<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended April 30, 1997
Commission file number 0-18724
------------------------------
MARQUETTE MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1046671
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8200 West Tower Avenue, Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices) (Zip Code)
(414) 355-5000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.10 Par Value
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
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. Yes X No
----- -----
Approximate aggregate market value of the registrant's Class A Common Stock
held by non-affiliates (based on the closing sales price of such stock as
reported in the NASDAQ National Market System) on July 1, 1997 was $264,616,590.
As of July 1, 1997, the number of shares of Class A Common Stock, $0.10 par
value, outstanding was 17,640,934.
DOCUMENTS INCORPORATED BY REFERENCE
Document Form 10-K Part
-------- --------------
1. Annual Report to Shareholders for fiscal year ended
April 30, 1997 II
2. Proxy Statement for Annual Meeting of Shareholders
scheduled to be held on August 13, 1997 III
_______________
* Excludes, among other shares, 3,569,857 shares of Common stock held by
officers and directors at July 1, 1997. Exclusion of such shares should not
be construed to indicate that any such person possesses the power, direct
or indirect, to direct or cause the direction of the management or policies
of the registrant or that such person is controlled by or under common
control with the registrant.
<PAGE>
ITEM 1. BUSINESS
Overview
Marquette Medical Systems, Inc. (including its subsidiaries, the
"Company" or "Marquette") is a worldwide leader in the development and
manufacture of medical equipment and integrated systems for patient
monitoring and diagnostic cardiology applications. Marquette also develops
clinical information systems, designed to be integrated with medical
equipment, consisting of hardware and software used by integrated health
care delivery networks and individual hospitals to electronically acquire,
record, store, analyze and distribute patient medical data. The Company
believes that its ability to offer integrated clinical information systems
and patient monitoring and diagnostic cardiology equipment provides it with
significant competitive advantages over companies that market only
equipment or clinical information systems. The Company has made a
substantial commitment to research and development and is well known for
its technological innovation and quality, dating back to 1965 when it
introduced the first centralized ECG processing and storage system.
Patient monitoring systems and diagnostic cardiology products
accounted for approximately 48% and 33% of net sales, respectively, for the
year ended April 30, 1997 ("Fiscal 1997") with the remaining 19% of net
sales relating to supplies and after market services. The Company's
products are sold in more than 65 countries throughout the world, with the
U.S. and international markets accounting for approximately 61% and 39%,
respectively, of net sales for Fiscal 1997. The Company's products are used
principally in critical and intensive care units, operating and recovery
rooms, step-down units, labor and delivery units, the cardiology
department, the Cath Lab and related areas of acute care hospitals. In
addition, Marquette products increasingly are being used in smaller
hospitals, medical clinics, outpatient surgery centers, physician offices
and the home.
The Company estimates that the worldwide market for patient monitoring
systems is approximately $1.6 billion, of which approximately $800 million
is attributable to the U.S. Marquette's patient monitoring systems
continuously acquire, analyze, store, display and print patient
physiological information, providing attending medical personnel a means to
continuously evaluate a patient's condition. Patient monitoring systems
include bedside, telemetry, anesthetic and respiratory gas, maternal/fetal,
neonatal and
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home care and clinical information systems. The Company believes it is one
of the leading manufacturers of maternal/fetal, bedside and telemetry
monitoring systems. The Company offers fully integrated, networked, open
architecture clinical information systems that process information obtained
from patient monitors and various other sources, including Marquette's and
other companies' products, to create an interactive electronic patient
medical record.
The Company estimates that the worldwide market for diagnostic
cardiology products is approximately $1 billion, of which approximately
$430 million is attributable to the U.S. Marquette's diagnostic cardiology
products are used to diagnose cardiac disorders through the detection,
recording and analysis of electrical signals and other information relating
to the heart. These include resting, exercise testing and Holter
(ambulatory) ECG equipment, cardiovascular information systems, cardiac
defibrillators, cardiac catheterization laboratory monitors, and photo
image and digital image processing equipment. The Company believes it is
one of the leading manufacturers of cardiovascular information systems and
cardiac catheterization laboratory monitors. The Company offers an open
architecture cardiovascular information system that accepts and stores data
from electrocardiographs and other diagnostic cardiology products to create
a patient-specific cardiology database for comparative and other purposes.
Addressing Market Needs
Health care providers are increasingly differentiating medical
equipment vendors based on their ability to provide clinical management and
patient administration systems that deliver better quality care at lower
costs. Marquette is addressing these market needs with a total systems
approach based on a combination of its broad product lines, open
architecture Unity Network and its clinical process expertise.
Marquette's Unity Network is an integrated system which enables a wide
range of patient monitoring, diagnostic cardiology and clinical information
systems to be interconnected and to interface with hospital information
systems maintained by its customers. Reports can be generated that provide
the data in both clinical and administrative form to aid in improving the
quality of care in the most cost effective manner. The Unity Network is
designed to (i) communicate patient information from bedside and telemetry
monitors to central nurses' stations, (ii) allow clinicians to view patient
information from various areas of the hospital or from remote locations via
telephone lines and modems, and (iii) electronically transfer patient
information
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to care units, outpatient facilities or physicians' offices.
Marquette differentiates itself from other medical equipment vendors
by addressing market needs with a total solutions approach:
First, Marquette offers its customers a broad product line and the
ability to equip and supply multiple areas along the continuum of care,
thereby enabling integrated health care delivery networks and hospitals to
gain efficiencies through standardization with a single vendor.
Second, Marquette offers its customers the ability to construct an
information network infrastructure and clinical information systems to
enhance the utilization and clinical value of the Company's patient
monitoring and diagnostic cardiology products as well as other medical
equipment vendors' products to which the Unity Network can be interfaced.
Third, Marquette provides its customers expertise in clinical problem
solving, systems integration and process improvement to customize the
configuration of the Company's products and systems to optimize clinical
applications for the customers' various care areas and patient management
needs.
Business Strategy
The Company's objective is to be the premier provider of medical
systems for patient monitoring and diagnostic cardiology across the
continuum of care. The elements of the Company's strategy to achieve this
objective are identified below.
Enter New Care Areas. The Company seeks to capitalize on the shift
from critical care to subacute care, physician offices and home care
through the introduction of newly designed patient monitoring and
diagnostic cardiology products aimed specifically at these evolving care
areas. The Company believes that there is a greater potential for growth
in these care areas than in the hospital market in which the Company's
products have historically been sold. The Company is developing new
products that address the functional needs of these lower acuity care areas
based on the Company's technological expertise developed in connection with
its hospital products.
Broaden and Enhance Existing Product Lines. The Company is adding
depth to its product lines by introducing products at lower price points.
The Company has implemented this strategy by developing
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products internally, forming strategic alliances and through acquisitions.
For example, as part of the E for M acquisition, the Company obtained
Hellige's development efforts relating to a high performance, compact,
portable, battery-powered, multiparameter patient monitor.
Continue Development of Clinical Information Systems. The networking
of the Company's products through clinical information systems enhances the
value of the Company's products to customers and will continue to be a
focus of the Company's product development efforts. The Company believes
that the development of expanded clinical information systems capabilities
is an important element of Marquette's competitive advantage in the patient
monitoring and diagnostic cardiology markets.
Increase Penetration of International Markets. International sales
have increased from approximately 33% of net sales for the year ended April
30, 1996 ("Fiscal 1996") to approximately 39% of net sales for Fiscal 1997
primarily due to the acquisition of E for M. The Company will continue to
seek greater penetration of the European market, where the E for M
acquisition has substantially broadened the Company's distribution network.
The Asia/Pacific market accounted for approximately 7% of the Company's net
sales for Fiscal 1997 and has been identified by the Company as an area for
potential growth.
Increase Recurring Revenue Streams. The Company is focused on
increasing its recurring revenue by actively developing the disposable
supplies market for the products it sells. The Company seeks to continue
to leverage its installed based to further increase sales of supplies and
services related to its equipment. Additionally, the Company seeks to
leverage the brand-name recognition generated through its equipment sales
to increase sales of technology-distinguished supplies related to a broad
range of medical products manufactured by the Company and others.
Enhance Profit Margins. The Company continually seeks to improve
gross margins by increasing capacity utilization at existing manufacturing
facilities and utilizing global purchasing contracts to reduce material and
component costs. Additionally, the Company seeks to control operating
costs such as engineering and general and administrative expenses relative
to sales growth in order to increase operating margins.
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Patient Monitoring
Marquette's patient monitoring systems continuously acquire, analyze,
store, display and print patient physiological information such as ECGs,
pulse rate, blood pressure, temperature, gas measurements, respiration rate
and oxygen saturation in the blood. This information provides attending
medical personnel a means to continuously evaluate a patient's condition.
The Company estimates the worldwide market for patient monitoring is
approximately $1.6 billion, of which approximately $800 million is
attributable to the U.S. Recent market growth has been driven principally
by demographic trends resulting in larger numbers of ill and elderly
patients. Future market growth is also expected to result from emerging
monitoring demand in new care areas which previously did not use or require
monitoring. As health care providers seek to reduce costs, significant
portions of patient care are being delivered in lower acuity care areas.
Many patients who in the past would have remained in the intensive care
unit and received care with a 1:1 patient-to-nurse ratio for extended
periods of time are being moved to lower acuity care areas with a 4:1 or
6:1 patient-to-nurse ratio in which portable monitors or telemetry is used.
These areas, which include step-down and subacute areas of hospitals,
outpatient care facilities and home care, are expected to provide
significant growth opportunities.
Marquette has leveraged its expertise in microprocessor design,
advanced circuit development and software programming to establish itself
as a global leader in physiological data acquisition and analysis. The
Company has well known core competencies in ECG signal acquisition and
analysis, pulse oximetry monitoring, invasive and non-invasive blood
pressure measurement, cardiac output determination and respiratory gas
analysis, and is actively involved in the advancement of measurement
techniques and algorithms in these areas.
In May 1994 the Company acquired Corometrics Medical Systems, Inc.
("Corometrics"), a designer and manufacturer of fetal and neonatal
monitoring systems, and one of the leading providers of clinical
information systems for labor and delivery applications. The Corometrics
acquisition allowed the Company to expand its product offerings to the
labor and delivery care area with a well recognized trade name and an
established market position. The Company believes that its Corometrics and
Marquette brand names are widely recognized for excellence and innovation
in the patient monitoring sector.
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The following table provides information with respect to the Company's
principal patient monitoring systems.
<TABLE>
<CAPTION>
Approximate Introduc-
List Principal tion Care
Product Category Price Range Product Date Areas
---------------- ----------- ------- --------- ------
<S> <C> <C> <C> <C>
Modular Bedside Monitors $13,000- Solar 8000 1995 Intensive Care,
$25,000 Solar 9000 1996 Acute Care
Configured Bedside $ 6,500- Eagle 3000 1995 Intensive Care,
Monitors $20,000 Eagle 4000 1995 Acute Care, General
Eagle 1000 (Portable) 1996 Care, Portable and
Transport
Telemetry Monitoring $6,500 per CD - Telemetry LAN 1991 Ambulatory Care and
Systems bed System 1995 Sub Acute Care
APEX Transmitter
Anesthetic and Respiratory $10,000- RAMS Mass Spectrometer 1995 Intensive Care,
Gas Monitoring Equipment $60,000 SAM IR Anesthetic 1995 Acute Care
Agent
Module
Maternal/Fetal Monitoring $4,800- Model 150/Antepartum 1992 Labor and Delivery
Equipment $18,000 Model 151/Intrapartum 1994
Model 118/Intrapartum 1994
Model 155/Antepartum 1996
Model 340 Telemetry 1996
/Intrapartum
Model 120 Series 1997
Neonatal Monitoring $8,000- Eagle 4000N 1993 Intensive Care
Equipment $20,000 Model 556 (color) 1994
Solar 7000N 1995
Eagle 3000N 1996
Solar 8000N 1996
Home Care Monitoring $1,500-$3,800 500E 1986 Home Care
Equipment 500EXL 1995
510/511 1996
Event-Link 1996
Clinical Information $40,000- QS System 1996 All care areas
Systems $1,500,000
</TABLE>
Modular Bedside Monitors are used to continuously acquire, analyze and
monitor physiological information from critically ill patients located in
intensive and critical care units and operating rooms. These devices use
multiple software modules for separate physiological parameters to adjust
the device configuration at the point of care to meet the monitoring needs
and acuity of any particular patient.
The Solar 8000, the Company's principal modular bedside monitor,
features a hardware base which offers the user the flexibility to choose
among various features and capabilities, including acquisition and analysis
of 12-lead ECGs and point-of-care blood gas analysis,
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through the addition of software modules. A new single parameter Solar
module library can be configured for between one and eight physiological
parameters to meet a full range of monitoring configuration needs.
Marquette recently introduced the Solar 9000, a more advanced modular
bedside monitor that provides local area network computer and internet
connection capabilities. Initially, the Solar 9000 is targeted to
operating rooms that require combined vital signs monitoring and clinical
information management.
Configured Bedside Monitors are very similar to the modular bedside
monitors in their continuous vital signs monitoring capabilities. However,
they do not permit point-of-care configurability. In most cases, these
devices are used to monitor patients in less acute settings or in places
where general purpose monitoring is needed, such as post-anesthesia
care/recovery units or the emergency department.
The Company offers the Eagle 4000, 3000 and 1000 configured bedside
monitors. The Eagle 4000 is the most advanced of these products and is
capable of monitoring 12-lead ECGs, (including the ST segment of the ECG
waveform) and carbon dioxide levels. The Eagle 3000 is lower priced and
offers fewer features than the Eagle 4000. The Company believes that the
current features of the Eagle 3000, together with its lower price compared
to the Eagle 4000, should enable the Eagle 3000 to further penetrate the
configured bedside monitor market. The Eagle 1000 is a low cost battery-
powered portable monitor that is available in a variety of configurations
and is especially well suited to compete in cost sensitive markets outside
the U.S.
Telemetry Monitoring Systems continuously collect ECGs from a device
worn by the patient and transmit the data via radio frequency to a central
receiver unit and viewing station. These systems are designed for patients
who are not confined to their beds, which generally includes post-operative
patients and others in the recovery process. Telemetry monitoring systems
represent an increasing share of the market for monitoring equipment
because they allow patients to be ambulatory, which facilitates earlier
discharge from the hospital.
Marquette competes in this category with its CD-Telemetry LAN System
and APEX Telemetry Transmitter. The Company has entered into several
recent strategic alliances which add patient and staff tracking and
location capabilities, and clinician/caregiver paging with alarm
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event view on the pager.
Anesthetic and Respiratory Gas Monitoring Equipment are used in tandem
with the Company's other vital sign monitors and diagnostic products for
cardiopulmonary monitoring in anesthesia, post-operative recovery, critical
care and pulmonary function laboratories. Gas monitoring products are used
to verify the accuracy of anesthetic gas vaporizers and delivery systems
before, during and after surgery, and measure pulmonary functions such as
oxygenation and ventilation. Gas monitors also detect potentially life-
threatening conditions such as hyperventilation (excessive pulmonary gas
exchange), hypoventilation (inadequate pulmonary gas exchange), pulmonary
air embolus (air bubbles in the pulmonary blood stream), and equipment
malfunction during surgery.
The Company offers products using two methodologies for multiple gas
detection and analysis: mass spectrometry and infrared spectroscopy. The
Company's mass spectrometry product, the RAMS, provides a comprehensive
analysis of gases administered/monitored during surgery. The Company's
infrared spectroscopy product, consisting of the SAM IR Anesthetic Agent
Modules, allows for cost-effective intraoperative monitoring of anesthetic
agents, carbon dioxide, and oxygen.
Maternal/Fetal Monitoring Equipment provides electronic monitoring of
the fetal heart rate and uterine activity as well as maternal parameters
such as ECG, non-invasive blood pressure and pulse oximetry. The Company
offers a broad line of Corometrics brand perinatal products used in
hospitals, physician offices and other clinical settings for care of mother
and child during pregnancy (antepartum) and delivery (intrapartum).
The antepartum monitors, Models 145, 150 and 155 offer a full range of
non-invasive fetal surveillance throughout high risk pregnancies. The
ability to offer dual ultrasound heart rate for twin monitoring, external
uterine contraction monitoring and electronic fetal movement detection
allows flexibility in assessing fetal well-being during pregnancy.
The intrapartum monitors, Models 151, 118 and 340 Telemetry allow for
both non-invasive and invasive fetal ECG monitoring and uterine
contractions. In addition, the Model 118 was the first product to combine
fetal monitoring with maternal vital signs, non-invasive blood pressure and
oxygen saturation. This combined maternal/fetal monitor allows assessment
of the maternal and fetal response to labor events
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which may affect the intrauterine environment, including anesthesia,
induction of labor and recovery of the mother. The Model 118 is ideally
suited to the new concept in obstetrical care of providing labor, delivery,
recovery and postpartum (LDRP) in one room. The Model 120 series expands
the capability of the Model 118 and provides a display of maternal ECG
waveforms. This feature allows the clinician advanced monitoring
capability. The Model 340 Telemetry system allows ambulatory patients to
be monitored during labor.
Neonatal Monitoring Equipment provides continuous monitoring of
neonates and allows clinicians to record, analyze and react to a neonate's
changing conditions. The Company's neonatal product line meets the
monitoring requirements of the less critical to the most critically ill
neonate. These monitors are capable of displaying multiple measurements
such as ECG, respiration, invasive pressures, temperatures, pulse oximetry
and non-invasive blood pressure. Using the Eagle and Solar monitoring
platforms, the Corometrics brand products have added neonatal features such
as superior respiration detection algorithms and trending, thereby
customizing these monitors to the needs of the neonate in the neonatal
intensive care unit. In addition, the more compact and cost effective
Model 556 monitor is designed for lower acuity nurseries.
Home Care Monitoring Equipment incorporates the technological advances
of the Corometrics brand hospital based monitors with the simplicity that
home use requires. Corometrics introduced the first battery backup and
internal memory apnea monitor in the 1980s. In 1995, the Model 510/511
became the first apnea monitor with integrated pulse oximetry cleared by
the FDA for use in the home, and the Company believes the Model 510/511
remains the only monitor of its kind on the market today. The 500 series
of apnea products and Event-Link software allows home care clinicians to
collect, store and analyze monitoring data to provide objective
documentation of alarm cause and effect, allowing more cost efficient care
of the patient in the home.
Clinical Information Systems integrate and store data coming from
multiple patient care areas. The data can be charted, reviewed and
presented in hospital selected formats that provide clinicians with a
comprehensive overview of patient status. Reports can then be generated
that provide the data in both clinical and administrative form to aid in
improving the quality of care in the most effective manner.
The Company's product platform, the QS System, is designed to
integrate data from all care areas, including labor and delivery, the
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neonatal intensive care unit, general floor, intensive care unit, critical
care unit, operating room and perioperative unit. Interfaces also exist
for most lab and hospital information systems as well as for all Company
patient monitoring systems and the patient monitoring products of other
companies. Integrated clinical applications can include remote site access
that enables satellite hospitals, clinics and physicians to be linked to
the centrally-located system. The QS System can be customized to meet the
most basic entry level requirements to the most complex whole hospital
solutions involving wide area networks. The Company believes that one of
the primary advantages of the QS System is its ability to interconnect and
interface with hospital information systems through the Unity Network.
