<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-9983
OEC MEDICAL SYSTEMS, INC.
(Registrant)
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 94-2538512
384 Wright Brothers Drive, Salt Lake City, Utah 84116
(Address of Principal Executive Offices)
Telephone: (801) 328-9300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
----- -----
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As of October 29, 1999, there were 12,743,165 shares of Common Stock ($.01 par
value) outstanding.
Part I. Financial Information
Item 1. Financial Statements
OEC MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
FOR THE QUARTER & NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
------------------ --------------------
<S> <C> <C> <C> <C>
Net sales
Product $32,839 $42,005 $124,057 $117,966
Service 6,199 5,875 18,284 17,056
------- ------- -------- --------
Total net sales 39,038 47,880 142,341 135,022
------- ------- -------- --------
Cost of sales
Product 19,384 23,336 70,329 65,516
Service 5,141 4,172 14,216 12,383
------- ------- -------- --------
Total cost of sales 24,525 27,508 84,545 77,899
------- ------- -------- --------
Gross margin 14,513 20,372 57,796 57,123
------- ------- -------- --------
Operating Expenses
Research and development 3,274 3,305 10,129 9,589
Marketing and sales 8,136 7,916 25,875 23,079
Administrative, general and other 4,302 2,425 9,609 7,148
------- ------- -------- --------
Total operating expenses 15,712 13,646 45,613 39,816
------- ------- -------- --------
Operating income (loss) (1,199) 6,726 12,183 17,307
Interest income 208 264 539 754
Interest expense (2) (68) (16) (213)
------- ------- -------- --------
Income (loss) before income taxes (993) 6,922 12,706 17,848
Income tax expense (benefit) (347) 2,606 4,447 6,412
------- ------- -------- --------
Net income (loss) $ (646) $ 4,316 $ 8,259 $ 11,436
======= ======= ======== ========
Net income (loss) per common share:
Diluted $ (0.05) $ 0.32 $ 0.62 $ 0.85
Basic (0.05) 0.34 0.65 0.90
Common shares:
Diluted 13,470 13,354 13,391 13,378
Basic 12,702 12,709 12,707 12,679
</TABLE>
(See Accompanying Notes)
2
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OEC MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(In thousands, except per share amounts)
ASSETS
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------- -----------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,684 $ 4,438
Securities available for sale 11,618 15,222
Accounts receivable, net of allowances of $1,288 40,299 44,365
Inventories, net 53,243 42,579
Prepaid expenses and other current assets 1,754 1,079
Income taxes receivable 295 629
Deferred income taxes 5,872 6,698
-------- --------
Total current assets 120,765 115,010
Long-term receivables 700 1,520
Property and equipment, net 17,316 17,242
Cost in excess of net assets acquired, net of
accumulated amortization of $10,854 and $10,126, respectively 9,194 9,922
Deferred income taxes 755 256
Investment in unconsolidated affiliate 2,381 1,421
Other assets 1,136 876
-------- --------
Total $152,247 $146,247
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 11,982 $ 12,101
Accrued salaries and benefits 6,903 6,485
Accrued warranty and installation costs 2,677 2,702
Deferred income and customer deposits 4,933 4,647
Accrued distributor commissions 2,836 3,795
Other accrued liabilities 5,106 4,548
-------- --------
Total current liabilities 34,437 34,278
-------- --------
Stockholders' Equity:
Preferred stock, $.01 par value
Authorized--2,000 shares, none outstanding -- --
Common stock, $.01 par value
Authorized--30,000 shares
Issued--14,170 and 13,976 shares, respectively 142 140
Capital in excess of par value 92,463 88,990
Retained earnings 46,325 38,066
Treasury stock, 1,445 and 1,200 shares at cost, respectively (20,741) (15,036)
Accumulated other comprehensive income (379) (191)
-------- --------
Total stockholders' equity 117,810 111,969
-------- --------
Total $152,247 $146,247
======== ========
</TABLE>
(See Accompanying Notes)
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OEC MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 8,259 $ 11,436
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization expense 4,057 3,600
Deferred income tax expense 327 433
Current tax benefit attributable to stock options exercised 716 2,281
Non-employee stock option expense 147 --
Changes in current assets and liabilities:
Accounts receivable, net 4,066 390
Inventories, net (10,664) (12,916)
Prepaid expenses and other current assets (675) 2,139
Income taxes 334 (368)
Other assets (260) 955
Accounts payable (119) (126)
Accrued salaries and benefits 418 1,993
Accrued warranty and installation costs (25) 765
Deferred income and customer deposits 286 386
Accrued legal fees and litigation settlements -- 380
Accrued distributor commissions (959) (837)
Other accrued liabilities 558 (417)
