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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended APRIL 2, 1994 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ___________
Commission file number 0-14953
ACUSON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2784998
- - ----------------------------- --------------------------------
(State of Incorporation) (IRS Employer Identification No)
1220 CHARLESTON ROAD
P. O. BOX 7393
MOUNTAIN VIEW, CA 94039-7393
(Address of principal executive offices)
Registrant's telephone number, including area code, is (415) 969-9112
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 29, 1994
- - -------------------------------- --------------------------------
Common Stock, $.0001 par value 28,510,528 shares
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FORM 10Q
ACUSON CORPORATION
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of
April 2, 1994 and December 31, 1993 1
Condensed Consolidated Statements of Operations
for the Three Months Ended April 2, 1994 and
April 3, 1993 3
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended April 2, 1994 and
April 3, 1993 4
Notes to Unaudited Condensed Consolidated
Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 9
ITEM 6. Exhibits and Reports on Form 8-K 10
Signature 11
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ACUSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
ASSETS 1994 1993
(Unaudited)
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 49,258 $ 11,184
Short-term investments 38,174 48,103
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Total cash and short-term
investments 87,432 59,287
Accounts receivable 71,277 62,976
Inventories 42,033 41,964
Other current assets 29,133 37,095
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Total current assets 229,875 201,322
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PROPERTY AND EQUIPMENT
At cost, net of accumulated depreciation
and amortization of $79,152 in 1994
and $75,700 in 1993 44,608 44,307
OTHER ASSETS
Net investment in leases 3,382 19,502
Other long-term assets 6,204 5,950
-------- --------
Total Assets $284,069 $271,081
======== ========
</TABLE>
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See accompanying notes to unaudited condensed consolidated financial statements.
1
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ACUSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
(Unaudited)
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $19,757 $12,644
Other accrued liabilities 72,090 75,176
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Total current liabilities 91,847 87,820
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Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.0001
authorized - 10,000 shares
outstanding - none -- --
Common stock, par value $.0001
authorized - 50,000 shares
outstanding - 28,508 shares in 1994
and 28,279 shares in 1993 71,291 69,115
Cumulative translation adjustment (1,822) (2,259)
Unrealized holding loss (236) --
Retained earnings 122,989 116,405
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Total stockholders' equity 192,222 183,261
------- -------
Total Liabilities and $284,069 $271,081
Stockholders' Equity ======== ========
</TABLE>
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See accompanying notes to unaudited condensed consolidated financial statements.
2
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ACUSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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APRIL 2, APRIL 3,
1994 1993
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<S> <C> <C>
NET SALES
Product $74,688 $66,459
Service 18,137 15,836
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Total net sales 92,825 82,295
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COST OF SALES
Product 31,132 25,915
Service 8,761 8,567
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Total cost of sales 39,893 34,482
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Gross profit 52,932 47,813
OPERATING EXPENSES
Selling, general and administrative 26,640 27,038
Product development 17,317 14,223
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Total operating expenses 43,957 41,261
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Income from operations 8,975 6,552
INTEREST INCOME, NET 1,155 1,164
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Income before provision for
income taxes 10,130 7,716
PROVISION FOR INCOME TAXES 3,546 2,701
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Net income $ 6,584 $ 5,015
======= =======
EARNINGS PER SHARE $ 0.23 $ 0.17
======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 29,355 29,595
======= =======
</TABLE>
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See accompanying notes to unaudited condensed consolidated financial statements.
3
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ACUSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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APRIL 2, APRIL 3,
1994 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,584 $ 5,015
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 4,964 4,708
Changes in:
Accounts receivable (8,002) 2,765
Inventories 45 1,566
Other current assets 1,862 535
Accounts payable 7,079 5,360
Other accrued liabilities (1,988) 1,722
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Net cash provide by operating
activities 10,544 21,671
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CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in short-term
investments 9,567 (7,656)
Investment in property and
equipment (4,988) (2,831)
Decrease (increase) in investment
in leases 22,518 (3,863)
Increase in other assets (213) (269)
------- --------
Net cash provided by (used in)
investing activities 26,884 (14,619)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (1,774) (9,497)
Issuance of common stock under
stock option and
stock purchase plans 2,176 2,450
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Net cash provided by (used in)
financing activities 402 (7,047)
------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 244 (6)
------- --------
Net increase (decrease) in cash and
cash equivalents 38,074 (1)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 11,184 21,483
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CASH AND CASH EQUIVALENTS, END OF PERIOD $49,258 $ 21,482
======= ========
</TABLE>
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See accompanying notes to unaudited condensed consolidated financial statements.
