Income (loss) per common and common
equivalent share:
Income from continuing operations $ 1.01 $ 0.94 $ 0.69 $ 0.80 $ 0.96
Loss from discontinued operations -- -- -- (1.06) (2.52)
--------- --------- -------- --------- --------
Net income (loss) $ 1.01 $ 0.94 $ 0.69 $ (0.26) $ (1.56)
--------- --------- -------- --------- --------
Common and common equivalent shares 12,797 12,585 12,552 12,281 12,182
========= ========= ======== ========= ========
BALANCE SHEET DATA FOR CONTINUING OPERATIONS
Cash and short term investments $ 17,103 $ 16,584 $ 7,608 $ 5,383 $ 1,924
Working capital 53,847 43,900 31,199 16,949 18,172
Total assets 111,946 91,462 81,555 77,134 64,214
Long-term debt -- -- -- -- 55
Stockholders' equity 82,174 69,070 58,913 43,298 40,680
--------- --------- -------- --------- --------
</TABLE>
Note: The Company has never paid a dividend on its common stock.
20
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995.
NET SALES
Net sales for the year ended December 31,1996 were $128.0 million compared to
$101.5 million in 1995.
Product sales in 1996 were $111.4 million compared to $86.4 million in 1995, an
increase of 28.9%. The increase was due to a broadened product line and
increased market penetration of existing products. The company introduced two
new products in 1996, the Mini 6600 and the Compact 7600, in addition, the
company's urology product sales increased substantially over 1995. This increase
in urology sales was due to an increase in market share and built up demand from
prior years due in part to healthcare reform. International sales were up 22.2%
as compared to 1995.
Domestic bookings for all products in 1996 were approximately $92.0 million,
compared to $75.1 million in 1995, an increase of 22.5%. International bookings
increased approximately 44.4% from $16.8 million in 1995 to $24.4 million in
1996. The geographic difference in growth rates reflects expanding market
penetration in the international markets. Worldwide, the Company's urology
product bookings increased 18.2% from the prior year while mobile C-Arm bookings
increased approximately 28.8%, due to the new C-arm product introductions and
increases in international bookings.
Total bookings increased 26.6% to approximately $116.4 million from $91.9
million the prior year. As a result, at December 31,1996, OEC's backlog had
improved to approximately $24.1 million compared with $16.8 million at the prior
year end. OEC includes in backlog only firm orders deliverable within 12 months.
Backlog also includes service contract revenue which will be earned over the
next twelve months.
OEC service revenue increased 9.9%, from $15.1 million to $16.6 million in 1996.
The percentage growth increase has slowed compared to prior years. The slower
growth was the result of improved product reliability and increased competition
from third party service organizations. The Company has adopted an aggressive
service pricing strategy designed to regain market share through higher contract
capture rates and is developing partnerships with third party groups in a
proactive manner.
The following table sets forth OEC's operating results as a percentage of net
sales:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales
Product 87.0% 85.1% 86.8%
Service 13.0 14.9 13.2
----- ----- -----
Total net sales 100.0 100.0 100.0
----- ----- -----
Cost of sales
Product 51.1 50.6 53.7
Service 8.9 8.8 8.1
----- ----- -----
Total cost of sales 60.0 59.4 61.8
----- ----- -----
Gross margin 40.0 40.6 38.2
----- ----- -----
Operating expenses
Research and development 6.9 7.6 8.6
Marketing and sales 16.8 17.4 16.8
Administrative, general and other 5.7 5.4 5.9
----- ----- -----
Total operating expenses 29.4 30.4 31.3
----- ----- -----
Operating income 10.6 10.2 6.9
Net income 10.0 11.7 8.9
</TABLE>
21
<PAGE> 4
MARGIN ANALYSIS
The Company's gross margin decreased slightly in 1996 to 40.0% of sales compared
with 40.6% in 1995. The main reason for the slight decline was due to increased
pricing pressures world wide. The Company's continued focus in 1995 and 1996 on
manufacturing costs and efficiencies helped offset most of these pricing
effects.
The Company's net service costs increased 27.5% or $2.5 million from 1995.
Although actual service expense increased in line with revenues at 10.3%,
warranty utilization credits declined significantly due to the increased
reliability of the Company's products.
R&D EXPENSE
R & D expense increased 14.6% in 1996 to $8.9 million, versus $7.7 million in
1995. The increase reflects the costs associated with the development of two new
products in 1996, along with the increase in continuing engineering expense
associated with a broadened product offering. As a percent of net sales, R & D
expense declined 0.7% from the prior year. The company anticipates that R & D
expense will grow proportionally with increasing revenue.
MARKETING & SALES EXPENSE
Marketing and sales expense increased in 1996 by $3.8 million to $21.5 million,
or 21.6% above 1995. The largest part of the increase in expense is due to the
increase in commission expense in direct relation to the increase in revenue.
The other factor is the continuing increase in investment in both U.S. and
international sales and marketing for coverage due to the broadened product
lines. As a percentage of net sales, marketing and sales expense declined 0.6%
to 16.8%.
ADMINISTRATIVE, GENERAL & OTHER EXPENSE
Administrative, general and other expenses increased 32.1% in 1996 to $7.3
million, versus $5.5 million in 1995. But as a percentage of net sales, expenses
were up 0.3%. Part of the increase resulted from costs associated with the
implementation of a new companywide computer system that the company purchased
in the second quarter of 1996 and the ongoing training involved with its
conversion. The installation of this system is scheduled for completion by the
middle of 1997.