Diagnostic Cardiology
Marquette's diagnostic cardiology products are used to diagnose
cardiac disorders through the detection, recording and analysis of
electrical signals and other information relating to the heart. Coronary
artery disease is the leading cause of death of adult Americans today, and
accounts for over 20 percent of the national health care budget.
The Company estimates the worldwide market for diagnostic cardiology
products is approximately $1 billion, of which approximately $430 million
is attributable to the U.S. An aging population, the increasing trend
towards preventative rather than corrective medicine and a general
preference for less invasive procedures are the factors expected to
generate increased demand for the Company's diagnostic cardiology products.
Marquette believes its cardiovascular information solution, the MUSE
CV/TM/ information system, is one of the leading products used to store,
manage, process and deliver the entire cardiology patient file. The system
delivers advances in patient databasing, hospital information system
interfaces, network connectivity, internet technology, e-mail accessibility
and health care protocol standards.
In January 1996, the Company acquired E for M Corporation ("E for M").
Through the acquisition, Marquette added new cardiac imaging capabilities,
broadened its diagnostic cardiology product line and expanded its customer
base for cardiology systems. E for M's product lines also include high
quality cineangiography film and digital imaging products. Also, the E for
M acquisition, which included all of the stock in Hellige GmbH ("Hellige"),
added European manufacturing, marketing and distribution facilities. The
acquisition of E for M
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allowed the Company's MUSE CV cardiovascular information system to expand
its functionality into image and electrophysiology management. Management
believes Marquette has the only complete Cath Lab solution providing
electrophysiology and hemodynamic monitoring, digital imaging and
cardiology patient information management.
The following table provides information with respect to the Company's
principal diagnostic cardiology products.
<TABLE>
<CAPTION>
Approximate Introduc-
List Principal tion Care
Product Category Price Range Products Date Area
---------------- ----------- --------- --------- ----
<S> <C> <C> <C> <C>
Resting ECG Equipment $1,800- Mac PC 1985 Intensive Care,
$15,000 Mac 6 1989 Acute Care,
Mac VU 1991 General Purpose,
Mac 8 1993 Emergency Care,
CardioSmart 1994 Sub Acute
MicroSmart 1996
Exercise Testing ECG $4,000- MAX 1 1989 General Purpose,
Systems $23,000 CASE 16 1994 Sub Acute
MAX Personal 1995
CardioSys XT 1996
CardioSmart ST 1997
Holter (Ambulatory) ECG $21,000- CENTRA 1989 Ambulatory Care,
Equipment $60,000 SXP 1991 Home Care
Memoport 1995
MARS 1996
Cardiovascular Information $30,000- MUSE CV 1996 Intensive Care,
Systems $300,000 Acute Care,
General Purpose,
Emergency Care,
Sub Acute Care
Cardiac Defibrillators $2,000- CardioServ 360+ 1991 Intensive Care,
$14,500 1250 Series 1991 Acute Care,
1500 Series 1991 General Purpose,
CardioServ 1993 Emergency Care,
2500 Series 1996 Portable and
Transport, Sub
Acute Care
Cardiac Catheterization $90,000- Mac Lab 1990 Intensive Care
Equipment $160,000 Midas 6000 1993
Midas 8000 1995
Photo Image and Digital $10,000- AccuVision Series 1995 Intensive Care
Image Processing Equipment $125,000
</TABLE>
Resting ECG Equipment is designed to record an ECG of a patient who is
at rest, and are generally mounted on a wheeled cart for movement to the
patient's bedside or elsewhere as needed. The Company's
electrocardiographs permit as many as 14 lead wires to be attached to
patients, maximizing the amount of data that can be
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acquired. The Company's extensive line of resting electrocardiographs is
designed for use across the spectrum of care areas, including acute care
hospitals, outpatient surgery centers, ambulances and physicians' offices.
The Company's resting electrocardiographs perform immediate analysis of
ECGs, store ECGs for further analysis and can communicate ECGs
electronically to other electrocardiographs or other equipment, including
cardiovascular information systems, for storage and comparison.
Exercise Testing ECG Systems are used to diagnose cardiac disease and
assess its severity by stressing the heart through physical exercise to
elevate its blood flow requirement. While this stress exists, any
significant obstruction in the coronary arteries limits the flow of blood
and results in cardiac dysfunction, which can be detected by a physician
using electrocardiography. The Company's exercise testing ECG systems are
predominantly used in physician offices and hospitals. The Company's
CardioSys/TM/ system is capable of communicating ECGs electronically to
other electrocardiographs or other equipment, including cardiovascular
information systems, for storage and comparison.
Holter (Ambulatory) ECG Equipment is designed to provide ECG
information from an ambulatory patient who experiences intermittent
symptoms such as palpitations, angina or loss of consciousness through a
small recording device over the course of an extended period (usually 24
hours), in or out of the hospital. The Company has recently introduced
MARS (Multiparameter Analysis Review Station), a new generation of Holter
(ambulatory) ECG equipment. It combines the ability to analyze signals
acquired from the Company's line of intensive care or telemetry monitors
with those of a traditional Holter monitor, thus reducing the length of
stay for many patients who might otherwise be delayed in the hospital
waiting for tests to be performed or interpreted.
Cardiovascular Information Systems are designed to accept data from
outlying electrocardiographs via telephone line, diskette or direct
connection, store hundreds of thousands of ECGs and quickly retrieve them
for comparison with ECGs currently being reviewed.
The Company's latest cardiovascular information system, the MUSE
CV/TM/, is an open architecture system designed for hospitals. In addition
to storing, analyzing and retrieving ECGs taken at rest, MUSE CV provides
similar capability for Holter ECGs, exercise testing ECGs, and other
testing procedures and integrates all of the Company's diagnostic
cardiology products together through networking and computer processing,
creating a complete cardiology patient file. MUSE CV also provides an
interface to the hospital's information system. MUSE CV can generate
billing and activity reports which can assist a hospital or other user in
cost control and decrease the possibility of tests remaining unbilled.
Many
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MUSE CV systems serve more than one hospital, with outlying hospitals
employing workstations connected to the central MUSE CV by telephone lines,
permitting cardiologists at the central hospital to assist in treating
large numbers of patients in wide geographical areas.
Cardiac Defibrillators are designed to restart the heart of victims of
sudden cardiac arrest, a severe form of heart attack. Cardiac arrest is
among the leading causes of death in the U.S. The highest incidence of
cardiac arrest occurs outside the hospital. The Company markets a number
of defibrillator models for pre-hospital and hospital use. Marquette's
Model 1500 is the only pre-hospital defibrillator that provides 12-lead ECG
acquisition and pacing, and can transmit ECGs directly to the hospital's
cardiovascular information system. The Company's hospital line of
defibrillators can be used in all care areas, including the exercise
testing lab, patient transport and the emergency department.
Cardiac Catheterization Equipment is used in various cardiovascular
procedures performed in the Cath Lab and the EP Lab. In vascular or
"hemodynamic" studies, the catheter, with attached physiological sensors,
is used to measure temperature and blood pressure in various parts of the
heart and the surrounding circulatory system, as well as determining the
volume of blood being pumped by the heart. Electrophysiology studies are
performed to evaluate the process of the conduction of electricity through
the heart as the heart contracts and to diagnose the mechanisms of abnormal
heart rhythm. The Company's Midas System 8000 is the only system that
combines complete electrophysiology and hemodynamics into one workstation,
maximizing the utilization of the workstation. The system is specially
configured to assist cardiologists with fast, accurate collection and
analysis of physiological data.
Photo Image and Digital Image Processing Equipment is used to view the
performance and function of a patient's coronary vasculature to assist in
the detection, diagnosis, treatment and prevention of cardiac diseases and
injuries, particularly in connection with cardiac catheterization. The
Company's photographic and digital imaging systems allow the capture,
storage and review of these images. The Company's photographic systems
utilize a variety of 35mm high grade films produced under the Company's
label by third-party manufacturers and offer a number of different
processing chemistries. The Company's digital image processing systems
capture analog images from X-ray, ultrasound and other common imaging
sources and convert them to digital images. These systems then manage the
digitized images so they can be enhanced, quantified, reviewed in real-
time, transmitted over networks and/or archived on CD-R media. The Company
does not manufacture or sell the X-ray, ultrasound or other imaging source
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associated with this process.
Supplies and Disposables
The Company manufactures, markets and distributes a broad spectrum of
disposable supplies and disposables used primarily in conjunction with the
Company's large installed base of patient monitoring systems and diagnostic
cardiology products. These products include ECG and other recording paper,
monitoring and diagnostic electrodes, patient belts and straps, disposable
and reusable blood pressure cuffs, disposable water traps, temperature
probes, pulse oximetry probes and ambulatory ECG/telemetry hookup kits. In
addition, the Company utilizes its product expertise and manufacturing
capacity to produce private label products for third parties.
The Company seeks to continue to leverage its installed base to
further increase sales of supplies and services related to its equipment.
Additionally, the Company seeks to leverage the brand-name recognition
generated through its equipment sales to increase sales of technology-
distinguished supplies related to a broad range of medical products
manufactured by the Company and others. To implement this strategy the
Company recently created supplies and disposable products as a separate
division of the Company and devoted additional management resources to the
division.
Customer Service
The Company's service operations are responsible for equipment
installation at customers' sites and for the fulfillment of the Company's
warranty and maintenance commitments. Most equipment sold by the Company
is fully warranted for all parts and labor for one year. The Company
offers a variety of post-warranty service agreements permitting customers
to contract for the level of equipment maintenance and repair they require.
In addition to warranty and post-warranty maintenance service, the
Company performs circuit board repairs on a 48-hour return basis, and
manufactures and markets replacement parts to the Company's dealers and
equipment users. The Company offers repair and maintenance training
classes throughout the year for customers and dealers. In addition, the
Company supports customers, dealers and the Company's field personnel by
providing telephone assistance on service problems.
The Company has a national network of approximately 167 service
technicians located throughout the U.S., and approximately 125 service
technicians located in Europe. At its operations in Germany, the Company
operates a parts and support center for European service. In some foreign
countries, if direct Company field engineers and technicians are not
conveniently located,
15
<PAGE>
employees of local dealers provide warranty and field maintenance service.
Research and Development
Marquette has made a substantial commitment to product research and
development throughout its history and has introduced major new products in
each of its product lines during the past three years. The Company
expended $30.7 million, $37.3 million, and $48.1 million on research and
development, which represented approximately 9.0%, 9.0% and 8.9% of net
sales for the fiscal years ending April 30, 1995, 1996 and 1997,
respectively. Marquette has leveraged its expertise in microprocessor
design, advanced circuit development and software programming to establish
itself as a global leader in physiological data acquisition and analysis.
The Company has well-known core competencies in ECG signal acquisition and
analysis, pulse oximetry monitoring, invasive and non-invasive blood
pressure measurement, cardiac output determination and respiratory gas
analysis, and is actively involved in the advancement of measurement
techniques and algorithms associated with each area. The Company's primary
product development efforts are carried out at the division level. In
addition, the Company maintains a 17,000 square foot dedicated Research and
Development Center approximately one mile from its corporate offices in
Milwaukee, Wisconsin.
The Company's research and development strategy is to improve and
expand its product line through innovative engineering and to create
diagnostic and monitoring technologies that address problems brought to its
attention by contacts in the medical community, particularly those
technologies which improve quality of care and reduce costs. For example,
Marquette's telemetry products improve the quality of care by tracking
ambulatory patients and alerting the nurse at the central control station
if the patient has an event. Additionally, the Solar 8000 modular bedside
monitor was recently redesigned to reduce production costs by reducing the
number of circuit boards from three to one and by utilizing an off-the-
shelf display. In addition, the Company seeks to be first to market with
new products, to enter new markets and to respond to market trends.
The Company's product engineers work closely with the Company's sales
force and customers to modify and improve current products. In addition,
these engineers assist with the integration of components or technologies
across several Company product lines to enhance product competitiveness.
16
<PAGE>
Sales, Distribution and Marketing
The Company's products are used principally in the critical and
intensive care units, operating and recovery rooms, step-down units and
related areas of acute care hospitals, particularly those institutions
specializing in the diagnosis and treatment of heart disease, together with
labor and delivery units. Marquette products increasingly are also being
used in medical clinics, outpatient surgery centers, physician offices and
the home.
The U.S. has been the principal geographic market for the Company's
products. Over the past ten years the Company has sought to develop its
international market standing, and international sales increased from
approximately 33% in Fiscal 1996 to approximately 39% in Fiscal 1997. The
Company will continue to seek greater penetration of the European market,
where the E for M acquisition has substantially broadened the Company's
distribution network.
The Company has a direct sales force in the U.S. of approximately 282
sales representatives, clinical specialists, and managers, as well as 7
national account managers. In addition, the Company has approximately 120
and 8 direct sales employees in Europe and Australia, respectively, as well
as numerous dealers in both markets. The remaining international markets,
primarily Japan, China, Southeast Asia, India, Latin America and Canada,
are served by distributorship arrangements under which a local dealer buys
products from the Company at a discount for resale within its own
territory.
Because most Company products are highly technical requiring extensive
training in their application and operation, the Company's sales
organization is organized along divisional product lines, including
technical support groups which consist primarily of nurses, biomedical
engineers and clinicians. In addition, the Company believes its reputation
in diagnostic cardiology enables it to obtain an entry to patient
monitoring systems sales. The Company has also designated certain senior
sales personnel to act as "Unity Team Managers" to coordinate multiple
product line sales to the same customer. The Company maintains
demonstration equipment so that sales personnel can make on-site clinical
demonstrations for equipment sales. The Company offers technical seminars
and training sessions on a worldwide basis, and furnishes instruction
manuals, maintenance manuals, operator guides, application information and
software in foreign languages, as required.
In recent years, many hospitals have joined buying groups or have been
acquired by large hospital chains permitting them to negotiate with
suppliers of hospital equipment to obtain more favorable pricing on large
quantity purchases. In addition, some
17
<PAGE>
large hospitals, chains and buying groups prefer to negotiate with a
limited number of vendors who can provide a broad range of products used by
the hospital or group. While the Company believes that the existence of
these groups will present a marketing opportunity for the Company, there
can be no assurance that the Company will be able to negotiate purchasing
arrangements with all of these groups or on terms that are favorable to the
Company. The Company currently has purchasing arrangements in place with
many national and regional hospital systems, including Columbia/HCA
Healthcare Corporation, Tenet Healthcare, Inc., and many purchasing groups,
including MAGNET, AmeriNet, and CMMA (Catholic Materials Management
Alliance), as well as with various subdivisions of the federal government.
The Company has an arrangement with a third party leasing company
which provides customer financing. Under this arrangement, the Company is
paid in full for its products, and the leasing company assumes credit
risks. The Company also directly provides lease financing in certain
circumstances and equipment rentals.
The Company also offers a Managed Use Program, permitting hospitals to
make payments to the Company based upon the frequency of use of equipment
by the hospital. Under the Managed Use Program, the Company has the right
to increase or reduce the number of equipment units deployed at the
hospital to correlate with the degree of use of the units at the hospital.
The Company believes that the program is being well received by the market
and will further facilitate distribution of the Company's products by
permitting hospitals to better correlate their equipment to their needs.
The Company markets and distributes its supplies in the U.S. through
an in-house telemarketing group, its national direct sales force and a
number of dealers. The Company distributes its supplies outside of the
U.S. through its direct sales force in Europe, its Australian subsidiary
and through independent dealers.
Manufacturing
Marquette internally controls all critical manufacturing processes,
including state-of-the-art circuit board assembly and thick film hybrid and
multichip module assembly, utilizing advanced assembly and subassembly
burn-in systems. The Company partners with major suppliers by locating
supplier inventories on Marquette premises, thereby reducing Company
inventory costs and improving access to technical components.
The Company believes that its facilities are modern, well maintained
and adequate for its present needs. (See Item 2-Properties).
18
<PAGE>
Competition
The markets for the Company's products have historically been highly
competitive. The consolidation of health care providers in the U.S. and
the national effort to curtail increases in medical care costs have
increased the level of competition. Although the Company competes directly
with other providers of medical equipment, no one company or group of
companies competes with the Company across its full line of products. The
Company's primary competitors in patient information monitoring include
Hewlett-Packard Corporation, Siemens Medical Systems, Inc., SpaceLabs
Medical, Inc. and Datex Company, and in diagnostic cardiology include
Hewlett-Packard Corporation, Schiller AG and Quinton Instrument Company, a
subsidiary of American Home Products Corporation. Certain of these
competitors are larger and have greater financial and marketing resources
than Marquette. The principal competitive factors that differentiate one
manufacturer from another in the market are a manufacturer's reputation for
producing accurate, reliable and technically advanced products, product
features, product line breadth, price, expected medical cost savings and
effectiveness of sales and marketing efforts.
The Company believes that it has a reputation for technological
leadership and product reliability, which, with its working relationship
with physicians at teaching and research hospitals as well as the breadth
of its product line, have provided it with a strong competitive position.
The Company's competitive position is strongest with respect to its
cardiology product line and fetal and neonatal monitoring products, where
the Company has been selling its products for the longest period of time,
has the greatest name recognition and competes primarily on the basis of
product features and technological advances.
Government Regulation
The medical devices manufactured and marketed by the Company are
subject to extensive and rigorous regulation by the FDA and, in many
instances, by state and foreign governments. Under the FDC Act, the FDA
regulates, among other things, the testing, manufacturing, labeling,
distribution and promotion of medical devices in the U.S. To facilitate
compliance with the FDC Act and regulations promulgated thereunder, the
Company, from time to time, may institute voluntary compliance actions such
as product recalls when it believes it advisable to do so. The failure of
the Company to comply with FDA requirements could result in warning
letters, injunctions, civil penalties, mandatory recall or seizure of
products, total or partial suspension of production, the government's
refusal to grant, or withdrawal of, marketing authorizations, and criminal
prosecution.
In general, before a new medical device may be marketed in the
19
<PAGE>
U.S., the manufacturer must obtain marketing authorization from the FDA
through either clearance of a pre-market notification submission (a "510(k)
submission") or approval of a pre-market approval application. In
addition, changes to a medical device that significantly affect the safety
or efficacy of a marketed device are subject to FDA review and clearance or
approval.
The Company's products have not generally been subject to the
comprehensive pre-market approval requirements, but are generally subject
to pre-market notification requirements. The FDA may grant marketing
clearance of a new medical device pursuant to a 510(k) submission if it
determines that the device is substantially equivalent to a predicate
device that did not require pre-market approval. A 510(k) submission must
be supported by information demonstrating substantial equivalence. The FDA
recently has been requiring more rigorous demonstration of substantial
equivalence than in the past, including the submission of clinical data in
some cases. It generally takes from four to 12 months from submission to
obtain clearance of a 510(k) submission, but it may take longer. The FDA
has no specific time limit by which it must respond to a pre-market
notification submission.
As a manufacturer of medical devices, the Company is also subject to
certain other FDA regulations, including compliance with current good
marketing practices ("GMPs") and similar regulations in other countries,
which include testing, control and documentation requirements, and medical
device reporting requirements. The FDA recently revised its medical device
GMP regulation, and the new regulation, which goes into effect later this
year, permit the FDA to regulate the design as well as manufacture of
medical devices and make a number of other significant changes in
regulatory requirements. Ongoing compliance with GMP and other applicable
regulatory requirements is monitored through periodic inspections by
federal and state agencies, including the FDA, and by comparable agencies
in other countries.