-------- --------
Net cash provided by operating activities 6,466 10,094
-------- --------
INVESTING ACTIVITIES:
Reduction (increase) in long-term receivables 820 (121)
Additions to property and equipment (3,217) (4,641)
Sale (purchase) of securities available for sale 3,604 (3,883)
Payment for the purchase of unconsolidated affiliate (1,140) (1,575)
Other (188) (39)
-------- --------
Net cash used by investing activities (121) (10,259)
-------- --------
FINANCING ACTIVITIES:
Common stock issued under benefit plans 2,612 3,457
Purchases of treasury stock (5,705) (4,580)
-------- --------
Net cash used by financing activities (3,093) (1,123)
-------- --------
Net increase (decrease) in cash and cash equivalents 3,246 (1,288)
Cash and cash equivalents at beginning of period 4,438 17,502
-------- --------
Cash and cash equivalents at end of period $ 7,684 $ 16,214
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 16 $ 25
</TABLE>
4
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<TABLE>
<S> <C> <C>
Cash paid during the period for income taxes $ 3,154 $ 2,741
</TABLE>
(See Accompanying Notes)
5
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OEC MEDICAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999 AND 1998
1. Interim information is unaudited but, in the opinion of Company management,
all adjustments necessary for a fair presentation of interim results have
been included. The results for the three and nine months ended September
30, 1999 and 1998, are not necessarily indicative of the results to be
expected for the entire year. These consolidated financial statements and
notes should be read in conjunction with the Company's consolidated
financial statements for the year ended December 31, 1998, filed on Form
10-K on March 25, 1999.
2. Inventories are stated at the lower of cost, utilizing the first-in/first-
out method, or market. Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Purchased parts and completed subassemblies $25,879 $21,893
Work-in-process 7,869 5,816
Finished goods 1,608 2,268
Demonstration equipment 14,996 11,476
Service and repair parts 8,165 5,870
------- -------
Total 58,517 47,323
Less: reserves for excess and obsolete inventory (5,274) (4,744)
------- -------
Net $53,243 $42,579
======= =======
</TABLE>
3. The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes new rules for the reporting and display of comprehensive income
and its components, however, it has no impact on the Company's net income.
The components of comprehensive income are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30, Nine Months Ended September 30,
1999 1998
----- ----
(In thousands)
<S> <C> <C>
Net income $8,259 $11,436
Foreign currency translation adjustments (188) (39)
------ -------
Total comprehensive income $8,071 $11,397
====== =======
</TABLE>
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133." SFAS No. 137 delays the effective date of
SFAS No. 133 to fiscal years beginning after June 15, 2000. The Company
will adopt the new statement beginning on January 1, 2001. The Company does
not believe that SFAS 133, as amended by SFAS 137, will have a significant
effect on the earnings and financial position of the Company.
4. On July 7, 1999 the Company agreed to increase its minority equity interest
in Heartlab, Inc., a medical imaging software development company, by
investing an additional $1.1 million. The Company agreed to increase the
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investment by up to an additional $0.8 million if Heartlab, Inc. met
certain profitability criteria over the next year. The Company will
continue to account for this investment using the equity method of
accounting.
5. On August 9, 1999, the Company announced that it had signed a definitive
agreement to merge its operations with the GE Medical Systems business of
General Electric Company (NYSE: GE). In this transaction, Company
shareholders will receive approximately $36 per share payable in GE stock.
The actual number of shares of GE stock that each Company shareholder will
receive will be based on the trading prices of GE stock for a period of
time prior to the closing of the transaction. OEC Shareholders plan to vote
on the proposed merger at a Special Meeting scheduled for November 29, 1999
and the transaction is expected to close immediately thereafter. The boards
of directors of both GE and the Company have approved the merger. In
connection with the merger agreement, the Company granted GE an option to
acquire newly issued shares of the Company common stock, representing 15%
of its total shares outstanding, at the $36 per share transaction price.
7
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OEC MEDICAL SYSTEMS, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
those described in the "Factors That May Affect Future Operations" section on
page 8 of this Form 10-Q.