INCOME TAXES
During 1996, the Company recorded current tax expense of $4.7 million. However,
due to the recognition of the deferred benefit of $3.2 million, the net tax
expense was $1.5 million for 1996 compared to a net tax benefit of $0.9 million
in 1995. Included in the 1996 deferred benefit was the reversal of the remaining
$4.3 million of valuation allowance which was completed by the end of the third
quarter as the Company recognized the likelihood of fully utilizing the deferred
tax assets. The Company also recorded $0.9 million of tax benefit directly to
stockholder's equity for the benefit derived from stock options exercised.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.
NET SALES
Net sales for the year ended December 31, 1995 were $101.5 million compared to
$98.2 million in 1994.
Product sales in 1995 were $86.4 million compared with $85.2 million in 1994, an
increase of 1.4%. The increase was primarily due to a large increase in
international sales. Domestic sales declined by 10.5%, a factor of backlog
erosion in 1994.
Total OEC bookings increased 14% to approximately $91.9 million from $80.5 the
prior year. As a result, at December 31, 1995, OEC's backlog had improved to
approximately $16.8 million, compared with $11.2 million 1994 year end.
OEC service revenue increased 16.7%, from $13.0 million to $15.1 million in
1995. These results were attained from an increased contract capture rate
despite very aggressive competition from third-party service organizations.
22
<PAGE> 5
MARGIN ANALYSIS
The Company's gross margin increased in 1995 to 40.6% of sales compared with
38.2% in 1994. Management's focus on manufacturing efficiencies starting in the
latter part of 1994 and continuing through 1995 has enabled the Company to
reduce its cost of sales.
OEC's service costs increased approximately $1.0 million from 1994 or 12.3%
while service revenue grew by 16.8%.
R&D EXPENSE
R&D expense declined 8.2% in 1995 to $7.7 million, versus $8.4 million in 1994.
The decline reflects the completion of the Series 9600 project in mid-1994.
MARKETING & SALES EXPENSE
Marketing and sales expense increased in 1995 by $1.2 million to $17.7 million,
or 7.2% above 1994. The increase reflects the continuing investment in
international sales and the cost increase in the domestic market due to
competitive pressures.
ADMINISTRATIVE, GENERAL & OTHER EXPENSE
Administrative, general and other expense was basically flat from 1994. As a
percentage of net sales it was down .5%.
INCOME TAXES
During 1995, the reversal of reserves against deferred tax assets resulted in a
deferred tax benefit of $1.6 million. This benefit was offset by $0.7 million of
current tax provision for various state income taxes and federal alternative
minimum tax. In addition, $1.0 million of tax benefit was recorded directly to
stockholders' equity for the tax benefit derived from stock option exercises.
GENERAL INFORMATION
INFLATION
To date, the Company has not experienced any significant effects from inflation.
LIQUIDITY & CAPITAL RESOURCES
Cash provided by operating activities from the Company's operations was $6.3
million in 1996 compared with $12.8 million in 1995 and $9.3 million in 1994.
The reduction in 1996 is a reflection of the Company's decision to utilize its
cash position to assist the sales force through extended credit terms and more
demonstration equipment. The $8.3 million increase in accounts receivable
reflects these extended credit terms and the Company's increased sales. The $5.8
million increase in inventory reflects the additions to demonstration equipment
and finished goods.
The Company's capital expenditures totalled $4.5 million in 1996 compared with
$1.1 million in 1995 and $3.4 in 1994. The purchase and implementation of a new
core computer system as well as investments in manufacturing equipment were the
primary capital expenditures designed to position the Company to meet its growth
expectations. At December 31, 1996, the Company had no significant commitments
for capital expenditures.
Cash and temporary cash investments increased to $17.1 million at December 31,
1996 from $16.6 million at December 31, 1995.
A stock repurchase program of 750,000 shares of its outstanding common stock was
announced in December 1994 and the authorized amount was increased to 1,250,000
shares in January 1996. As of December 31, 1996, 888,483 shares have been
repurchased at a cost of $7,366,126, of which 87,983 shares were retired and
800,500 shares were recorded as treasury stock.
OEC believes that it has sufficient liquidity and anticipated cash flow to meet
its obligations in 1997. In addition, OEC continues to carry an unused $10
million line of credit.
23
<PAGE> 6
FACTORS THAT MAY AFFECT FUTURE RESULTS
Except for historical information, this discussion contains forward looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those projected. Such risks and uncertainties include:
Product demand and market acceptance; the effect of general economic conditions
and foreign currency fluctuations; the impact of competitive products and
pricing; new product development and commercialization; the effect of the
continuing shift in growth from domestic to international healthcare customers,
and the impact of managed care initiatives in the United States and the ability
to increase operating margins on higher sales.
OEC's future operating results are dependent on its ability to develop,
manufacture and market innovative products that meet customers' needs. The
process of developing new high technology medical products is complex and
uncertain and requires innovative designs that anticipate customer needs,
technological trends and healthcare shifts. There can be no assurance that the
Company will be able to develop and market new products on a cost-effective and
timely basis, that such products will compete favorably with products developed
by others or that existing technology will not be superseded by new discoveries
or breakthroughs, for example, the delay in introduction of the Series 9600 in
1994 which negatively impacted revenue and earnings for the year.
Because of the substantial length of time and expense associated with bringing
new products through development and regulatory approval to the marketplace, the
medical device industry places considerable importance on obtaining patent,
trademark, copyright and trade secret protection for new technologies, products
and processes. The loss of protection could have a material adverse effect on
the Company's business.
OEC depends on some significant and single-source vendors for certain important
component parts for certain products. While the Company believes any of these
single-source items could be replaced over time, abrupt disruption in the supply
of a part for a product could have a material adverse effect on the Company's
production and on its financial condition and results of operations in cases
where the existing inventory of the components is not adequate to meet the
Company's demand for the component during such disruption.
