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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required] For the fiscal year ended December 31, 1994 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] For the transition period from ____________ to
____________
Commission file number 0-14953
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ACUSON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2784998
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(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
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock New York Stock Exchange
$.0001 par value
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Purchase Rights
_________________________
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 ___
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) 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. [ ]
The aggregate market value of the Registrant's voting stock held by non-
affiliates on March 3, 1995 (based upon the NYSE closing price on such date) was
approximately $277,062,000.
As of March 3, 1995, there were 29,024,583 shares of the Registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference in Parts II
and III of this Form 10-K Report: (1) Proxy Statement for registrant's Annual
Meeting of Stockholders to be held May 31, 1995 (other than the Compensation
Committee Report and Performance Graph contained therein) (Part III), and (2)
registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1994 (Part II).
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PART I
ITEM 1
BUSINESS
GENERAL
Acuson Corporation ("Acuson" or the "Company") designs, manufactures and
markets premium quality medical diagnostic ultrasound imaging systems and image
management products. The Company believes its systems provide superior
diagnostic performance, versatility, upgradability and reliability and can
enable the physician to make earlier, more accurate and/or more confident
diagnoses.
The Company focuses its efforts on the following major hospital grade
ultrasound market segments:
UNITED STATES GENERAL IMAGING. Acuson entered this largest U.S. segment in
1983. Major sub-segments of this market include:
RADIOLOGY. Major applications include examinations of abdominal organs,
the gastrointestinal tract, the urinary tract and small parts such as the
breasts, testes and thyroid. Pediatric examinations are of growing
interest in this segment.
PERIPHERAL VASCULAR. Acuson introduced system capabilities in 1985 for
this segment which focuses primarily on examinations of the vessels of the
leg and neck.
OBSTETRICS/GYNECOLOGY. Acuson has provided premium quality hospital grade
products for Ob/Gyn applications beginning with the Company's first system
shipments in 1983. Applications center on examinations of the female
reproductive system and the developing fetus.
UNITED STATES CARDIOVASCULAR. Acuson entered this second largest segment in
1988. Cardiology applications center on examinations of the heart and
proximate vessels, while cardiovascular applications extend to include the
entire vascular system.
INTERNATIONAL. Acuson began its international efforts in 1984 with the
establishment of its first international sales subsidiary. The Company
distributes its products in most of the developed world through ten direct
international sales subsidiaries and a number of foreign distributors.
International markets include the same range of clinical ultrasound
applications as the domestic market.
Acuson introduced its first product in 1983. The Company's sales were $350
million in 1994.
Acuson's products are based on specialized hardware, software and transducer
technologies which the Company considers to be proprietary. Acuson's hybrid
analog/digital computer systems are specially designed and produced by the
Company electronically to form high resolution, real-time ultrasound images
under software control. These systems utilize a variety of application-specific
transducers, almost all of which are designed and fabricated by the Company, to
send and receive ultrasound beams with superior precision.
Acuson introduced its first generation system, the Acuson/R/ 128, in 1983,
and sold more than 4,000 of these systems during the next seven years. Over the
life of the Acuson 128, the system grew to support many additional new
ultrasound modes, transducers and other capabilities.
Acuson's second generation system, the Acuson 128XP/TM/, was introduced in
July 1990. A more configurable system than the original Acuson 128, the 128XP
provides a greater number of application-specific configurations for a broader
range of clinical uses. This greater flexibility has allowed the Company to
address a wider spectrum of clinical specialties and pricing segments in both
the international and domestic ultrasound markets.
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During 1994, Acuson introduced the EV7 endovaginal transducer, which offers
improved imaging performance over Acuson's earlier endovaginal transducers. The
Company also announced the V5M transesophageal transducer. This new probe will
provide multi-plane transesophageal imaging and expects to begin shipment in the
latter half of 1995. During 1994, Acuson completed the 50th network installation
of AEGIS/TM/, the Sonography Management System/TM/. The AEGIS system digitizes,
stores and organizes images. The Company believes that Acuson's AEGIS networks
represent the largest installed base of ultrasound image management systems.
Acuson believes its systems provide the following major benefits when
compared with other ultrasound technologies.
IMAGING PERFORMANCE. Acuson's systems are designed to provide superior
image quality through greater detail resolution, contrast resolution and
image uniformity. In addition, Acuson systems provide superior clinical
sensitivity for a broad range of Doppler and color Doppler applications,
which are used to detect, measure and depict blood flows.
VERSATILITY. All Acuson systems can operate in all major high resolution
imaging formats and in all major ultrasound modes. As a result, Acuson
systems can offer superior performance for a broad range of examinations
that are typically of interest to ultrasound physicians.
RELIABILITY. The Company's thousands of domestic systems under warranty or
full-service contract have achieved greater than 99.9% cumulative uptime
since 1983.
UPGRADABILITY. Every Acuson system shipped since 1983 can be upgraded to
perform every diagnostic capability the Company now offers on new systems.
In many cases, the changes are accomplished simply with new software. In
other cases, customers purchase new hardware options or transducers, which
also include new software to control performance.
EASE OF USE. Acuson's philosophy of system design and its system
architecture allow for greater ease of use. For example, Acuson's systems
avoid menus where possible in favor of direct access to functions via
dedicated keys. Further, Acuson's high level computer control allows the
user, by entering a few simple keystrokes, to orchestrate the many
detailed imaging parameter changes required to optimize high performance
ultrasound examinations in real time.
DIAGNOSTIC ULTRASOUND
Ultrasound was introduced for medical imaging purposes in the mid-1960's and
has been characterized by rapid technical development and increasing breadth of
application by physicians. Medical diagnostic ultrasound systems use low power,
high-frequency sound waves to produce real-time moving images of soft tissues,
internal body organs and blood flows. Ultrasound systems generate ultrasonic
waves via the electrical stimulation of specialized crystals known as
transducers. Traveling at a constant speed, these sound waves propagate through
the body where they are reflected by tissues and surfaces, such as the
boundaries between organs and blood. The reflected sound echoes are received by
the transducer and processed in the system. The resulting images are displayed
on a high-resolution monitor.
Ultrasound is a noninvasive technique which, unlike X-ray, does not use
ionizing radiation, and is generally considered safe by physicians. Because of
its ease of use, relative safety and low cost, ultrasound is often the first
imaging study a physician will order. Although ultrasound signals cannot
effectively penetrate air or bone, it is often the imaging technique of choice
for many soft tissues and has common cardiac, abdominal (e.g., liver, kidney,
spleen and gallbladder), gynecological, obstetrical, urological (e.g.,
prostate), and peripheral vascular applications. Major uses include the
detection of abdominal cancer, and the diagnosis of heart disease and fetal
abnormalities.
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Acuson regards the United States hospital grade ultrasound market as
comprising two principal segments, General Imaging and Cardiovascular, which are
differentiated by the type of physician most commonly using the ultrasound
equipment. Acuson systems can be tailored with software and transducers to offer
premium performance in each segment. Outside the United States, high performance
ultrasound is often performed by an Internal Medicine department, and systems
are often sold with a combination of clinical capabilities.
The hospital and clinic market uses sophisticated ultrasound systems with
broad clinical capabilities and is Acuson's major focus. This segment comprises
approximately three fourths of the annual worldwide dollar sales of ultrasound
systems. The remainder of the ultrasound market uses systems with limited
capabilities for conducting simple exams in the doctor's office. Acuson sells
some systems with basic configurations into this segment.
ULTRASOUND TECHNOLOGIES
The Company believes there are currently a number of system technologies and
display formats, including those used by the Company, that are factors in the
market, such as:
SYSTEM TECHNOLOGY. In the late 1970's, moving ultrasound images were first
created by the use of "mechanical sector" technology. This type of
technology uses motors to mechanically rotate or vibrate the transducer
elements, sweeping the ultrasound lines as a result of the rotation or
vibration. A more recent development of this technology, designed to
improve image quality, is the "annular array," a mechanical sector
transducer with a number of concentric transducer elements.
All-electronic transducers and systems, which were first widely accepted
in the early 1980's, sweep ultrasound lines without utilizing moving
mechanical parts, in ways similar to the method by which advanced phased
array military radar sweeps radar signals without moving parts. The
ultrasound lines in all-electronic transducers are "steered" from the
transducer face with electronics by using many stationary transducer
elements and precisely changing the timing of sending and receiving sound
from these elements.
All-electronic ultrasound designs are optimal for spectral and color
Doppler, and can offer newer imaging formats such as Vector/R/ Array,
linear array and curved array. All-electronic transducers are by far the
most frequently used for high performance ultrasound applications
involving Doppler and color Doppler imaging. While some systems still
utilize motor driven transducers, or a combination of motor driven and
all-electronic transducers, all of Acuson's transducers are
all-electronic.
IMAGE FORMATS. High performance ultrasound transducers provide a number of
different formats. Generally, different formats are required or preferred
for particular types of clinical applications.
SMALL FOOTPRINT TRANSDUCERS. Because ultrasound signals cannot
effectively penetrate air or bone, the "acoustic windows" into the body
are often limited by the need to image around the ribs or other bones,
the lungs or bowel gas, bandages, or other impediments. When access is
limited, the physician generally will select a transducer with a small
imaging surface, or "footprint." Small footprint transducers commonly
are produced in three formats:
SECTOR ARRAY. This format produces a pie-shaped image which is
narrow at the skin line and wider as it goes deeper into the body.
Implemented properly, sector transducers are capable of high
resolution imaging. However, because their field of view is so
narrow near the skin line, sector format transducers have a limited
ability to image structures in the near field (i.e., close to the
skin's surface). This format can be provided by either mechanical
or all-electronic transducers.
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TIGHTLY CURVED ARRAY. A form of the all-electronic curved array
(see below), this format allows for a wider near field of view than
sector, while generally offering inferior lateral resolution at
depth compared to an equivalent sector transducer.
VECTOR ARRAY. Introduced by Acuson with the 128XP system in 1990,
this proprietary format offers uncompromised resolution with a
wider field of view than sector at all depths. Because it combines
high resolution and a larger field of view in all-electronic
transducers capable of color Doppler, Acuson believes that Vector
Array is the ideal format for small footprint ultrasound
applications.
MEDIUM AND LARGE FOOTPRINT TRANSDUCERS. Medium and large footprint
transducers are often used when wider imaging access is available, and
are commonly produced in the following two formats:
LINEAR ARRAY. Linear arrays are all-electronic transducers capable
of imaging a rectangular field of view. Implemented properly, they
are capable of high resolution imaging, although many systems
(typically sold for use in the doctor's office) incorporate linear
imaging with much poorer resolution.
CURVED ARRAY. Curved array transducers are essentially linear
transducers that have been bent to offer a convex geometry. As a
result, they can offer a larger far field of view for the same size
footprint than an equivalent linear transducer, though often with
some compromises in image quality or the degree of image artifact
present.
ENDOCAVITY TRANSDUCERS. Endocavity transducers are widely used to
obtain superior imaging and Doppler examinations through closer access
to internal body organs. Endovaginal probes are widely used for Ob/Gyn
examinations, while endorectal probes are frequently used to examine
the prostrate and the rectal wall. Transesophageal probes are used in
cardiology to examine the heart, and also are used to monitor the heart
during surgical procedures.
FREQUENCIES. Ultrasound systems typically offer a number of single-
frequency transducers at different frequency levels. Higher frequency
transducers can offer greater resolution than lower frequency transducers,
but cannot image as deeply into the body. In general, therefore, in
selecting transducers there is a tradeoff between depth of penetration and
image resolution.
In actual clinical practice, the clinician, when beginning an examination,
will often select the highest frequency transducer that will have the
penetration required to perform the entire examination. The penetration
required is somewhat unpredictable, and clinicians find it time consuming
and inconvenient to switch transducers. As a result, portions of
examinations may be performed at lower frequencies than might be actually
desirable.
MODES. The three major modes that are most often used in diagnostic
ultrasound include:
B-MODE. This mode, often called "grayscale" by radiologists and "2-D"
by cardiologists, forms black and white images of the anatomy being
examined.
SPECTRAL DOPPLER. Spectral Doppler is not an imaging technique per se;
rather, it is a way of graphically measuring and graphically displaying
the velocity of blood flow at a single point through vessels or between
chambers of the heart. The measured information is presented
graphically on a real-time basis, and helps a physician determine, for
example, the velocity of blood flow through a vessel that is partially
blocked or through a heart defect. B-mode ultrasound is most often used
to aim spectral Doppler ultrasound, so that the physician can see from
what part of a vessel or the heart the spectral Doppler measurements
derive.
COLOR DOPPLER. Color Doppler superimposes a color-encoded
representation of blood flow on the anatomical black and white
ultrasound image formed by B-mode. Blood flow toward the transducer is
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presented as one color (e.g., red) and flow away from the transducer is
presented as another color (e.g., blue). As a result, color Doppler
allows a physician to visualize blood flow throughout the field of
interest, instead of just at a single point as is the case for spectral
Doppler.
Until the 1980's, ultrasound systems were primarily used to image anatomy
in B-mode. Beginning in the 1980's, the use of spectral Doppler became
almost universal among hospital grade systems. During the second half of
the 1980's, color Doppler gained almost universal acceptance in new
placements of hospital grade cardiology systems. By the early 1990's, new
placements of hospital grade radiology systems generally included color
Doppler as well.
ACUSON'S TECHNOLOGY
Acuson's technology is based on a hybrid analog/digital computer architecture
specially designed and manufactured by the Company to accommodate the
requirements of real-time ultrasound image formation. This basic computer
architecture was utilized in the Acuson 128 system and also forms the basis for
the Company's second generation system, the 128XP.
All of Acuson's systems utilize 128 independent transmit/receive channels of
ultrasound information, although some specialty transducers may utilize fewer
channels. Acuson believes that, if utilized properly, 128 channels can offer a
number of benefits over fewer numbers of channels. Depending on the transducer
design and other parameters, these benefits can include greater lateral
resolution and contrast resolution, as well as decreased image artifact.