Results of Operations
- ---------------------
For the third quarter ended September 30, 1999, OEC Medical Systems, Inc. had a
net loss of $0.6 million and for the nine months ended September 30, 1999, the
Company had net income of $8.3 million, compared with net income of $4.3 million
and $11.4 million, respectively, for the same periods in 1998.
During the third quarter, the Company encountered transition issues with the
introduction of the Series 9800 Mobile C-arm, which delayed production at the
beginning of the quarter. Although these issues were resolved by mid-August, the
reduced shipments adversely affected revenue and income.
On August 9, 1999, the Company announced that it had signed a definitive
agreement to merge with the GE Medical Systems business of General Electric
Company, subject to shareholder approval. During the third quarter, the Company
had $1.5 million of merger related costs. Excluding merger expenses, the Company
would have earned $0.02 per share for the quarter.
The following table sets forth OEC's operating results as a percentage of net
sales:
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
------------------- -------------------
<S> <C> <C> <C> <C>
Net sales:
Product 84.1 87.7 87.2 87.4
Service 15.9 12.3 12.8 12.6
----- ----- ----- -----
Total net sales 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of sales:
Product 49.7 48.8 49.4 48.5
Service 13.1 8.7 10.0 9.2
---- ----- ----- -----
Total cost of sales 62.8 57.5 59.4 57.7
----- ----- ----- -----
Gross margin 37.2 42.5 40.6 42.3
----- ----- ----- -----
Operating expenses:
Research and development 8.4 6.9 7.1 7.1
Marketing and sales 20.8 16.5 18.2 17.1
Administrative, general and other 11.1 5.1 6.7 5.3
----- ----- ----- -----
Total operating expenses 40.3 28.5 32.0 29.5
----- ----- ----- -----
Operating income (loss) (3.1) 14.0 8.6 12.8
----- ----- ----- -----
Net income (loss) (1.7) 9.0 5.8 8.5
===== ===== ===== =====
</TABLE>
Sales and Markets
- -----------------
Net sales for the quarter and nine months ended September 30, 1999, were $39.0
million and $142.3 million, respectively, compared with net sales of $47.9
million and $135.0 million for the comparable periods of 1998. This reflects an
18% decrease and 5% increase, respectively, and is a direct result of transition
issues with the introduction of the Series 9800. Product sales for the quarter
and nine months ended September 30, 1999 were
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$32.8 million and $124.1 million, respectively, compared with product sales of
$42.0 million and $118.0 million, respectively, for the same periods last year.
The order rate in the third quarter was down 12% over last year, and for the
nine months was up 4%, with strong international bookings partially offsetting
the slowdown of domestic orders associated with the introduction of the Series
9800.
Service revenue for the quarter and nine months ended September 30, 1999 was
$6.2 million and $18.3 million, respectively, compared with service revenue of
$5.9 million for the same quarter last year and $17.1 million for the nine month
period in 1998.
International revenue was up 35% for the nine-month period, compared to the
prior year. The significant increases are partially due to strong growth in
Europe as well as improvements in the economic conditions in Asia.
Margin Analysis
- ---------------
OEC's gross margin was 37.2% of net sales for the third quarter and 40.6% for
the nine months of 1999, compared to 42.5% and 42.3%, respectively, for the same
periods in 1998. The decline in margin was due to production start-up costs
with the introduction of the Series 9800, the increased international sales that
typically have a lower selling price and additional discounting of the Series
9600 as that product nears the end of its product life cycle.
Service expenses increased by $1.0 million in the third quarter and $1.8 million
for the nine months, compared to the same periods in 1998. The increases are
due to additional personnel and the start-up costs associated with restructuring
the Company's service support in Texas, Iowa and Nebraska.
Operating Expenses
- ------------------
Research and development costs were flat for the three-month period and up $0.5
million for the nine months compared to the prior year.
Marketing and sales expenses were flat for the quarter and increased $2.8
million or 12% for the nine months compared to the prior year, primarily due to
additional commission expense associated with the increased revenue and the
start-up costs required for restructuring the Company's product distribution
channel in Texas.
Administrative expenses included $1.5 million of merger related costs.
Excluding the merger costs, administrative expenses increased 14% for the nine
months ended September 30, 1999 compared to the prior year.