The testing, marketing and sale of human healthcare products entails an inherent
risk of product liability, and there can be no assurance that product liability
claims will not be asserted against OEC. Although OEC has product liability
insurance coverage, there can be no assurance that such coverage will provide
adequate coverage against all potential claims.
As a manufacturer of medical devices, OEC is subject to extensive and rigorous
governmental regulation, principally by the FDA and corresponding state and
foreign agencies. Failure to comply with FDA regulations could result in
sanctions being imposed, including restrictions on the marketing of or recall of
the affected products. OEC's facilities and manufacturing processes have been
periodically inspected by the FDA and other agencies, but remain subject to
further inspections from time to time. OEC continues to devote substantial human
and financial resources to regulatory compliance and believes that it remains in
substantial compliance with all applicable federal and state regulations.
Nevertheless, there can be no assurance that the FDA or a state agency will
agree with OEC's positions, or that its GMP or ISO compliance will not be
challenged at some subsequent point in time.
A portion of the Company's research and development activities, its corporate
headquarters and other critical business operations are located near a major
earthquake fault. The ultimate impact on the Company, significant suppliers and
the general infrastructure is unknown, but operating results could be materially
affected in the event of a major earthquake.
Although OEC believes that it has the product offerings and resources needed for
continuing success, future revenue and margin trends cannot be reliably
predicted and may cause the Company to adjust its operations. Factors external
to the Company can result in volatility of the Company's common stock price.
24
<PAGE> 7
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
(In thousands)
<S> <C> <C> <C>
NET SALES
Product $ 111,383 $ 86,415 $ 85,206
Service 16,602 15,121 12,952
--------- --------- --------
Total net sales 127,985 101,536 98,158
--------- --------- --------
COST OF SALES
Product 65,334 51,408 52,734
Service 11,372 8,922 7,942
--------- --------- --------
Total cost of sales 76,706 60,330 60,676
--------- --------- --------
Gross margin 51,279 41,206 37,482
--------- --------- --------
OPERATING EXPENSES
Research and development 8,854 7,728 8,416
Marketing and sales 21,494 17,668 16,487
Administrative, general and other 7,260 5,498 5,776
--------- --------- --------
Total operating expenses 37,608 30,894 30,679
--------- --------- --------
Operating income 13,671 10,312 6,803
Interest income 786 676 346
Interest expense (9) (11) (257)
--------- --------- --------
Income before income taxes 14,448 10,977 6,892
Income tax (expense) benefit (1,536) 856 1,816
--------- --------- --------
Net income $ 12,912 $ 11,833 $ 8,708
========= ========= ========
Net income per common and common
equivalent share $ 1.01 $ 0.94 $ 0.69
--------- --------- --------
Common and common equivalent shares 12,797 12,585 12,552
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term cash investments $ 17,103 $ 16,584
Accounts and notes receivable, net of allowances
of $853 and $577, respectively 33,191 24,982
Inventories 23,868 18,031
Prepaid expenses and other current assets 1,451 885
Deferred income taxes 8,006 5,810
--------- --------
Total current assets 83,619 66,292
Long-term receivables 1,627 1,002
Property and equipment, net 11,903 9,868
Cost in excess of net assets acquired, net of accumulated
amortization of $8,183 and $7,542, respectively 10,213 10,854
Deferred income taxes 3,879 2,898
Other assets, net 705 548
--------- --------
Total $ 111,946 $ 91,462
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,358 $ 4,673
Accrued salaries and benefits 4,127 2,920
Accrued warranty and installation costs 1,748 1,259
Deferred income and customer deposits 5,462 5,511
Income taxes payable 509 412
Accrued legal fees and litigation settlements 4,062 3,793
Accrued distributor commissions 2,891 1,892
Other accrued liabilities 3,615 1,932
--------- --------
Total current liabilities 29,772 22,392
========= ========
Stockholders' equity:
Preferred stock, $.01 par value; Authorized -- 2,000 shares,
including 1,100 shares of convertible preferred stock, none outstanding
Common stock, $.01 par value; Authorized -- 30,000 shares
Issued -- 13,158 and 12,789 shares, respectively 132 128
Capital in excess of par value 79,341 76,344
Stock subscription receivable -- (210)
Retained earnings (accumulated deficit) 9,786 (3,126)
Treasury stock, 801 and 560 shares at cost, respectively (6,850) (4,056)
Foreign currency translation adjustment (235) (10)
--------- --------
Total stockholders' equity 82,174 69,070
--------- --------
Total $ 111,946 $ 91,462
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 9
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL RETAINED
COMMON STOCK IN EXCESS EARNINGS/ TREASURY STOCK FOREIGN STOCK
------------ OF PAR ACCUMULATED -------------- CURRENCY SUBSCRIPTION
SHARES AMOUNT VALUE DEFICIT SHARES AMOUNT TRANSLATION RECEIVABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------ ----- -------- -------- ---- ------- ----- ----- --------
Balance, January 1, 1994 12,411 $ 124 $ 66,858 $(23,667) -- -- $ (17) -- $ 43,298
------ ----- -------- -------- ---- ------- ----- ----- --------
Issuance of stock under
employee/consultant
benefit plans 71 1 359 -- -- -- -- -- 360
Tax benefit attributable to
appreciation of common
stock options exercised -- -- 2,091 -- -- -- -- -- 2,091
Cancellation of note payable
originally issued in
connection with the 1993
corporate restructuring -- -- 4,475 -- -- -- -- -- 4,475
Foreign currency translation -- -- -- -- -- -- (19) -- (19)
Net income -- -- -- 8,708 -- -- -- -- 8,708