Acuson's 128XP systems can operate in all major high resolution imaging
formats, which include sector, Vector Array, linear array and High Performance
Curved Array. The Company's systems also can provide all of the major operating
modes, which include B-mode, spectral Doppler and color Doppler. The Company
sells approximately 25 different transducers offering a variety of frequencies,
formats and operating modes.
A key element of the Company's computer architecture is Acuson's Dynamic
Computed Lens System/TM/, which performs proprietary image formation operations
on the signals from the system's 128 separate transmit/receive channels. The
Acuson Dynamic Computed Lens System electronically focuses at each point of the
field of view in every frame, electronically optimizes the lens aperture at each
focal point, and substantially filters out certain stray reflected sound
captured by more conventional systems, often allowing better contrast
resolution. All of these functions are performed automatically without any
operator intervention in creating up to 50 or more images per second.
Color Doppler is incorporated in the vast majority of Acuson systems sold to
all market segments. While Acuson did not invent color Doppler, it has made a
number of important innovations in this area. In 1988, Acuson was the first
company to ship color Doppler systems in a configuration appropriate for a broad
range of radiology examinations, and the Company believes that Acuson systems
have had a major impact in expanding the acceptance of color Doppler for
mainstream radiology applications.
The Acuson 128XP system, includes a number of important technologies and
system capabilities, such as the following:
VECTOR ARRAY offers uncompromised resolution with a wider field of view at
all depths than sector. It is an advance in computer imaging technology,
not a change in the transducer itself; as a result, the Vector Array
capable 128XP systems introduced in 1990 (or Acuson 128 systems upgraded
with the appropriate Performance Option Package) can perform Vector Array
imaging with the same sector transducers originally shipped with the
Acuson 128 in 1983.
HIGH PERFORMANCE CURVED ARRAY technology brings Acuson quality and 128
channel capability to this format. It offers high resolution imaging while
substantially reducing the far-field drop off and imaging artifacts often
associated with conventional curved arrays.
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MULTIHERTZ/R/ frequency selectable imaging gives, on a single transducer,
the ability to switch between two or three frequencies for both grayscale
and color Doppler imaging, simply by pushing a button. Because it makes
accessing a higher frequency so convenient, Acuson believes that its
MultiHertz technology makes high frequency imaging more practical across a
broad range of examinations. Acuson accomplishes MultiHertz imaging
through a combination of proprietary hardware, software and transducer
technologies.
B-COLOR IMAGING is a mode that maps B-mode information in color. Because
humans can perceive more different colors than they can perceive different
shades of gray, B-color imaging increases the amount of diagnostic
information a clinician can perceive from the wide dynamic range of an
Acuson B-mode image.
IN 1993, ACUSON INTRODUCED ACOUSTIC RESPONSE TECHNOLOGY (ART) as an
available upgrade to the 128XP Platform. ART incorporated new image
processing techniques that increase the amount of imaging and Doppler
information that the system provides. During its first year of
availability, ART became standard on all new Acuson systems, and in
addition was installed at more than 2,500 Acuson customer sites as a field
upgrade.
Acuson attempts to protect technologies that it views as proprietary through
a combination of trade secrets and, where appropriate, copyrights and patents.
The Company owns and has rights to several U.S. and international patents,
covering certain aspects of its systems, and it has several patent applications
pending. No assurances can be given as to the breadth or degree of protection
patents will afford the Company.
The Company also relies substantially on its unpatented proprietary know-how.
No assurances can be given that others will not be able to develop substantially
equivalent proprietary information or otherwise obtain access to the Company's
know-how.
The Company is currently involved in a litigation proceeding relating to
patent infringement claims against the Company made by one of the Company's
competitors. See Item 3 - Legal Proceedings.
ACUSON'S PRODUCTS
Acuson offers a variety of product configurations, all of which are based on
the Acuson 128XP Computed Sonography system. Several basic mainframe platforms
may be tailored for cardiovascular, radiology, peripheral vascular and Ob/Gyn
ultrasound applications by combining various transducers, options such as
spectral Doppler and color Doppler, and software packages.
The Acuson 128 system was introduced for radiology applications in 1983. The
introduction of the Acuson 128XP in 1990 further expanded Acuson's radiology
capabilities. In general, the 128XP is more configurable than was the Acuson 128
and thus can address a wider market price range than the previous system. The
XP/4, a color Doppler-capable system and the Company's most basic radiology
configuration, currently sells for a list price of approximately $100,000. A
typical XP/10 color Doppler radiology system configuration, including optional
software and transducers, may have a list price of $170,000 to $200,000.
Acuson introduced the Acuson 128 system for cardiovascular applications in
1988 and followed with the 128XP in 1990. A basic cardiovascular system
configuration sells for a list price of approximately $120,000 and consists of
the Acuson 128XP with special cardiology applications software, plus one cardiac
transducer and spectral Doppler. A typical XP/10 color Doppler cardiology
configuration, when it includes an option supporting vascular examinations, may
have a list price of $150,000 to $170,000.
The diagnostic capabilities provided on the 128XP are available in addition
to all of the extensive clinical capabilities that were available on the
previous Acuson 128 system. These new capabilities also can be added to existing
Acuson 128 systems through Performance Option Packages.
The AEGIS system, introduced by Acuson in October 1992, provides significant
new capabilities for managing and storing ultrasound images and for preserving
the quality of the images' diagnostic information. By computerizing ultrasound
image and data handling, the AEGIS system can also increase the productivity of
existing
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ultrasound instruments, reducing overall hospital costs in addition to improving
patient care. By the end of 1994, more than 50 AEGIS networks had been installed
at customer sites in North America.
MARKETING AND SALES
The Company sells its products primarily to hospitals, private and
governmental institutions and health care agencies, medical equipment
distributors and doctors' offices. The Company and its subsidiaries employ their
own full-time sales, service and applications staff in North America, selected
European countries, Australia and Japan. Acuson sells through independent
distributors in other European countries, Asia, South America and the Middle
East.
See Note 10 of Notes to Consolidated Financial Statements contained in the
Company's 1994 Annual Report and incorporated by reference for a summary of
operations by geographic region.
The sales process for ultrasound systems typically requires six to twelve
months between initial customer contact and placement of an order. On-site
demonstrations are often part of the customer's evaluation process, and
customers frequently make side-by-side comparisons of performance and other
features of competing systems. Acuson employs a staff of applications personnel
who operate the system during sales demonstrations and who also train physicians
and ultrasound technicians on the use of the system after delivery.
During 1993, slow economic conditions together with concerns about the
unknown impacts of potential health care reform in the United States caused many
U.S. customers to delay purchasing decisions. In 1994, though the prospect of
legislated reform receded at year end, medical cost containment, health care
provider consolidation and intense competitive pressures continued adversely to
impact customer buying activity.
SERVICE
The Company employs a staff of full-time service engineers who service Acuson
systems in North America and in the countries where Acuson has international
subsidiaries. Service to customers in other international areas is provided
through the Company's independent distributors.
Acuson warrants its products for 12 months, extendible by service contract.
All domestic systems under Acuson warranty or full-service contracts are
guaranteed to have 99.0% uptime, and such systems have averaged more than 99.9%
cumulative uptime since 1983.
Systems under warranty or service contract receive periodic maintenance by
Acuson service engineers, who also install new system capabilities or software
upgrades and respond to customer service requests. Certain of these services may
be purchased from the Company's service organization by customers who do not
have a service contract with Acuson.
Service was 21.3% of total net sales, see Part II, Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations.
COMPETITION
Acuson competes primarily on the basis of its major clinical benefits of
imaging performance, ease of use, versatility, upgradability and reliability.
The Company believes that these product capabilities can enable physicians to
make earlier, more accurate and/or more confident diagnoses and also can provide
superior long-term economic value. As do virtually all companies in the
industry, Acuson offers on-site system demonstrations to customers during the
sales process, and customers frequently do their own evaluations of equipment
performance and other factors. The markets for these products have become
increasingly competitive, and price is more often a factor in the purchase
decision.
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The Company's ultrasound equipment competes with systems offered by a number of
companies and their affiliates abroad, including Acoustic Imaging, Inc. (a
subsidiary of Dornier); Advanced Technology Laboratories, Inc.; Aloka Co., Ltd.;
Diasonics, Inc. (a subsidiary of Elbit, Ltd.); General Electric Company;
Hewlett-Packard Company; Philips Ultrasound, Inc.; Siemens Medical Labs, Inc.
and its subsidiary Quantum Medical Systems, Inc.; and Toshiba Medical Systems,
Inc. Most of these competitors have significantly greater financial and other
resources and generally compete in more medical imaging and other market
segments and countries than Acuson. The products offered to date by these
competitors in some cases include features not currently offered by Acuson and
in many cases are substantially less expensive than Acuson's products.
There can be no assurance that any established or new ultrasound company will
not introduce a system that is equal or superior to Acuson's in quality or
performance.
In most cases where there is a choice between using diagnostic ultrasound and
other imaging modalities, such as conventional X-ray, computed tomography or
magnetic resonance imaging, the ultrasound examination is performed first.
Ultrasound units are generally among the least expensive of such modalities. In
addition, in certain applications, ultrasound offers capabilities that make it
the modality of choice regardless of cost.
However, no assurance can be given that such price or performance advantages
can be maintained in comparison to other current or future imaging modalities.
In addition, ultrasound systems compete with other imaging modalities for
hospital funding.
PRODUCT DEVELOPMENT
Acuson believes that new product development is of great importance to its
success and believes that its engineering effort is among the largest in the
ultrasound industry. Since Acuson's founding, virtually all product development
has taken place at the Company's headquarters in Mountain View, California.
Despite the extent of its product development effort, and although many new
products are typically under development at any time, the Company has no
anticipated time when it expects to deliver new products, and there can be no
assurances that the Company will be able to complete any new products.
The Company spent $47.7 million, $58.3 million and $70.8 million on product
development in 1992, 1993 and 1994, respectively.
GOVERNMENT REGULATION
As a manufacturer of medical devices, Acuson is subject to various
regulations of the United States Food and Drug Administration (the "FDA") and of
the California Department of Health Services, including marketing clearance of
the Company's products by the FDA. Although Acuson believes that it is in
compliance with all applicable regulations of the FDA and of the State of
California, current regulations depend heavily on administrative interpretation,
and there can be no assurance that future interpretations with possible
retroactive effect will not adversely affect the Company. The process of
obtaining clearance to market products can be time consuming and can delay the
marketing and sale of the Company's products.
In December 1990, Congress passed the Safe Medical Devices Act of 1990. This
law significantly expands the FDA's product clearance and enforcement authority.
It is likely to require the submission to the FDA of longer and more complex
product applications and the submission of more extensive post-marketing
reports. Because the FDA's implementation of this authority is in process, the
full potential effect of this law on Acuson cannot be assessed. Also, the FDA is
using its statutory authority more vigorously during inspections of companies
and in other enforcement matters. While Acuson believes it is in compliance with
all applicable FDA regulations, the potential effects on the Company of
heightened enforcement cannot be predicted.
The Federal government regulates reimbursement for diagnostic examinations
furnished to Medicare beneficiaries, including related physician services and
capital equipment acquisition costs. For example, Medicare reimbursement for
operating costs for ultrasound examinations performed on hospital inpatients
generally is set
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under the Medicare prospective payment system ("PPS") diagnosis-related group
("DRG") regulations. Under PPS, Medicare pays hospitals a fixed amount for
services provided to an inpatient based on his or her DRG, rather than
reimbursing for the actual costs incurred by the hospital. Patients are assigned
to a DRG based on their principal and secondary diagnoses, procedures performed
during the hospital stay, age, gender and discharge status.
For capital costs for inpatient services, prior to October 1, 1991, Medicare
reimbursed hospitals an amount based on 85 percent of the actual reasonable
costs they had incurred. On October 1, 1991, Medicare began to phase in over a
ten year period a prospective payment system for capital costs which
incorporates an add-on to the DRG-based payment to cover capital costs and which
replaces the reasonable cost-based methodology.
For certain hospital outpatient services, including ultrasound examinations,
reimbursement currently is based on the lesser of the hospital's costs or
charges, or a blended amount, 58 percent of which is based on the hospital's
reasonable costs and 42 percent of which is based on the amount that Medicare
reimburses for such services when furnished in a physician's office. For the
fiscal years 1991 through 1998 (beginning October 1, 1990), reimbursement for
the cost portion of the blend is reduced by 5.8 percent. Capital acquisition
costs for services furnished to hospital outpatients are currently reimbursed on
the basis of 90 percent of the reasonable costs actually incurred by the
hospital.
Until January 1, 1992, Medicare generally reimbursed physicians on the basis
of their reasonable charges or, for certain physicians, including radiologists,
on the basis of a "charge-based" fee schedule. On January 1, 1992, Medicare
began to phase in over a five year period a new system that reimburses all
physicians based on the lower of their actual charges or a fee schedule amount
based on a "resource-based relative value scale." Under this new system, it is
anticipated that some physician specialties, including radiologists and
cardiologists, generally will be reimbursed under Medicare less than what they
would have been reimbursed if the old payment system had remained in effect.
Reimbursement for services rendered to Medicaid beneficiaries is determined
pursuant to each state's Medicaid plan which is established by state law and
regulations, subject to requirements of Federal law and regulations.
As part of the Omnibus Budget Reconciliation Act of 1993, Congress enacted
provisions, effective January 1, 1995, which prohibit physicians from referring
Medicare or Medicaid patients to any entity in which the physician or a family
member has an ownership or compensation relationship if the referral is for any
of a list of "designated health services," which includes ultrasound services.
Regulations implementing these statutory provisions have not been published.
These prohibitions, and similar prohibitions in some state laws, may result in
lower utilization of certain procedures, including ultrasound.