Income Taxes
- ------------
For the first nine months of 1999 and 1998, the Company recorded $4.4 million
and $6.4 million of tax expense, respectively. The effective tax rate remains
at 35% and it is expected to remain around that level throughout 1999.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations for the nine months ended September 30,1999 and 1998
was $6.4 million and $10.1 million, respectively. During 1999, cash generated
from net income was partially offset by inventory increases associated with the
production delays of the Series 9800.
At the beginning of the third quarter, the Company increased its minority
interest investment in Heartlab, Inc. by an additional $1.1 million.
Factors That May Affect Future Results
- --------------------------------------
Certain statements contained in this document and other written and oral
statements made from time to time by the Company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by
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the use of terminology such as "anticipate," "believe," "estimate," "expect,"
"intend," "may," and similar words or expressions. The Company's forward-looking
statements generally relate to its growth strategies, financial results, product
development and regulatory approval programs, and sales efforts. One must
carefully consider forward-looking statements and understand that such
statements involve a variety of risks and uncertainties, known and unknown, and
actual results may vary materially.
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 superceded by new discoveries
or breakthroughs.
In May 1999, the Company introduced its new Series 9800 1k x 1k product
platform, which is the next generation successor to the Company's Series 9600
platform. As previously reported, the Company has encountered transition issues
often associated with new product introductions and the Company experienced a
related shortfall in revenue and profits for the third quarter of 1999. Although
the Company believes that the significant issues have been resolved, there may
be additional issues related with the new product's introduction.
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 such protection could have a material adverse effect
on the Company's business.
OEC depends on some significant 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 an 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. 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 and other 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 or
foreign 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, some of its
single-source vendors, 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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Foreign Currency Rate Exposure
The Company has operating subsidiaries located in Europe and utilizes forward
exchange contracts with durations generally less than six months to hedge
against the effect of exchange rate fluctuations of European income. The
Company's forward exchange contracts are not material. The Company also has
other customers located throughout the world; however, these customers' invoices
are denominated in U.S. dollars. As a result, the Company has not incurred
material gains or losses resulting from foreign currency fluctuations. However,
adverse fluctuations of exchange rates can affect the purchasing power of
international customers that can result in volatility of international demand.
Interest Rate Risk Exposure
The Company has purchased certain debt obligations of the U.S. government and
various corporations with original maturities of less than one year. As of
September 30, 1999, such investments totaled approximately $11.6 million and the
difference between fair market value and amortized cost is immaterial. Interest
rate risk and default risk underlying these securities is not considered to be
significant.
Other Exposures
The Company has not entered into any speculative derivatives and does not
foresee utilizing such instruments in the future. The Company does not utilize
commodities in the normal course of its manufacturing process. Accordingly, the
Company does not believe it has any significant commodity risks or exposures.
Year 2000 Readiness Disclosure
The Company has completed a review of its business information systems with
respect to Year 2000 compliance and will either replace or correct those
computer systems that have been found to have date-related deficiencies. New
integrated business information systems for the order administration, financial
and manufacturing processes were put in place in 1997. A few minor corrective
actions are required to make these systems Year 2000 compliant and these
corrections had been completed by the end of the third quarter 1999. The
business information system for the service operations is being replaced with a
planned completion date of November 1999.
The Company's products being shipped today have been assessed and found to be
Year 2000 compliant provided that the user perform a reset of the date upon
first use in the Year 2000. The Company believes that products previously
shipped are either Year 2000 compliant or can be made Year 2000 compliant with
the purchase of an upgrade or a date reset performed upon first use in the Year
2000.
The Company is also assessing facility and telecommunications systems and
systems used to support the product design and manufacturing processes to ensure
that these will be Year 2000 ready. It is anticipated that any required
corrective actions will be complete by mid fourth quarter 1999.
The Company relies on third party providers for materials and services such as
telecommunications, utilities, financial services and other key services.
Interruption of those materials or services due to Year 2000 issues could affect
the Company's operations. The Company has completed the process of contacting
its major suppliers and has determined that all major suppliers are in the
process of ensuring Year 2000 compliance. However, since the Company is
dependent on key third parties, there can be no guarantee that the Company's
efforts will prevent a material adverse impact on its financial position,
results of operations or liquidity in future periods in the event that a
significant number of suppliers and/or customers experience business disruptions
as a result of their lack of Year 2000 readiness.