------ ----- -------- -------- ---- ------- ----- ----- --------
Balance, December 31, 1994 12,482 125 73,783 (14,959) -- -- (36) -- 58,913
------ ----- -------- -------- ---- ------- ----- ----- --------
Issuance of stock under
employee/consultant
benefit plans 355 4 1,919 -- -- -- -- -- 1,923
Tax benefit attributable to
appreciation of common
stock options exercised -- -- 950 -- -- -- -- -- 950
Purchase of treasury shares -- -- -- -- (648) $(4,575) -- -- (4,575)
Retirement of treasury shares (88) (1) (518) -- 88 519 -- -- --
Issuance of stock subscription
receivable 40 -- 210 -- -- -- -- $(210) --
Foreign currency translation -- -- -- -- -- -- 26 -- 26
Net income -- -- -- 11,833 -- -- -- -- 11,833
------ ----- -------- -------- ---- ------- ----- ----- --------
Balance, December 31, 1995 12,789 128 76,344 (3,126) (560) (4,056) (10) (210) 69,070
------ ----- -------- -------- ---- ------- ----- ----- --------
Issuance of stock under
employee/consultant
benefit plans 369 4 2,115 -- -- -- -- -- 2,119
Tax benefit attributable to
appreciation of common
stock options exercised -- -- 882 -- -- -- -- -- 882
Purchase of treasury shares -- -- -- -- (241) (2,794) -- -- (2,794)
Receipt of stock subscription
receivable -- -- -- -- -- -- -- 210 210
Foreign currency translation -- -- -- -- -- -- (225) -- (225)
Net income -- -- -- 12,912 -- -- -- -- 12,912
------ ----- -------- -------- ---- ------- ----- ----- --------
Balance, December 31, 1996 13,158 $ 132 $ 79,341 $ 9,786 (801) $(6,850) $(235) -- $ 82,174
====== ===== ======== ======== ==== ======= ===== ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 10
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 12,912 $ 11,833 $ 8,708
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,117 3,272 3,546
Bad debt expense 45 20 245
Legal settlement recorded as reduction of note payable to related party -- -- (750)
Deferred income tax benefit (3,177) (1,611) (2,280)
Current tax benefit attributable to stock options exercised 882 175 49
Changes in current assets and liabilities:
Accounts and notes receivable, net (8,254) (713) 650
Inventories (5,837) 432 657
Prepaid expenses and other current assets (566) (50) 263
Other assets, net (157) (296) (252)
Accounts payable 2,685 (485) 916
Accrued salaries and benefits 1,207 400 179
Accrued warranty and installation costs 489 144 (248)
Deferred income and customer deposits (49) 283 412
Income taxes payable 97 (3) (401)
Accrued legal fees and litigation settlements 269 (526) 244
Accrued restructuring costs -- -- (3,259)
Accrued distributor commissions 999 (368) (162)
Other accrued liabilities 1,683 305 825
-------- -------- -------
Net cash provided by operating activities 6,345 12,812 9,342
-------- -------- -------
INVESTING ACTIVITIES
Reduction (increase) in long-term receivables (625) (99) 458
Additions to property and equipment (4,511) (1,111) (3,441)
Other (225) 26 (19)
-------- -------- -------
Net cash used in investing activities (5,361) (1,184) (3,002)
-------- -------- -------
FINANCING ACTIVITIES
Common stock issued under benefit plans 2,329 1,923 360
Purchases of treasury stock (2,794) (4,575) --
Payments on notes payable -- -- (4,475)
-------- -------- -------
Net cash used in financing activities (465) (2,652) (4,115)
-------- -------- -------
Net increase in cash and short-term cash investments 519 8,976 2,225
Cash and short-term cash investments at beginning of year 16,584 7,608 5,383
-------- -------- -------
Cash and short-term cash investments at end of year $ 17,103 $ 16,584 $ 7,608
======== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 9 $ 11 $ 257
Cash paid during the year for income taxes $ 3,734 $ 583 $ 357
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1994, the remaining balance of the note payable to related party, in the
amount of $4,475 was cancelled with the corresponding benefit credited to
capital in excess of par value. During the years ended December 31, 1995 and
1994, the tax benefits in the amount of $775 and $2,042, respectively,
attributable to the appreciation of common stock options exercised were credited
directly to capital in excess of par value. During the year ended December 31,
1995, the Company sold 40 shares of its common stock in exchange for a note
receivable in the amount of $210, which was repaid to the company during the
year ended December 31, 1996.
See accompanying notes to consolidated financial statements.
28
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include those of OEC Medical Systems, Inc.
and its wholly-owned subsidiaries ("the Company"). All material intercompany
balances and transactions have been eliminated in consolidation.
OPERATIONS
The Company designs, manufactures, markets and services computer-based medical
instruments (primarily X-ray imaging systems) for use in hospitals, outpatient
clinics, and private practice surgi-centers. The manufacturing facilities are
located in Salt Lake City, Utah, Warsaw, Indiana and Wendelstein, Germany. The
systems are marketed through direct sales forces of the Company and through
independent distributors and dealers worldwide (see Note 7).
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Sales are generally recognized at the time the products are shipped, as are
provisions for estimated installation costs, warranty costs, agents' commissions
and sales allowances. Amounts received upon the sale of service contracts are
deferred and recognized as service revenue over the life of the contract.
CASH AND SHORT-TERM INVESTMENTS AND LINE OF CREDIT
Short-term cash investments are interest-bearing investments readily convertible
to cash with original short-term maturities less than 90 days and are stated at
cost, which approximates market. At December 31, 1996 and 1995, the Company had
a line of credit for $10 million which expires May 1998. No borrowings had been
made under this line as of December 31, 1996 and 1995.