Federal, state and foreign regulations regarding the development,
manufacture and sale of medical devices are subject to change. The Company
cannot predict what impact, if any, such changes might have on its
business. The Company also seeks, where appropriate, to comply with safety
standards of Underwriters Laboratories, the Canadian Standards Association,
the European Economic Community and other countries in which it markets
products.
The Company's products are used by health care providers for
diagnostic testing services and other services for which the providers may
seek reimbursement under the federal Medicare and Medicaid programs or from
other governmental and private payers. Such reimbursement is subject to
federal regulations and policies and regulations of other payers. For
example, the Medicare
20
<PAGE>
program, which reimburses hospitals and physicians for services provided to
a significant percentage of hospital patients, places certain limitations
on the methods and levels of reimbursement of hospitals for procedure costs
and for capital expenditures made to purchase equipment such as that sold
by the Company. The Medicare program also limits the level of
reimbursement to physicians for diagnostic tests and recently has
instituted changes that may further limit the amount of such reimbursement
of both facilities and physicians for services provided in connection with
diagnostic and clinical procedures. Federal and state regulations
regarding the amount and manner of reimbursement are subject to change.
National health remains a priority item on its legislative agenda and there
are a number of bills presently being considered in both Houses of
Congress. The Company is unable to predict the impact, if any, that such
change or legislation might have on its business.
In addition to laws and regulations enforced by the FDA, the Company
is also subject to regulation under the Occupational Safety and Health Act,
the Environmental Protection Act, the Resource Conservation and Recovery
Act and other present and potential future federal, state and local
regulations.
Product Liability and Insurance
The use of the Company's products in the delivery of medical services
involves the possibility of adverse effects that could expose the Company
to product liability claims. A recent U.S. Supreme Court decision held
that product liability may exist despite FDA approval and future court
decisions may also increase the Company's risk of product liability. The
Company is involved in various legal proceedings, including product
liability suits of a nature considered normal to its business. The
Company's products are used by health care providers in connection with the
treatment of patients, who will, on occasion, sustain injury or die as a
result of their condition or medical treatment. If a lawsuit is filed
because of that occurrence, the Company, along with physicians and nurses,
hospitals and other medical suppliers, may be named as a defendant, and
whether or not the Company is ultimately determined to be liable, the
Company may incur significant legal expenses. In addition, such litigation
could damage the Company's reputation and therefore impair its ability to
market its products, and impair its ability to obtain product liability
insurance or cause the premiums for such insurance to increase. The
Company carries product liability insurance coverage under several policies
with an aggregate loss coverage which the Company believes is sufficient.
However, in the future the Company may be unable to obtain adequate product
liability coverage on acceptable terms, if at all. A successful product
liability claim or series of claims brought against the Company that are
not covered by insurance or exceed policy limits could have a material
adverse effect on the Company's business, financial condition and
21
<PAGE>
results of operations.
Employees
At April 30, 1997, the Company had approximately 2,347 employees in
the U.S. and approximately 803 employees outside the U.S., including
approximately 1,005 employees engaged primarily in sales, approximately 927
employees engaged primarily in manufacturing, approximately 461 employees
engaged primarily in research and product development and approximately 353
employees primarily engaged in service. Management considers employee
relations to be excellent.
The Company believes that high levels of employee support and
participation significantly contribute to the Company's business success.
Therefore, the Company has implemented various employee benefit programs
and work-related policies. Employees are permitted to personalize their
work areas and determine their own flexible work schedules. The Company
also provides many of its employees with day care facilities, exercise
facilities, and a tuition reimbursement program. It also encourages direct
and individual ownership by employees of Common Stock through its 401(k)-
Profit Sharing Plan and grants of stock options.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information regarding executive officers who are
not also directors.
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Mary M. Kabacinski 48 Senior Vice President,
Chief Financial Officer and
Treasurer
Karl F. Braun 64 Vice President-EMEA
Gerald G. Woodard 50 Division President-Patient
Monitoring
Steven G. Books 47 Division President-Cardiology
Gerald J. Lentz 50 Division President-Service
P. Michael Breedlove 53 Division President-E for M
Imaging Systems
James R. Mertens 44 Division President-E for M
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
Cath Lab
Louis P. Scafuri 45 Division President-
Corometrics Medical
Systems
Mark R. Tauscher 45 Division President-Supplies
Division
</TABLE>
Mary M. Kabacinski became the Senior Vice President of the Company in
August, 1996, Vice President and Chief Financial Officer of the Company in
July, 1991 and Treasurer of the Company in 1989. Prior to her employment
with the Company, Mrs. Kabacinski was a tax manager at Arthur Andersen LLP.
Gerald G. Woodard became Division President-Patient Monitoring in
January, 1997. Mr. Woodard was Vice President-Sales and Marketing from
October, 1995 to January, 1997 and Director of Operations of Quantitative
Medicine, Inc. from January, 1992 to October, 1995.
Karl F. Braun became Vice President-EMEA in May, 1996. Mr. Braun
became Managing Director of Hellige GmbH, a wholly-owned subsidiary of the
Company, in May, 1994 and was Director of Marketing and Development for
Hellige from June, 1993 to May, 1994. Mr. Braun was Vice President-
Cardiology of Hellige from September, 1989 to June, 1993.
Steven G. Books became Division President-Cardiology in May, 1996. Mr.
Books was Vice President-Cardiology Division from June, 1994 to May, 1996
and a manager in the Company's manufacturing and engineering departments
from 1982 to June, 1994.
Gerald J. Lentz became Division President-Service in May, 1996. Mr.
Lentz was a Product Manager from June, 1994 to May, 1996 and National
Service Manager from February, 1977 to June, 1994.
Mark R. Tauscher became Division President-Supplies in November, 1996.
Mr. Tauscher was General Manager of Medical Supplies for Hewlett Packard
Corporation from 1994 to November, 1996. Prior to joining the Company, Mr.
Tauscher was employed at Hewlett Packard for 21 years, where he also held
the positions of Director of National Accounts and Marketing Manager for
medical customer service.
P. Michael Breedlove became Division President-E for M Imaging
Services in May, 1996. Mr. Breedlove was Vice President-Field Operations
for E For M from October, 1995 to May, 1996, and a Vice President of Cerner
Corporation from 1993 until October, 1995 and Managing Director of Cerner
Corporation PTY LTD from 1991 until
23
<PAGE>
1993. Mr. Breedlove was Vice President-Sales and Marketing of Cerner
Corporation from 1984 to 1991.
James R. Mertens became Division President-E For M Cathlab, in May,
1996. Mr. Mertens was Vice President-Software Technology for E For M from
June, 1994 to May, 1996 and Software Manager for Mortara Instruments
Company from November, 1983 to June, 1994. Mr. Mertens was a software
engineer for the Company from 1981 to November, 1983.
Louis P. Scafuri became Division President-Corometrics Medical
Systems, in May, 1996. Mr. Scafuri has also been President of Corometrics
since September, 1995. Mr. Scafuri was a Vice President of Aspect Medical
Systems, Inc. from September, 1992 to August, 1995. Mr. Scafuri was
Director of Sales, Western Hemisphere, for the Company from May, 1991 to
September, 1992 and held various field sales management positions
throughout the Company prior to May, 1991.
ITEM 2. PROPERTIES
The following table sets forth certain information as of April 30,
1997, relating to the Company's principal real estate facili ties:
<TABLE>
<CAPTION>
Location
(Owned or Approximate
Leased) Square Feet Principal Uses
--------- ----------- --------------
<S> <C> <C>
Freiburg, Germany
(owned) 140,000 Engineering, research and development,
marketing and manu facturing of
diagnostic and monitoring products,
primarily for European distribution.
Freiburg, Germany 35,100 Research and development,
(leased until marketing and sale and
September 30, 2006) purchasing for Hellige
manufactured products
Jupiter, Florida 180,000 Manufacturing, engineering and
(owned) marketing of supplies and car-
diac catheterization products
and repair and maintenance of
products.
Milwaukee, 295,000 Corporate offices, engineering,
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
Wisconsin research and development, and
(owned) marketing and manufacturing of
diagnostic and adult monitoring
products
Paris, France 8,000 Marketing and sales,
(leased until general administration
February, 1999)
Torrance, California 65,500 Engineering, research and
(leased until December, development and marketing
2004) and manufacturing of
imaging systems
Wallingford, CT 180,000 Engineering, research and
(owned) development and marketing and
manufacturing of fetal and neo-
natal monitoring and diagnostic
products
</TABLE>
The Company believes that its manufacturing facilities are sufficient
for its current needs. Because approximately 75% of its manufacturing
capacity is presently being utilized, the Company believes that such
facilities are sufficient for the next three years based on the Company's
expected rate of growth.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceeding other than
ordinary routine litigation incident to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Security
Holder Matters
The section labeled "General Information" appearing on page 42 of the
Company's 1997 Annual Report to Shareholders is incorpo rated herein by
reference.
25
<PAGE>
The Registrant has three classes of stock, Class A Common Stock, $0.10
par value, Class C Common Stock, $0.01 par value and Preferred Stock,
without par value. There are no shares of Class C Common Stock or
Preferred Stock outstanding.
ITEM 6. Selected Financial Data
The section labeled "Five Year Summary of Selected Financial Data"
appearing on page 3 of the Company's 1997 Annual Report to Shareholders 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 on pages 34
through 40 of the Company's 1997 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The Report of Independent Public Accountants appearing on page 33 and
the Consolidated Financial Statements and Notes to Consoli dated Financial
Statements appearing on pages 16 through 32 of the Company's 1997 Annual
Report to Shareholders are incorporated herein by reference.
ITEM 9. Changes in, and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
(a) The section labeled "Nominees" appearing on page 2 of the
Company's Proxy Statement dated July 17, 1997 is incorporated herein by
reference.
26
<PAGE>
(b) Information concerning the Company's executive officers who are
not directors is set forth in Part I of this Form 10-K.
ITEM 11. Executive Compensation
The sections labeled "Executive Officer Compensation" and "Report of
the Human Resources Committee" appearing on pages 7 through 10 of the
Company's Proxy Statement dated July 17, 1997 is incorporated herein by
reference to the extent necessary to be responsive to the requirements of
this Item.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The section labeled "Stock Ownership of Management and Others"
appearing on pages 5 and 6 of the Company's Proxy Statement dated July 17,
1997 is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
The subsection labeled "Certain Transactions" appearing on page 12 of
the Company's Proxy Statement dated July 17, 1997 is incorporated herein by
reference.
27
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Index to Financial Statements
The following Financial Statements
are included in the Company's
1997 Annual Report to Shareholders Page in 1997
and are incorporated herein by Annual Report
reference pursuant to Item 8: to Shareholders
---------------
Consolidated Balance Sheets at 16-17
April 30, 1997 and 1996
Consolidated Statements of Income 18
for the years ended April 30, 1997, 1996
and 1995
Consolidated Statements of Cash Flows 19
for the years ended April 30, 1997,
1996 and 1995
Consolidated Statements of Shareholders' 20
Equity for the years ended April 30,
1997, 1996 and 1995
Notes to Consolidated Financial 21-32
Statements
Selected Quarterly Data (Unaudited) 32
Report of Independent Public Accountants 33
2. Index to Financial Statement Schedules
The following schedule is filed as part of this Report on Form 10-K
and is covered by the "Report of Independent Public Accoun tants on
Supplementary Schedule" included herein.
Schedule
Number Description
-------- -----------
II Valuation and Qualifying Accounts
All other financial statement schedules not listed have been omitted
since the required information is included in the con solidated statements
or the notes thereto, or is not applicable or required under the rules of
Regulation S-X.
28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY SCHEDULE
To the Shareholders of Marquette Medical Systems, Inc.:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Marquette Medical Systems,
Inc.'s annual report to shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated June 5, 1997. Our audit was
made for the purpose of forming an opinion on those statements taken as a
whole. The following schedule is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Milwaukee, Wisconsin
June 5, 1997
29
<PAGE>
MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance Additions Additions Write-Offs Balance
Beginning Charged Due to Net of End
of Year to Income Acquisitions Recoveries of Year
--------- --------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C>
Year ended
April 30,
1995 $ 458 $196 $ 347 $ (65) $1,066
Year ended
April 30,
1996 $1,066 $817 $5,427 $ 880 $6,430
Year ended
April 30,
1997 $6,430 $398 $ -0- $2,664 $4,164
</TABLE>
30
<PAGE>
3. Exhibits
Exhibit
No.
2.1 Stock Purchase Agreement by and between the Company, AHP
Subsidiary Holding Corporation and American Home Products
Corporation dated April 7, 1994 (filed as Exhibit 2 to Form 8-K
dated May 31, 1994 and incorporated herein by reference). All
schedules to the Agreement have been omitted, the Company hereby
agreeing to furnish supplementary a copy of any omitted schedule
to the Commission upon request.
2.2 Closing Date Agreement between Marquette Electronics, Inc., AHP
Subsidiary Holding Corporation and American Home Products Corpo
ration dated May 23, 1994 (filed as Exhibit 2 to Form 8-K dated
May 31, 1994 and incorporat ed herein by reference)
2.3 Offer to Purchase for Cash dated November 10, 1995 made by
Marquette Subcorp (filed as Exhibit (a)(1) to Schedule 14D-1
filed on November 13, 1995 and incorporated herein by reference)
2.4 Agreement and Plan of Merger dated as of November 5, 1995 between
Registrant, Marquette Subcorp and E For M Corporation (filed as
Exhibit (a)(10) to Schedule 14D-1 filed on November 13, 1995 and
incorporated herein by reference)
3.1 (a) Restated Articles of Incorporation (filed as Exhibit 1.1 to
Form S-1 Registration Statement No. 33-35642, filed June 29, 1990
and incorporated herein by reference)
(b) Articles of Amendment to Amended and Restated Articles of
Incorporation (filed as Exhibit 99.2 to Form 8-K dated August 22,
1996 and incorporated herein by reference)
3.2 (a) Amended and Restated By-Laws of the Registrant adopted as of
January 8, 1996 (filed as Exhibit 3.2(a) to Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by
reference)
31
<PAGE>
Exhibit
No.
(b) Amendment No. 1 to Amended and Restated By-Laws of the
Registrant adopted May 21, 1996 (filed as Exhibit 3.2(b) to Form
10-K for the fiscal year ended April 30, 1996 and incorporated
herein by reference)
(c) Amendment No. 2 to Amended and Restated By-Laws of the
Registrant adopted November 20, 1996
(d) Amendment No. 3 to Amended and Restated By-Laws of the
Registrant adopted June 24, 1997
(e) A complete copy of the By-Laws as amended to date
4.1 Rights Agreement dated as of December 18, 1996 between Registrant
and Firstar Trust Company as Rights Agent (filed as Exhibit 4 to
Form 8-K dated December 18, 1996 and incorporated herein by
reference)
10.1 Post-Death Option Agreement, by and between Marquette
Electronics, Inc. and Michael J. Cudahy, dated April 6, 1992
(filed as Exhibit 10.67 to Form 10-K for the fiscal year ended
April 30, 1992 and incorporated herein by reference)
10.2 Post-Death Option Agreement, by and between Marquette
Electronics, Inc. and Warren B. Cozzens, dated April 6, 1992
(filed as Exhibit 10.68 to Form 10-K for the fiscal year ended
April 30, 1992 and incorporated herein by reference)
10.3 Amended and Restated Stock Option Plan for Employees of Marquette
Electronics, Inc. (filed as Exhibit 10.70 to Form 10-K for the
fiscal year ended April 30, 1992 and incorpo-
32
<PAGE>
Exhibit
No.
rated herein by reference)
10.4 Amendment No. 1 to Amended and Restated Stock Option Plan for
Employees of Marquette Elec tronics, Inc. adopted September 10,
1993 (filed as Exhibit 10.15 to Form 10-K for the fiscal year
ended April 30, 1994 and incorpo rated herein by reference)
10.5 Amendment No. 2 to Amended and Restated Stock Option Plan for
Employees of Marquette Elec tronics, Inc. adopted June 2, 1994
(filed as Exhibit 10.16 to Form 10-K for the fiscal year ended
April 30, 1994 and incorporated herein by reference)
10.6 Amendment No. 3 to Amended and Restated Stock Option Plan for
Employees of Marquette Elec tronics, Inc. adopted May 21, 1996
(filed as Exhibit 10.6 to Form 10-K for the fiscal year ended
April 30, 1996 and incorporated herein by reference)
10.7 Letter Agreement between the Company and Warren B. Cozzens dated
July 11, 1994 (filed as Exhibit 10.21 to Form 10-K for the fiscal
year ended April 30, 1994 and incorporated herein by reference)
10.8 Marquette Electronics, Inc. Profit Sharing and 401(K) Plan and
Trust (as restated and amend ed) dated April 10, 1994 (filed as
Exhibit 10.22 to Form 10-K for the fiscal year ended April 30,
1994 and incorporated herein by reference)
10.9 Amendment No. 1 to Marquette Electronics, Inc. Profit-Sharing and
401(k) Plan and Trust (as restated and amended) adopted on August
1, 1994 (filed as Exhibit 10.9 to Form 10-K for the fiscal year
ended April 30, 1996 and
33
<PAGE>
Exhibit
No.
incorporated herein by reference)
10.10 Amendment No. 2 to Marquette Electronics, Inc. Profit-Sharing and
401(k) Plan and Trust (as amended and restated) adopted on
February 9, 1996 (filed as Exhibit 10.10 to Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by
reference)
10.11 Amendment No. 3 to Marquette Medical Systems, Inc. Profit-Sharing
Plan and 401(k) Plan and Trust (as amended and restated) adopted
on January 30, 1997
10.12 Marquette Electronics, Inc. Directors (non-employee) Stock Option
Plan adopted August 19, 1993 (filed as Exhibit 10.23 to Form 10-K
for the fiscal year ended April 30, 1994 and incorporated herein
by reference)
10.13 Loan Agreement dated May 31, 1994 between Marquette Electronics,
Inc., M&I Marshall & Ilsley Bank and NBD Bank, N.A. (filed as
Exhibit 10.19 to Form 10-K for the fiscal year ended April 30,
1995 and incorporated herein by reference)
10.14 Marquette Electronics, Inc. Management Deferred Compensation
Plan, as adopted on Febru ary 9, 1996 (filed as Exhibit 10.13 to
Form 10-K for the fiscal year ended April 30, 1996 and
incorporated herein by reference)
10.15 Employment Agreement dated September 20, 1995 between E For M
Corporation, a wholly-owned subsidiary of the Registrant, and P.