The Company estimates that it has incurred costs of approximately $4 million, to
date, in external and internal costs to address its Year 2000 readiness issues,
the majority of which are the new business information systems installed in
1997. The Company currently estimates that it will incur additional costs of
approximately less than $1 million to complete its Year 2000 readiness projects.
11
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Both the Company's cost estimates and completion time frames could be influenced
by its ability to successfully identify all Year 2000 issues, the nature and
amount of corrective action required, the availability and cost of trained
personnel in this area and the Year 2000 success that key third parties and
customers attain. While these and other unforeseen factors could have a
material adverse impact on the Company's financial position, results of
operations or liquidity in future periods, management believes that it has
implemented an effective Year 2000 compliance program that will minimize the
possible negative consequences to the Company.
Throughout 1999, the Company has determined areas where contingency planning is
needed. The planning efforts have included, but are not limited to,
identification and mitigation of potential serious business interruptions,
adjustments of inventory levels to meet customer needs, and establishing crisis
response processes to address unexpected problems. Due to the November 1999
completion date for the replacement of the business information system for
service operations, the Company has developed contingency plans for the
potential business interruptions if this system fails. The contingency plan
includes utilizing current existing systems, instituting manual processes and
utilizing increased inventory levels. In addition, the Company has increased
inventory levels to mitigate the risk of an interruption in the delivery of
materials by its suppliers for current production as well as service support.
Part II. Other information
Item 1. Legal proceedings
There are no significant changes in legal proceedings from the previous stated
position in the Company's Annual Report for 1998 or Form 10K filed with the
Securities & Exchange Commission on March 25, 1999.
Item 5. Other Information
On August 9, 1999, the Company announced that it had signed a definitive
agreement to merge its operations with the GE Medical Systems business of
General Electric Company (NYSE: GE). In this transaction, Company shareholders
will receive approximately $36 per share payable in GE stock. The actual number
of shares of GE stock that each Company shareholder will receive will be based
on the trading prices of GE stock for a period of time prior to the closing of
the transaction. OEC Shareholders plan to vote on the proposed merger at a
Special Meeting scheduled for November 29, 1999 and the transaction is expected
to close immediately thereafter. The boards of directors of both GE and the
Company have approved the merger. In connection with the merger agreement, the
Company granted GE an option to acquire newly issued shares of the Company
common stock, representing 15% of its total shares outstanding, at the $36 per
share transaction price.
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Item 6. Exhibits
(a) The following exhibit (numbered in accordance with Item 601 of SEC
Regulations S-K) is filed as part of this report:
Exhibit
Number Description
--------
3.1 Certificate of Incorporation, as amended. Incorporated by
reference to the OEC MedicalSystems, Inc. Form 10-K, filed
March 30, 1994.
3.2 By-Laws, as amended May 15, 1997. Incorporated by reference to
the OEC Medical Systems, Inc. Form 10-Q, filed August 8, 1997.
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.
10.14 Form of Option Agreement used in connection with options having
service-vesting provisions. Incorporated by reference to the
OEC Medical Systems, Inc. Form S-8, filed June 12, 1998.
10.15 Form of Option Agreement used in connection with options having
milestone provisions.Incorporated by reference to the OEC
Medical Systems, Inc. Form S-8, filed June 12, 1998.
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 S-8, filed
June 12, 1998.
10.20 Form of Warrant Agreement used in connection with grant to
independent contractors for the purchase of common shares.
Incorporated by reference to the OEC Medical Systems, Inc. Form
10-K, filed March 27, 1997.
10.24 OEC Medical Systems, Inc. 1993 Employee Incentive Stock
Acquisition Plan, as amended and re-stated March 31, 1998.
Incorporated by reference to the OEC Medical Systems, Inc. Form
S-8, filed June 12, 1998.
10.25 OEC Medical Systems, Inc. 1998 Stock Option Plan. Incorporated
by reference to the OEC Medical Systems, Inc. Form S-8, filed
June 12, 1998.
10.26 Form of Option Agreement used in connection with the granting
of incentive stock options. Incorporated by reference to the
OEC Medical Systems, Inc. Form S-8, filed June 12, 1998.
10.27 Agreement and Plan of Merger among General Electric Company,
Ruby Merger Corp. and OEC Medical Systems, Inc. dated August 7,
1999. Incorporated by reference to the OEC Medical Systems,
Inc. Form 10-Q filed August 13, 1999 .