INVENTORIES
Inventories are stated at the lower of cost (utilizing the first-in/first-out
method) or market. Inventories consist of the following:
<TABLE>
DECEMBER 31, (In thousands) 1996 1995
<S> <C> <C>
Purchased parts and completed
subassemblies $ 8,672 $ 8,190
Work-in-process 3,097 3,216
Finished goods 3,783 2,456
Demonstration equipment 8,203 2,691
Service and repair parts 4,475 4,171
-------- --------
Total 28,230 20,724
Reserves for excess and obsolete inventory (4,362) (2,693)
-------- --------
Net $ 23,868 $ 18,031
======== ========
</TABLE>
LONG-LIVED ASSETS
Impairment of long-lived assets is determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-lived Assets and of Long-lived Assets to be Disposed Of," which was adopted
on January 1, 1996. There were no impairments as of December 31, 1996.
29
<PAGE> 12
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. The Company uses the straight-line method to depreciate and
amortize the cost of assets over their estimated useful lives as follows:
<TABLE>
<CAPTION>
DECEMBER 31, (In thousands) Estimated 1996 1995
Useful Lives
------------
<S> <C> <C> <C>
Buildings and land 30 years $ 7,591 $ 6,586
Machinery and equipment 3 to 10 years 16,486 13,754
Leasehold improvements Life of lease (June, 2000) 886 700
Furniture and fixtures 2 to 5 years 204 164
-------- --------
Total $ 25,167 $ 21,204
Less accumulated depreciation
and amortization (13,264) (11,336)
-------- --------
Net $ 11,903 $ 9,868
======== ========
</TABLE>
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired include the following:
<TABLE>
<CAPTION>
DECEMBER 31, (In thousands) 1996 1995
<S> <C> <C>
Cost in excess of net assets acquired $ 18,396 $ 18,396
Less accumulated amortization (8,183) (7,542)
-------- --------
Net $ 10,213 $ 10,854
======== ========
</TABLE>
Cost in excess of net assets acquired is being amortized on a straight-line
basis over approximately 30 years. Amortization amounted to $641,000 in each of
the three years in the period ended December 31, 1996.
OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, (In thousands) 1996 1995
<S> <C> <C>
Deposits $531 $345
Investment in affiliate, at cost (see Note 9) 174 203
---- ----
Net $705 $548
==== ====
</TABLE>
ACCRUED WARRANTY AND INSTALLATION COSTS
The Company provides currently for the estimated cost to repair or replace
products under warranty provisions in effect at the time of sale.
CONTINGENCIES
As a manufacturer of medical products, the Company is subject to certain
regulations of the United States Food and Drug Administration ("FDA") and
various state agencies. These regulations require review or approval of the
Company's products, facilities and manufacturing processes, including periodic
inspections of manufacturing facilities for compliance with Good Manufacturing
Practices as established by the FDA. The Company has devoted substantial human
and financial resources to regulatory compliance, and believes that it is in
substantial compliance with all applicable federal and state regulations.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net Income per common and common equivalent share is computed using the weighted
average number of the Company's common shares outstanding and dilutive common
equivalent shares from stock options and warrants, as calculated using the
treasury stock method.
30
<PAGE> 13
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries are measured
using local currencies as the functional currency. Assets and liabilities are
translated into US dollars at year-end rates of exchange and results of
operations are translated at average rates of exchange for the year, with the
difference accumulated in a separate component of stockholders' equity until
such time as the subsidiary's operations are discontinued, sold or substantially
liquidated.
2. INCOME TAXES
Income tax (expense) benefit consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (In thousands) 1996 1995 1994
<S> <C> <C> <C>
Current Expense:
State $ (719) $ (598) $ (351)
------- ------- -------
Federal (6,507) (3,771) (2,033)
Less utilization of operating loss
carryforwards and tax credits 2,513 3,614 1,920
------- ------- -------
Net Federal (3,994) (157) (113)
------- ------- -------
Total Current (4,713) (755) (464)
------- ------- -------
Deferred Benefit:
Reversal of valuation allowance 4,306 5,394 $ 5,125
Net operating loss utilized currently (2,513) (3,614) (1,920)
Other deferred tax assets created (utilized) 1,384 (169) (925)
------- ------- -------
Total Deferred 3,177 1,611 2,280
------- ------- -------
Net $(1,536) $ 856 $ 1,816
======= ======= =======
</TABLE>
Income tax (expense) benefit differs from the amount computed by applying the
statutory federal tax rate to income from continuing operations for the
following reasons:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (In thousands) 1996 1995 1994
<S> <C> <C> <C>
Computed federal income tax expense at
statutory rate of 35% $(5,057) $(3,842) $(2,412)
State income taxes (719) (598) (351)
Effects of foreign subsidiaries on U.S. tax rates 58 16 (314)
Change in valuation allowance for deferred tax assets 4,306 5,394 5,125
Permanent differences (124) (114) (232)
------- ------- -------
Income tax (expense) benefit $(1,536) $ 856 $ 1,816
======= ======= =======
</TABLE>
The Company has investment and research and experimental tax credit
carryforwards of approximately $3,476,000 expiring in the period 1997 through
2009, plus alternative minimum tax credit carryforwards of approximately
$2,236,000. The Company also has foreign net operating losses in Germany and
France and various states in the U.S. which expire in the period from 2007
through 2011.