Michael Breedlove (filed as Exhibit 10.14 to Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by
reference)
10.16 Employment Agreement dated May 14, 1996 be-
34
<PAGE>
Exhibit
No.
tween Registrant and Peter P. Tong (filed as Exhibit 10.15 to
Form 10-K for the fiscal year ended April 30, 1996 and
incorporated herein by reference)
10.17 Stock Purchase Agreement, dated July 1, 1996, between the
Registrant, E For M Corporation and Polar Vision, Inc. (filed as
Exhibit 10.16 to Form 10-K for the fiscal year ended April 30,
1996 and incorporated herein by reference)
10.18 Loan Agreement between Registrant and M & I Marshall and Ilsley
Bank, Wachovia Bank of Georgia N.A. and NBD Bank, N.A. dated
December 12, 1995 (filed as Exhibit 10.17 to Form 10-K for the
fiscal year ended April 30, 1996 and incorporated herein by
reference)
10.19 Commercial and Industrial Lease Agreement dated March 29, 1995
between Bond Street Building Co. and E For M Corporation (a whol
ly-owned subsidiary of Registrant) (filed as Exhibit 10.19 to
Form 10-K for the fiscal year ended April 30, 1996 and
incorporated herein by reference)
10.20 Standard Industrial/Commercial Single Tenant-Tenant Lease-Net
dated May 24, 1994 between Albor Properties One LP and Enhanced
Imaging Technologies, Inc. (now known as E For M Corporation)
(filed as Exhibit 10.20 to Form 10-K for the fiscal year ended
April 30, 1996 and incorporated herein by reference)
10.21 Stock Option dated June 24, 1997 issued by Registrant to Michael
J. Cudahy (filed as Exhibit 1 to Form 8-K dated July 2, 1997 and
incorporated herein by reference)
13.1 1997 Annual Report to Shareholders
35
<PAGE>
Exhibit
No.
21.1 List of subsidiaries
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated February 26, 1997 (filed on February 26, 1997) reporting the
issuance of a press release announcing a strategic alliance with Physio-
Control Corporation (Other Events).
36
<PAGE>
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.
Date: July 25, 1997
MARQUETTE MEDICAL SYSTEMS, INC.
By: /s/ Timothy C. Mickelson
---------------------------------
Timothy C. Mickelson, President
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 dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ Michael J. Cudahy Chief Executive
------------------------------ Officer, Director July 25, 1997
Michael J. Cudahy
Principal Financial Officer:
/s/ Mary M. Kabacinski Senior Vice President,
------------------------------ Chief Financial
Mary M. Kabacinski Officer, Assistant
Secretary July 25, 1997
A Majority of Directors:
/s/ Michael J. Cudahy Chief Executive
------------------------------ Officer, Director July 25, 1997
Michael J. Cudahy
/s/ Frederick G. Luber Director July 25, 1997
------------------------------
Frederick G. Luber
/s/ Timothy C. Mickelson President,
------------------------------ Director July 25, 1997
Timothy C. Mickelson
/s/ Melvin S. Newman Director July 25, 1997
------------------------------
Melvin S. Newman
</TABLE>
37
<PAGE>
EXHIBIT 3.2(c)
AMENDMENT NO. 2 TO BY-LAWS OF
MARQUETTE MEDICAL SYSTEMS, INC.
(Formerly Known as Marquette Electronics, Inc.)
(As Adopted November 20, 1996)
1. Article XI is hereby redesignated as Article XII and the
following be and is hereby adopted as Article XI of the By-Laws, to-wit:
"ARTICLE XI
-----------
Conflicts of Interest
---------------------
1. A Director shall be considered to have a conflict of
interest if:
(a) The Director has existing or potential financial or other
interests which impair or might reasonably appear to impair their
independent, unbiased judgment in the discharge of their responsibilities
to the Corporation.
(b) Directors are aware that a member of their family (which for
the purposes of this paragraph shall be a spouse, parents, siblings,
children, and any other relative if the latter resides in the same
household as the Director) has such existing or potential or other
interests.
(c) Any organization in which the Director (or member of their
family) is an officer, director, employee, member, partner, trustee, or
controlling stockholder has such existing or potential or other interests.
2. The following guidelines exist in cases where a real or
perceived conflict of interest exists:
(a) The Director shall disclose to the Board any possible
conflict of interest at the earliest practical time.
(b) No Director shall vote on any matter under consideration at a
Board or Committee meeting, in which such director has a conflict of
interest.
(c) The minutes of such meeting shall reflect that a disclosure
was made and that the Director having a conflict of interest abstained from
voting.
<PAGE>
(d) Any Director who is uncertain whether a conflict of interest
may exist in any matter may request the Board or Committee to resolve the
questions by majority vote."
3. This Amendment shall be known as Amendment No. 2 to the Amended
and Restated By-Laws of Marquette Medical Systems, Inc.
4. In all other respects, the Amended and Restated By-Laws of
Marquette Medical Systems, Inc., as adopted on January 8, 1996, and amended
by Amendment No. 1 adopted May 21, 1996, shall remain in full force and
effect.
<PAGE>
EXHIBIT 3.2(d)
AMENDMENT NO. 3 TO BY-LAWS OF
MARQUETTE MEDICAL SYSTEMS, INC.
(As Adopted June 24, 1997)
Effective as of August 13, 1997, the first sentence of Section 2 of
Article III of the Corporation's By-Laws be amended to read as follows:
"The number of directors of the Corporation shall be six (6)."
<PAGE>
EXHIBIT 3.2(e)
BY-LAWS
OF MARQUETTE MEDICAL SYSTEMS, INC.
(Formerly Known as Marquette Electronics, Inc.)
(AS AMENDED AND RESTATED AS OF JUNE 24, 1997)
ARTICLE I
---------
OFFICES
-------
The principal office of the corporation in the State of Wisconsin
shall be located in the City of Milwaukee, County of Milwaukee. The
corporation may have such other offices, either within or without the State
of Wisconsin, as the Board of Directors may designate or as the business of
the corporation may require from time to time.
The registered office of the corporation required by the
Wisconsin Business Corporation Law to be maintained in the State of
Wisconsin may be, but need not be, identical with the principal office in
the State of Wisconsin, and the address of the registered office may be
changed from time to time by the Board of Directors.
ARTICLE II
----------
SHAREHOLDERS
------------
Section 1 -- Annual Meeting.
--------- --------------
The annual meeting of the shareholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held at such time as is specified in
the notice of the meeting on either the first Friday in July of each year
or on such other date as may be fixed by the Board of Directors of the
corporation prior to the giving of the notice of the meeting. The Board of
Directors acting by resolution may postpone or reschedule any annual
meeting of shareholders.
Nominations of persons for election to the Board of Directors of
the corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (a) pursuant
to the corporation's notice of meeting, (b) by or at the direction of the
Board of Directors or (c) by any
<PAGE>
shareholder of the corporation who was a shareholder of record at the time
of giving of notice provided for in this By-Law, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
By-Law.
For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to clause (c) of the foregoing
paragraph of this By-Law, the shareholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
shareholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not less than 75 days nor more than
100 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, notice by the shareholder to be timely must be
so delivered not earlier than the 100th day prior to such annual meeting
and not later than the close of business on the later of the 75th day prior
to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes
to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations
of proxies for election of directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal
is made; (c) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (i) the
name and address of such shareholder, as they appear on the corporation's
books, and of such beneficial owner and (ii) the class and number of shares
of the corporation which are owned beneficially and of record by such
shareholder and such beneficial owner.
Notwithstanding anything in the second sentence of the preceding
paragraph to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation is increased and there
is no public announcement naming all of the nominees for Director or
specifying the size of the increased Board of Directors made by the
corporation at least 85 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this
By-Law shall also be considered timely, but only with respect to nominees
for any new
<PAGE>
positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the corporation not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the corporation.
Only such persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve as
directors and only such business shall be conducted at an annual meeting of
shareholders as shall have been brought before the meeting in accordance
with the procedures set forth in this By-Law. The chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this By-Law and, if any proposed
nomination or business is not in compliance with this By-Law, to declare
that such defective proposal shall be disregarded.
For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this By-Law, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-Law. Nothing in this By-Law shall be deemed
to affect any rights of shareholders to request inclusion of proposals in
the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 2 -- Special Meetings.
--------- ----------------
Special meetings of the shareholders for any purpose or purposes
shall be called to be held at any time upon the request of the President, a
majority of the members of the Board of Directors or of the Executive
Committee then in office or upon the written request of the holders of not
less than ten (10%) percent of all outstanding shares of the corporation.
Business transacted at all special meetings shall be confined to the
specific purpose or purposes of the persons authorized to request such
special meeting as set forth in this Section 2 and only such purpose or
purposes will be set forth in the notice of the meeting. The Board of
Directors acting by resolution may postpone or reschedule any previously
scheduled special meeting of shareholders.
Nominations of persons for election to the Board of Directors may
be made at a special meeting of shareholders at which directors are to be
elected (a) pursuant to the corporation's notice of meeting, (b) by or at
the direction of the Board of
<PAGE>
Directors or (c) by any shareholder of the corporation who is a shareholder
of record at the time of giving of notice provided for in this By-Law, who
shall be entitled to vote at the meeting and who complies with the notice
procedures set forth in this By-Law. Nominations by shareholders of persons
for election to the Board of Directors may be made at such a special
meeting of shareholders if the shareholder's notice required by the third
paragraph of Section 1 of Article I of these By-Laws shall be delivered to
the Secretary at the principal executive offices of the corporation not
earlier than the 100th day prior to such special meeting and not later than
the close of business on the later of the 75th day prior to such special
meeting or the 10th day following the day on which such public announcement
is first made of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting.
Only such persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve as
directors and only such business shall be conducted at a special meeting
of shareholders as shall have been brought before the meeting in accordance
with the procedures set forth in this By-Law. The chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this By-Law and, if any proposed
nomination or business is not in compliance with this By-Law, to declare
that such defective proposal shall be disregarded.
Notwithstanding the foregoing provisions of this By-Law, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-Law. Nothing in this By-Law shall be deemed
to affect any rights of shareholders to request inclusion of proposals in
the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 3 -- Place of Meeting.
--------- ----------------
All meetings of the shareholders shall be held at such place
within or without the state of Wisconsin as shall be fixed by the Board of
Directors from time to time.
Section 4 -- Notice of Meeting.
--------- -----------------
Written notice stating the place, day and hour of the meeting
and, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than ninety days before the date of
the meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or the officer or persons calling the meeting,
to each shareholder of record entitled to vote at such meeting. If mailed,
such notice
<PAGE>
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock
record books of the corporation, with postage thereon prepaid.
Section 5 -- Closing of Transfer Books or Fixing of
--------- ---------------------------------------
Record Date.
-----------
The Board of Directors may fix a future date as the record date
for one or more voting groups in order to determine the shareholders
entitled to notice of a shareholders meeting, to demand a special meeting,
or to vote or to take any other action. The record date may not be more
than seventy days nor less than fifteen days before the meeting or action
requiring a determination of shareholders. Except as otherwise provided by
these By-Laws, a determination of shareholders entitled to notice of or to
vote at a shareholders meeting is effective for any adjournment of the
meeting unless the Board of Directors fixes a new record date, which it
shall do if the meeting is adjourned to a date more than one hundred twenty
days after the date fixed for the original meeting. The Board of Directors
may from time to time fix in advance a date, not more than seventy days
prior to the date for the payment of any dividend, or the date for the
allotment of any rights, or the date when any change or conversion or
exchange of shares shall become effective, as a record for the
determination of the shareholders entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion, or exchange of shares, and only
such shareholders as shall be shareholders of record on the date so fixed
shall be entitled to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, notwithstanding any
transfer of any shares on the books of the corporation after any such
record date so fixed.
Section 6 -- Shareholders' List For Meeting.
--------- ------------------------------
After fixing a record date for a meeting, the corporation shall
prepare a list of the names of all its shareholders who are entitled to
notice of a shareholders meeting. The list shall be arranged by class or
series of shares and show the address of and number of shares held by each
shareholder.
The corporation shall make the shareholders' list available for
inspection by shareholders, beginning two business days after notice of the
meeting is given for which the list was prepared and continuing to the date
of the meeting, at the corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be
held. A shareholder or his or her agent or attorney may, on written
demand, inspect the list, and during regular business hours and at his or
her expense, during the period that it is available for inspection
<PAGE>
under this section copy such list, provided, however, that the
shareholder's demand to copy such list is made in good faith and for a
proper purpose, that the shareholder describes with reason able
particularity his or her purpose and that the shareholders' list that he or
she desires to copy is directly connected with his or her purpose.
The corporation will make the shareholders' list available at the
meeting, and any shareholder or his or her agent or attorney may inspect
the list at any time during the meeting or any adjournment.
Section 7 -- Quorum.
--------- ------
A majority of the outstanding shares of the corporation entitled
to vote at the meeting, represented in person or by proxy, shall constitute
a quorum at a meeting of shareholders. Though less than a quorum of the
outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
repre sented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8 -- Proxies.
--------- -------
At all meetings of shareholders, a shareholder entitled to vote
may vote by proxy appointed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary
of the corporation before or at the time of the meeting. No proxy shall be
valid after eleven months from the date of its execution, unless otherwise
provided in the proxy. Each proxy shall be revocable unless expressly
provided therein to be irrevocable and unless otherwise made irrevocable by
law.
Section 9 -- Voting of Shares.
--------- ----------------
Each outstanding share shall be entitled to one vote on each
matter submitted to a vote at the meeting of shareholders, except to the
extent that the voting rights of the shares of any class are limited or
denied by the Articles of Incorporation or by a resolution of the Board of
Directors designating a series of preferred stock. At each election for
Directors, every shareholder entitled to vote at such election shall have
the right to vote, in person or by proxy, the number of shares owned by him
for as many persons as there are Directors to be elected and for whose
election he has a right to vote, but without the right to cumulate votes.
Except with respect to the election of Directors, and unless required by
statute or determined by the chairman of the meeting to be advisable, the
vote on any question need not be by ballot. If a quorum is present at any
meeting of shareholders, the vote of the
<PAGE>
holders of a majority of the shares cast by the holders of shares entitled
to vote on the matter shall be sufficient for the transaction of any
business, except that directors shall be elected by a plurality of shares
cast by the holders of shares entitled to vote in the election.
Section 10 -- Inspectors of Election.
---------- ----------------------
Prior to each meeting of shareholders, the Board of Directors
shall appoint not more than three Inspectors, who shall not be directors or
officers of the corporation or candidates for the office of director. Such
Inspectors shall count and report to the meeting the votes cast on all
matters submitted to a vote at such meeting. In the case of failure of the
Board of Directors to make such appointments, or in the case of failure of
any Inspector so appointed to act, the chairman of the meeting shall make
such appointments or fill such vacancies. Each Inspector shall be entitled
to a reasonable compensation from the corporation for his services. The
Inspectors appointed to act at any meeting of the shareholders, before
entering upon the discharge of their duties, shall be sworn faithfully to
execute the duties of Inspectors at such meeting with strict impartiality
and according to the best of their ability, and the oath so taken shall be
subscribed by them.
Section 11 -- Voting Company's Shares.
---------- -----------------------
Shares of the corporation belonging to it shall not be voted
directly or indirectly at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but
shares held by this corporation in a fiduciary capacity may be voted and
shall be counted in determining the total number of outstanding shares at
any given time.
Section 12 -- Shares in Other Corporation's Name.
---------- ----------------------------------
Shares standing in the name of another corporation may be voted
either in person or by proxy, by the president of such corp oration or any
other officer appointed by such president. A proxy executed by any
principal officer of such other corporation or assistant thereto shall be
conclusive evidence of the signer's authority to act, in the absence of
express notice to this corpora tion, given in writing to the secretary of
this corporation, of the designation of some other person by the board of
directors or the by-laws of such other corporation.
Section 13 -- Order of Business.
---------- -----------------
The order of business of each meeting of the shareholders of the
corporation shall be determined by the chairman of the meeting. The
chairman of the meeting shall have the right and authority to proscribe
such rules, regulations and procedures and
<PAGE>
do all acts and things as are necessary or desirable for the conduct of the
meeting, including without limitation, the estab lishment of procedures for
the dismissal of business not properly presented, the maintenance of order
and safety, limitations on the time allotted to questions or comments on
the affairs of the corporation, restrictions on entry to such meetings
after the time prescribed for commencement thereof and opening and closing
of the voting polls.
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
Section 1 -- General Powers.
--------- --------------
Number. The principal officers of the Corporation shall be a
Chairman of the Board, a President and Chief Operating Officer, Vice
Presidents, Divisional Presidents, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed
by the Board of Directors. Any two or more offices may be held by the same
person except the offices of President and Secretary and the offices of
President and Vice President
Section 2 -- Number, Tenure and Qualifications.
--------- ---------------------------------
The number of directors of the corporation shall be six (6).
Each director shall hold office until the next annual meeting of
shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Wisconsin or shareholders
of the corporation.
Section 3 -- Regular Meetings.
--------- ----------------
Regular meetings of the Board of Directors shall be held without
further notice than this By-Law immediately after and at the same place, as
the annual meeting of shareholders, and each adjourned session thereof and
on the 4th Tuesday in November, February and May of each year, at the
principal offices of the corporation at the hour of 9:00 a.m. The Chairman
of the Board of the corporation may, upon not less than five (5) days
written notice to all members of the Board of Directors, provide for a
variance in the time, date or location of any such meeting.
Section 4 -- Special Meetings.
--------- ----------------
Special meetings of the Board of Directors may be called by or at
the request of the Chairman of the Board, President or any two directors.
The person or persons authorized to call special
<PAGE>
meetings of the Board of Directors may fix any place, either within or
without the State of Wisconsin, as the place for holding any special
meeting of the Board of Directors called by them.
Section 5 -- Notice.
--------- ------
Notice of any special meeting shall be given at least 48 hours
previously thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered
to the telegraph company. Whenever any notice whatever is required to be
given to any director of the corporation under the provisions of these by-
laws or under the provisions of the articles of incorpora tion or under the
provisions of any statute, a waiver thereof in writing, signed at any time,
whether before or after the time of meeting, by the director entitled to
such notice, shall be deemed equivalent to the giving of such notice. The
attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting and objects
thereat to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
Section 6 -- Quorum.
--------- ------
A majority of the number of directors fixed by Section 2 of this
Article III shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but though less than such quorum is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
Section 8 -- Vacancies.
--------- ---------
The Board of Directors may fill any vacancy (occurring by
resignation, removal or otherwise) in the board happening after any regular
annual election or any vacancy created by an increase in the authorized
number of directors until the next succeeding elec tion, by the affirmative
vote of a majority of the directors then in office, although less than a
quorum.
Section 9 -- Compensation.
--------- ------------
The Board of Directors, by affirmative vote of a majority of the
directors then in office, and irrespective of any personal
<PAGE>
interest of any of its members may establish reasonable compensa tion of
all directors for services to the corporation as directors, officers or
otherwise, or may delegate such authority to an appro priate committee.
Section 10 -- Presumption of Assent.
---------- ---------------------
A director of the corporation who is present at a meeting of the
Board of Directors or a committee thereof at which action on any corporate
matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
Section 11 -- Committees.
---------- ----------
The Board of Directors by resolution adopted by the affirmative
vote of a majority of the number of directors fixed by Section 2 of this
Article III may designate an Executive Committee, an Audit Committee, a
Human Resources Committee, a Nominating and Proxy Committee, and one or
more other committees, each committee to consist of two or more directors
elected by the Board of Directors. The Board of Directors may elect one or
more of its members as alternate members of any such committee who may take
the place of any absent member or members at any meeting of such committee,
upon request by the President or upon request by the chairman of such
meeting. Each such committee shall fix its own rules governing the conduct
of its activities and shall make such reports to the Board of Directors of
its activities as the Board of Directors may request.