10.28 Stock Option Agreement between General Electric Company and OEC
Medical Systems, Inc. dated August 7, 1999. Incorporated by
reference to the OEC Medical Systems, Inc. Form 10-Q filed
August 13, 1999.
10.29 Proxy Statement dated October 1, 1999. Incorporated by
reference to the OEC Medical Systems, Inc. Form DEF M14A filed
October 1, 1999.
10.30 Form of Warrant Purchase Agreement used in connection with the
purchase of warrants previously granted to independent
contractors.
11 Statement of Computation of Per Share Earnings.
13
<PAGE>
21 List of Subsidiaries. Incorporated by reference to the OEC
Medical Systems, Inc. Form 10-Q, filed May 13, 1997.
27 Financial Data Schedule (FDS) for Edgar Filing.
(b) Reports on Form 8-K:
Not Applicable
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OEC MEDICAL SYSTEMS, INC.
(Registrant)
By: /s/ Randy W. Zundel
------------------------------
Randy W. Zundel
Chief Financial Officer
(Principal Accounting Officer)
Date: November 5, 1999
15
<PAGE>
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered into
effective this 27th day of October, 1999, by and between OEC Medical Systems,
Inc., a Delaware Corporation (hereinafter referred to as the "Company"), and the
Undersigned Warrant Holder (hereinafter referred to as the "Holder").
RECITALS
A. The Holder is one of a group of holders (collectively, the
"Holders") who own certain warrants to purchase shares of the Company's common
stock (the "Warrant Shares") that the Company issued pursuant to that certain
"Common Stock Warrant" (the "Warrants") and "Registration Rights Agreement" (the
"Registration Rights Agreement") on or about September 5, 1996.
B. The Company desires that all of the Holders, including the
undersigned Holder, voluntarily surrender their Warrants, which Warrants will be
purchased by the Company for a price equal to $36.00 per Warrant Share, less the
purchase price of the Warrant Shares of $11.75 per share (the "Warrant Price")
and any amounts required to be withheld by the Company for applicable tax
withholdings.
E. The Holder desires to voluntarily surrender his/her Warrant and
waive his/her rights under the Registration Rights Agreement, pursuant to the
terms and conditions hereinafter set forth.
F. The Holder further desires to release the Company and its
affiliates, successors and assigns, and to hold them harmless, from and against
any and all demands claims, damages, losses or other liabilities arising from or
based upon the Holder's surrender of his/her Warrants and waiver of his/her
rights under the Registration Rights Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto agree as follows:
AGREEMENT
1. Purchase of Warrant. The Company hereby agrees to purchase from
--------------------
the Holder, and the Holder hereby agrees to sell to the Company, the Holder's
Warrant for a purchase price equal to $36.00 per Warrant Share for the number of
Warrant Shares underlying the Warrant, less the Warrant Price for the number of
Warrant Shares underlying the Warrant and any amounts required to be withheld by
the Company for applicable tax withholdings.
2. Waiver of Rights Under Registration Rights Agreement. As
----------------------------------------------------
additional consideration for the payment made hereunder to the Holder, the
Holder hereby waives,
<PAGE>
relinquishes and foregoes any and all rights he/she may have under the
Registration Rights Agreement.
3. Holder Representations.
-----------------------
(a) Disclosure. The Holder represents that
-----------
(i) he/she has received from the Company copies of the
Company's (A) most recent annual report on Form 10-K; (B) most recent
annual report to shareholders; (C) most recent quarterly report on Form 10-
Q; and (D) the definitive proxy statement dated October 1, 1999; and
(ii) he/she is capable of evaluating the merits and the
risks of the transaction contemplated by this Agreement and has the
capacity to protect his/her own interest and to bear the economic risk of
the transaction contemplated herein. The Holder alone, or with the
assistance of his/her legal, tax and financial advisors, is knowledgeable
and experienced in financial and business matters and is capable of making
an informed decision to enter, and has independently determined to enter,
into the transaction contemplated in this Agreement.
(b) Irrevocability of Agreement. The Holder hereby understands
----------------------------
and agrees that this Agreement shall be irrevocable.