The Clinton Administration and the Congress from time to time consider
various Medicare and other health care reform proposals that could significantly
affect both private and public reimbursement for health care services. Some of
these proposals, if enacted into law, could reduce reimbursement for or the
incentive to use diagnostic devices and procedures and thus could adversely
affect the demand for diagnostic devices, including the Company's products.
In addition to the federal laws described above, there are state laws and
regulations regarding the manufacture and sale of health care products and
diagnostic devices, and reimbursement for such products and their use. These
laws and regulations also are subject to future changes whose impact cannot be
projected.
MANUFACTURING
The Company manufactures its products at its Mountain View, California
facility. Fabrication of most transducers is performed in-house in order to
safeguard the Company's proprietary technology. In October 1994, Acuson acquired
Sound Technology Incorporated ("STI"), a transducer manufacturer located in
State College, Pennsylvania. STI provides complementary technical capabilities
to the Company's established Transducer Division. For other sub-assemblies, the
Company generally subcontracts the assembly or fabrication to outside vendors
and in addition produces some components at its own facility in Canoga Park,
California. Sub-assemblies are produced according to the Company's designs or
specifications. The Company performs assembly, testing and quality assurance at
various stages of completion.
10
<PAGE>
________________________________________________________________________________
Component parts and microprocessors for the Company's products and some
specialty transducers are purchased from outside vendors. A number of such items
currently have limited or single sources of supply, and disruption or
termination of those sources could have a temporary adverse effect on shipments
and the financial results of the Company. The Company believes that it could
ultimately develop alternate sources for all such items.
The Company builds units to a marketing forecast that is updated periodically
and utilizes a commercially available computer system for manufacturing,
accounting, and sales order processing. Because it builds to forecast, the
Company does not consider its backlog a significant indicator of business
levels.
EMPLOYEES
As of December 31, 1994, the Company had 1,652 full-time employees. The
Company considers its relations with its employees to be good.
________________________________________________________________________________
Acuson, MultiHertz, Vector, XP and the XP logo are registered trademarks of
Acuson Corporation. AEGIS, The Sonography Management System, 128XP, and Dynamic
Computed Lens System are trademarks of Acuson Corporation.
11
<PAGE>
________________________________________________________________________________
ITEM 2
PROPERTIES
The Company leases its facilities under operating leases. The principal
offices and manufacturing space are located in Mountain View, California. In
addition, the Company leases manufacturing facilities in Canoga Park, California
and State College, Pennsylvania, and sales and service facilities in various
locations in the United States and abroad. The Company believes its facilities
are adequate for its present needs, in good condition and suitable for their
intended uses.
________________________________________________________________________________
12
<PAGE>
________________________________________________________________________________
ITEM 3
LEGAL PROCEEDINGS
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 and 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 these matters will not have a
material adverse effect on the Company's financial condition.
On September 14, 1994, the Company filed an action in the United States District
Court for the Northern District of California against Advanced Technology
Laboratories, Inc. ("ATL") of Bothell, Washington. In the action, the Company
accuses ATL of infringing U.S. Letters Patent No. 4,058,003 for "Ultrasonic
Electronic Lens with Reduced Delay Range," a patent licensed exclusively to the
Company. In addition, the Company seeks a declaration that it infringes no valid
claim of four ATL patents: U.S. Letters Patent No. 4,543,960 for
"Transesophageal Echocardiography Scanhead," No. 5,050,610 for "Transesophageal
Ultrasonic Scanhead," No. 5,207,225 for "Transesophageal Ultrasonic Scanhead,"
or No. 5,226,422 for "Transesophageal Echocardiography Scanner with Rotating
Image Plane." No dollar amount is specified as damages in the Company's action,
but the complaint seeks an accounting for damages, treble damages and an
assessment of interests and costs against ATL. In addition, the Company is
informed that, in August 1994, ATL filed an action against the Company in the
United States District Court for the Western District of Washington, in which
ATL sought a declaration that it infringes no valid claim of U.S. Letters Patent
No. 4,058,003. On October 31, 1994, ATL amended that action and added claims
accusing the Company of infringing U.S. Patent Nos. 4,543,960; 5,050,610;
5,207,225; and 5,226,422. No dollar amount is specified as damages in ATL's
action, but the complaint seeks an injunction against alleged infringement, an
accounting for damages, treble damages, and an assessment of interest and costs
against the Company. Management believes that the ultimate outcome of this
matter will not have a material adverse effect on the Company's financial
condition.
On October 27, 1994, the Company was sued in Ghent, Belgium by Cormedica NV, in
connection with the Company's termination of its distributor relationship with
Cormedica. In the suit, Cormedica seeks indemnities and damages in the amount of
approximately $2,500,000. The Company intends to defend the suit vigorously.
Management believes that the ultimate outcome of this matter will not have a
material adverse effect on the Company's financial condition.
________________________________________________________________________________
13
<PAGE>
________________________________________________________________________________
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
ITEM 4A
EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of the Company and
their ages as of March 7, 1995 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel H. Maslak 46 President, Chief Executive Officer and Director
Robert J. Gallagher 51 Chief Operating Officer and Director
Daniel R. Dugan 40 Senior Vice President, Worldwide Sales, Service and Marketing
Judith A. Heyboer 45 Senior Vice President
Bradford C. Anker 49 Vice President, Manufacturing
Charles H. Dearborn 42 Vice President, Secretary and General Counsel
Stephen T. Johnson 51 Vice President, Chief Financial Officer and Treasurer
L. Thomas Morse 51 Vice President, Corporate Controller
William C. Varley 45 Vice President, Cardiology Business Operations
</TABLE>
________________________________________________________________________________
SAMUEL H. MASLAK co-founded the Company in September 1981 and has been
President, Chief Executive Officer and a director since that date.
ROBERT J. GALLAGHER joined Acuson in January 1983 as Vice President, Finance
and Chief Financial Officer. Mr. Gallagher became Executive Vice President in
March 1991 and Chief Operating Officer in February 1994.
DANIEL R. DUGAN joined the Company in 1984 as Western Regional Sales Manager,
became National Sales Manager in October 1988 and Director, North American
Sales in August 1989. From November 1989 through April 1991, he was Vice
President of Ultrasound Business Operations at Toshiba America Medical Systems,
Inc. In April 1991, Mr. Dugan rejoined Acuson as Vice President, Field
Operations. He became Senior Vice President, Worldwide Sales, Service and
Marketing in February 1994.
JUDITH A. HEYBOER joined the Company in October 1983 as Director of Employee
Relations and became Vice President, Employee Relations in July 1984. She became
Senior Vice President in February 1994.
BRADFORD C. ANKER joined the Company in December 1983 and has served as Vice
President, Manufacturing since that date.
CHARLES H. DEARBORN joined the Company in October 1988 and has served as
General Counsel since that date. He was elected Secretary of the Company in
February 1991 and Vice President in February 1995.
STEPHEN T. JOHNSON joined the Company in February 1986 as Treasurer and
became Vice President, Treasurer in March 1989. In February 1994, he became
Chief Financial Officer.
L. THOMAS MORSE joined the Company in July 1983 and has served as Corporate
Controller since that date. He was elected an officer of the Company in March
1989 and Vice President, Corporate Controller in February 1991.
WILLIAM C. VARLEY joined Acuson in August 1988 as Cardiology Marketing
Manager, became Director of Marketing in January 1989, Vice President, Marketing
in March 1991, and Vice President, Cardiology Business Operations in June 1994.
________________________________________________________________________________
14
<PAGE>
________________________________________________________________________________
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by Item 5 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Market for Registrant's
Common Equity and Related Stockholder Matters" in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1994 (the "1994 Annual
Report").
________________________________________________________________________________
________________________________________________________________________________
ITEM 6
SELECTED FINANCIAL DATA
The information required by Item 6 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Selected Consolidated
Financial Data" in the Company's 1994 Annual Report.
________________________________________________________________________________
________________________________________________________________________________
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by Item 7 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the Company's
1994 Annual Report.
________________________________________________________________________________
________________________________________________________________________________
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 of Form 10-K is incorporated by reference
to the consolidated financial statements and notes thereto, and to the section
captioned "Quarterly Data" in the Company's 1994 Annual Report.
________________________________________________________________________________
________________________________________________________________________________
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
________________________________________________________________________________
15
<PAGE>
________________________________________________________________________________
With the exception of the information specifically incorporated by reference
from the 1994 Annual Report in Part II of this Form 10-K, the Company's
1994 Annual Report is not to be deemed filed as part of this Form 10-K.
================================================================================
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS. The information required by Item 10 of Form 10-K with respect to
directors is incorporated by reference to the information contained in the
sections captioned "Nomination and Election of Directors" and in the last
paragraph of "Share Ownership of Directors, Executive Officers and Certain
Beneficial Owners" in the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 31, 1995 (the "Proxy Statement").
EXECUTIVE OFFICERS. See page 14 of this Form 10-K.
================================================================================
________________________________________________________________________________
ITEM 11
EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is incorporated by reference
to the information contained in the sections captioned "Compensation of
Directors and Executive Officers," "Options Granted to Executive Officers,"
"Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values," and "Compensation Committee Interlocks and Insider Participation" in
the Proxy Statement.
================================================================================
________________________________________________________________________________
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Share Ownership of
Directors, Executive Officers and Certain Beneficial Owners" in the Proxy
Statement.
________________________________________________________________________________
16
<PAGE>
________________________________________________________________________________
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Certain Relationships and
Other Transactions" in the Proxy Statement.
________________________________________________________________________________
17
<PAGE>
________________________________________________________________________________
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
(1) Financial Statements. The following consolidated financial
statements of Acuson Corporation and Report of Independent Public
Accountants are incorporated into this Form 10-K Report by
reference to the section entitled "Financial Contents" of the
Company's 1994 Annual Report:
Consolidated Statements of Operations -- For the Three Years
Ended December 31, 1994
Consolidated Balance Sheets -- As of December 31, 1994 and 1993
Consolidated Statements of Cash Flows -- For the Three Years
Ended December 31, 1994
Consolidated Statements of Stockholders' Equity -- For the
Three Years Ended December 31, 1994
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Supplementary Information
Quarterly Data (Unaudited)
(2) Financial Statement Schedule. The following financial statement
schedule of Acuson Corporation for the three years ended December
31, 1994 is filed as part of this Form 10-K:
<TABLE>
<CAPTION>
Schedule Page
-------- ----
<S> <C>
Report of Independent Public Accountants on Schedule S-1
II -Valuation and Qualifying Accounts S-2
</TABLE>
All other schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial
statements or notes incorporated herein by reference to the
Company's 1994 Annual Report.
18
<PAGE>
________________________________________________________________________________
(3) Exhibits. The following Exhibits are filed as part of, or
incorporated by reference into, this Form 10-K:
<TABLE>
<C> <S> <C>
3.1 Restated Certificate of Incorporation, as amended *
(Exhibit 3.8)
3.2 Bylaws as currently in effect (Exhibit 3.2) #
4.1 Rights Agreement, dated as of May 5, 1988, between ***
Acuson Corporation and The First National Bank of
Boston, as Rights Agent (Exhibit 1)
10.1 The Company's 401(k) Plan, as amended (Exhibit 10.1) ****/(1)/
10.2 The Company's 1986 Employee Stock Purchase Plan (the //(1)/
"1986 Purchase Plan"), as amended (Exhibit 10.2)
10.3 Form of Employee Stock Purchase Agreement to be used */(1)/
under the 1986 Purchase Plan (Exhibit 10.5)
10.4 The Company's 1982 Incentive Stock Option Plan, as //(1)/
amended (Exhibit 10.4)
10.5 Form of Incentive Stock Option and related exercise **/(1)/
documents
10.6 The Company's 1986 Supplemental Stock Option Plan, as //(1)/
amended (Exhibit 10.6)
10.7 Form of Supplemental Stock Option (Exhibit 10.7) //(1)/
10.8 Series A Preferred Stock Purchase Agreement, dated *
January 6, 1982, between the Company and the
Purchasers listed on Schedule A thereto (Exhibit
10.8)
10.9 Series B Preferred Stock Purchase Agreement, dated *
March 29, 1983, between the Company and the
Purchasers listed on Schedule A thereto (Exhibit
10.9)
10.10 Series C Convertible Preferred Stock Purchase *
Agreement, dated March 30, 1984, between the
Company and the Purchasers listed on Exhibit A
thereto (Exhibit 10.10)
10.11 Lease of office space, dated May 15, 1990, ++
between Shoreline Investments III and the Company
(Exhibit 19.1)
10.12 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments III and the Company (Exhibit
19.2)
10.13 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments III and the Company (Exhibit
19.3)
10.14 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments VI and the Company (Exhibit
19.4)
10.15 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments V and the Company (Exhibit
19.5)
10.16 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments VI and the Company (Exhibit
19.6)
10.17 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments VI and the Company (Exhibit
19.7)
10.18 Lease of office space, dated May 15, 1990 between ++
Shoreline Investments VII and the Company (Exhibit
19.8)
</TABLE>
19
<PAGE>
________________________________________________________________________________
<TABLE>
<C> <S> <C>
10.19 Non-Negotiable Secured Promissory Note, dated May 1, +/(1)/
1989, of John G. Freund (Exhibit 10.19)
10.20 Non-Negotiable Secured Promissory Note, dated May 1, +/(1)/
1989, of John G. Freund (Exhibit 10.20)
10.21 Third Deed of Trust, dated May 1, 1989, between +
John G. Freund, the Company and First American Title
Insurance Company, as Trustee (Exhibit 10.21)
10.22 The Company's 1991 Stock Incentive Plan +++/(1)/
10.23 Form of the Company's Supplemental and Non-Employee //(1)/
Director Supplemental Options under the 1991 Stock
Incentive Plan and related exercise documents as
amended (Exhibit 10.23)
10.24 Non-Negotiable Secured Promissory Note, dated August 8, ++++/(1)/
1991, of Daniel R. Dugan (Exhibit 19.1)
10.25 Second Deed of Trust, dated August 8, 1991, between ++++
Daniel R. Dugan and First American Title Insurance
Company, as Trustee (Exhibit 19.2)
10.26 Lease of office space, dated July 31, 1991, between ++++
Shoreline Investments V and the Company (Exhibit 19.3)
10.27 First Amendment to the Company's 401(k) Plan (Exhibit #/(1)/
10.31)
10.28 Lease of office space, dated January 31, 1992, between ##
Shoreline Investments V and the Company (Exhibit 19.1)
10.29 Credit Agreement between Acuson Corporation and the ###
First National Bank of Boston, as Agent, dated July 2,
1992 (Exhibit 19.1)
10.30 Officers' Bonus Plan (Exhibit 10.30) ####/(1)/
10.31 Form of Amendment Number 1 to Supplemental Stock Option /////(1)/
Terms Under the Company's 1986 Supplemental Stock Plan
and 1991 Stock Incentive Plan (Exhibit 10.1)
10.32 Form of Supplemental Stock Option Terms Under the /////(1)/
Company's 1991 Stock Incentive Plan (Exhibit 10.2)
10.33 Consulting Agreement, dated June 20, 1994, between /////(1)/
William H. Abbott and the Company (Exhibit 10.3)
10.34 Employment and Non-Competition Agreement, dated /(1)/
October 7, 1994, between John G. Freund and the
Company
11.1 Statement regarding computation of per share earnings ####
for the fiscal year ended December 31, 1992 (Exhibit
11.1)
11.2 Statement regarding computation of per share earnings /
for the fiscal year ended December 31, 1993 (Exhibit
11.1)
11.3 Statement regarding computation of per share earnings //
for the fiscal period ended April 2, 1994 (Exhibit
11.1)
11.4 Statement regarding computation of per share earnings ///
for the fiscal period ended July 2, 1994 (Exhibit
11.1)
11.5 Statement regarding computation of per share earnings ////
for the fiscal period ended October 1, 1994 (Exhibit
11.1)
11.6 Statement regarding computation of per share earnings
for the fiscal year ended December 31, 1994
</TABLE>
20
<PAGE>
________________________________________________________________________________
<TABLE>
<C> <S> <C>
13.1 Registrant's 1994 Annual Report
22.1 Subsidiaries of Registrant
24.1 Consent of Independent Public Accountants
27.1 Financial Data Schedule for the period ended October 1, ////
1994 (Exhibit 27.1)
27.2 Financial Data Schedule for the year ended December 31,
1994
</TABLE>
(b) The Registrant filed no reports on Form 8-K during the last quarter
of the fiscal year ended December 31, 1994.