Any Executive Committee which to the extent provided in said
resolution, as initially adopted, and as thereafter supple mented or
amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the powers of the
Board of Directors in the management of the business and affairs of the
corporation, except as otherwise limited by law.
Any Human Resources Committee designated by the Board of
Directors shall consist of not less than two (2) directors who shall be
neither officers nor employees of the corporation or its subsidiaries or
any person having a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment in
carrying out the responsibili ties of a director. The Human Resources
Committee shall have the responsibility for (a) authorizing the grant of
stock options under
<PAGE>
any employee stock option plan; (b) making recommendations to the Board of
Directors with respect to the salaries and bonuses to be paid to officers
of the Company and the terms and conditions of their employment; and (c)
reviewing the overall compensation plans and policies of the corporation,
fringe benefit programs and other conditions of employment and recommending
to the Board of Directors changes or modifications thereof.
Any Audit Committee designated by the Board of Directors shall
consist of not less than two (2) directors who shall be neither officers
nor employees of the corporation or its sub sidiaries or any person having
a relationship which, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. The Audit Committee shall have
responsibility to (a) review the proposal by the corporation's independent
public accountants for the audit of the corporation for the current year;
(b) recommend to the Board of Directors, for appointment by the Board, the
firm of independent public accountants to audit the books, records and
accounts of the corporation; (c) review all recommendations made by the
corporation's independent public accountants with respect to accounting
principles, accounting methods used and adequacy of systems of internal
control to be followed by the corporation and advise the Board of Directors
with respect thereto; (d) examine and make recommendations to the Board of
Directors with respect to the scope of the audit conducted by the
corporation's independent public accountants; (e) review and discuss with
the independent public accountants the scope of the audits performed by the
corporation's internal audit staff; and (f) assist the Board of Directors
in fulfilling its fiduciary respon sibilities for financial reporting and
internal accounting controls.
Any Nominating and Proxy Committee designated by the Board of
Directors shall consist of the President and such number of other
directors, not less than two, as from time to time shall be prescribed by
the Board of Directors, who shall hold office until their respective
successors are elected. The Nominating and Proxy Committee shall have the
duty and responsibility of recom mending to the Board of Directors, prior
to the annual share holders' meeting each year, the nominees for election
to the Board of Directors for whom the corporation should solicit proxies
and recommending, prior to the annual directors' meeting each year,
nominees for election as President for the ensuing year.
<PAGE>
ARTICLE IV
----------
OFFICERS
--------
Section 1 -- Number.
--------- ------
The principal officers of the corporation shall be a Chairman of
the Board, a President, a Co-President, Vice-Presi dents, a Secretary, and
a Treasurer, each of whom shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person, except the offices of President and
Secretary and the offices of President and Vice-President.
Section 2 -- Election and Term of Office.
--------- ---------------------------
The officers of the corporation to be elected by the Board of
Directors shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3 -- Removal.
--------- -------
Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment
the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment shall not of itself create
contract rights.
Section 4 -- Vacancies.
--------- ---------
A vacancy in any principal office because of death, resignation,
removal, disqualification or otherwise, shall be filled by the Board of
Directors for the unexpired portion of the term.
Section 5 -- Chairman of the Board.
--------- ---------------------
The Chairman of the Board shall be the chief executive officer of
the corporation and shall have general direction over the affairs of the
corporation, subject to the control and direction of the Board of
Directors. The Chairman shall, when present, preside as chairman at all
meetings of the shareholders and the Board of Directors. The Chairman may
call meetings of the
<PAGE>
shareholders and of the Board of Directors and of the committees whenever
he deems it necessary.
Section 6 -- President.
--------- ---------
The President shall be the chief operating officer of the
corporation and, subject to the control of the Chairman of the Board and
Board of Directors of the corporation, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
the Chairman of the Board is unavail able, preside, as Chairman, at all
meetings of the shareholders and of the Board of Directors. He may sign,
with the Secretary or any other proper officer of the corporation thereunto
authorized by the Board of Directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these by-laws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or
executed; and in general shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Chairman of the
Board or Board of Directors from time to time.
Section 7 -- Co-President.
--------- ------------
In the absence of the President, or in the event of his death,
inability or refusal to act, the Co-President shall perform the duties of
the President, and when so acting, shall have all of the powers of and be
subject to all of the restrictions upon the President. He shall also
perform such duties as may be delegated to him by the President or Chairman
of the Board or as may be prescribed by the Board of Directors, from time
to time.
Section 7 -- The Vice-Presidents.
--------- -------------------
In the absence of the President or in the event of his death,
inability or refusal to act, the Vice-President (or in the event there be
more than one Vice-President, the Vice-Presidents in the order designated
at the time of their election, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice-President may sign, with the
Secretary or an Assistant Secretary certificates for shares of the
corporation; and shall perform such other duties as from time to time may
be assigned to him by the President or by the Board of Directors.
Section 8 -- The Division Presidents.
--------- -----------------------
<PAGE>
One or more Division Presidents, each of whose division shall be
identified as part of his title, may be elected to manage and operate a
business division of the Corporation recognized by the Board of Directors
and shall report to the President and Chairman of the Board.
Section 9 -- The Secretary.
--------- -------------
The Secretary shall: (a) keep the minutes of the share holders'
and of the Board of Directors' meetings in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with
the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the
seal of the corpora tion is affixed to all documents the execution of which
on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the postoffice address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) sign with the
President, or a Vice-President, certificates for shares of the corporation,
the issuance of which shall have been authorized by resolution of the Board
of Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office
of Secretary and such other duties as from time to time may be assigned to
him by the President or by the Board of Directors.
Section 10 -- The Treasurer.
---------- -------------
If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine. He shall:
(a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or
other depositaries as shall be selected in accordance with the provisions
of Article V of these By-Laws; and (b) in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
Section 11 -- Assistant Secretaries and Assistant Treasurers.
---------- ----------------------------------------------
The Assistant Secretaries, when authorized by the Board of
Directors, may sign with the President or a Vice-President certificates for
shares of the corporation the issuance of which shall have been authorized
by a resolution of the Board of Directors. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the
faithful discharge of
<PAGE>
their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary or the Treasurer, respectively, or by the President or the Board
of Directors.
Section 12 -- Salaries.
---------- --------
The salaries of the officers shall be fixed from time to time by
the Board of Directors and no officer shall be prevented from receiving
such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
---------
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
--------------------------------------
Section 1 -- Contracts.
--------- ---------
The Board of Directors may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances.
Section 2 -- Loans.
--------- -----
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by
or under the authority of a resolution of the Board of Directors. Such
authorization may be general or confined to specific instances.
Section 3 -- Checks, Drafts, etc.
--------- -------------------
All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the
corporation, shall be signed by such officer or officers, agent or agents
of the corporation and in such manner as shall from time to time be
determined by or under the authority of resolution of the Board of
Directors.
Section 4 -- Deposits.
--------- --------
All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as may be selected by or under the
authority of the Board of Directors.
ARTICLE VI
----------
<PAGE>
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
Section 1 -- Certificates for Shares.
--------- -----------------------
The corporation shall deliver certificates representing all
shares to which shareholders are entitled. Such certificates shall be
numbered and shall be entered on the books of the corporation as they are
issued and shall be signed by the President or Vice President and the
Secretary or an Assistant Secretary of the corporation, and may be sealed
with the seal of the corporation or a facsimile thereof. The signatures of
the President or Vice President, Secretary or Assistant Secretary may be
facsimiles, if the certificate is countersigned by a transfer agent or
registered by a registrar, either of which is other than the corporation
itself or an employee of the corporation. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer at the date of its issuance. There shall be set forth upon the face
or back of the certificate a statement that the corporation will furnish to
any stockholder upon request and without charge, a summary of the
designations, preferences, limitations and relative rights applicable to
each class and, if the corporation is authorized to issue any series, the
variations in rights, preferences and limitations between the shares of
each such series so far as the same have been fixed and determined and the
authority of the Board of Directors to fix and determine the relative
rights and preferences of subsequent series. Each certificate representing
shares shall state upon the face thereof that the corporation is organized
under the laws of the State of Wisconsin, the name of the person to whom
issued, the number and class and the designation of the series, if any,
which such certificate represents and the par value of each share
represented by such certificate or a statement that the shares are without
par value. No certificate shall be issued for any share until the
consideration therefor has been fully paid.
Section 2 -- Transfer Agent.
--------- --------------
The corporation may maintain one or more transfer offices or
agencies, each under control of a Transfer Agent, where the shares of the
corporation may be transferable. The corpora tion may maintain one or more
registry offices or agencies, each under the control of a Registrar, where
the shares may be reg istered. The board of directors may make such
additional rules and regulations as it may deem expedient concerning the
issue, transfer, and registration of certificates for shares of the
corporation.
Section 3 -- Transfer of Shares.
--------- ------------------
<PAGE>
Transfer of shares of the corporation shall be made only on the
stock transfer books of the corporation by the holder of record thereof or
by his legal representative, who shall furnish proper evidence of authority
to transfer, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with any
authorized Transfer Agent, and on surrender for cancellation of the certifi
cate for such shares. The person in whose name shares stand on the books
of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes.
Section 4 -- Lost, Stolen or Destroyed Certificates.
--------- --------------------------------------
The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certifi cates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors, in
its discretion and as a condition precedent to the issuance thereof, may
require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 5 -- Stock Regulations.
--------- -----------------
The Board of Directors shall have the power and author ity to
make all such further rules and regulations not incon sistent with the
statutes of the State of Wisconsin as they may deem expedient concerning
the issue, transfer and registration of certificates representing shares of
the corporation.
ARTICLE VII
-----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the first day
of May and end on the thirtieth day of April in each year.
ARTICLE VIII
------------
DIVIDENDS
---------
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares
<PAGE>
in the manner and upon the terms and conditions provided by law and its
articles of incorporation.
ARTICLE IX
----------
SEAL
----
The Board of Directors shall provide a corporate seal which shall
be circular in form and shall have inscribed thereon the name of the
corporation and the words, "Corporate Seal, Wisconsin."
ARTICLE X
---------
INDEMNIFICATION
---------------
The corporation shall indemnify each officer and director of the
corporation to the full extent provided by applicable law and, in addition,
in accordance with any other rights such persons may have under a
resolution of the share holders of the corporation, a resolution of its
Board of Directors or under the corporation's Articles of Incorporation, as
amended and restated from time to time, or pursuant to any insurance
policy, an agreement or otherwise. Any person entitled to indemnification
or to the reimbursement or advancement of expenses hereunder may elect, to
the extent permitted by law, to have the right of indemnification (or
reimbursement or advancement of expenses) interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or
events giving rise to the action, suit or proceeding or on the basis of the
applic able law in effect as of the date these Amended and Restated By-Laws
are adopted. The foregoing rights to indemnification shall be in addition
to any other rights such person may have under a resolution of the
shareholders of the corporation, a resolution of its directors, the
Articles of Incorporation of the corporation, as amended and restated from
time to time, common law, any insurance policy, any written agreement or
otherwise.
ARTICLE XI
----------
Conflicts of Interest
---------------------
1. A Director shall be considered to have a conflict of interest
if:
(a) The Director has existing or potential financial or
<PAGE>
other interests which impair or might reasonably appear to impair their
independent, unbiased judgment in the discharge of their responsibilities
to the Corporation.
(b) Directors are aware that a member of their family (which for
the purposes of this paragraph shall be a spouse, parents, siblings,
children, and any other relative if the latter resides in the same
household as the Director) has such existing or potential or other
interests.
(c) Any organization in which the Director (or member of their
family) is an officer, director, employee, member, partner, trustee, or
controlling stockholder has such existing or potential or other interests.
2. The following guidelines exist in cases where a real or
perceived conflict of interest exists:
(a) The Director shall disclose to the Board any possible
conflict of interest at the earliest practical time.
(b) No Director shall vote on any matter under consideration at a
Board or Committee meeting, in which such director has a conflict of
interest.
(c) The minutes of such meeting shall reflect that a disclosure
was made and that the Director having a conflict of interest abstained from
voting.
(d) Any Director who is uncertain whether a conflict of interest
may exist in any matter may request the Board or Committee to resolve the
questions by majority vote.
ARTICLE XII
-----------
AMENDMENTS
----------
Section 1 -- Board of Directors.
--------- ------------------
The Board of Directors may from time to time, by vote of a
majority of its members, adopt, amend or repeal any and all of the By-Laws
of this corporation except such By-Laws as may have been adopted by the
subscribers or Shareholders of the corpora tion.
Section 2 -- Shareholders.
--------- ------------
The Shareholders may from time to time, by vote of a majority,
adopt, amend or repeal any and all of the By-Laws of the corporation.
<PAGE>
EXHIBIT 10.11
Third Amendment to Marquette Medical Systems, Inc. Profit-Sharing and
401(k) Plan and Trust (as amended and restated)
WHEREAS, effective April 30, 1993, the Corporation, by resolution of
its Board of Directors, adopted the Marquette Electronics, Inc. Profit-
Sharing and 401(k) Plan and Trust (as amended and restated) (the "Plan");
and
WHEREAS, on August 23, 1996, the corporate name of the Corporation was
changed from Marquette Electronics, Inc. to Marquette Medical Systems,
Inc.; and
WHEREAS, the Plan has been amended by Amendment Nos. 1 and 2,
respectively, adopted on August 1, 1994 and February 19, 1996; and
WHEREAS, the Board of Directors of the Corporation, acting through its
Executive Committee, wishes to further amend the Plan effective as of the
date hereof;
NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended,
effective January 30, 1997, in the following respects:
A. ARTICLE IX be and is hereby amended by adding thereto Section 9.6
to read as follows:
"9.6 Age 60 Withdrawal and Diversification Alternatives. A
Participant who is both age 60 and has completed 5 or more Years of
Service (determined in accordance with section 3.3(a)(2)) may withdraw
all or any portion of his Account, and/or may direct the liquidation
of all or any portion of his Employer Stock Account and reinvestment
of such amounts in any other investment accounts available under the
Plan.
Withdrawals from the Employer Stock Fund may, at the
Participant's election, be made in cash or in kind.
Liquidation elections shall be subject to the rules in section
7.3(c), without regard to the 6.25% and 25% of Account limitations
therein.
Withdrawals shall be subject to the rules of section 9.4, without
regard to the limitations based upon the source or timing of
contributions giving rise to the Account, the percentage of the
Account or the value of the Account.
<PAGE>
In light of initial implementation of this provision, eligible
Participants will be given the opportunity to exercise their rights
hereunder during February and March of 1997 in addition to the times
normally applicable, in accordance with the rules of uniform and
nondiscriminatory application adopted by the Employer."
B. In all other respects, the Plan, as amended by Amendment Nos. 1
and 2, shall remain in full force and effect.
<PAGE>
EXHIBIT 10.21
STOCK OPTION
------------
This Stock Option is granted as of June 24, 1997 by MARQUETTE MEDICAL
SYSTEMS, INC., a Wisconsin corporation ("Company"), to MICHAEL J. CUDAHY
("Cudahy"), pursuant to resolutions adopted by the Board of Directors of
the Company on May 28, 1997.
In order to give Cudahy an incentive and to induce Cudahy to
remain in the employ of the Company, and as an active member of its Board
of Directors, the Company hereby grants to Cudahy an option to purchase,
from time to time, all or any part of a total of Two Hundred Fifty Thousand
(250,000) Class A Common Shares, Ten Cent ($.10) par value, at a price of
$20.63 per share, upon the following terms and conditions:
1. The term of the option shall be for ten (10) years from the date
hereof, and it shall expire on May 27, 2007 unless sooner terminated as
hereinafter provided.
2. At any time or times (but in no event after the above expiration
date or prior termination of this option), Cudahy may exercise this option,
in whole or in part.
(a) Exercise may only be made in multiples of one thousand
(1,000) shares.
(b) This option shall be exercised only by timely signed written
notice delivered to the Company's Secretary or his office, in terms of the
prescribed "Exercise of Option" form attached as Exhibit "A", specifying
the number of shares and accompanied by payment, in cash or by check, of
the full option purchase price therefor and any amount required to be
withheld by the Company for Federal, state and/or local tax purposes.
(c) The obligation of the Company to sell and deliver shares upon
the due exercise of this option shall be subject to: (I) all applicable
laws, rules and regulations and to such approvals of any governmental
agencies as may be required, including but not by way of limitation, the
effectiveness of a Registration Statement under The Securities Act of 1933,
as amended, or the availability of an exemption from registration under the
said Act, whichever may be deemed necessary or appro priate by counsel for
the Company; and (ii) the satisfaction of all stock exchange or NASDAQ
requirements, if any, necessary to accomplish the listing, complete the
listing or qualify for trading upon which the shares of the Company may be
listed, or NASDAQ as the case may be.
<PAGE>
3. This option, to the extent not then already exercised or
otherwise terminated or expired, shall terminate on the one hundred
eightieth (180th) day following the effective date of the last to occur of
(i) Cudahy's death or termination of employment with the Company and (ii)
such time as he no longer serves as a Director of the Company.
<PAGE>
4. This option is not transferable other than by Will or the laws of
descent and distribution, may be exercised during the life of Cudahy only
by Cudahy personally, and after Cudahy's death, only to the extent, if any,
as provided in Paragraph 3 hereof. Any attempted transfer by Cudahy
(voluntarily or by operation of law) shall be null and void, and this
option shall then become null and void.
5. Neither this option, shares of stock issued upon the exercise of
it, any excess of market value over option price, nor any other rights,
profits, values or interests resulting from the granting of this option
shall be considered as "compensation" for purposes of any present or future
benefit plan of the Company.
6. In the event of any stock split, stock dividend, combination of
shares or other capital reorganization or reclassi fication of the Company,
which materially affects the value of the Class A Common Shares,
appropriate adjustment in the number of shares subsequent to this option or
to the option price per share, or both, shall be made; provided that a
stock dividend in the amount equal to five percent (5%) or less shall not
be deemed to materially affect the value of shares subject to this option.
If the Company shall propose to merge into or consolidate with any other
corporation or to enter into an agreement to sell substantially all of its
assets, the extent not previously exercised within thirty (30) days
following execution of the Agreement. To the extent that the option remains
unexercised after such thirty (30) day period, the option shall be void and
without further force or effect.
7. The Company hereby represents and warrants to Cudahy, that it has
reserved and will at all times while this option is in force, have
available sufficient shares to fulfill this option.
MARQUETTE MEDICAL SYSTEMS, INC.
By: /s/ Timothy C. Mickelson
-------------------------------------
President
<PAGE>
EXHIBIT "A"
President
MARQUETTE MEDICAL SYSTEMS, INC.
8200 West Tower Avenue
Milwaukee, WI 53223
RE: Option Dated June 24, 1997
Dear Sir:
I hereby exercise the above Option to the extent of _____ Class A
Common Shares of MARQUETTE MEDICAL SYSTEMS, INC., at the option price of
$________________ per share, in accordance with the terms and conditions of
the aforesaid Option.