4
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ACUSON CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - INTERIM STATEMENTS
In the opinion of management, the unaudited interim condensed consolidated
financial statements include all adjustments, which include only normal
recurring adjustments, necessary to summarize fairly the Company's condensed
consolidated financial position as of April 2, 1994 and its condensed
consolidated results of operations and cash flows for the three-month periods
ended April 2, 1994 and April 3, 1993. The results of operations for the three
months ended April 2, 1994 are not necessarily indicative of the results to be
expected for the entire year ending December 31, 1994. Certain information
reported in prior years has been reclassified to conform to the 1994
presentation.
The Company's principle accounting policies are set forth in the financial
statements for the year ended December 31, 1993 and notes thereto contained in
the Company's Annual Report filed with the Securities and Exchange Commission.
NOTE 2 - CASH AND CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, the Company has classified
certain short-term investments as cash equivalents if the original maturity of
such investments is three months or less. The Company does not intend to hold
its investments on a long-term basis; accordingly, such investments are
classified as current assets in the accompanying consolidated balance sheets.
NOTE 3 - CHANGE IN ACCOUNTING METHOD
Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" and the effect on the financial
statements was not significant. Under SFAS No. 115, the Company's investments,
which consisted entirely of debt securities, were classified as available-for-
sale. These securities mature at various dates through the year 1995.
As of April 2, 1994, the securities' gross unrealized holding loss was
approximately $362,000. The unrealized holding loss of approximately $236,000,
net of the tax effect, was reported as a separate component of stockholders'
equity. The Company has determined that the unrealized holding loss is not a
permanent impairment of the fair value of its investments. During the quarter
the Company sold certain of its available-for-sale securities for proceeds of
approximately $2,010,000. The Company realized a gain of approximately $15,000
on those sales.
NOTE 4 - INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 2, DEC. 31,
1994 1993
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<S> <C> <C>
Raw materials $18,962 $17,093
Work-in-process 5,158 5,820
Finished goods 17,913 19,051
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Total inventories $42,033 $41,964
======= =======
</TABLE>
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5
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NOTE 5 - LEGAL CONTINGENCIES
In September 1991, Diasonics, Inc. filed an action against the Company in the
Federal District Court for the Northern District of California alleging
infringement of two patents owned by Diasonics. In May, 1994, the Company and
Diasonics settled the litigation. The settlement will not have a material
adverse effect on the Company's financial condition.
On July 1, 1993 and July 30, 1993, individuals purporting to represent a class
of persons who purchased Acuson common stock during the period between October
24, 1990 and July 22, 1992 filed two separate, but related, actions against the
Company, twelve of its officers and one former officer in the Federal District
Court for the Northern District of California alleging that the defendants'
statements about the Company were incomplete or inaccurate, in violation of
federal securities laws. Plaintiffs seek damages in an unspecified amount, as
well as equitable relief or injunctive relief and attorneys' fees, experts' fees
and costs. The Company intends to defend the suits vigorously. Management
believes that the ultimate outcome of this matter will not have a material
adverse effect on the Company's financial condition.
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6
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter ended April 2, 1994 increased from $82.3 million in
the quarter ended April 3, 1993 to $92.8 million. The increased revenues were
primarily the result of increased product shipments in response to the release
of Acoustic Response Technology (ART), increased international shipments
that were favorably impacted in particular by the Acuson 128XP/4 introduced in
May 1993, and increased service revenues worldwide. The increased sales were
offset by lower average unit selling prices resulting from competitive pricing
pressures and by more sales of lower priced product configurations. Service
revenue for the quarter ended April 2, 1994 increased 14.5% to $18.1 million
from $15.8 million in the quarter ended April 3, 1993, primarily due to growing
service contract revenue from a larger base of installed systems.