________________________________________________________________________________
21
<PAGE>
________________________________________________________________________________
<TABLE>
<C> <S>
* Incorporated by reference to the indicated exhibit in the Company's
Registration Statement on Form S-1 (File No. 33-7838), as amended.
** Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1987.
*** Incorporated by reference to the indicated exhibit in the Company's
Form 8-K dated May 5, 1988.
**** Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1990.
+ Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1989.
++ Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended June 30,
1990.
+++ Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended June 29,
1991.
++++ Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended September
28, 1991.
# Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1991.
## Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended March 28,
1992.
### Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended September
26, 1992.
#### Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1992.
/ Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1993.
// Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended April 2,
1994.
/// Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended July 2,
1994.
//// Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended October 1,
1994.
/(1)/ Management contract or compensatory plan required to be filed as an
exhibit.
</TABLE>
________________________________________________________________________________
22
<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.
ACUSON CORPORATION
March 30, 1995 By /s/ Samuel H. Maslak
-----------------------------------------
Samuel H. Maslak
President and Chief
Executive Officer
March 30, 1995 By /s/ Robert J. Gallagher
-----------------------------------------
Robert J. Gallagher
Chief Operating Officer
March 30, 1995 By /s/ Stephen T. Johnson
-----------------------------------------
Stephen T. Johnson
Chief Financial Officer
and Treasurer (Principal
Financial and Accounting Officer)
23
<PAGE>
________________________________________________________________________________
SIGNATURES
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>
/s/ Samuel H. Maslak President, Chief Executive March 30, 1995
------------------------------------
(Samuel H. Maslak) Officer and Director
/s/ Robert J. Gallagher Chief Operating Officer and March 30, 1995
------------------------------------
(Robert J. Gallagher) Director
/s/Stephen T. Johnson Chief Financial Officer and March 30, 1995
------------------------------------
(Stephen T. Johnson) Treasurer (Principal Financial and
Accounting Officer)
/s/ Royce Diener Director March 30, 1995
------------------------------------
(Royce Diener)
/s/ Albert L. Greene Director March 30, 1995
------------------------------------
(Albert L. Greene)
/s/ Karl H. Johannsmeier Director March 30, 1995
------------------------------------
(Karl H. Johannsmeier)
/s/ Alan C. Mendelson Director March 30, 1995
------------------------------------
(Alan C. Mendelson)
</TABLE>
________________________________________________________________________________
24
<PAGE>
________________________________________________________________________________
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Acuson Corporation's Annual Report to
stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 3, 1995. Our audit was made for the purpose of
forming an opinion on those statements taken as whole. The schedule listed at
Item 14(a)(2) is the responsibility of the Company's management and is
presented for purpose 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.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
San Jose, California
February 3, 1995
S-1
<PAGE>
________________________________________________________________________________
ACUSON CORPORATION SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Balance at End
of Period Expenses Write-Offs of Period
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended:
December 31, 1992 $2,563 $ 30 $ (1) $2,592
December 31, 1993 $2,592 $701 $(449) $2,844
December 31, 1994 $2,844 $597 $ (9) $3,432
Accrued warranty:
Year ended:
December 31, 1992 $4,055 $7,330 $(7,354) $4,031
December 31, 1993 $4,031 $6,235 $(6,979) $3,287
December 31, 1994 $3,287 $7,949 $(6,761) $4,475
</TABLE>
________________________________________________________________________________
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS:
---------
<C> <S> <C>
3.1 Restated Certificate of Incorporation, as amended *
(Exhibit 3.8)
3.2 Bylaws as currently in effect (Exhibit 3.2) #
4.1 Rights Agreement, dated as of May 5, 1988, between ***
Acuson Corporation and The First National Bank of
Boston, as Rights Agent (Exhibit 1)
10.1 The Company's 401(k) Plan, as amended (Exhibit 10.1) ****/(1)/
10.2 The Company's 1986 Employee Stock Purchase Plan (the //(1)/
"1986 Purchase Plan"), as amended (Exhibit 10.2)
10.3 Form of Employee Stock Purchase Agreement to be used */(1)/
under the 1986 Purchase Plan (Exhibit 10.5)
10.4 The Company's 1982 Incentive Stock Option Plan, as //(1)/
amended (Exhibit 10.4)
10.5 Form of Incentive Stock Option and related exercise **/(1)/
documents
10.6 The Company's 1986 Supplemental Stock Option Plan, as //(1)/
amended (Exhibit 10.6)
10.7 Form of Supplemental Stock Option (Exhibit 10.7) //(1)/
10.8 Series A Preferred Stock Purchase Agreement, dated *
January 6, 1982, between the Company and the
Purchasers listed on Schedule A thereto (Exhibit
10.8)
10.9 Series B Preferred Stock Purchase Agreement, dated *
March 29, 1983, between the Company and the
Purchasers listed on Schedule A thereto (Exhibit
10.9)
10.10 Series C Convertible Preferred Stock Purchase *
Agreement, dated March 30, 1984, between the
Company and the Purchasers listed on Exhibit A
thereto (Exhibit 10.10)
10.11 Lease of office space, dated May 15, 1990, ++
between Shoreline Investments III and the Company
(Exhibit 19.1)
10.12 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments III and the Company (Exhibit
19.2)
10.13 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments III and the Company (Exhibit
19.3)
10.14 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments VI and the Company (Exhibit
19.4)
10.15 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments V and the Company (Exhibit
19.5)
10.16 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments VI and the Company (Exhibit
19.6)
10.17 Lease of office space, dated May 15, 1990, between ++
Shoreline Investments VI and the Company (Exhibit
19.7)
10.18 Lease of office space, dated May 15, 1990 between ++
Shoreline Investments VII and the Company (Exhibit
19.8)
</TABLE>
<PAGE>
________________________________________________________________________________
<TABLE>
<C> <S> <C>
10.19 Non-Negotiable Secured Promissory Note, dated May 1, +/(1)/
1989, of John G. Freund (Exhibit 10.19)
10.20 Non-Negotiable Secured Promissory Note, dated May 1, +/(1)/
1989, of John G. Freund (Exhibit 10.20)
10.21 Third Deed of Trust, dated May 1, 1989, between +
John G. Freund, the Company and First American Title
Insurance Company, as Trustee (Exhibit 10.21)
10.22 The Company's 1991 Stock Incentive Plan +++/(1)/
10.23 Form of the Company's Supplemental and Non-Employee //(1)/
Director Supplemental Options under the 1991 Stock
Incentive Plan and related exercise documents as
amended (Exhibit 10.23)
10.24 Non-Negotiable Secured Promissory Note, dated August 8, ++++/(1)/
1991, of Daniel R. Dugan (Exhibit 19.1)
10.25 Second Deed of Trust, dated August 8, 1991, between ++++
Daniel R. Dugan and First American Title Insurance
Company, as Trustee (Exhibit 19.2)
10.26 Lease of office space, dated July 31, 1991, between ++++
Shoreline Investments V and the Company (Exhibit 19.3)
10.27 First Amendment to the Company's 401(k) Plan (Exhibit #/(1)/
10.31)
10.28 Lease of office space, dated January 31, 1992, between ##
Shoreline Investments V and the Company (Exhibit 19.1)
10.29 Credit Agreement between Acuson Corporation and the ###
First National Bank of Boston, as Agent, dated July 2,
1992 (Exhibit 19.1)
10.30 Officers' Bonus Plan (Exhibit 10.30) ####/(1)/
10.31 Form of Amendment Number 1 to Supplemental Stock Option /////(1)/
Terms Under the Company's 1986 Supplemental Stock Plan
and 1991 Stock Incentive Plan (Exhibit 10.1)
10.32 Form of Supplemental Stock Option Terms Under the /////(1)/
Company's 1991 Stock Incentive Plan (Exhibit 10.2)
10.33 Consulting Agreement, dated June 20, 1994, between /////(1)/
William H. Abbott and the Company (Exhibit 10.3)
10.34 Employment and Non-Competition Agreement, dated /(1)/
October 7, 1994, between John G. Freund and the
Company
11.1 Statement regarding computation of per share earnings ####
for the fiscal year ended December 31, 1992 (Exhibit
11.1)
11.2 Statement regarding computation of per share earnings /
for the fiscal year ended December 31, 1993 (Exhibit
11.1)
11.3 Statement regarding computation of per share earnings //
for the fiscal period ended April 2, 1994 (Exhibit
11.1)
11.4 Statement regarding computation of per share earnings ///
for the fiscal period ended July 2, 1994 (Exhibit
11.1)
11.5 Statement regarding computation of per share earnings ////
for the fiscal period ended October 1, 1994 (Exhibit
11.1)
11.6 Statement regarding computation of per share earnings
for the fiscal year ended December 31, 1994
</TABLE>
<PAGE>
________________________________________________________________________________
<TABLE>
<C> <S> <C>
13.1 Registrant's 1994 Annual Report
22.1 Subsidiaries of Registrant
24.1 Consent of Independent Public Accountants
27.1 Financial Data Schedule for the period ended October 1, ////
1994 (Exhibit 27.1)
27.2 Financial Data Schedule for the year ended December 31,
1994
</TABLE>
(b) The Registrant filed no reports on Form 8-K during the last quarter
of the fiscal year ended December 31, 1994.
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
<TABLE>
<C> <S>
* Incorporated by reference to the indicated exhibit in the Company's
Registration Statement on Form S-1 (File No. 33-7838), as amended.
** Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1987.
*** Incorporated by reference to the indicated exhibit in the Company's
Form 8-K dated May 5, 1988.
**** Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1990.
+ Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1989.
++ Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended June 30,
1990.
+++ Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended June 29,
1991.
++++ Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended September
28, 1991.
# Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1991.
## Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended March 28,
1992.
### Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended September
26, 1992.
#### Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1992.
/ Incorporated by reference to the indicated exhibit in the Company's
Form 10-K Annual Report for the fiscal year ended December 31, 1993.
// Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended April 2,
1994.
/// Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended July 2,
1994.
//// Incorporated by reference to the indicated exhibit in the Company's
Form 10-Q Quarterly Report for the quarterly period ended October 1,
1994.
/(1)/ Management contract or compensatory plan required to be filed as an
exhibit.
</TABLE>
________________________________________________________________________________
<PAGE>
================================================================================
ACUSON CORPORATION EXHIBIT 10.32
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
THIS AGREEMENT ("Agreement") is entered by and between Acuson Corporation,
a Delaware corporation, having a principal place of business at 1220 Charleston
Road, Mountain View, California 94043 ("Acuson"), and John G. Freund ("Freund"),
a resident of Atherton, California, as of October 7, 1994.
1. EMPLOYMENT
Freund shall continue to be employed as Executive Vice President of Acuson
until the earliest of (a) December 31, 1994, (b) the date upon which Freund
shall give written notice to Acuson that he resigns as an employee or (c)
Freund's death (the "resignation date"). As of the resignation date, Freund's
employment with Acuson shall terminate and, except as specifically provided in
this Agreement, all compensation, benefits, and other prerequisites of
employment shall cease.