I hereby certify that I intend by this exercise of such Option to
acquire such shares for purchase of investment and that I have no intention
of reselling them after I have acquired them or upon the acquisition of
such shares, to dispose of other shares of the Company held by me;
provided, however, that this representation shall expire upon the
registration of such shares so acquired or to be acquired under The
Securities Act of 1933.
Dated:__________________, ______.
_______________________________________
Michael J. Cudahy
<PAGE>
ACCEPTANCE
----------
I hereby accept the above "Stock Option" upon the terms and conditions
therein stated.
In consideration thereof, I hereby covenant and agree:
1) That except as otherwise provided in the above Option, my rights,
interests and benefits thereunder are personal to me and may not
be assigned, transferred or pledged by me in any way, voluntarily
or by operation of law.
2) That this agreement shall be binding upon me, my heirs, legatees,
executors and administrators, and shall inure to the benefit of
and be binding upon the Company, its successors and assigns.
3) That as to any shares acquired by me under the above Option, I
hereby irrevocably waive and relinquish any rights that I may
have, as a shareholder of the Company, under The Business
Corporation Act of Wisconsin, to examine, review, obtain or make
copies of books or records of the Company.
4) That except to the extent set forth below, if at all, there are
no agreements, commitments or understandings with respect to my
continued employment by the Company, verbal or written, nor shall
any be implied from the terms of the above Option.
Dated this 24th day of June, 1997.
/s/ Michael J. Cudahy
----------------------------------------
Michael J. Cudahy
<PAGE>
EXHIBIT 13.1
[ANNUAL SHAREHOLDER REPORT]
MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
APRIL 30, 1997 AND 1996 (Dollars In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
ASSETS 1997 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,704 $ 2,890
Accounts receivable, less allowances of $4,164 and $6,430 140,136 138,455
Inventories 110,779 106,168
Prepaid expenses and other 4,850 5,543
Deferred income tax benefits 8,304 7,904
Total current assets 266,773 260,960
- ------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Land and improvements 19,757 23,669
Buildings 43,528 43,579
Equipment 85,321 82,896
Construction in progress 7,371 458
155,977 150,602
Less- Accumulated depreciation 58,985 53,826
Net property and equipment 96,992 96,776
- ------------------------------------------------------------------------------------------
OTHER ASSETS:
Goodwill, less accumulated amortization of $9,828 and $6,635 39,984 45,882
Other intangibles, less accumulated amortization of $2,945 and $648 16,547 20,587
Cash surrender value and other 8,036 7,513
Total other assets 64,567 73,982
Total assets $428,332 $431,718
- ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated balance sheets.
- ------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
CURRENT LIABILITIES: -------- --------
Amounts due to bank $ 11,114 $ 7,101
Notes payable to bank 30,422 28,822
Current maturities of long-term debt -- 3,122
Accounts payable 28,674 31,764
- ------------------------------------------------------------------------------------------
Accrued liabilities-
Payroll related expenses 22,910 22,014
Warranty 6,191 6,475
Other 18,280 28,465
Total current liabilities 117,591 127,763
LONG-TERM DEBT, less current maturities 57,000 81,254
DEFERRED INCOME TAXES 16,814 21,404
PENSION AND OTHER LONG-TERM LIABILITIES 45,727 45,372
CLASS A COMMON STOCK UNDER REPURCHASE AGREEMENTS (NOTE 10) 8,000 8,000
SHAREHOLDERS' EQUITY:
- ------------------------------------------------------------------------------------------
Class A Common Stock, $.10 par value, 30,000,000 shares authorized,
17,602,407 and 16,060,311 shares issued 1,760 1,606
Class C Common Stock, $.01 par value, 50,000,000 shares authorized,
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
zero and 26,250,000 shares issued -- 263
Additional paid-in capital 52,890 31,569
Retained earnings 147,343 126,152
Treasury stock, 18,900 shares, at cost (312) --
Cumulative translation adjustment (10,481) (3,665)
Class A Common Stock under repurchase agreements (Note 10) (8,000) (8,000)
Total shareholders' equity 183,200 147,925
Total liabilities and shareholders' equity $428,332 $431,718
- ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated balance sheets.
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995 (Dollars In Thousands Except Per Share Data)
1997 1996 1995
<S> <C> <C> <C>
NET SALES $543,317 $416,293 $342,176
COST OF SALES 274,155 214,947 167,130
Gross profit 269,162 201,346 175,046
ENGINEERING EXPENSES 48,106 37,307 30,716
SELLING EXPENSES 138,044 105,259 85,072
GENERAL AND ADMINISTRATIVE EXPENSES 44,088 32,880 25,362
RESTRUCTURING EXPENSES -- 3,956 --
WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH & DEVELOPMENT -- 35,700 --
Total operating expenses 230,238 215,102 141,150
Operating income (loss) 38,924 (13,756) 33,896
INTEREST EXPENSE 8,434 4,386 2,973
OTHER EXPENSE (INCOME), net (3,604) (1,162) (107)
Income (loss) before provision for income taxes 34,094 (16,980) 31,030
PROVISION FOR INCOME TAXES 12,903 7,888 11,473
NET INCOME (LOSS) $ 21,191 $(24,868) $ 19,557
- -----------------------------------------------------------------------------------------
PER CLASS A COMMON SHARE:
Net income (loss) $ 1.29 $ (1.53) $ 1.21
The accompanying notes are an integral part of
these consolidated statements.
- -----------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995 (Dollars In Thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 1995
<S> <C> <C> <C>
Net income (loss) $ 21,191 $ (24,868) $ 19,557
- -------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation and amortization 22,026 12,042 14,378
Write-off of acquired in-process research & development -- 35,700 --
Deferred income taxes (2,540) (634) 826
Changes in assets and liabilities-
Accounts receivable (4,810) 992 364
Inventories (7,373) 2,379 (7,037)
Prepaid expenses and other assets (703) 6,497 (675)
Accounts payable and accrued liabilities (928) (8,123) 8,806
Net cash provided by operating activities 26,863 23,985 36,219
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (18,211) (11,399) (15,124)
Purchase of E for M Corporation and Corometrics
Medical Systems, Inc., net of cash acquired -- (89,171) (70,045)
Net cash used in investing activities (18,211) (100,570) (85,169)
- --------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) from notes payable to bank (1,124) 3,005 14,737
Proceeds from issuance of long-term debt -- 90,000 45,000
Payments on long-term debt (26,911) (17,000) (37,003)
Proceeds from issuance of common stock 25,484 1,393 1,110
Purchase of treasury stock (4,643) -- --
Net cash (used in) provided by financing activities (7,194) 77,398 23,844
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (1,644) (1,253) 626
Net decrease in cash and cash equivalents (186) (440) (24,480)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,890 3,330 27,810
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,704 $ 2,890 $ 3,330
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
- ------------------------------------------------------------------------------------------
MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1997, 1996 AND 1995 (Dollars in Thousands)
Class A Class C
Common Stock Common Stock Treasury Stock Additional
<S> <C> <C> <C> <C>
Cumulative
Paid-In Retained Translation
Shares Amount Shares Amount Shares Amount Capital Earnings Adjustment
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, April 30, 1994 15,852,355 $1,585 26,250,000 $ 263 -- $ -- $ 25,590 $131,463 $ (1,480)
Issuance of common stock
under option 94,250 9 -- -- -- -- 1,101 -- --
Cumulative translation
adjustment -- -- -- -- -- -- -- -- 626
Other -- -- -- -- -- -- 179 -- --
Net income -- -- -- -- -- -- -- 19,557 --
BALANCE, April 30, 1995 15,946,605 $1,594 26,250,000 $ 263 -- $ -- $ 26,870 $151,020 $ (854)
Issuance of common stock
under option 113,706 12 -- -- -- -- 1,381 -- --
Cumulative translation
adjustment -- -- -- -- -- -- -- -- (2,811)
Conversion of E for M stock
options into Marquette
options -- -- -- -- -- -- 3,083 -- --
Other -- -- -- -- -- -- 235 -- --
Net loss -- -- -- -- -- -- -- (24,868) --
BALANCE, April 30, 1996 16,060,311 $1,606 26,250,000 $ 263 -- $ -- $ 31,569 $126,152 $ (3,665)
Issuance of common stock
in offering 1,373,422 137 -- -- -- -- 23,471 -- --
Issuance of common stock
under option 168,674 17 -- -- -- -- 1,859 -- --
Purchase of treasury stock -- -- -- -- (281,400) (4,643) -- -- --
Cumulative translation
adjustment -- -- -- -- -- -- -- -- (6,816)
Conversion of Class C stock
into Class A stock -- -- (26,250,000) (263) 262,500 4,331 (4,069) -- --
Other -- -- -- -- -- -- 60 -- --
Net income -- -- -- -- -- -- -- 21,191 --
BALANCE, April 30, 1997 17,602,407 $1,760 -- $ -- (18,900) $ (312) $ 52,890 $147,343 $(10,481)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The accompanying notes are an integral part of these consolidated statements.
MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997, 1996 AND 1995 (Dollars In Thousands Except Per Share Data)
(1) Nature of Operations-
Marquette Medical Systems, Inc. (the "Company", formerly known as Marquette
Electronics, Inc.) is a worldwide leader in the development and manufacture
of medical equipment and integrated systems for patient monitoring and
diagnostic cardiology applications. The Company also develops clinical
information systems, designed to be integrated with medical equipment,
consisting of hardware and software used by integrated health care delivery
networks and individual hospitals to electronically acquire, record, store,
analyze and distribute patient medical data. The Company's products are
used principally in critical and intensive care units, operating and
recovery rooms, step-down units, labor and delivery units, cardiology
departments, cardiac catheterization laboratories and related areas of
acute care hospitals. In addition, the Company's products are increasingly
being used in smaller hospitals, medical clinics, outpatient surgery
centers, physician offices and homes. The Company covers the United States
market, most of Western Europe and Australia through its own sales force.
The remainder of the international market is served by dealers.
(2) Summary of Significant Accounting Policies-
(a) Basis of consolidation-
The consolidated financial statements include the accounts of
Marquette Medical Systems, Inc. and its foreign and domestic
subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
(b) Revenue recognition-
Revenue is recognized on an accrual basis when equipment and supplies
are shipped. Revenue for service contracts is recognized over the term
of the contract, typically twelve months. Costs related to service
contracts are expensed as incurred.
(c) Supplemental disclosure of cash flow information-
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996 1995
<S> <C> <C> <C>
Cash paid during the year for-
Interest $ 8,059 $4,153 $ 2,911
Income taxes $13,409 $9,789 $11,523
</TABLE>
The Company purchased all of the capital stock of E for M Corporation and of
Corometrics Medical Systems, Inc. for $90,333 and $70,766, in fiscal 1996 and
1995, respectively.
<TABLE>
<CAPTION>
In conjunction with the acquisition, liabilities were assumed as follows:
<S> <C> <C> <C>
Year Ended April 30,
1997 1996 1995
Fair value of assets acquired
(including goodwill) $ -- $215,524 $ 78,729
Cash paid for the capital stock -- 90,333 70,766
Stock options converted -- 3,083 --
Liabilities assumed $ -- $122,108 $ 7,963
(d)Inventories-
</TABLE>
<PAGE>
Inventories consist of the following:
<TABLE>
April 30,
1997 1996
<S> <C> <C>
Raw materials and component parts $ 31,629 $ 35,716
Work-in-process and finished goods 56,434 45,869
Inventory on loan or consignment 22,716 24,583
$110,779 $106,168
</TABLE>
<PAGE>
For its domestic inventories (representing 72% and 61% of total inventories at
April 30, 1997 and 1996, respectively), the Company employs the last-in, first-
out (LIFO) cost method. The first-in, first-out (FIFO) cost method is used for
all remaining inventories. If the FIFO cost method had been used for domestic
inventories instead of the LIFO cost method, the carrying value assigned to
inventories would have been $2,206 and $1,962 less at April 30, 1997 and 1996,
respectively.
(e) Property and equipment-
Property and equipment, along with improvements that significantly
extend the useful life of existing assets, are carried at cost.
Depreciation is provided on the straight-line method over the
estimated useful lives of the assets which range from 15-20 years for
land improvements, 40-50 years for buildings and 3-7 years for
equipment.
(f) Engineering expenses-
Engineering expenses represent research and development costs and are
charged to operations as incurred. The Company also charged to
operations $35,700 related to the write-off of acquired in-process
research and development attributable to the E for M acquisition in
fiscal 1996. See Note 3 for further discussion of purchased research
and development costs.
(g) Advertising costs-
Advertising costs are charged to operations as incurred. Such charges
were $3,541, $2,260 and $1,691 in fiscal 1997, 1996 and 1995,
respectively.
(h) Cash and cash equivalents-
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
(i) Foreign currency-
Asset and liability accounts of the Company's foreign operations are
translated at the current exchange rate, and income and expense
accounts are translated at the average of the monthly exchange rates.
Gains and losses resulting from the translation of foreign currency
financial statements are classified as a separate component of
shareholders' equity.
Foreign currency transaction gains (losses) totalling $1,811, $744 and $124 are
included in other income in the consolidated statements of income for fiscal
1997, 1996 and 1995, respectively.
As a hedge against foreign accounts payable, the Company at times has entered
into various forward exchange contracts to exchange foreign currencies for
United States dollars at a fixed contract rate. Market value gains and losses
resulting from these contracts are recognized in the consolidated statements of
income and offset foreign exchange gains or losses on the foreign payables at
their maturity date. As of April 30, 1997, the Company has three such contracts
to exchange various foreign currencies for a total contract amount of $2,296 and
a maturity date of May 30, 1997. The carrying value of these contracts
approximates fair value.
(j) Net income per Class A
common share-
Class C Common Stock participates in income with Class A Common Stock
in the ratio of 1:100. In December, 1996, all 26,250,000 outstanding
shares of the Company's Class C common shares, $0.01 par value, were
<PAGE>
exchanged for 262,500 shares of Class A common stock.
The weighted average shares for calculating net income per Class A
common share is equal to the sum of the weighted average number of
shares of Class A Common Stock outstanding and 1/100 of the weighted
average number of shares of Class C Common Stock outstanding during
the year. Such weighted average shares were 16,452,000, 16,254,000 and
16,172,000 for fiscal 1997, 1996 and 1995, respectively.
In March, 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128 "Earnings per Share." The Company will adopt this
statement in fiscal 1998. However, the pro forma earnings per share
for fiscal 1997, 1996 and 1995 under this statement would have been as
follows:
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996 1995
<S> <C> <C> <C>
Per share amounts
Basic EPS as reported $1.29 $(1.53) $1.21
Effect of SFAS No. 128 (.02) -- (.02)
Diluted EPS as restated $1.27 $(1.53) $1.19
(k) Goodwill-
</TABLE>
The excess of the purchase cost over the fair value of net assets
acquired is being amortized over a range of 15-20 years on a straight-
line basis. The Company continually evaluates whether later events and
circumstances have occurred that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company uses
an estimate of the related business segment's discounted net cash
flows over the remaining life of the goodwill in measuring whether the
goodwill is recoverable. Goodwill (net of accumulated amortization)
was $39,984 and $45,882 at April 30, 1997 and 1996, respectively.
Amortization of goodwill was $3,193 in fiscal 1997, $2,453 in fiscal
1996, and $1,871 in fiscal 1995. See Note 3 for further discussion
related to the goodwill attributable to the E for M and Corometrics
acquisitions.
In March, 1995, FASB issued SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", which addresses accounting for the impairment of long-
lived assets that either will be held and used in operations or that
will be disposed of. The Company adopted this statement on May 1, 1996
with no material impact on the financial position or results of
operations of the Company.
(l) Use of estimates-
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.
(m) Reclassification of prior year amounts-
Certain prior year amounts have been reclassified to conform with
current year presentations.
(3) Acquisition of Corometrics Medical Systems, Inc. and E for M Corporation-
On May 31, 1994, the Company acquired 100% of the common stock of
Corometrics Medical Systems, Inc. ("Corometrics"), a manufacturer of fetal
monitors and related products. The purchase price was approximately $70,800
and was paid in cash. Related to this purchase, the Company borrowed
$49,200 under a bank loan
<PAGE>
agreement. As of April 30, 1996, these borrowings have been paid in full.
The acquisition has been accounted for as a purchase, and the excess of the
purchase price over the fair value of net assets acquired has been
allocated to goodwill. The value of such goodwill is $23,230.
Effective January 1, 1996, the Company acquired 100% of the common stock of
E for M Corporation ("E for M"), an international medical equipment,
software and supplies company serving patient monitoring and cardiology,
which includes cardiac catheterization and electrophysiology laboratories.
The purchase price was approximately $93,400 and was paid in cash and
through the issuance of stock options. The Company converted outstanding
options for E for M stock into options for Marquette stock as part of the
transaction. The fair value of the converted options was $3,083. Related to
this purchase, the Company borrowed $90,000 under bank loan agreements
payable periodically over the next five years. The acquisition has been
accounted for as a purchase and the excess of the purchase price over the
fair value of the net assets acquired has been allocated to goodwill. The
value of such goodwill is $26,022. In addition, the Company acquired
intangible assets related to in-process research and development (R&D),
product technologies and tradenames with values of $35,700, $12,672 and
$8,468, respectively. The acquired in-process R&D was entirely written-off
during the year. The remaining intangibles have estimated useful lives
ranging from 7 to 40 years.
In connection with the acquisition, the Company implemented a restructuring
plan for the purpose of integrating the E for M operation into the
Company's existing operations. This restructuring plan included
consolidation of facilities as well as a reduction in the number of
employees required for the combined operations. The costs expected to be
incurred with respect to this restructuring plan were recorded as
liabilities of E for M which were assumed in the purchase transaction. The
total restructuring charges attributable to E for M were $10,120, of which
$8,447 was estimated at the time of the acquisition in fiscal 1996. An
additional $1,673 was recorded in fiscal 1997 as a change in estimate. The
total charges include $7,205 of severance costs, $992 of dealer termination
costs and $1,923 of facility closing, legal and other costs.