Deferred income taxes reflect the net tax effects of: (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes; and (b) operating loss
and tax credit carryforwards. The tax effects of significant items comprising
the Company's deferred taxes are as follows:
31
<PAGE> 14
<TABLE>
<CAPTION>
DECEMBER 31, (In thousands) 1996 1995
<S> <C> <C>
DEFERRED TAX ASSETS:
Reserves not currently deductible for tax purposes:
Allowance for bad debt $ 570 $ 525
Inventory 1,546 1,277
Litigation 1,543 1,451
Warranty 598 449
Deferred income 392 396
Vacation accrual 452 389
Other 368 (161)
Foreign & state net operating loss carryforwards 704 --
Tax credit carryforwards 5,712 8,688
------- --------
Total deferred taxes 11,885 13,014
Valuation allowance -- (4,306)
------- --------
Net deferred taxes $11,885 $ 8,708
======= ========
</TABLE>
3. COMMITMENTS
The Company leases certain of its manufacturing facilities and certain equipment
under operating leases. Future minimum annual rental payments under the
Company's operating leases are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (In thousands)
<S> <C>
1997 $ 831
1998 217
1999 158
2000 82
------
Total $1,288
======
</TABLE>
Total rent expense in 1996, 1995, and 1994, was $1,296,000, $1,076,000, and
$1,028,000, respectively.
The Company sponsors a 401(k) savings plan in which most domestic salaried
employees of the Company are eligible to participate. Contributions made to the
plan by the Company are based on a percentage of employee contributions, and
totaled $766,000, $690,000, and $436,000, in 1996, 1995, and 1994,
respectively.
4. COMMON STOCK
The Company's 1990 Stock Plan (which incorporates active options under
predecessor plans) permits officers, directors, employees and independent
contractors to acquire options or other rights to purchase Company common stock.
The purchase price for the shares is their fair market value on the date the
option or purchase right is granted. Options and purchase rights generally vest
over a five-year period. During 1996, the stockholders approved an increase of
500,000 shares to the 1990 Stock Plan.
The Company also maintains an Incentive Stock Acquisition Plan (ISAP) in which
only employees may participate. Under the ISAP, the purchase price is 85 percent
of the fair market value of the shares on the trading day before the six-month
participation period begins or the last trading day of the participation period,
whichever is less. During 1996, the stockholders approved an increase of 100,000
shares to the ISAP.
32
<PAGE> 15
A summary of stock plan activities is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
(In thousands, except average prices) NUMBER WEIGHTED Number Weighted Number Weighted
OF AVG. of Avg. of Avg.
SHARES EXERCISE Shares Exercise Shares Exercise
PRICE Price Price
<S> <C> <C> <C> <C> <C> <C>
OPTIONS:
Outstanding beginning of year 1,740 $ 6.02 1,952 $ 6.27 2,006 $ 6.30
Granted 579 11.84 714 5.87 85 5.45
Cancelled (8) 6.09 (600) 6.96 (95) 6.46
Exercised (311) 5.43 (326) 5.46 (44) 5.27
----- ------ ----- ------ ----- ------
Outstanding end of year 2,000 $ 7.80 1,740 $ 6.02 1,952 $ 6.27
----- ------ ----- ------ ----- ------
Weighted average fair market value of options
granted during year $ 5.39 $ 2.31
Shares purchased under ISAP 58 69 27
Weighted average fair market value of shares
purchased under ISAP $ 1.28 $ 0.90
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996 (in thousands, except price information).
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------ ------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$ 5.25 - 8.00 1,396 6.5 years $ 6.05 1,183 $ 6.04
8.01 - 12.00 486 9.6 years 11.48 37 11.14
12.01 - 14.38 118 7.5 years 13.40 28 12.26
- -------------- ----- --- --------- ----- ---------
$ 5.25 - 14.38 2,000 7.5 years $ 7.80 1,248 $ 6.34
- -------------- ----- --- --------- ----- ---------
</TABLE>
The Company accounts for stock options granted using Accounting Principles Board
(APB) Opinion 25. Accordingly, no compensation cost has been recognized for its
fixed stock option plans. Had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with Statement of Financial Accounting
Standards (SFAS) No. 123, the Company's net income and net income per common and
common equivalent share would have changed to the pro forma amounts indicated
below.
<TABLE>
<CAPTION>
DECEMBER 31, (In thousands) 1996 1995
<S> <C> <C>
Net income
As reported $ 12,912 $ 11,833
Pro forma $ 11,899 $ 10,824
Net income per common and common equivalent share:
As reported $ 1.01 $ 0.94
Pro forma $ 0.93 $ 0.86
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: dividend yield of 0.00%; expected
volatility of 40.29%; risk-free interest rates ranging from 5.76% to 6.45%, and
expected lives of 2.5 years subsequent to vesting date.
33
<PAGE> 16
WARRANTS
In connection with the signing of a product development agreement in 1990, the
Company, through its predecessor, issued warrants to purchase 200,000 shares of
its common stock. The warrants are exercisable at a price of $12.70 per share
over the period August 31, 1994 through August 31, 1997. On January 26, 1997,
the Company repurchased the warrants for $1.0 million. During 1996, the Company
issued warrants to purchase 38,000 shares to independent distributors which are
exercisable at a price of $11.75 per share during the period of October 1, 1999
to December 31, 1999.
STOCK REPURCHASE
A stock repurchase program of 750,000 shares of the Company's outstanding common
stock was announced in December 1994 and an additional 500,000 shares in January
1996. The manner and timing of the repurchase will depend on market conditions
and the company's cash reserves. As of December 31, 1996, 888,483 shares have
been repurchased, of which 87,983 were retired and 800,500 are recorded as
treasury stock.