2. CONSULTING SERVICES
From the resignation date until June 30, 1995, Freund agrees to perform
consulting services ("Services") for Acuson as Acuson may reasonably request
from time to time and as reasonably agreed to by Freund. Acuson agrees that it
will not request Freund to provide any Services if the provision of such
Services would conflict with other employment or consulting activities Freund
may have at the time. Nothing in this Agreement shall restrict Freund from
obtaining part time or full time employment with, or providing consulting
services to, any third party, subject to Freund's obligation to Acuson with
respect to proprietary and confidential information, including pursuant to this
Agreement and pursuant to Freund's Employee Proprietary Information and
Inventions Agreement that he signed when he joined Acuson and to Paragraph 4
below. In conjunction with the Services, Acuson shall provide Freund the use a
secretary and an office at Acuson (equivalent to the Acuson office he occupies
as of the date of this Agreement) and the company car phone until June 30, 1995.
3. COMPENSATION AND OTHER BENEFITS
In consideration of Freund's execution and performance of this Agreement,
as well as his past services to Acuson: (a) Acuson shall continue to pay Freund
his salary at his current rate and continue to provide Freund with dental,
medical, life and disability insurance as in effect on the date hereof until the
resignation date; (b) Acuson shall pay Freund all accrued vacation, but shall
not pay Freund for his untaken sabbatical; (c) on January 1, 1995, Acuson shall
forgive the remaining amount outstanding under that certain $500,000 Non-
Negotiable Secured Promissory Note dated May 1, 1989 between Acuson and Freund
(the "Loan"); (d) Acuson shall pay (on an after tax basis) any amounts Freund
must pay to continue his existing Acuson-provided health insurance covering him
and his family pursuant to COBRA until June 30, 1995; (e) specifically in
exchange for the Services, on January 6, 1995, Acuson shall pay Freund the sum
of $50,000; and (f) specifically in exchange for the non-competition agreement
set forth in Paragraph 4, on January 6, 1995, Acuson shall pay Freund the sum of
$113,150.
4. NON-COMPETITION
Freund agrees that until June 30, 1995, he will not obtain part time or
full time employment with, or provide consulting services to, any third party
that is engaged in the manufacture and/or sale of medical diagnostic ultrasound
imaging equipment.
5. CONFIDENTIAL INFORMATION
5.1 (a) INFORMATION. Freund shall hold in trust and confidence all
information, documents and other materials, regardless of form, relating to
Acuson, its business, suppliers and customers supplied to Freund or learned by
Freund in the course of performing the Services for Acuson ("Information").
Information includes, but is not
<PAGE>
limited to, technical and business information relating to Acuson's inventions
or products, research and development, production, manufacturing and engineering
processes, costs, profit or margin information, employee skills and salaries,
finances, customers, marketing, production, and future business and product
plans of Acuson, its suppliers and its customers, but shall not include
information contained in written materials broadly distributed by Acuson to the
general public, such as brochures, advertising and publicly available financial
statements.
(b) LIMITATIONS ON USE. Freund will use Information solely to perform
work for Acuson pursuant to this Agreement. Freund will not disclose Information
to any third party without Acuson's prior written consent.
5.2 ACUSON PROPERTY. All work performed by Freund for Acuson under this
Agreement and all documents and other material, whether delivered to Freund by
Acuson or made or received by Freund in the performance of Services (the "Acuson
Property") are the sole and exclusive property of Acuson. Freund agrees to
deliver to Acuson, or at Acuson's request destroy, promptly the original and any
copies (including any copies stored in any computer memory or other storage
medium) of the Acuson Property at any time upon Acuson's request.
6. OUTSTANDING OPTIONS
6.1 Vesting. All of Freund's outstanding options granted under the
Company's 1986 Supplemental Stock Option Plan and 1991 Stock Incentive Plan
(collectively "Outstanding Options") shall continue to vest until December 31,
1994, at which time all further vesting shall cease.
6.2 Option Exercisability. Acuson and Freund acknowledge that Freund's
Outstanding Options shall remain exercisable until March 31, 1995.
7. TERM
This Agreement will terminate on June 30, 1995.
8. INDEPENDENT RELATIONSHIP
After the resignation date, Freund's relationship with Acuson will be that
of an independent contractor, and nothing in this Agreement is intended to, or
should be construed to, create a partnership, agency or employment relationship
after the resignation date. Except as otherwise agreed between Freund and
Acuson, after the resignation date, Freund will not be entitled to any of the
benefits which Acuson may make available to its employees. Freund is solely
responsible for all tax returns and payments required to be filed with, or made
to, any federal, state or local tax authority with respect to the performance of
Services and receipt of fees for the non-competition provisions under this
Agreement. No part of Freund's compensation under this Agreement with respect to
the Services or the non-competition agreement will be subject to withholding by
Acuson for the payment of any social security, federal, state or any other
employee payroll taxes.
9. MUTUAL RELEASE
In consideration of the execution and delivery of this Agreement, each of
Acuson and Freund hereby completely release the other from all claims of any
kind, known and unknown, which Acuson or Freund, as the case may be, may now
have or have ever had as of the resignation date against the other, including
all claims arising from Freund's employment with Acuson, the resignation of his
employment, or Freund's compensation or benefits. This release includes, but is
not limited to, claims arising under federal, state, or local laws prohibiting
employment discrimination (including, for example, age, sex, race, color,
national origin, religion, disability or claims under the federal Age
Discrimination in Employment Act) and claims arising out of any other legal
restrictions on the Acuson's right to terminate its employees or laws governing
the payment of wages and benefits.
Each of Freund and Acuson understand that, Section 1542 of the California
Civil Code provides that "[a] general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor." Being aware of this provision and its effects upon
their respective rights, Freund and Acuson each expressly waive this provision
in entering into this Agreement.
2
<PAGE>
Without limiting the foregoing, Freund expressly understands and agrees
that, by entering into this Agreement (a) he is waiving any rights or claims he
may have under the Age Discrimination in Employment Act; (b) he has received
consideration beyond that to which he was previously entitled; (c) he has been
advised to consult with an attorney before signing this Agreement; and (d) he
has been given up to twenty-one (21) days to consider whether to sign this
Agreement. Freund also understands that he may revoke this Agreement within
seven (7) days after signing it, and he further understands that this Agreement
shall not be effective until the revocation period has expired.
10. GENERAL PROVISIONS
10.1 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of California as applied to agreements entered into and
to be performed entirely within California between California residents.
10.2 WAIVER. The waiver by either party of a breach of any provision of
this Agreement by the other party will not operate, or be interpreted, as a
waiver of any other or subsequent breach.
10.3 SUCCESSORS AND ASSIGNS. This Agreement is not assignable by either
party hereto without the consent of the other party. Subject to the preceding
sentence, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
10.4 SURVIVAL. Paragraph 5 ("Confidential Information") shall survive
termination of this Agreement.
10.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties relating to the termination of Freund's employment with
Acuson and supersedes all prior or simultaneous representations, discussions,
negotiations, and agreements, whether written or oral, with respect thereto,
except that nothing in this Agreement shall amend, modify or supersede in any
way Freund's obligations under any other agreement with Acuson with respect to
Acuson confidential or proprietary information. This Agreement may be amended or
supplemented, and any right hereunder may be waived, only by a writing that is
signed by both parties.
10.6 ADDITIONAL ACTIONS. Each party hereto agrees to take such additional
actions and to execute and deliver such additional documents as may be
reasonably requested by the other party to fully effectuate this Agreement.
Without limiting the generality of the foregoing, Acuson agrees, at its expense
and by January 31, 1995, to execute and file with the appropriate authorities
such documents as Freund may reasonably request to evidence forgiveness of the
Loan and to release Freund's residence from any lien or other encumbrance in
Acuson's favor relating to the Loan.
ACUSON CORPORATION: FREUND:
By: /s/ Robert J. Gallagher By: /s/ John G. Freund
-------------------------------- -------------------------------
Robert J. Gallagher John G. Freund
3
<PAGE>
________________________________________________________________________________
ACUSON CORPORATION EXHIBIT 11.6
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
In accordance with APB 15, the company used the modified treasury stock
method in computing the 1994 Earnings Per Share.
The following is a computation of the 1994 Earnings Per Share:
<TABLE>
<S> <C>
Step (a):
Number of shares outstanding at December 31, 1994 28,903,660
Number of shares assumed to be repurchased (limited to 20%
of number of shares outstanding) 5,780,732
Multiply by average market value per common share $14.08
------
Cost to repurchase 81,389,362
Assumed proceeds to the Company had everyone exercised
outstanding stock options 81,562,323
----------
Excess assumed proceeds available 172,960
Multiply by average interest rate for the year 5.0%
----
Assumed interest on excess funds 8,648
Less: tax provision (2,465)
-------
Adjustment to net income 6,183
Add: net income 18,267,000
----------
Adjusted net income $18,273,183
Divided by weighted shares outstanding, including
common stock equivalents 29,382,192
Earnings per share $0.62
=====
</TABLE>
<PAGE>
ACUSON CORPORATION EXHIBIT 13.1
================================================================================
C O N T E N T S
================================================================================
Management's Discussion and Analysis
of Financial Condition and Results of Operations 16
Selected Consolidated Financial Data 19
Quarterly Data 19
Consolidated Statements of Operations 20
Consolidated Balance Sheets 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Stockholders' Equity 23
Notes to Consolidated Financial Statements 24
Report of Independent Public Accountants 30
Market for Registrant's Common Equity
and Related Stockholder Matters 31
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results Of Operations
The following table sets forth, for the periods indicated, certain items in
the consolidated statements of operations as percentages of total net sales
and the percentage change of each such item from the comparable prior period.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage Change
Year Ended December 31, 1994 1993 1992 1994 vs. 1993 1993 vs. 1992
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales
Product 78.7% 77.5% 83.5% 20.6% (20.1)%
Service 21.3 22.5 16.5 12.3 17.6
------ ------ ------
Total net sales 100.0 100.0 100.0 18.7 (13.9)
------ ------ ------
Cost of sales
Product 33.2 30.3 30.6 30.0 (14.7)
Service 10.2 11.6 10.1 5.1 (1.3)
------ ------ ------
Total cost of sales 43.4 41.9 40.7 23.1 (11.4)
------ ------ ------
Gross profit 56.6 58.1 59.3 15.5 (15.6)
Operating expenses
Selling, general and administrative 30.1 34.6 30.6 2.9 (2.1)
Product development 20.2 19.8 13.9 21.3 22.2
Restructuring cost -- 4.1 -- (100.0) 100.0
------ ------ ------
Total operating expenses 50.3 58.5 44.5 2.0 13.3
------ ------ ------
Income (loss) from operations 6.3 (0.4) 14.8 n/m n/m
Interest income, net 1.0 1.6 2.2 (23.6) (37.5)
------ ------ ------
Income before income taxes 7.3 1.2 17.0 645.5 (94.1)
Provision for (benefit from) income taxes 2.1 (0.1) 6.3 n/m n/m
------ ------ ------
Net income 5.2% 1.3% 10.7% 392.2% (89.9)%
====== ====== ======
</TABLE>
1994 Compared To 1993
Net sales in 1994 increased by 18.7% to $350.5 million from $295.3 million in
1993. Worldwide product revenues in 1994 increased by $47.0 million from
$228.7 million in 1993, a 20.6% increase. Although product unit sales
increased, the Company's average unit selling prices were lower in 1994 as a
result of an increase in sales of lower-priced configurations
and intense competitive pressures. Worldwide service revenues increased by
12.3% to $74.7 million from $66.6 million in 1993, primarily due to growing
service contract revenue from a larger base of installed systems.
Geographically, international revenues increased 41.5% in 1994 to $111.1
million, totalling 31.7% of the Company's sales as compared to 26.6% in
16
<PAGE>
1993. Total domestic revenues increased 10.4% to $239.3 million.
Uncertainty in the changing U.S. health care environment has continued to
affect the ultrasound markets in 1994. Although the prospect of legislated
health care reform receded at year end, the trends of health care provider
consolidation, medical cost containment and intense competition existed
throughout the year, and are expected to continue into 1995.
Cost of sales increased as a percentage of net sales to 43.4% for 1994 compared
to 41.9% for 1993. The percentage increase in 1994 was primarily a reflection of
reduced product prices and increased sales of lower-priced product
configurations, partially offset by lower service costs as a percentage of
sales.
Selling, general and administrative costs were $105.5 million for 1994 compared
to $102.6 million for 1993. As a percentage of net sales, these expenses
decreased to 30.1% in 1994 from 34.6% in 1993. Costs did not increase at the
same rate as sales primarily because of a reduction in legal expenses, reduced
advertising spending, and flat domestic sales expense, offset by increased
international expenses for additional staff in selected subsidiaries.
Product development spending for 1994 totalled $70.8 million compared to $58.3
million for 1993. As a percentage of net sales, product development was 20.2% in
1994 and 19.8% in 1993. The increase in product development expenditure results
from continuing investment in multiple new product programs. Product development
is expected to continue to grow in total dollars in 1995.
Restructuring cost was a one-time pre-tax charge of $12.0 million taken during
the second quarter of 1993. The cost was 4.1% of net sales. The restructuring
consisted of a series of planned actions, including a reduction of about 15% of
the Company's worldwide work force, the restructuring of facilities and the
write-down of certain assets. Substantially all of the $1.1 million
restructuring balance that remained at December 31, 1993 was used during 1994.
The actual costs of the restructuring were substantially in alignment with
original expectations.
Provision for income taxes was $7.3 million in 1994 versus a benefit of $0.3
million in 1993; the prior year's benefit was due primarily to a research and
development tax credit and to the mix of income between domestic and
international operations. The Company's overall tax rate increased to 28.5% in
1994 from (8.2)% in 1993.
Net income was $18.3 million in 1994 compared to $3.7 million in 1993. The
increase was the result of a higher volume of sales and the absence of the
restructuring cost in 1994.