As of April 30, 1997 and 1996, $1,537 and $7,662, respectively, of the
restructuring charges remained in "Other current liabilities" in the
Consolidated Balance Sheets. Unaudited pro-forma results of operations,
assuming the acquisition of both Corometrics and E for M as of May 1, 1994,
and the $35,700 write-off of acquired in-process R&D in fiscal 1996, would
be as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
1996 1995
<S> <C> <C>
Net Sales $540,936 $541,138
Net Income (Loss) (27,430) 11,493
Net Income (Loss) Per Class
A Common Share (1.69) .71
</TABLE>
(4) Income Taxes-
Deferred income taxes are recorded to reflect the tax consequences on
future years on differences between the tax basis of assets and liabilities
and their financial reporting amounts at fiscal year end. Deferred tax
expense is the result of changes in deferred tax assets and liabilities.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996 1995
<S> <C> <C> <C>
Current-
Federal $13,069 $7,692 $ 8,609
State 1,990 1,072 1,547
Foreign 384 (242) 491
15,443 8,522 10,647
Deferred (2,540) (634) 826
$12,903 $7,888 $11,473
</TABLE>
<PAGE>
A reconciliation of the statutory Federal income tax rate to the consolidated
effective income tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996 1995
<S> <C> <C> <C>
Statutory Federal income tax rate 35.0% (35.0)% 35.0%
State and local income taxes, net of Federal income
tax benefit 3.8 4.1 3.4
Tax credits (0.9) (0.6) (1.9)
Foreign tax rate differences and foreign tax
loss utilization (1.5) 7.4 0.2
FSC benefit (1.7) (2.7) (1.4)
Purchased R&D -- 73.6 --
Goodwill 1.3 0.8 --
Other 1.8 (1.1) 1.7
Effective income tax rate 37.8% 46.5% 37.0%
</TABLE>
Temporary differences which give rise to the deferred tax assets and liabilities
at April 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
April 30,
1997 1996
<S> <C> <C>
Short-term deferred tax assets (liabilities):
Net operating loss carryforward $ 16,638 $ 18,230
Employee benefits 3,890 3,330
Warranty reserve 1,448 1,350
Inventories 284 (513)
Restructuring reserve -- 4,371
Bad debt reserve 177 201
Capital loss carryforward 167 532
Deferred revenue 427 --
Other 357 406
Valuation allowance (15,084) (20,003)
$ 8,304 $ 7,904
Long-term deferred tax assets (liabilities):
Tax Basis Difference of Fixed Assets $ (6,933) $ (8,724)
Tax Basis Difference of Intangible Assets (10,428) (12,199)
Other 547 (481)
$(16,814) $(21,404)
</TABLE>
(5) Notes Payable to Bank-
The Company has an unsecured line of credit with a bank whereby it may
borrow up to $25,000. As of April 30, 1997, the borrowings outstanding are
$8,000. Standby letters of credit of $292 reduce the available credit to
$16,708 as of April 30, 1997.
The Company has loan authorizations and overdraft facilities with various
banks whereby it may borrow up to $45,336 (or Eurocurrency equivalent) to
be used for general purposes. As of April 30, 1997, the borrowings
outstanding are $22,422. Outstanding bank guarantees of $5,393 reduce the
available credit to $17,521 as
<PAGE>
of April 30, 1997.
The carrying value of notes payable approximates fair value.
The Company has entered into some of the above foreign currency loans in an
amount and term similar to the expected collection period of foreign
accounts receivable as a natural hedge against these amounts. The amount
outstanding on such loans was $9,754 and $6,236 at April 30, 1997 and 1996,
respectively.
The following table summarizes certain information regarding these
short-term borrowings:
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996 1995
<S> <C> <C> <C>
Maximum amount
of borrowings $52,628 $28,742 $27,256
Average amount
of borrowings 39,879 21,975 20,924
Weighted average interest
rate during year 6.7% 6.8% 6.1%
Weighted average interest
rate at year end 6.7% 6.5% 6.7%
(6) Long-Term Debt-
Long-term debt consists of the following:
April 30,
1997 1996
Senior notes, due in installments
through August 29, 2008, bearing
interest at 7.46% $30,000 $ --
Term note, due in installments through
October 31, 2000, bearing interest at
LIBOR + 1% (6.6875% at April 30, 1997) 9,000 27,000
Term note, due in installments through
October 31, 2000, bearing interest at
LIBOR + 1% (6.6875% at April 30, 1997) 9,000 27,000
Term note, due in installments through
October 31, 2000, bearing interest at
LIBOR + 1% (6.6875% at April 30, 1997) 9,000 27,000
Installment promissory note, paid in
fiscal 1997, bearing interest at
fixed rate of 7.175% -- 1,224
Installment promissory note,
paid in fiscal 1997, bearing interest
at fixed rate of 8.750% -- 1,687
Other -- 465
57,000 84,376
Less- Current maturities -- 3,122
$57,000 $81,254
Scheduled maturities:
Year Ending
April 30, Amount
1998 $ --
1999 4,500
2000 22,500
2001 --
2002 --
Thereafter 30,000
$57,000
</TABLE>
The carrying value of long-term debt approximates fair value.
The senior notes and term notes contain restrictive covenants which, among
other things, require the
<PAGE>
Company to maintain a minimum tangible net worth, a minimum interest
coverage ratio and a maximum liabilities to tangible net worth ratio. The
Company was in compliance with all such covenants at April 30, 1997.
(7) Commitments and Contingencies-
The Company leases plant, office space, and automobiles under various
operating lease agreements. Minimum rental commitments under leases having
initial or remaining terms of greater than one year are as follows:
<TABLE>
<CAPTION>
Year Ending
April 30, Amount
<S> <C>
1998 $5,511
1999 4,118
2000 2,586
2001 5,245
</TABLE>
Rental expense charged to operations was $6,076, $1,585 and $1,591 in
fiscal 1997, 1996 and 1995, respectively.
The Company leases automobiles from a company owned by two directors.
Rental expense was $314, $589 and $1,028 in fiscal 1997, 1996 and 1995,
respectively.
Various lawsuits and claims are pending against the Company. Although the
outcome of such lawsuits and claims cannot be predicted with certainty, the
resolution of these lawsuits and claims will not, in the opinion of
management, result in a material adverse effect on the financial position
or results of operations of the Company.
(8) Shareholders' Equity-
In March, 1997, the Company sold, through an underwritten public offering,
1,373,422 Class A common shares at a net price of $17.37 per share. The net
proceeds of this offering were used to repay existing bank debt.
In December, 1996, the Company adopted a shareholder rights plan and
declared a dividend of one preferred share purchase right on each
outstanding share of the Company's Class A Common Stock. Under certain
conditions, each right may be exercised to purchase one one-hundredth share
of a new series of nonredeemable preferred stock at an exercise price of
$80, subject to adjustment. The rights may be exercised only after a public
announcement that a party acquired or will make a tender offer to acquire
20% or more of the Company's common stock. The rights, which do not have
voting rights, expire on December 18, 2006 and may be redeemed by the
Company at a price of $0.01 per right at any time prior to their expiration
or the acquisition of 20% of the Company's common stock.
In the event that the Company is acquired in a merger or other business
combination transaction, provisions shall be made so that each holder of a
right shall have the right to receive, upon exercise thereof at the then
current exercise price, the number of shares of common stock of the
surviving company which at the time of such transaction would have a market
value of two times the exercise price of the right.
9) Stock Option Plans-
The Company has reserved 3,500,000 shares of Class A Common Stock for
issuance under the Amended and Restated Stock Option Plan for Employees of
Marquette Medical Systems, Inc. (the "Plan"). Under the Plan, incentive
options may be granted to purchase shares at or above fair market value on
the date of grant and expire within ten years, and non-qualified options
may be granted at or above 85% of fair market value on the date of grant
and expire within fifteen years. If stock options granted under the Plan
<PAGE>
expire or otherwise terminate without being exercised, the Class A Common
Stock not issued under such stock options shall again become available for
issuance under the Plan.
Option activity during fiscal 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Number Weighted
of Shares Average
Under Option Exercise Price
<S> <C> <C>
Outstanding, April 30, 1994 1,304,666 $14.28
Granted 292,200 18.43
Exercised (94,250) 11.78
Cancelled (80,250) 14.29
Outstanding, April 30, 1995 1,422,366 15.30
Granted 895,600 17.76
Exercised (96,800) 13.76
Cancelled (407,950) 14.92
Outstanding, April 30, 1996 1,813,216 16.68
Granted 396,000 19.34
Exercised (56,908) 14.57
Cancelled (119,558) 16.80
Outstanding, April 30, 1997 2,032,750 $17.25
</TABLE>
The Company has reserved 276,042 shares of Class A Common Stock for
issuance under the E for M 1991 Stock Option Plan and E for M 1991 Key
Employee Stock Option Plan. The E for M stock options outstanding on the
acquisition date were converted into stock options of the Company in
conjunction with the acquisition. Each option converted by the Company
continues to have, and is subject to, the same terms and conditions set
forth in E for M's stock option plan prior to the acquisition. The E for M
stock options were converted into 276,042 stock options of the Company
pursuant to this plan based on an exchange ratio of the average price of
Marquette stock at the acquisition date to the tender price of E for M
stock .
Option activity related to this plan in fiscal 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Number Weighted
of Shares Average
Under Option Exercise Price
<S> <C> <C>
Outstanding, April 30, 1995 -- $--
Granted 276,042 8.58
Exercised (16,906) 3.57
Cancelled -- --
Outstanding, April 30, 1996 259,136 8.91
Granted -- --
Exercised (111,766) 9.36
Cancelled (24,978) 8.21
Outstanding, April 30, 1997 122,392 $8.64
</TABLE>
The options outstanding under the Plan at April 30, 1997, consist of the
following:
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Price Range Number of Options Exercise Price Years Remaining in
Per Share Outstanding Exercisable Outstanding Exercisable Contractual Life
<S> <C> <C> <C> <C> <C>
$11.20-$14.99 504,150 213,650 $14.19 $14.14 6.4
$15.00-$21.50 1,528,600 181,000 $18.26 $17.75 8.5
2,032,750 394,650 $17.25 $15.79 8.0
</TABLE>
The options outstanding under the E for M stock option plans at April 30,
1997, consist of the following:
Weighted Average Weighted Average
<PAGE>
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Price Range Number of Options Exercise Price Years Remaining in
Per Share Outstanding Exercisable Outstanding Exercisable Contractual Life
<S> <C> <C> <C> <C> <C>
$ 6.17-$ 8.99 78,427 40,570 $ 6.43 $ 6.48 7.9
$ 9.00-$12.76 43,965 24,337 $12.57 $12.49 7.4
122,392 64,907 $ 8.64 $ 8.73 7.3
</TABLE>
On August 25, 1994, the Company's shareholders approved the Marquette
Electronics, Inc. Directors' (Non-Employee) Stock Option Plan (the
"Directors' Plan"). The Directors' Plan is designed to compensate non-
employee members of the Board of Directors by an annual grant of non-
qualified options for 4,000 shares of Class A Common Stock at the then fair
market value of the stock. These options become exercisable in four equal
annual installments on each of the first four anniversaries of the date of
grant and expire on the tenth anniversary date. The aggregate number of
shares that may be issued under the Directors' Plan shall not exceed
250,000. During fiscal 1994, options to purchase 16,000 shares were granted
at $14.50 per share. During fiscal 1995, options to purchase 20,000 shares
were granted at $16.00 per share. During fiscal 1996, options to purchase
20,000 shares were granted at $16.25 per share. During fiscal 1997, options
to purchase 16,000 shares were granted at $18.50 per share. All options
granted were outstanding at April 30, 1997, 32,000 shares of which were
exercisable.
The Company adopted SFAS No. 123 "Accounting for Stock-Based Compensation"
with footnote disclosure. The Company still accounts for all of its stock
option plans under APB Option No. 25, under which no compensation cost has
been recognized. Had compensation cost for these plans been determined per
SFAS No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
Year Ending April 30,
1997 1996
<S> <C> <C>
Net Income (Loss) $21,191 $(24,868)
As Reported 20,151 (25,519)
Pro Forma
Net Income (Loss) Per Share
As Reported $ 1.29 $ (1.53)
Pro Forma 1.22 (1.57)
</TABLE>
Because the SFAS No. 123 method of accounting does not apply to options
granted prior to May 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The weighted average fair value of options granted in fiscal 1997 and
fiscal 1996 were $8.08 and $8.40, respectively. 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 fiscal 1997 and fiscal 1996, respectively: risk-free rates of
5.8% and 6.3%, expected dividend yields of zero, expected lives of 7.0
years and 8.8 years, and expected volatility of 25% and 23% .
(10) Stock Repurchase Agreements-
By agreement, the Company is obligated to repurchase up to $4,000 worth of
Class A Common Stock from each of two shareholders, in each case at the
shareholder's death and at a price per share determined in accordance with
the agreements. Life insurance with a face value of $6,986 has been secured
on the lives of the two shareholders to fund the payments required under
the repurchase agreements. As of April 30, 1997, 397,516 shares of Class A
Common Stock were subject to these stock repurchase agreements. The amount
of the purchase price is
<PAGE>
payable within 210 days of the death of the shareholder.
(11) Restructuring of Operations-
In fiscal 1996, the Company initiated and began to implement a plan to
restructure its worldwide operations, primarily in Europe. The
restructuring plan consists of a consolidation of European offices as well
as a corresponding reduction in the number of employees. The restructuring
plan is undertaken for purposes of consolidating the distribution function
in Europe in order to address competitive conditions. In addition, the
restructuring plan is necessary as the existing Marquette operations are
integrated with E for M's European operations. In connection with these
actions, the Company recorded restructuring charges of $3,956 to operating
expenses in fiscal 1996. These charges include $1,267 of severance costs,
$1,366 of facility closing costs including asset write-offs, and $1,323 of
other costs such as dealer termination fees and related legal fees. This
restructuring plan implementation was completed during fiscal 1997.
(12) Employee Benefit Plans-
Profit Sharing and 401(k) Plan - The Company has a Profit Sharing and
401(k) Plan (the "Plan") covering substantially all non-union employees.
The Plan allows participants to make annual contributions ranging from 1%
to 12% of their compensation, subject to certain limitations imposed by the
Internal Revenue Code. The Company matches 30% of the Participants'
contributions, subject to maximum annual matching per participant of five
hundred dollars or 1.5% of the participants' qualified compensation,
whichever is greater. The Company may make annual discretionary
contributions as authorized by the Board of Directors. Total Company
contributions were $3,961, $3,313 and $3,300 in fiscal 1997, 1996 and 1995,
respectively.
Defined Benefit Plans - Marquette Hellige GmbH has an unfunded
noncontributory defined pension plan covering substantially all of its
German-based employees over 25 years of age and with at least 10 years of
service. The benefits are based on an employee's final month's salary and
the number of years of continuous service with E for M.
The Plan was amended in September, 1996 by increasing the retirement age
for some employees and reducing the pension benefit rate for both new and
active employees. The impact of the amendment results in an unrecognized
gain as of April 30, 1997 of $2,084. This will be amortized over the
remaining service life of active employees which is 14 years.
The components of net periodic pension cost for the year ended April 30,
1997 and four month period ended April 30, 1996, respectively, are:
<TABLE>
<CAPTION>
April 30, April 30,
1997 1996
<S> <C> <C>
Service costs $ 1,122 $ 377
Interest costs 3,056 1,127
Unrecognized net loss -- (503)
Net pension costs $ 4,178 $ 1,001
</TABLE>
The following is a reconciliation of the plan's projected benefit
obligation to the recorded pension obligation:
<TABLE>
<CAPTION>
April 30, April 30,
1997 1996
<S> <C> <C>
Accumulated benefit obligation $36,563 $41,099
Vested benefit obligation $34,430 $38,364
Projected benefit obligation $39,679 $45,339
Unrecognized net gain (loss) 408 (503)
Unrecognized gain from Plan Amendment 2,084 --
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Accrued pension obligation $42,171 $44,836
</TABLE>
Assumptions used in the actuarial calculation are as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal
1997 1996
<S> <C> <C>
Discount Rate 7% 7%
Salary Increases 2.75% 2.75%
</TABLE>
Corometrics established a defined benefit pension plan for certain of its
union employees effective June 1, 1994. Pension expense charges to
operations in fiscal 1997, 1996 and 1995 were not material.
(13) Segment and Geographic Information-
The Company operates primarily in one business segment, the medical
electronics equipment industry. Financial information by geographic area is
summarized as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996 1995
<S> <C> <C> <C>
Net sales originating from:
United States $426,469 $355,689 $321,408
Europe 172,558 98,137 45,634
Australia 6,364 5,479 6,281
Corporate and
eliminations (62,074) (43,012) (31,147)
$543,317 $416,293 $342,176
Income (loss) from
operations:
United States $ 41,529 $ 11,307 $ 34,198
Europe (2,615) (27,481) (1,103)
Australia 250 (157) 321
Corporate and
eliminations (240) 2,575 480
$ 38,924 $(13,756) $ 33,896
Identifiable assets:
United States $314,832 $332,492 $237,224
Europe 96,238 98,141 21,199
Australia 2,089 2,680 2,167
Corporate and
eliminations 15,173 (1,595) 4,275
$428,332 $431,718 $264,865
</TABLE>
Transfers between geographic areas are recorded at market-based transfer
prices.
Export sales, excluding sales to affiliates, totalled $51,517, $39,566 and
$38,731 in fiscal 1997, 1996 and 1995, respectively.
(14) Derivative Financial Instruments-
The Company uses foreign currency forward exchange contracts to hedge
specific foreign currency exposures. These derivative financial instruments
are not used for trading purposes.
(15) Quarterly Data (Unaudited)-
<TABLE>
1997
- --------------------------------------------------------------------------------
1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $124,794 $136,908 $137,714 $143,901
Gross Profit 60,385 66,310 67,480 74,987
Net Income (loss) 3,270 5,216 5,898 6,807
Per Class A
Common Share .20 .32 .37 .40
1996
- --------------------------------------------------------------------------------
1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Net Sales $ 81,127 $ 84,511 $ 10,309 $140,346
Gross Profit 38,641 43,843 53,578 65,284
Net Income (loss) 979 4,043 (30,665) 775
Per Class A
Common Share .06 .25 (1.89) .05
</TABLE>
The following table sets forth the high and low sales prices for the Class
A common stock as reported on the NASDAQ National Market System. The prices
reflect inter-dealer prices, without retail mark-up, mark-down or
commission:
<TABLE>
<CAPTION>
Year Ended
April 30, 1997 April 30, 1996
High Low High Low
<S> <C> <C> <C> <C>
First Quarter 18 3/4 15 3/4 19 13
Second Quarter 18 1/2 15 1/2 18 3/4 15 3/4
Third Quarter 22 3/8 14 3/4 21 17 3/4
Fourth Quarter 21 3/4 18 3/8 20 16 1/2
</TABLE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Shareholders of Marquette
Medical Systems, Inc.:
We have audited the accompanying consolidated balance sheets of MARQUETTE
MEDICAL SYSTEMS, INC. (a Wisconsin corporation) and subsidiaries as of
April 30, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended April 30, 1997. 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 mis-statement. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Marquette Medical
Systems, Inc. and subsidiaries as of April 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the three
years in the period ended April 30, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
June 5, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Fiscal 1997 compared to Fiscal 1996
<PAGE>
Net sales for fiscal 1997 increased by 30.5% to $543.3 million from $416.3
million for fiscal 1996. The Company's patient monitoring, diagnostic cardiology
and supplies and service product lines achieved sales growth of $52.6 million,
$53.9 million and $20.5 million, or 25.3%, 43.3% and 24.5%, respectively. The
fiscal 1997 results include a full year of activity from operations related to E
for M Corporation which was acquired on January 1, 1996. The increase in net
sales is partly attributable to the E for M acquisition. However, all existing
product lines achieved significant growth over last year.
The introduction of new products in both the patient monitoring and diagnostic
cardiology product lines as well as improved distribution have both contributed
to the sales growth. New product introductions at lower price points have
allowed the Company to increase its potential market by adding depth to its
product lines. These lower price point products are important in terms of
increasing the Company's potential market overseas. The increase in net sales
also reflects the effects of a strengthening market for health care equipment in
the U. S. particularly for the patient monitoring product line. The sales growth
for the fiscal year was negatively affected by a softer market in Western
Europe, particularly Germany, France and the United Kingdom, as well the
negative currency conversions due to a stronger U.S. dollar.