5. LITIGATION
Litigation was instituted against the Company by a terminated distributor in
1986. An unfavorable decision in the amount of $3.1 million was rendered by the
trial court in 1992. As a result of that decision, the Company established a
reserve for the judgment. The Company appealed the trial court decision on a
number of grounds, and in November, 1993, the appellate court reversed the trial
court and held for the Company on the ground that the distributor had released
his claims against the Company in the settlement of other litigation, and did
not reach the other issues raised on appeal. The distributor filed a petition in
the Indiana Supreme Court requesting that the court vacate the appellate court
ruling and remand the case to the appellate court for consideration of the other
issues raised on appeal. On December 31,1996, the Indiana Supreme Court reversed
the ruling of the appellate court and held that the trial court correctly
determined that the release executed by the distributor did not release the
Company. The case has been remanded back to the Indiana Circuit Court of Appeals
for consideration of the remaining issues raised on the appeal. While the
Company believes that it will ultimately prevail, no determination can be made
as to whether some or all of the reserve should be reversed. As of December 31,
1996 and 1995, the reserve with accrued interest totaled approximately $4.1
million and $3.7 million, respectively.
All but one of the pending lawsuits relating to the former MRI Division have
been favorably resolved by dismissals, summary judgment or directed verdicts in
favor of the Company. With respect to the sole exception, an action filed by
Lenox Hills Leasing Associates, Toshiba America Medical Systems, Inc.
("Toshiba") has agreed to defend and indemnify the Company. All of the pending
actions, and any future actions related to the MRI Division, are the subject of
an arbitration award in favor of the Company and against Toshiba. That
arbitration award holds that, with certain limited exceptions not applicable to
any of the pending actions, Toshiba is obligated to indemnify the Company for
compensatory and punitive damages, if any, awarded against the Company in any
action related to the former MRI Division and to reimburse the Company for its
attorney's fees and expenses incurred in defending such actions, regardless of
whether such actions allege intentional misconduct or fraud. This arbitration
award was affirmed by a California trial court. Toshiba appealed, and the
California Court of Appeals affirmed the ruling of the trial court in 1996. The
California Supreme Court has declined to hear Toshiba's appeal of the favorable
Court of Appeal's ruling.
The Company is also a defendant in other ordinary commercial litigation. In
light of available insurance and reserves, management believes that such
litigation will not have a material effect on its financial position or results
of operations.
6. PREFERRED SHARE PURCHASE RIGHTS
In July 1988, the Company through its predecessor, Diasonics Inc., declared a
dividend distribution of one Preferred Share Purchase Right (a "Right") on each
outstanding share of common stock. Prior to the acquisition by a person or group
of beneficial ownership of 25% or more of the Company's common stock, the Rights
are redeemable for two and one-half cents per Right at the option of the Board
of Directors.
34
<PAGE> 17
The Rights will trade together with the common stock until they become
exercisable. The Rights will be exercisable only if a person or group acquires
25% or more of the Company's common stock or announces a tender offer, the
consummation of which would result in ownership by a person or group of 25% or
more of the common stock. Each right will entitle stockholders to buy five
one-hundredths of a share of a new series of junior participating preferred
stock at an exercise price of $10. At December 31, 1996 and 1995, the Company
had 2,000,000 shares of such preferred stock authorized with none outstanding.
The preferred stock generally carries rights equivalent to one hundred times
those of common stock rights and is subject to certain non-dilutive and
repurchase options.
If the Company is acquired in a merger or engages in certain other acquisition
transactions with a person or group that holds 25% or more of the Company's
common stock, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at the time of twice the Right's exercise price. In
addition, if a person or group acquires 25% or more of the Company's outstanding
common stock, each Right will entitle its holder (other than such person or
members of such group) to purchase, at the Right's then-current exercise price,
a number of the Company's common shares having a market value of twice the
Right's exercise price. This ability to purchase common shares does not operate
if the acquisition of 25% occurs pursuant to a cash tender offer for all shares
in which such person or group increases its stake from below 25% to 80% or more
of the outstanding shares of common stock.
Following the acquisition by a person or group of beneficial ownership of 25% or
more of the Company's common stock and prior to an acquisition of 50% or more of
the common stock, the Board of Directors may exchange the Rights (other than
Rights owned by such person or group), in whole or in part, at an exchange ratio
of one share of common stock (or one-hundredth for a share of the new series of
junior participating preferred stock) per Right.
7. FOREIGN SALES
The Company markets its products internationally through subsidiaries in
Switzerland, Germany, France and Italy as well as dealers and distributors in
all other countries where applicable. The following table summarizes approximate
foreign product sales:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Europe $11,892 $ 8,770 $2,294
Other 8,689 8,078 5,201
------- ------- ------
Total foreign sales $20,581 $16,848 $7,495
======= ======= ======
</TABLE>
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 is as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C>
1996
Net sales $26,183 $30,594 $34,027 $37,181
Gross margin 10,538 12,245 13,623 14,873
Net income 2,739 3,336 3,875 2,962
Income per share .22 .26 .30 .23
1995
Net sales $22,802 $26,129 $25,470 $27,135
Gross margin 9,221 10,695 10,426 10,864
Net income 2,492 2,762 3,141 3,438
Income per share .20 .22 .25 .27
</TABLE>
35
<PAGE> 18
9. RELATED PARTIES
At December 31, 1993, the Company had a note payable to Diasonics Ultrasound,
Inc., its former subsidiary for $9,700,000, due in two equal installments, plus
interest at 3% per annum, on June 30, 1994 and December 31, 1994. The note was
cancellable under certain conditions, including a merger, acquisition or other
transaction resulting in a change in control of Diasonics Ultrasound, Inc. The
note was offset by $750,000 in the second quarter of 1994, which was the
Company's portion of a litigation settlement paid by Acuson, Inc., to Diasonics
Ultrasound, Inc. This reduction of $750,000 has been reflected in the Company's
accompanying consolidated statement of operations for the year ended December
31, 1994 as a reduction of administrative, general and other expenses. The first
installment of principal in the amount of $4,475,000 was made in the third
quarter of 1994. The second installment in the remaining amount of $4,475,000
was not required to be paid under the terms of the note, due to a change in
control of Diasonics Ultrasound, Inc. Upon cancellation, the $4,475,000 was
credited to capital in excess of par value. Sales to Diasonics, Ultrasound, Inc.
were $5.2 million during 1994.