Investments. In May 1993, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which was effective for fiscal years
beginning after December 15, 1993. This statement addresses the accounting for,
and reporting of, investments in certain equity securities that have readily
determinable fair values and all debt securities. The Company adopted this
statement at January 1, 1994. The effect of implementing this statement was not
material to the Company's financial statements.
1993 COMPARED TO 1992
Net sales in 1993 decreased by 13.9% to $295.3 million from $342.8 million in
1992. Worldwide product revenues in 1993 declined by $57.5 million from $286.2
million in 1992, a 20.1% decline. Both product unit sales and the average unit
selling prices for 1993 were lower due to a weak worldwide ultrasound market
that was adversely affected by slow worldwide economic conditions, and
uncertainties created by pending U.S. health care reform. A 17.6% increase in
service revenues partially offset the reduction in product sales. Worldwide
service revenues increased by $10.0 million from $56.6 million in 1992,
primarily due to growing service contract revenue from a larger base of
installed systems. Geographically, international revenues decreased 10.3% in
1993 to $78.5 million, totalling 26.6% of the Company's sales as compared to
25.5% in 1992. Total domestic revenues decreased 15.1% to $216.8 million.
Cost of sales increased as a percentage of net sales to 41.9% for 1993 compared
to 40.7% for 1992. The percentage increase in 1993 was primarily a reflection of
the higher percentage of service revenues which have a lower gross margin than
product sales, plus reduced system prices and increased sales of lower-priced
product configurations. These factors were partially offset by lower service
costs due to increasing efficiencies.
Selling, general and administrative costs were $102.6 million for 1993 compared
to $104.8 million for 1992. As a percentage of net sales, however, these
expenses were 34.6% in 1993 and 30.6% in 1992. The reduced expenditures
reflected the effects of the second quarter 1993 restructuring and other cost
containment measures.
Product development spending for 1993 totalled $58.3 million compared to $47.7
million for 1992. As a percentage of net sales, product development was 19.8% in
1993 and 13.9% in 1992. The significant increase in product development expenses
from 1992 to 1993 resulted primarily from increased
17
<PAGE>
staff levels and associated increased support costs for multiple product
development programs.
Restructuring cost, as previously mentioned, was a one-time pre-tax charge of
$12.0 million taken during the second quarter of 1993.
Net interest income was $4.7 million in 1993 compared to $7.5 million in
1992. The decrease resulted from reduced interest income on the Company's
short-term investment portfolio, primarily attributable to a substantial
decrease in the Company's average investment balances resulting from the
stock repurchase program (see "Liquidity and Capital Resources," below).
Provision for income taxes was a benefit of $0.3 million in 1993 versus a
provision for $21.5 million in 1992 primarily due to the effect of the
research and development tax credit and to the current mix of income between
domestic and international operations. The Company's overall tax rate
decreased to (8.2)% in 1993 from 36.8% in 1992.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which superseded SFAS No. 96. The Company adopted the provisions of this
Statement on a prospective basis in the first quarter of 1993, and the effect
on the financial statements is not significant.
Net income was $3.7 million in 1993 compared to $36.8 million in 1992. The
decline was the result of lower sales, increased product research and
development expenditures and the restructuring cost. Those declines were
offset somewhat by lower income taxes.
INFLATION
To date, the Company has not experienced any significant effects from
inflation.
LIQUIDITY AND CAPITAL RESOURCES
In 1992, the Board of Directors authorized the repurchase of 8,000,000 shares
of the Company's common stock over an unspecified period of time. This
program was completed in 1993.
On October 26, 1993, the Board of Directors authorized the repurchase of an
additional 4,000,000 shares of stock over an unspecified period of time. As
of December 31, 1994, the Company had repurchased 367,700 shares at a
cumulative cost of $5.4 million. As with all purchases thus far, the Company
intends to fund future purchases by utilizing the Company's cash balances.
The Company's cash and short-term investments balance increased $7.8 million
in 1994, while this balance had decreased $6.2 million in 1993. Operations
generated $33.0 million in cash in 1994, as compared to 1993 when operations
generated $31.7 million in cash. In the first quarter of 1994, the Company sold
its lease portfolio, generating $21.6 million in cash. Investment activities in
property and equipment and in other assets used $27.4 million in 1994 versus
$17.7 million in 1993. The cash used for the repurchase of common stock totalled
$7.2 million in 1994, down from $24.2 million in the prior year. Employee
participation in the Company's stock option and stock purchase plans raised $9.5
million in cash in 1994 compared to $4.4 million in 1993.
Net accounts receivable increased $15.6 million in 1994, to $78.5 million at
December 31, 1994. The increase largely resulted from the 18.7% increase in
revenue as well as an increase in days sales outstanding to 82 days in 1994 from
78 days in 1993. The days sales outstanding increased as a result of a larger
proportion of the receivable balance coming from international sales which have
a slower collection period than domestic sales. The investment in leases
decreased by $12.6 million as a result of the sale of the lease portfolio in
March 1994, which was partially offset by continued additions of new leases
throughout the remainder of the year. Inventory increased by $8.0 million to a
total of $49.9 million primarily due to an increase of stock to meet anticipated
requirements.
Net property and equipment increased by $4.7 million, to $49.0 million,
while gross property and equipment balances grew by $21.2 million. The increase
was due primarily to increased investment of $6.9 million spent to acquire
manufacturing equipment, $5.7 million spent for computers and software and $3.8
million spent for leasehold improvements. The Company continued to upgrade and
increase the number of engineering workstations and test equipment for product
development. Leasehold improvements supported various projects, primarily the
conversion of the manufacturing facilities to implement demand flow technology.
At December 31, 1994, the Company's working capital totalled $138.3 million,
including $67.1 million in cash and short-term investments. The Company also has
a revolving unsecured credit facility of $50 million which is in effect through
July 1995. No compensating balances are required and the full amount is
available under this credit facility.
Based on its current operating plan, the Company believes that the liquidity
provided by its existing cash and short-term investments balances, the borrowing
arrangements described above, and cash generated from operations will be
sufficient to meet the Company's operating and capital requirements for fiscal
1995.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share amounts) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations Data:
Net sales $350,484 $295,289 $342,832 $336,275 $282,811
Net income 18,267 3,711 36,806 58,522 47,836
Earnings Per Share:
Net income $ 0.62 $ 0.13 $ 1.08 $ 1.59 $ 1.33
Weighted average common and common
equivalent shares outstanding 29,382 28,934 34,283 36,886 36,026
Consolidated Balance Sheet Data:
Working capital $138,336 $113,502 $131,728 $223,557 $162,650
Total assets 304,638 271,081 278,557 336,141 249,064
Stockholders' equity 207,785 183,261 201,146 272,362 199,793
</TABLE>
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1994 Quarter Ended
(In thousands, except per share amounts) Dec. 31 Oct. 1 July 2 April 2
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 83,259 $ 86,386 $ 88,014 $ 92,825
Gross profit 46,499 49,344 49,545 52,932
Income before income taxes 4,492 4,651 6,291 10,130
Net income 3,860 3,734 4,089 6,584
Earnings per share 0.13 0.13 0.14 0.23
</TABLE>
<TABLE>
<CAPTION>
1993 Quarter Ended
(In thousands, except per share amounts) Dec. 31 Oct. 2 July 3 April 3
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 73,827 $ 67,067 $ 72,100 $ 82,295
Gross profit 42,635 39,143 42,096 47,813
Restructuring cost -- -- 12,000 --
Income (loss) before income taxes 4,242 1,813 (10,342) 7,716
Net income (loss) 3,139 2,279 (6,722) 5,015
Earnings (loss) per share 0.11 0.08 (0.23) 0.17
</TABLE>
19
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share amounts) 1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Product $275,754 $228,721 $286,234
Service 74,730 66,568 56,598
-------- -------- --------
Total net sales 350,484 295,289 342,832
-------- -------- --------
COST OF SALES
Product 116,233 89,399 104,843
Service 35,931 34,203 34,654
-------- -------- --------
Total cost of sales 152,164 123,602 139,497
-------- -------- --------
Gross profit 198,320 171,687 203,335
-------- -------- --------
OPERATING EXPENSES
Selling, general and administrative 105,536 102,587 104,800
Product development 70,786 58,336 47,719
Restructuring cost -- 12,000 --
-------- -------- --------
Total operating expenses 176,322 172,923 152,519
-------- -------- --------
Income (loss) from operations 21,998 (1,236) 50,816
Interest income, net 3,566 4,665 7,462
-------- -------- --------
Income before income taxes 25,564 3,429 58,278
Provision for (benefit from) income taxes 7,297 (282) 21,472
-------- -------- --------
NET INCOME $ 18,267 $ 3,711 $ 36,806
======== ======== ========
EARNINGS PER SHARE $ 0.62 $ 0.13 $ 1.08
======== ======== ========
Weighted average common and common
equivalent shares outstanding 29,382 28,934 34,283
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(In thousands, except per share amounts) 1994 1993
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 28,671 $ 11,184
Short-term investments 38,421 48,103
--------- ---------
Total cash and short-term investments 67,092 59,287
Accounts receivable, net of allowance for doubtful accounts
of $3,432 in 1994 and $2,844 in 1993 78,534 62,976
Inventories 49,926 41,964
Deferred income taxes 26,127 20,622
Other current assets 13,510 16,473
--------- ---------
Total current assets 235,189 201,322
--------- ---------
PROPERTY AND EQUIPMENT, AT COST
Furniture and fixtures 14,086 14,219
Test equipment 26,797 23,739
Machinery and equipment 78,017 63,492
Leasehold improvements 22,314 18,557
--------- ---------
141,214 120,007
Less: Accumulated depreciation and amortization (92,217) (75,700)
--------- ---------
Total property and equipment, net 48,997 44,307
--------- ---------
OTHER ASSETS
Net investment in leases, net of current portion 10,618 19,502
Other long-term assets, net 9,834 5,950
--------- ---------
Total assets $ 304,638 $ 271,081
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 16,295 $ 12,644
Accrued compensation 22,743 18,337
Deferred revenue 20,871 18,961
Accrued warranty 4,475 3,287
Accrued income taxes 10,355 7,981
Customer deposits 6,774 7,477
Other accrued liabilities 15,340 19,133
--------- ---------
Total current liabilities 96,853 87,820
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.0001: authorized, 10,000 shares;
outstanding, none -- --
Common stock and additional paid-in capital, common stock par value
$.0001: authorized, 50,000 shares; outstanding, 28,904 shares in 1994
and 28,279 shares in 1993 79,183 69,115
Cumulative translation adjustment (1,240) (2,259)
Unrealized holding loss on investment securities (370) --
Retained earnings 130,212 116,405
--------- ---------
Total stockholders' equity 207,785 183,261
--------- ---------
Total liabilities and stockholders' equity $ 304,638 $ 271,081
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $18,267 $ 3,711 $ 36,806
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 19,665 21,026 20,446
Bad debt expense 597 701 30
Write-down of assets related to the restructuring -- 2,195 --
Stock option compensation related to the restructuring -- 488 --
Tax benefit of employee stock transactions 1,529 213 345
Changes in:
Accounts receivable (15,991) 9,875 6,023
Leases receivable 12,607 (6,048) (13,753)
Inventories (7,598) (715) (8,091)
Deferred income taxes (5,370) (5,853) (6,166)
Other current assets (442) (3,261) 2,049
Accounts payable 3,580 (1,130) (648)
Accrued compensation 4,277 951 2,574
Deferred revenue 1,664 3,052 3,240
Accrued warranty 1,188 (744) (24)
Accrued income taxes 2,354 (762) 2,171
Customer deposits (896) 3,173 1,275
Other accrued liabilities (2,442) 4,840 8,931
------- ------- --------
Net cash provided by operating activities 32,989 31,712 55,208
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in short-term investments 9,139 (4,140) 98,778
Investment in property and equipment (23,708) (14,961) (35,155)
Increase in other assets (3,778) (2,783) (1,585)
------- ------- --------
Net cash provided by (used in) investing activities (18,347) (21,884) 62,038
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (7,172) (24,192) (111,350)
Issuance of common stock under stock option
and stock purchase plans 9,477 4,447 4,743
------- ------- --------
Net cash provided by (used in) financing activities 2,305 (19,745) (106,607)
------- ------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 540 (382) (812)
------- ------- --------
Net increase (decrease) in cash and cash equivalents 17,487 (10,299) 9,827
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,184 21,483 11,656
------- ------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $28,671 $11,184 $ 21,483
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Three Years Ended December 31, 1994 Cumulative Unrealized Total
Common Stock Translation Holding Retained Stockholders'
(In thousands, except per share amounts) Shares Amount Adjustment Loss Earnings Equity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 35,414 $77,245 $ 197 $ -- $194,920 $272,362
Exercise of stock options at $0.13 to
$29.13 per share 91 626 -- -- -- 626
Repurchase of common stock at $14.63 to
$21.88 per share (5,957) (13,517) -- -- (97,915) (111,432)
Issuance of stock under employee
stock purchase plan at $15.20 to
$17.85 per share 270 4,117 -- -- -- 4,117
Tax benefit of employee stock transactions -- 345 -- -- -- 345
Translation adjustments -- -- (1,678) -- -- (1,678)
Net income -- -- -- -- 36,806 36,806
------- -------- -------- ------ --------- ---------
BALANCE, DECEMBER 31, 1992 29,818 68,816 (1,481) -- 133,811 201,146
Exercise of stock options at $0.13 to
$14.67 per share 108 394 -- -- -- 394
Repurchase of common stock at $11.13 to
$14.00 per share (2,043) (4,849) -- -- (21,117) (25,966)
Issuance of stock under employee
stock purchase plan at $9.89 to
$10.95 per share 396 4,053 -- -- -- 4,053
Tax benefit of employee stock transactions -- 213 -- -- -- 213
Translation adjustments -- -- (778) -- -- (778)
Stock option compensation -- 488 -- -- -- 488
Net income -- -- -- -- 3,711 3,711
------- -------- -------- ------ --------- ---------
BALANCE, DECEMBER 31, 1993 28,279 69,115 (2,259) -- 116,405 183,261
Effect of adoption of accounting principle -- -- -- (19) -- (19)
Exercise of stock options at $0.13 to
$17.17 per share 592 5,454 -- -- -- 5,454
Repurchase of common stock at $13.13 to
$16.13 per share (368) (938) -- -- (4,460) (5,398)
Issuance of stock under employee
stock purchase plan at $9.89 to
$10.20 per share 401 4,023 -- -- -- 4,023
Tax benefit of employee stock transactions -- 1,529 -- -- -- 1,529
Translation adjustments -- -- 1,019 -- -- 1,019
Unrealized holding loss on investment
securities -- -- -- (351) -- (351)
Net income -- -- -- -- 18,267 18,267
------- -------- -------- ------ --------- ---------
BALANCE, DECEMBER 31, 1994 28,904 $79,183 $(1,240) $(370) $130,212 $207,785
======= ======== ======== ====== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
Founded in 1981, Acuson Corporation (the "Company") is a United States-based
multinational corporation. The Company is a leading manufacturer and worldwide
marketer and service provider of medical diagnostic ultrasound systems and image
management products. The markets for Acuson products are North America, Europe,
Australia, Asia, South America and the Middle East. The Company's products are
sold primarily to hospitals, private and governmental institutions and health
care agencies, medical equipment distributors and doctors' offices.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the 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.