Gross profit for fiscal 1997 increased 33.7% to $269.2 million from $201.3
million in fiscal 1996. Gross margin increased to 49.5% for fiscal 1997,
compared to 48.4% for fiscal 1996. The increase relates to manufacturing
efficiencies gained as E for M was fully integrated into Marquette as well as
product mix. The gross margins were negatively impacted by continued pricing
pressures, especially in Europe. However, the mix of higher margin products in
addition to the manufacturing efficiencies offset this negative impact. The
Company expects continued currency fluctuations and European pricing pressures
to affect future gross margins.
Engineering expenses for fiscal 1997 increased 28.9% to $48.1 million from $37.3
million in fiscal 1996. The increase is mainly attributable to the incremental
expenses related to the E for M operations. Engineering expenses as a percentage
of sales decreased slightly to 8.9% for fiscal 1997 from 9.0% for fiscal 1996.
The Company will continue to invest significantly in both new product
developments and continued enhancements to current products. Due to the
competitiveness and technological nature of the medical systems and equipment
industry, this investment is necessary in order to maintain the Company's
competitive position in the health care industry.
Selling expenses for fiscal 1997 increased 31.1% to $138.0 million from $105.3
million for fiscal 1996, due primarily to the E for M acquisition. In addition
to the incremental expenses related to the E for M operations, the expenses for
fiscal 1997 include increased sales bonuses as the Company's bookings for the
year exceeded the bonus thresholds. The increased bookings are reflected in an
increased backlog. These increases in selling expenses were partially offset by
the cost reductions gained through the restructuring of European distribution.
For fiscal 1997, selling expenses increased slightly as a percentage of sales to
25.4% from 25.3% of net sales for fiscal 1996.
General and administrative expenses for fiscal 1997 increased 34.1% to $44.1
million from $32.9 million in fiscal 1996. E for M operations accounted for a
significant portion of the increase. General and administrative expenses as a
percentage of sales were 8.1% for fiscal 1997 as compared to 7.9% for fiscal
1996. A portion of the increase as a percentage of sales relates to the
additional amortization expense for goodwill and other intangibles which were
recorded in connection with the E for M acquisition. During fiscal 1997, $3.5
million of goodwill and intangible amortization were expensed as compared to
$1.2 million of amortization expense related to the E for M acquisition in
fiscal 1996. Exclusive of the increased amortization, general and administrative
expenses as a percentage of sales would have declined from fiscal 1996. The
decline reflects the benefits realized from the restructuring of the European
operations and the E for M operations.
Operating income for fiscal 1997 was $38.9 million as compared to an operating
loss of $13.8 million for fiscal
<PAGE>
1996. The fiscal 1996 operating loss was attributable to a one-time charge
associated with the write-off of purchased research and development in-process
of $35.7 million in connection with the E for M acquisition and to a $4.0
million restructuring charge mainly related to the European operations.
Operating income for fiscal 1996, exclusive of these charges, was $25.9 million.
The increase for fiscal 1997 relates to the increased gross profit attributable
to sales growth and increased margins as well as cost savings associated with
the restructuring.
Interest expense for fiscal 1997 increased to $8.4 million from $4.4 million for
fiscal 1996. The increased interest expense related to the additional debt
outstanding for the entire fiscal year in connection with the E for M
acquisition. In addition, the proceeds received in the public offering of $24.0
million in March, 1997 were used to repay bank term loans incurred in the E for
M acquisition. The Company intends to continue to pay down bank term loans and
foreign lines of credit with any free cash flow in subsequent years. This,
coupled with the reduction in debt associated with the public offering proceeds,
should reduce interest expense in subsequent years.
Other income for fiscal 1997 increased to $3.6 million from $1.2 million in
fiscal 1996. The increase was primarily related to foreign exchange gains of
$1.8 million in fiscal 1997 as compared to $0.6 million in fiscal 1996. The
significant strengthening of the U.S. dollar and the devaluation of the German
mark contributed to the increased exchange gains.
The provision for income taxes for fiscal 1997 was $12.9 million as compared to
$7.9 million in fiscal 1996. The effective tax rate for fiscal 1997 was 37.8%.
In fiscal 1996, the effective tax rate, excluding the impact of the one-time
charge of $35.7 million related to purchased research and development in-
process, was 42.1%. The decrease in the effective rate is attributable to
reduced foreign losses not benefited, the utilization of certain foreign net
operating losses in fiscal 1997, and the reinstatement of the research and
development credit for a significant portion of the fiscal year. The decreases
in the effective rate are offset to some extent by the additional goodwill
expense incurred in connection with the E for M acquisition. Due to the
expiration of the research and development credit in fiscal 1998, management
believes the effective tax rate will increase in fiscal 1998 unless the credit
is reinstated. In addition, the ability to continue to utilize foreign net
operating losses will have an impact on future effective tax rates. If the
European market continues to weaken in the health care industry, unbenefited net
operating losses would increase the Company's effective tax rate.
Fiscal 1996 Compared to Fiscal 1995
Net sales for fiscal 1996 increased 21.7% to $416.3 million from $342.2 million
for fiscal 1995. The fiscal 1996 results included four months of activity from
operations related to E for M. Approximately $54.5 million of the increase in
net sales was due to sales of E for M products. The remaining increase in net
sales for fiscal 1996 of $19.6 million, or 5.7%, was related to the Company's
historic product lines. An improving health care market as well as the E for M
acquisition contributed to an increase in net sales of $27.3 million or 15.1%
for the patient monitoring line and $29.7 million or 31.3% for the diagnostic
cardiology product line. The supplies and service product lines recorded a sales
increase of $17.2 million, or 25.9%, from fiscal 1995. Fiscal 1995 results
included eleven months activity from operations related to Corometrics, which
was acquired in May, 1994.
Gross profit for fiscal 1996 increased 15.0% to $201.3 million from $175.0
million in fiscal 1995. Gross margin decreased to 48.4% for fiscal 1996,
compared to 51.1% for fiscal 1995. The decrease was primarily attributable
<PAGE>
to the lower gross margin realized on E for M products. The gross margin
realized on E for M products for the four months of E for M operations included
in fiscal 1996 was 38.1%. Lower than expected shipment levels of E for M
products, attributable in part to the integration of E for M operations into
Marquette, resulted in an inability to fully absorb fixed costs. All of the
Company's product lines experienced decreases in gross margins, mainly
attributable to increased pricing pressures, especially in Europe. In addition,
the ultrasound imaging line inventory at Corometrics was liquidated at a
significant discount, resulting in a margin decline in that line.
Engineering expenses for fiscal 1996 increased 21.5% to $37.3 million from $30.7
million in fiscal 1995. Most of this increase was related to the acquisition of
E for M, which had $4.9 million of engineering expense for the four months of E
for M operations included in fiscal 1996. The remaining increase was a result of
increased new product development costs, particularly in operating room and
emergency care products. Engineering expenses as a percentage of net sales
remained at 9.0% for fiscal 1996, the same percentage as for fiscal 1995.
Selling expenses for fiscal 1996 increased 23.7% to $105.3 million from $85.1
million for fiscal 1995, due primarily to the E for M acquisition. Of the total
increase, $13.1 million related to the four months of E for M operations
included in fiscal 1996. In addition to the increased expenses related to E for
M, a portion of the increase was also related to the incremental month of
Corometrics expenses included in fiscal 1996 compared to fiscal 1995. The
remaining increase was primarily related to an increased sales staff for all
product lines. For fiscal 1996, selling expenses increased slightly as
percentage of net sales to 25.3%, from 24.9% of net sales for fiscal 1995.
General and administrative expenses for fiscal 1996 increased 29.5% to $32.9
million from $25.4 million in fiscal 1995. General and administrative expenses
increased $6.0 million for fiscal 1996, primarily due to the operations of E for
M. The remaining operations of the Company had an increase of $1.5 million for
fiscal 1996 compared to fiscal 1995. In addition to the increase related to E
for M, an incremental month of Corometrics expenses in fiscal 1996 contributed
to the remaining difference. General and administrative expenses as a percentage
of net sales were 7.9% for fiscal 1996, compared to 7.4% for fiscal 1995.
The Company incurred a restructuring charge of $4.0 million for fiscal 1996,
primarily related to its European operations. The restructuring was undertaken
for purposes of consolidating the distribution function in Europe as well as the
integration of E for M operations into Marquette.
During 1996, the Company took a charge related to the write-off of purchased in-
process research and development ("R&D") in the amount of $35.7 million. This
one-time charge is attributable to the in-process R&D acquired with E for M. The
purchase price of E for M was allocated to the fair value of net tangible and
intangible assets acquired. The portion of the purchase price allocated to the
in-process R&D costs of E for M was written-off resulting in this non-recurring
charge.
Interest expense for fiscal 1996 increased to $4.4 million from $3.0 million for
fiscal 1995. The increased interest expense related to the E for M acquisition
was partially offset by the repayment of $8.0 million of debt originally
incurred in connection with the Corometrics acquisition in May 1994. Cash flow
from operations enabled the Company to retire the remaining debt related to the
Corometrics acquisition during fiscal 1996.
Other income for fiscal 1996 increased to $1.2 million from $0.1 million in
fiscal 1995, primarily due to increased foreign exchange gains of $0.6 million.
In addition, losses related to equity investments were $0.7 million less in
fiscal 1996 as compared to fiscal 1995.
The provision for income taxes for fiscal 1996 was $7.9 million. Even though the
Company incurred
<PAGE>
a before-tax loss of $17.0 million for the year, the $35.7 million charge
related to purchased in-process R&D was a permanent tax difference for which the
Company did not receive any tax benefit, either current or deferred. Excluding
this charge, the effective tax rate for fiscal 1996 was 42.1% compared to 37.0%
for fiscal 1995. This increase in the effective tax rate for fiscal 1996 was
partly due to the expiration of the R&D credit (a 1.9% benefit in 1995). This
credit was reinstated prospectively on July 1, 1996. The additional increase in
the tax rate for fiscal 1996 was related to foreign net operating losses which
the Company was unable to utilize.
Financial Outlook
In as much as the Company's principal product lines are all related to the
health care industry, they are subject to the current uncertainty surrounding
the industry including consolidation of hospital groups and a move towards
managed care. While the Company cannot predict the impact, if any, that such
modifications might have on its business, the Company's operating results are
closely linked to the health care economy. If revenue or earnings fail to meet
expectations of the investment community, there could be a significant impact of
the trading price for the Company's stock. Management believes that the
introduction of new products and the partnership relationships being established
with the hospitals will keep the Company in a competitive position as the health
care economy demand for new equipment increases.
Liquidity and Capital Resources
Working capital was $149.2 million at April 30, 1997 as compared to $133.2
million at April 30, 1996. Inventories increased by 4.3% to $110.8 million
primarily due to increased sales levels and to give the Company the continued
ability to effectively manage its backlog. Current liabilities decreased to
$117.6 million at April 30, 1997 from $127.8 million at April 30, 1996 as a
result of the payment of restructuring liabilities from the cash flow from
operations.
As of April 30, 1997, the Company had $8.0 million outstanding on U.S. lines of
credit of $25.0 million. In addition, the Company had $22.4 million, U.S. dollar
equivalent, outstanding on foreign lines of credit. The foreign currency
denominated borrowings are used to reduce the currency risks associated with
foreign currency receivables. As of April 30, 1996, the amounts outstanding on
the U.S. and foreign lines of credit were $14.5 million and $14.3 million,
respectively.
Capital expenditures for fiscal 1997 were $18.2 million as compared to $11.4
million in fiscal 1996. The increase relates primarily to the acquisition of a
new business system offset by the disposal of land in Germany.
The $90.3 million acquisition of E for M was funded by three variable rate bank
term loans each in the amount of $30.0 million. Each bank term loan is payable
in eight equal semi-annual installments of $3.75 million each beginning on April
30, 1997 and continuing on each October 31 and April 30 thereafter through
October 31, 2000. As of April 30, 1997, the Company had repaid or refinanced
$63.0 million of such bank term debt. Cash flow from operations was used to
repay $9.0 million of such debt, cash proceeds in an underwritten public
offering of 1,373,422 shares at a net price of $17.37 were used to repay $24.0
million of the such bank term debt, and the remaining $30.0 million was
converted into longer term fixed-rate senior debt. This senior debt accrues
interest at a fixed rate of 7.46% per annum and matures on August, 29, 2008. The
$27.0 million of bank term debt that remained outstanding as of April 30, 1997
accrued interest at a rate equal to the LIBOR rate plus one percent, reset
monthly. At April 30, 1997, the rate was 6.6875% per annum. The Company intends
to repay the interest and retire the remaining debt through cash flow from
operations.
In October, 1996, the Company repurchased 281,400 shares of Common Stock at a
price of $16.50 per share. The $4.6 million used to repurchase the treasury
stock was funded through cash flow from operations. In December, 1996, 262,500
of the treasury shares were used in the exchange of Class C common
<PAGE>
stock for Class A common stock. The Company retained 18,900 shares of treasury
stock as of April 30, 1997.
Management believes the Company has the financial resources to meet its short
term and long term cash requirements. Management believes its cash flow from
operations will be sufficient to continue to fund its current obligations as
well as fund the internal growth of the Company. The current U.S. inflation rate
has little impact on Company operations.
On March 3, 1997, FASB released SFAS No. 128, "Earnings per Share," which
simplifies the standards for computing earnings per share and requires a dual
presentation of basic and diluted earnings per share on the income statement.
This statement will apply to fiscal 1998. However, the impact of the change has
been reported in footnote 2(j).
BOARD OF DIRECTORS
Michael J. Cudahy
Chairman
Marquette Medical Systems, Inc.
Timothy C. Mickelson
President
Marquette Medical Systems, Inc.
Peter P. Tong
Marquette Medical Systems, Inc.
Frederick G. Luber
Chairman
Super Steel Products Corp.
Melvin S. Newman
Attorney
Schoenberg, Fisher & Newman, Ltd.
Walter L. Robb
Retired
Senior Vice President
General Electric Company
John G. Bollinger
Dean, College of Engineering
University of Wisconsin-Madison
OFFICERS
Michael J. Cudahy
Chairman and Chief Executive Officer
Timothy C. Mickelson
President and Chief Operating Officer
<PAGE>
Mary M. Kabacinski
Sr. Vice President and Chief Financial Officer
Steven G. Books
Division President, Cardiology
Karl F. Braun
Vice President, Europe, Middle East, Africa (EMEA)
P. Michael Breedlove
Division President, E for M Imaging Systems
Gerald J. Lentz
Division President, Service
James R. Mertens
Division President, E for M Cath Lab
Louis P. Scafuri
Division President,
Corometrics Medical Systems, Inc.
Mark Stega
Division President,
QMI Clinical Information Systems
Mark R. Tauscher
Division President, Supplies
Gerald G. Woodard
Division President, Patient Monitoring
Gordon W. Petersen
Secretary
Melvin S. Newman
Assistant Secretary
GENERAL INFORMATION
The 1997 annual meeting of shareholders will be held at 9:00 a.m. local time on
Wednesday, August 13, 1997 at the Company's principal offices, 8200 West Tower
Avenue, Milwaukee, WI 53223.
World Headquarters:
Marquette Medical Systems, Inc.
8200 W. Tower Avenue
Milwaukee, WI 53223
Independent Public Accountants:
Arthur Andersen LLP
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Milwaukee, WI
Legal Counsel:
Schoenberg, Fisher & Newman, Ltd.
Chicago, IL
Principal International Subsidiaries
and Offices:
Marquette Medical Systems (Australia) Pty Ltd
Sydney, AUSTRALIA
Hellige Ges.m.b.H.
Vienna, AUSTRIA
Marquette Benelux n.v./s.a.
Brussels, BELGIUM
Marquette Medical Systems, Inc.
Asia Pacific District
Tokyo, Japan
Marquette Hellige S.A.S.
Paris, FRANCE
Marquette Hellige GmbH
Freiburg, GERMANY
Marquette Hellige Italia, Srl
Milano, ITALY
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Marquette Hellige Espana S.A.
Madrid, SPAIN
Marquette Scandinavia
Stockholm, SWEDEN
Marquette Hellige (U.K.) Ltd.
Manchester, UNITED KINGDOM
Stockholder and Security Analyst Inquiries and Requests for Form 10-K should be
directed to:
Mary M. Kabacinski
Chief Financial Officer
Marquette Medical Systems, Inc.
8200 W. Tower Avenue
Milwaukee, WI 53223
(414) 362-2560
Stock Listing - Symbol MARQ:
Marquette Medical Systems, Inc. Class A Common Stock is listed on NASDAQ
National Market System.
Transfer Agent/Registrar:
Firstar Trust Company
777 E. Wisconsin Avenue
Milwaukee, WI 53202
The Company's Class A common stock, par value $0.10, is traded on the NASDAQ
National Market System under the symbol MARQ.
At July 1, 1997, Marquette had approximately 638 shareholders of record
(excluding beneficial owners of stock held in street names). Marquette has not
declared or paid dividends on its Class A common stock. The Company intends to
retain its earnings for use in its business and therefore does not anticipate
paying any cash dividends in the foreseeable future.
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EXHIBIT 21.1
MARQUETTE MEDICAL SYSTEMS, INC.
Subsidiaries:
The Company subsidiaries are listed below:
STATE OR COUNTRY
----------------
NAME OF ORGANIZATION
---- ---------------
Marquette Electronics Anesthesia &
Respiratory Care Corp. Missouri
Marquette Leasing, Inc. Wisconsin
Marquette International, Ltd. Virgin Islands
Marquette Hellige UK, Ltd. England
Marquette Hellige Italia, SRL Italy
Marquette Hellige S.A.S. France
Marquette Benelux n.v./s.a. Belgium
Marquette Hellige Espana, S.A. Spain
Marquette Medical Systems
(Australia) PTY, Ltd. Australia
Corometrics Medical System, Inc. Delaware
Hellige Ges.m.b.H. Austria
Marquette Hellige GmbH Germany
E For M Corporation Delaware
Vari X, Inc. California
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our reports included (or incorporated by refer ence) in
this Form 10-K, into the Company's previously filed Registration Statements
File Nos. 33-46729, 33-98468, 333-1334 and 333-20567.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Milwaukee, Wisconsin
July 24, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REGISTRANT'S FINANCIAL STATEMENTS AS OF AND FOR YEAR ENDED APRIL 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12 MONTHS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 2,704
<SECURITIES> 0
<RECEIVABLES> 144,300
<ALLOWANCES> 4,164
<INVENTORY> 110,779
<CURRENT-ASSETS> 266,773
<PP&E> 155,977
<DEPRECIATION> 58,985
<TOTAL-ASSETS> 428,332
<CURRENT-LIABILITIES> 117,591
<BONDS> 57,000
0
0
<COMMON> 1,760
<OTHER-SE> 181,440
<TOTAL-LIABILITY-AND-EQUITY> 428,332
<SALES> 543,317
<TOTAL-REVENUES> 543,317
<CGS> 274,155
<TOTAL-COSTS> 274,155
<OTHER-EXPENSES> 226,236
<LOSS-PROVISION> 398
<INTEREST-EXPENSE> 8,434
<INCOME-PRETAX> 34,094
<INCOME-TAX> 12,903
<INCOME-CONTINUING> 21,191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 21,191
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.27
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