During 1995, the Company purchased a 19.8% ownership position in Barwig
Medizinische Systeme GmbH (BMS), a German manufacturer of medical equipment. The
Company was granted exclusive worldwide distribution rights for a ten year
period for the 7600 C-Arm manufactured by BMS. During 1995 and 1996, the Company
provided long-term working capital loans to BMS of approximately $1.1 million.
Effective January 1, 1997, the Company increased its ownership of BMS to 100% in
exchange for cash payments of approximately $193,000, stock options valued at
approximately $274,000, and cancellation of loans to BMS of approximately
$615,000. The Company will account for the acquisition using the purchase method
which will result in the recording of approximately $1.6 million of goodwill.
36
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF OEC MEDICAL SYSTEMS, INC.:
We have audited the accompanying consolidated balance sheets of OEC Medical
Systems, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of OEC Medical Systems, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
January 21, 1997
37
<PAGE> 20
CORPORATE INFORMATION
OFFICERS
RUEDIGER NAUMANN-ETIENNE
Chairman, President & Chief Executive Officer
RANDY W. ZUNDEL
Executive Vice President, Chief Operating & Chief Financial Officer
HEINZ GLOOR
Vice President, International
GARY GLOWE
Vice President, Manufacturing
BARRY K. HANOVER
Executive Vice President, Engineering & Chief Technical Officer
LARRY E. HARRAWOOD
Vice President, Marketing & Business Development
GARY N. KILMAN
Vice President, Sales
ROY ORPHEY
Vice President, Service
TED PARROT
Vice President, Regulatory Affairs & Quality Assurance
CLARENCE VERHOEF
Vice President, Finance & Treasurer
DIRECTORS
RUEDIGER NAUMANN-ETIENNE
Chairman of the Board
GREGORY K. HINCKLEY *+
Executive Vice President, Chief Operating Officer & Chief Financial Officer
Mentor Graphics Corporation
BENNO P. LOTZ *
Former President & CEO
OEC Medical Systems, retired
ALLAN W. MAY *++
Secretary
Vice Chairman & CEO, MAST Immuno Systems, Inc.
CHASE N. PETERSON *+++
President Emeritus & Professor (Clinical) Departments of Internal Medicine and
Family & Preventive Medicine
University of Utah
* Audit Committee
+ Compensation Committee
++ Nominations Committee
INVESTOR INFORMATION
Reports on sales, earnings and activities of the Company can be accessed through
our News-On-Call service by calling 1-800-758-5804 Ext. 630450. A copy (without
exhibits) of the Company's report to the Securities and Exchange Commission on
Form 10-K may be obtained from the Company without charge. Other
publications--news releases, 10-Qs, etc., are also available. Direct your
written request to:
INVESTOR RELATIONS
Linda M. Etzel
OEC Medical Systems, Inc.
384 Wright Brothers Drive
Salt Lake City, Utah 84116
(801) 536-4806
e-mail address: [email protected]
Home Page: http://www.oecmed.com
INDEPENDENT AUDITORS
Deloitte and Touche LLP
Salt Lake City, Utah
TRANSFER AGENT & REGISTRAR
Chase Mellon Shareholder Services
50 California Street, 10th Floor
San Francisco, CA 94111
ANNUAL MEETING
Notice of the Annual Meeting of Shareholders of OEC Medical Systems, Inc., and
proxy statements will be mailed to shareholders of record in advance of the
meeting.
STOCK PRICE
<TABLE>
<CAPTION>
High Low Close
---- --- -----
<S> <C> <C> <C>
March 31, 1996 13 3/4 9 1/2 11 3/4
June 30, 1996 13 5/8 11 1/4 13 5/8
September 30, 1996 13 1/2 10 3/4 12 1/2
December 31, 1996 16 7/8 12 1/4 15
</TABLE>
38
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
OEC Europe, Ltd. (England)
Frank Manufacturing
Diasonics Export Sales Corp. (Disc)
Chromosonics, Inc.
Diasonics Foreign Sales Corp. (FSC)
OEC Medical Systems (Europe) AG
OEC Medical Systems SA
OEC Medical Systems GmbH
OEC Medical Systems S.R.L.
OEC Medical International, Inc. (FSC)
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 33-69672, 33-37396, and 33-40280 of OEC Medical Systems, Inc. on Forms S-8
of our report dated January 21, 1997, appearing in and incorporated by
reference in the Annual Report on Form 10-K of OEC Medical Systems, Inc. for
the year ended December 31, 1996.
/s/ DELOITTE & TOUCHE LLP
- ------------------------------
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 1996 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<PERIOD-START> JAN-01-1996
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 17,103
<SECURITIES> 0
<RECEIVABLES> 34,044
<ALLOWANCES> 853
<INVENTORY> 23,868
<CURRENT-ASSETS> 83,619
<PP&E> 25,167
<DEPRECIATION> 13,264
<TOTAL-ASSETS> 111,946
<CURRENT-LIABILITIES> 29,772
<BONDS> 0
0
0
<COMMON> 132
<OTHER-SE> 82,042
<TOTAL-LIABILITY-AND-EQUITY> 111,946
<SALES> 111,383
<TOTAL-REVENUES> 127,985
<CGS> 65,334
<TOTAL-COSTS> 76,706
<OTHER-EXPENSES> 37,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 14,448
<INCOME-TAX> 1,536
<INCOME-CONTINUING> 12,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,912
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