Translation of Foreign Currencies. The functional currency of Acuson's
foreign subsidiaries is the local currency. Acuson translates all assets and
liabilities to U.S. dollars at current exchange rates as of the applicable
balance sheet date. Sales and expenses are translated at the average
exchange rates prevailing during the period. Gains and losses resulting from
the translation of the foreign subsidiaries' financial statements are
reported as a separate component of stockholders' equity. The results of
foreign exchange transactions were immaterial to the Company's financial
statements.
Concentration of Credit Risk. Credit risk represents the accounting loss that
would be recognized at the reporting date if counterparties failed to perform as
contracted. Concentrations of credit risk (whether on or off balance sheet) that
arise from financial instruments, exist for groups of customers or
counterparties when they have similar economic characteristics that would cause
their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. The Company does not have significant
exposure to any individual customer or counterparty.
The Company provides credit in the form of trade accounts receivable to
hospitals, private and governmental institutions and health care agencies,
medical equipment distributors and doctors' offices. Acuson products are
manufactured at the world headquarters in Mountain View, California, and are
sold through a direct sales force in North America, Europe, Australia and
Japan, and through distributors in Europe, Asia, South America and the Middle
East. The Company does not generally require collateral to support customer
receivables. The Company performs ongoing credit evaluations of its
customers and maintains allowances which management believes are adequate for
potential credit losses.
Financial Instruments and Credit Risk. The Company operates internationally,
giving rise to significant exposure to market risks from changes in foreign
exchange rates. The Company enters into foreign currency exchange contracts,
which are derivative financial instruments, to reduce exposure to currency
exchange risk. The effect of this practice is to minimize the impact of foreign
exchange rate movements on the Company's operating results. Hedging activities
do not subject the Company to exchange rate risk as gains and losses on these
contracts offset gains and losses on the assets, liabilities and transactions
being hedged. The Company does not engage in foreign currency speculation nor
does it hold or issue financial instruments for trading purposes. Forward
contract terms are currently not more than three months. The counterparties to
foreign currency exchange contracts are major domestic and international
financial institutions.
At December 31, 1994, the Company had forward exchange contracts maturing
from January 1995 through February 1995 to sell a net equivalent of
approximately $29 million of foreign currencies, of which approximately $11
million are in Italian lira, $5 million are in French francs, and $5 million are
in British pounds. Likewise, at December 31, 1993, the Company also had forward
contracts maturing from January 1994 through February 1994 to sell approximately
$23 million of foreign currencies, of which approximately $7 million were in
Italian lira and $4 million were in German marks. The carrying value of these
contracts approximates their fair market value as of both year-ends.
Derivatives. The Company's only use of derivatives securities is its routine
usage of forward contracts to hedge foreign currency exposure. Gains and losses
on hedges of existing assets or liabilities are included in the carrying amounts
of those assets or liabilities and are ultimately recognized in
24
<PAGE>
income as part of those carrying amounts. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions are also deferred and are
recognized in income or as adjustments of carrying amounts when the hedged
transaction occurs.
Inventories Inventories are stated at the lower of cost (first-in, first-out)
or market and include material, labor and manufacturing overhead. The
components of inventories were as follows as of December 31:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
Raw materials $29,552 $17,093
Work-in-process 3,783 5,820
Finished goods 16,591 19,051
------- -------
Total inventories $49,926 $41,964
======= =======
</TABLE>
Property and Equipment. Property and equipment are stated at cost and are
depreciated or amortized using the straight-line method over the following
estimated useful lives:
----------------------------------------------------------------------------
Furniture and fixtures 5 years
Test equipment 3-5 years
Machinery and equipment 3-5 years
Leasehold improvements Term of lease
Revenue Recognition. Revenues from equipment sales and sales-type leases are
generally recognized when the equipment has been shipped, and lease contracts,
if applicable, have been executed. Estimated costs of installation, which are
minimal, are accrued at the time revenue is recognized. Service revenues are
recognized ratably over the contractual period or as the services are provided.
Earnings Per Share. Earnings per share is computed based on the weighted
average number of common and common equivalent shares outstanding during the
period. The modified treasury stock method was used in computing the
earnings per share. Primary earnings per share is essentially the same as
fully diluted earnings per share.
Consolidated Statement of Cash Flows. For purposes of the statement 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. For purposes of the statements of cash flows, the Company classifies cash
flows from hedging contracts in the same category as the cash flows from the
items being hedged.
Cash paid for income taxes and interest expense was as
follows for each of the years ended December 31:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes $ 8,248 $ 9,517 $ 26,278
Interest expense $ 151 $ 56 $ 118
</TABLE>
In conjunction with repurchase of common stock in 1993 (see Note 7), the Company
incurred a liability due to the timing of the settlement dates.
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase of common stock $ 5,398 $ 25,966 $111,432
Cash paid for repurchase of
common stock (7,172) (24,192) (111,350)
------- -------- --------
Net cash effect $(1,774) $ 1,774 $ 82
======= ======== ========
</TABLE>
Reclassifications Certain information reported in previous years has been
reclassified to conform to the 1994 presentation.
NOTE 3. INVESTMENTS
Under Statement of Financial Accounting Standards No. 115, the Company's
investments, which consisted entirely of debt securities, (the "securities"),
were classified as available-for-sale. These securities mature at various dates
through the year 1996.
As of December 31, 1994, the securities' gross unrealized holding loss was
approximately $543,000. The unrealized holding loss of approximately $370,000,
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 year, the
Company sold certain of its available-for-sale securities for proceeds of
approximately $29.0 million. The Company sold these securities for approximately
original cost.
Short-term investments as of December 31, 1994, consist of the following:
<TABLE>
<CAPTION>
Market Value Amount at Which
Marketable Securities Cost of at Balance Carried in
(In thousands) Each Issue Sheet Date Balance Sheet
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Securities $8,442 $8,396 $8,396
U.S. Government
and Agencies 30,522 30,025 30,025
------- ------- -------
Total short-term
investments $38,964 $38,421 $38,421
======= ======= =======
</TABLE>
NOTE 4. BANK LINE OF CREDIT
As of December 31, 1994, the Company had an unsecured revolving credit
agreement for $50 million through July 1995. No compensating balances are
required and the full amount is available under this credit facility. No
draws on this line of credit were made during the year.
25
<PAGE>
Note 5. Net Investment In Sales-type Leases
The Company leases equipment to customers under sales-type leases as defined
in Statement of Financial Accounting Standards No. 13. The Company's leasing
operations consist of leases of medical equipment which expire over a period
of 1 to 6 years. The following lists the components of the net investment in
sales-type leases as of December 31, 1994:
<TABLE>
<CAPTION>
(In thousands) Amount
----------------------------------------------------------------------------
<S> <C>
Minimum amounts receivable $15,485
Less: Allowance for uncollectibles (411)
-------
Net minimum lease payments receivable 15,074
Estimated residual values of leased property 690
Less: Unearned interest income (1,495)
-------
Net investment in leases 14,269
Less: Current portion
(included in other current assets) (3,651)
-------
Long-term portion $10,618
=======
</TABLE>
Minimum amounts receivable under existing leases as of December 31, 1994,
were as follows:
<TABLE>
<CAPTION>
(In thousands) Amount
----------------------------------------------------------------------------
<S> <C>
1995 $ 4,693
1996 3,773
1997 3,195
1998 2,266
1999 1,506
Thereafter 52
-------
Total minimum amounts receivable $15,485
=======
</TABLE>
The Company sold a portion of its lease portfolio, with recourse, for $21.6
million in the first quarter of 1994. The maximum recourse liability to the
Company is approximately $2.1 million.
NOTE 6. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities and certain other equipment under
operating lease agreements expiring through May 31, 2002. Future minimum
lease payments as of December 31, 1994, were as follows:
<TABLE>
<CAPTION>
(In thousands) Amount
----------------------------------------------------------------------------
<S> <C>
1995 $ 9,380
1996 8,818
1997 8,504
1998 8,072
1999 7,895
Thereafter 11,431
-------
Total future minimum lease payments $54,100
=======
</TABLE>
Rent expense was approximately $10,098,000, $9,414,000 and $9,502,000 in
1994, 1993 and 1992, respectively.
Legal Contingencies. 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 and 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 suit vigorously. Management believes that
the ultimate outcome of this matter will not have a material adverse effect
on the Company's financial condition.
On September 14, 1994, the Company filed an action in the United States
District Court for the Northern District of California against Advanced
Technology Laboratories, Inc. ("ATL") of Bothell, Washington. In the action,
the Company accuses ATL of infringing U.S. Letters Patent No. 4,058,003 for
"Ultrasonic Electronic Lens with Reduced Delay Range," a patent licensed
exclusively to the Company. In addition, the Company seeks a declaration
that it infringes no valid claim of four ATL patents: U.S. Letters Patent
No. 4,543,960 for "Transesophageal Echocardiography Scanhead," No. 5,050,610
for "Transesophageal Ultrasonic Scanhead," No. 5,207,225 for "Transesophageal
Ultrasonic Scanhead," or No. 5,226,422 for "Transesophageal Echocardiography
Scanner with Rotating Image Plane." No dollar amount is specified as damages
in the Company's action, but the complaint seeks an accounting for damages,
treble damages and an assessment of interests and costs against ATL. In
addition, the Company is informed that, in August 1994, ATL filed an action
against the Company in the United States District Court for the Western District
of Washington, in which ATL sought a declaration that it infringes no valid
claim of U.S. Letters Patent No. 4,058,003. On October 31, 1994, ATL amended
that action and added claims accusing the Company of infringing U.S. Patent Nos.
4,543,960; 5,050,610; 5,207,225; and 5,226,422. No dollar amount is specified as
damages in ATL's action, but the complaint seeks an injunction against alleged
infringement, an accounting for damages, treble damages, and an assessment of
interest and costs against the Company. Management believes that the ultimate
outcome of this matter will not have a material adverse effect on the Company's
financial condition.
On October 27, 1994, the Company was sued in Ghent, Belgium, by Cormedica
NV, in connection with the
26
<PAGE>
Company's termination of the distributor relationship with Cormedica. In the
suit, Cormedica seeks indemnities and damages in the amount of approximately
$2.5 million. The Company intends to defend the suit vigorously. Management
believes that the ultimate outcome of this matter will not have a material
adverse effect on the Company's financial condition.
NOTE 7. COMMON STOCK
Common Stock Purchase. Rights During 1988, the Company declared a dividend of
one common share purchase right for each then outstanding share of common stock.
As a result of the Company's 3-for-2 split of its common stock in August 1990,
each share of common stock now has associated with it two-thirds of one common
share purchase right. In addition, two-thirds of one right will be issued with
each future share of common stock issued by the Company before the date the
rights become exercisable, or before the rights are redeemed by the Company, or
before the rights expire on May 15, 1998. The rights will not be exercisable, or
transferable apart from the common stock, until 10 days after another person or
group of persons acquires 20% of the common stock or commences a tender or
exchange offer for at least 20% of the common stock. Each right entitles the
holder to purchase from the Company one and one-half shares of common stock at
$80 per share, subject to adjustments for dilutive events. In certain
circumstances, the right will entitle its holder to purchase a larger number of
shares of common stock or stock in an acquiring company. The Board of Directors
may redeem the rights, at any time, at $.01 per right, payable in cash, common
shares or other consideration. In addition, the Board may also, without consent
of the holders of the rights, amend the terms of the rights to lower the
threshold for exercisability of the rights.
Stock Option Plans. The Company has in effect a 1986 Supplemental Stock Option
Plan (the "1986 Plan") and a 1991 Stock Incentive Plan (the "1991 Plan").
Under the 1991 Plan, incentive and supplemental stock options may be granted
to employees, directors and consultants to purchase common stock at a price
which is not less than 100% of the market value (or 10% for supplemental
stock options) of the shares at the grant date. The options can be granted
for periods of up to ten years and are subject to exercise and vesting
schedules as determined by the Board of Directors. At December 31, 1994,
1,544,236 shares were available for future grant.
On June 4, 1993, the Board of Directors offered employees holding non-
qualified stock options the opportunity of cancelling options in exchange for
new options issued at the then current fair market value at the ratio of two new
shares for three cancelled shares. Options covering approximately 4,672,000
shares at prices per share ranging from $10.75 to $38.63 were cancelled and
options covering approximately 3,116,000 shares were granted at $10.75 per
share.