The Company believes that its first quarter results may not be indicative of
the results for the entire year. Acuson expects that future revenues may be
impacted for an indeterminate period by market uncertainties regarding the
purchase of hospital equipment due to ongoing worldwide medical cost containment
pressures and concern about the potential impacts of U.S. health care reform.
Total cost of sales for the first quarter of 1994 was 43.0% of net sales,
compared to 41.9% in the comparable 1993 period. The percentage increase
reflected lower sales prices on systems and an increased proportion of service
revenues, which have lower gross margins than product revenues.
Selling, general and administrative expenses totaled $26.6 million in the
quarter ended April 2, 1994, down from $27.0 million in the comparable prior
year's period. As a percentage of sales, such expenses in the current quarter
totaled 28.7% compared to 32.9% in the first quarter of 1993. Expenditures
decreased as the result of a reduction in the Company's work force following the
restructuring in the second quarter of 1993.
Product development costs in the first quarter of 1994 totaled $17.3
million or 18.7% of sales, compared to $14.2 million or 17.3% of sales in the
first quarter of 1993. The increase in product development expense resulted
from increased costs for multiple product development programs.
Provision for income taxes increased to $3.5 million in 1994 versus $2.7
million in 1993, primarily due to higher income. The Company's overall tax
rate remained constant at approximately 35.0%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments balance increased $28.1
million during the first quarter to $87.4 million at April 2, 1994. During the
quarter, the Company generated $10.5 million in cash from operations, as
compared to the first quarter of 1993 when operations generated $21.7 million
in cash. The Company's financing and investing activities in the first quarter
of 1994 generated $27.3 million in cash, with $21.6 million provided by the
sale of the Company's lease portfolio. The Company also raised $2.2 million in
cash in the first quarter of 1994 through employee participation in the
Company's stock option and stock purchase plans, compared to $2.5 million
during the first quarter of 1993.
At April 2, 1994, the Company's working capital totaled $138.0 million.
The Company also has a revolving unsecured credit facility for $50 million
which is in effect through July 1995. No compensating balances are required
and no amounts were outstanding under this credit facility.
7
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Based on its current operating plan, the Company believes that the
liquidity provided by its existing cash and short-term investment balances, the
borrowing arrangements described above, and cash generated from operations
will be sufficient to meet the Company's operating capital requirements for
fiscal 1994.
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8
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PART II
ITEM 1
LEGAL PROCEEDINGS
In September 1991, Diasonics, Inc. filed an action against the Company in
the Federal District Court for the Northern District of California alleging
infringement of two patents owned by Diasonics. In May, 1994, the Company and
Diasonics settled the litigation. The settlement will not have a material
adverse effect on the Company's financial condition.
9
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ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
--------
11.1 Statement regarding computation of per share earnings for
the fiscal period ended April 2, 1994
b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the quarter ended
April 2, 1994.
10
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACUSON CORPORATION
(Registrant)
May 16, 1994 By /s/ Stephen T. Johnson
------------------------------------
Stephen T. Johnson
Vice President, Chief Financial
Officer and Treasurer
(duly authorized Officer and Principal
Financial and Accounting Officer)
11
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EXHIBIT 11.1
ACUSON CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE FISCAL PERIOD ENDED APRIL 2, 1994
In accordance with APB 15, the Company used the modified treasury stock
method in computing the first quarter 1994 earnings per share.
The following is a computation of earnings per share:
<TABLE>
<S> <C>
Number of shares outstanding at April 2, 1994.................... 28,507,800
Number of shares assumed to be repurchased (limited to 20%
of number of shares outstanding)................................ 5,701,560
Multiply by market value per common share........................ $ 12.50
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Cost to repurchase............................................... $71,269,500
Assumed proceeds to the Company had everyone exercised........... 82,272,043
-----------
Excess assumed proceeds available................................ 11,002,543
Multiply by average interest rate for the period................. 1.24%
-----------
Assumed interest on excess funds................................. 136,432
Less: tax provision.............................................. 47,751
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Adjustment to net income......................................... 88,681
Add: net income................................................. 6,584,000
-----------
Adjusted net income.............................................. $ 6,672,681
===========
Divided by weighted shares outstanding, including common stock
equivalents.................................................... 29,355,181
Fiscal period earnings per share................................. $0.23
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</TABLE>
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