4. Release by Holder. The Holder does hereby forever
------------------
unconditionally, irrevocably and completely release, waive, cancel and discharge
the Company and its officers, directors, employees, shareholders, affiliates,
agents, representatives, successors and assigns (collectively, the "Released
Parties"), of and from any and all rights, claims, demands, damages, penalties,
costs, expenses, liabilities, obligations and causes of action (collectively,
"Claims") of any nature or kind whatsoever, whether known or unknown, or
hereafter discovered, whether fixed or contingent, whether anticipated or
unanticipated, whether in law or in equity, arising out of, related to or based
upon the Warrant, the Registration Rights Agreement and any and all incentives
of the Company previously granted, outstanding or promised to the Holder,
including, without limitation, any claims as a stockholder, option holder,
warrant holder, distributor, dealer or otherwise under federal or state
securities or "blue sky" laws, rules or regulations, under general corporate
laws or any other statute, law, rule or regulation, or under common law. The
Holder agrees not to file or allow to be filed on his or her behalf any lawsuit,
charge or complaint against the Released Parties regarding the claims released
hereby. The Holder waives the benefit of any statute, rule or law that might
grant a releasing party the right to assert unknown or unsuspected claims
following the execution of a release. Notwithstanding the foregoing, the Holder
is not releasing the Company for any breach of or obligations arising under this
Agreement.
5. General Provisions. The following are also an integral part of
-------------------
this Agreement:
2
<PAGE>
(a) Counterparts. This Agreement may be executed in one or more
-------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument, and which shall become effective when
there exists copies signed by the Company and by the Holder.
(b) Other Documents. The parties to this Agreement shall in
----------------
good faith execute such other and further instruments, agreements or documents
as may be necessary or advisable to carry out the transactions contemplated by
this Agreement.
(c) Applicable Law. This Agreement shall be interpreted,
---------------
construed and enforced in accordance with the laws of the State of Utah.
(d) Binding Agreement. This Agreement shall be binding upon and
------------------
inure to the benefit of the heirs, legal representatives, successors and
assigns, as permitted, of the respective parties hereto, and any entities
resulting from the reorganization, consolidation or merger of any corporate
party hereto.
(e) Assignment. This Agreement and the rights and obligations
----------
herein may not be assigned or delegated by any party hereto without the prior
written consent of the other party.
(f) Severability. In the event that any provision of this
-------------
Agreement is held by a court of competent jurisdiction to be void, voidable or
unenforceable for any reason whatsoever, the remainder of this Agreement shall
nevertheless continue in full force and effect as if the void, voidable or
unenforceable provision were not contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the day and year first above written.
OEC MEDICAL SYSTEMS, INC.
By:______________________________________
Randy W. Zundel
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
Holder
By:______________________________________
______________________________________
(Print name in space provided above)
SLC:0027256.02
3
<PAGE>
EXHIBIT 11
Computation of Earnings Per Share for the Quarter and Nine Months Ended
September 30, 1999 and 1998:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss)* $ (646) $ 4,316 $ 8,259 $11,436
Earnings (loss) per common share:
Basic $ (.05) $ .34 $ .65 $ .90
Diluted $ (.05) $ .32 $ .62 $ .85
Shares outstanding (average):
Common shares 14,147 13,825 14,135 13,718
Treasury shares (1,445) (1,116) (1,428) (1,039)
------- ------- ------- -------
Common shares - basic (average) 12,702 12,709 12,707 12,679
Options: common equivalents 743 627 663 681
Warrants: common equivalents 25 18 21 18
------- ------- ------- -------
Common shares - diluted (average) 13,470 13,354 13,391 13,378
======= ======= ======= =======
</TABLE>
*Note: The Company did not have any outstanding preferred stock for the periods
ending September 30, 1998 and 1999.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPANY'S 3RD QUARTER FORM 10-Q
FOR 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,684
<SECURITIES> 11,618
<RECEIVABLES> 41,587
<ALLOWANCES> 1,288
<INVENTORY> 53,243
<CURRENT-ASSETS> 120,765
<PP&E> 32,909
<DEPRECIATION> 15,593
<TOTAL-ASSETS> 152,247
<CURRENT-LIABILITIES> 34,437
<BONDS> 0
0
0
<COMMON> 142
<OTHER-SE> 117,668
<TOTAL-LIABILITY-AND-EQUITY> 152,247
<SALES> 124,057
<TOTAL-REVENUES> 142,341
<CGS> 70,329
<TOTAL-COSTS> 84,545
<OTHER-EXPENSES> 45,613
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 12,706
<INCOME-TAX> 4,447
<INCOME-CONTINUING> 8,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,259
<EPS-BASIC> .65
<EPS-DILUTED> .62
</TABLE>