On August 2, 1994, the Board of Directors approved an amendment to
outstanding non-qualified stock options that provides for accelerated vesting
of such options in the event that some person or entity acquires more than
20% of the Company's then outstanding stock without the approval of the Board
of Directors.
The following table summarizes option activity for the past three years.
<TABLE>
<CAPTION>
(In thousands, except per share data) Shares Price per Share
-----------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1991 5,677 $ 0.13 - $38.63
Granted 1,888 $15.38 - $32.00
Exercised (86) $ 0.13 - $29.13
Expired or cancelled (213) $ 0.40 - $38.63
-------
Outstanding at December 31, 1992 7,266 $ 0.13 - $38.63
Granted 4,499 $10.75 - $14.88
Exercised (108) $ 0.13 - $14.67
Expired or cancelled (4,968) $ 0.40 - $38.63
-------
Outstanding at December 31, 1993 6,689 $ 0.13 - $37.38
Granted 859 $ 1.80 - $17.75
Exercised (592) $ 0.13 - $17.17
Expired or cancelled (299) $ 0.13 - $37.38
-------
OUTSTANDING AT DECEMBER 31, 1994 6,657 $ 0.40 - $37.38
=======
</TABLE>
At December 31, 1994, there were options for 3,614,907 shares exercisable
under these Plans at $0.40 to $37.38 per share.
Employee Stock Purchase Plan. During 1993, the Board of Directors amended the
Company's 1986 Employee Stock Purchase Plan (the "Plan") to increase the
number of shares which may be issued by 1,250,000. As of December 31, 1994,
the Company has reserved 631,834 shares of common stock for issuance under
the Plan. Qualified employees may elect to have between 3% and 15% of their
salary withheld pursuant to the Plan. The salary so withheld is then used to
purchase shares of the Company's common stock at a price not less than 85% of
the market value of the stock on specified dates determined at the
commencement of the offering period.
Common Stock Repurchase Program. In 1992, the Board of Directors authorized
the repurchase of 8,000,000 shares of the Company's common stock. This
program was completed in 1993.
On October 26, 1993, the Board of Directors authorized the repurchase of an
additional 4,000,000 shares over an
27
<PAGE>
unspecified period of time. As of December 31, 1994, the Company had
repurchased 367,700 shares for an aggregate price of $5.4 million. The
difference between the original issue price and the repurchase price has been
accounted for as a reduction in retained earnings.
NOTE 8. RESTRUCTURING
In 1993, the Company restructured its worldwide operations in order to
address the weakness in the worldwide demand for premium quality medical
diagnostic ultrasound products. The restructuring consisted of a series of
planned actions, including a reduction of approximately 15% of the Company's
worldwide work force, the restructuring of facilities and
the write-down of certain assets. In connection with these actions, the
Company recorded a one-time pre-tax charge of $12.0 million during the
second quarter of 1993. Substantially all of the $1.1 million restructuring
balance which remained at December 31, 1993, was used during the year. The
actual costs of the restructuring were substantially in alignment with
original expectations.
NOTE 9. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes," which supersedes SFAS No. 96. The Company adopted the
provisions of SFAS No. 109 on a prospective basis effective January 1, 1993,
and the effect on its financial statements was not significant. In 1992 the
Company accounted for income taxes by directive of Accounting Principles
Board Opinion No. 11.
Income before provision for income taxes and the components of the provision
for income taxes consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before provision
for income taxes:
Domestic $23,709 $ 7,677 $57,302
Foreign 2,086 (2,872) 1,924
Eliminations (231) (1,376) (948)
------- ------- -------
$25,564 $ 3,429 $58,278
======= ======= =======
Provision for income taxes:
Federal
Current $ 8,812 $ 5,175 $19,702
Deferred (3,567) (5,605) (2,478)
------- ------- -------
5,245 (430) 17,224
======= ======= =======
State
Current 1,362 1,102 4,871
Deferred (748) (1,217) (977)
------- ------- -------
614 (115) 3,894
======= ======= =======
Foreign
Current 1,438 263 445
Deferred -- -- (91)
------- ------- -------
1,438 263 354
------- ------- -------
Total provision (benefit) $ 7,297 $ (282) $21,472
======= ======= =======
</TABLE>
The provision for income taxes differs from the amounts obtained by applying
the Federal statutory rate to income before taxes as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 34.0%
State taxes, net of Federal
income tax benefit 1.6 (7.9) 4.4
Foreign subsidiary income (loss) 1.8 29.4 (0.5)
Research and development
tax credits (13.3) (67.1) (2.2)
Other 3.4 2.4 1.1
------ ------ -----
Provision rate 28.5% (8.2)% 36.8%
====== ====== =====
</TABLE>
The components of deferred tax assets were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C>
Reserves not currently deductible $12,346 $ 9,032
Inventory amortization 5,005 5,315
Accruals not currently deductible 4,959 5,289
Vacation accrual 2,471 1,627
Research and development
credit carryback 2,629 --
Depreciation 933 755
State income tax accruals (1,368) (1,213)
Other 1,751 518
------- -------
Deferred tax assets $28,726 $21,323
======= =======
</TABLE>
NOTE 10. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment: the development, manufacture
and sale of medical diagnostic ultrasound imaging systems and image
management products. Acuson products are manufactured at the world
headquarters in Mountain View, California, and are sold through a direct
sales force in North America, Europe, Australia and Japan, and through
distributors in Europe, Asia, South America and the Middle East. Sales from
domestic operations to subsidiaries are recorded on the basis of arms-length
prices established by the Company.
28
<PAGE>
A summary of the Company's operations by geographic area for the three
years ended December 31, 1994 is as follows:
<TABLE>
<CAPTION>
From Domestic From Foreign
(In thousands) Operations Operations Eliminations Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers 1994 $279,753 $70,731 $ -- $350,484
1993 249,473 45,816 -- 295,289
1992 285,970 56,862 -- 342,832
-------------------------------------------------------------------------------------------------------------------------
Transfers between geographic areas 1994 $ 38,432 $ -- $(38,432) $ --
1993 27,907 -- (27,907) --
1992 32,588 -- (32,588) --
-------------------------------------------------------------------------------------------------------------------------
Total sales 1994 $318,185 $70,731 $(38,432) $350,484
1993 277,380 45,816 (27,907) 295,289
1992 318,558 56,862 (32,588) 342,832
-------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 1994 $ 20,515 $ 1,714 $ (231) $ 21,998
1993 3,361 (3,221) (1,376) (1,236)
1992 50,110 1,654 (948) 50,816
-------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 1994 $ 23,709 $ 2,086 $ (231) $ 25,564
1993 7,677 (2,872) (1,376) 3,429
1992 57,302 1,924 (948) 58,278
-------------------------------------------------------------------------------------------------------------------------
Identifiable assets 1994 $257,915 $49,336 $ (2,613) $304,638
1993 237,760 39,377 (6,056) 271,081
1992 243,710 39,545 (4,698) 278,557
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
Foreign Sales. Shipments to foreign customers from both domestic and foreign
operations for each of the three years ended December 31, were as follows:
<TABLE>
<CAPTION>
Percent of
(In thousands) Foreign Sales Total Sales
------------------------------------------------------------------------------
<S> <C> <C>
1994 $111,144 31.7%
1993 78,498 26.6
1992 87,500 25.5
</TABLE>
29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Acuson Corporation:
We have audited the accompanying consolidated balance sheets of Acuson
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Acuson Corporation and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
San Jose, California
February 3, 1995
30
<PAGE>
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Acuson's Common Stock, par value $.0001, trades on the New York Stock
Exchange under the symbol ACN. The following table sets forth the high and
low closing sales price on the New York Stock Exchange for 1994 and 1993.
<TABLE>
1994 HIGH LOW
-----------------------------------------------------------------------------
<S> <C> <C>
1ST QUARTER $13.25 $11.38
2ND QUARTER 15.25 12.13
3RD QUARTER 16.25 11.63
4TH QUARTER 18.38 14.88
1993 High Low
-----------------------------------------------------------------------------
1st Quarter $15.50 $12.13
2nd Quarter 14.00 10.75
3rd Quarter 12.88 11.13
4th Quarter 14.25 12.00
</TABLE>
The approximate number of record holders of the Company's Common Stock as of
December 31, 1994, was 1,791.
Acuson has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future.
31
<PAGE>
CORPORATE DIRECTORY
DIRECTORS
Royce Diener
Retired Chairman
American Medical
International, Inc. /1, 3/
Robert J. Gallagher
Chief Operating Officer
Acuson Corporation /2/
Albert L. Greene
President and
Chief Executive Officer
Alta Bates Medical Center
Karl H. Johannsmeier
Private Investor
Samuel H. Maslak
President and
Chief Executive Officer
Acuson Corporation /2/
Alan C. Mendelson
Partner
Cooley Godward Castro
Huddleson & Tatum
OFFICERS
Samuel H. Maslak
President and
Chief Executive Officer
Robert J. Gallagher
Chief Operating Officer
Daniel R. Dugan
Senior Vice President
Worldwide Sales,
Service and Marketing
Judith A. Heyboer
Senior Vice President
Bradford C. Anker
Vice President, Manufacturing
Charles H. Dearborn
Vice President
Secretary and General Counsel
Stephen T. Johnson
Vice President, Chief Financial
Officer and Treasurer
L. Thomas Morse
Vice President
Corporate Controller
William C. Varley
Vice President, Cardiology
Business Operations
ACUSON PRINCIPAL FELLOW
Amin M. Hanafy
CORPORATE HEADQUARTERS
1220 Charleston Road
Mountain View, CA 94043
(415) 969-9112
REGIONAL OFFICES
Central Region Office
Cincinnati, Ohio
MidAtlantic Region Office
Columbia, Maryland
Midwest Region Office
Schaumburg, Illinois
Northeast Region Office
Elmwood Park, New Jersey
Southeast Region Office
Atlanta, Georgia
Southwest Region Office
Irving, Texas
Western Region Office
San Jose, California
SUBSIDIARIES
Acuson Pty. Ltd.
Epping, N.S.W.
Australia
Acuson Canada Ltd.
Oakville, Ontario
Canada
Acuson OY
Hameenlinna
Finland
Acuson S.A.R.L.
Les Ulis
France
Acuson GmbH
Erlangen
Germany
Acuson Hong Kong Ltd.
Hong Kong
Acuson S.p.A.
Milan
Italy
Acuson Nippon K.K.
Tokyo
Japan
Acuson A/S
Skarer
Norway
Acuson CIS
Moscow
Russia
Acuson AB
Arlandastad
Sweden
Acuson Ltd.
Uxbridge
United Kingdom
AUDITORS
Arthur Andersen LLP
San Jose, California
REGISTRAR AND TRANSFER AGENT
The First National Bank of Boston
Boston, Massachusetts
STOCK LISTING
Acuson Corporation
Common Stock is traded on the New York Stock Exchange under the symbol ACN.
SHAREHOLDER INFORMATION
Inquiries should be directed to
Shareholder Relations
P.O. Box 7393
Mountain View, California
94039-7393
(800) 433-1447
(415) 969-9112 in California
/1./ Member of Audit Committee
/2./ Member of Executive Committee
/3./ Member of Compensation Committee
Acuson, MultiHertz, XP and the XP logo are registered trademarks of Acuson
Corporation. CDE, Color Doppler Energy, DTI, Doppler Tissue Imaging,128XP, AEGIS
and The Sonography Management System are trademarks of Acuson Corporation.
ACU541-30M395
<PAGE>
________________________________________________________________________________
ACUSON CORPORATION EXHIBIT 22.1
SUBSIDIARIES OF THE REGISTRANT
Acuson Corporation has the following wholly-owned subsidiaries:
1. Acuson Pty. Ltd., organized under the laws of Australia.
2. Acuson Canada Ltd., organized under the laws of Ontario, Canada.
3. Acuson OY, organized under the laws of Finland.
4. Acuson S.A.R.L., organized under the laws of France.
5. Acuson GmbH, organized under the laws of Germany.
6. Acuson Hong Kong Ltd., organized under the laws of Hong Kong.
7. Acuson S.p.A., organized under the laws of Italy.
8. Acuson Nippon K.K., organized under the laws of Japan.
9. Acuson Benelux BV, organized under the laws of the Netherlands.
10. Acuson A/S, organized under the laws of Norway.
11. Acuson AB, organized under the laws of Sweden.
12. Acuson Ltd., organized under the laws of the United Kingdom.
13. Acuson Foreign Sales Corporation, organized under the laws of the
Virgin Islands.
14. Acuson International Sales Corporation, organized under the laws of the
State of California.
15. Acuson Worldwide Sales Corp., organized under the laws of the State of
California.
16. Sound Technology, Inc., organized under the laws of the State of
Pennsylvania.
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
ACUSON CORPORATION EXHIBIT 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included (or incorporated by reference) in this Form 10-K, into
the Company's previously filed Registration Statements on Form S-8, File Nos.
33-29596, 33-43606, 33-59250, and 33-66734.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
San Jose, California
March 23, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 28,671
<SECURITIES> 38,421
<RECEIVABLES> 81,966
<ALLOWANCES> 3,432
<INVENTORY> 49,926
<CURRENT-ASSETS> 235,189
<PP&E> 141,214
<DEPRECIATION> 92,217
<TOTAL-ASSETS> 304,638
<CURRENT-LIABILITIES> 96,853
<BONDS> 0
<COMMON> 79,183
0
0
<OTHER-SE> 128,602
<TOTAL-LIABILITY-AND-EQUITY> 304,638
<SALES> 275,754
<TOTAL-REVENUES> 350,484
<CGS> 116,233
<TOTAL-COSTS> 152,164
<OTHER-EXPENSES> 176,322
<LOSS-PROVISION> 597
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> 25,564
<INCOME-TAX> 7,297
<INCOME-CONTINUING> 18,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,267
<EPS-PRIMARY> $ 0.62
<EPS-DILUTED> $ 0.62
</TABLE>
