<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1995 or
------------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ___________
Commission file number 0-14953
-------
ACUSON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2784998
------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
1220 CHARLESTON ROAD
P. O. BOX 7393
MOUNTAIN VIEW, CA 94039-7393
(Address of principal executive offices)
Registrant's telephone number, including area code, is (415) 969-9112
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
-----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.0001 par value 27,877,787 shares .
------------------------------- ----------------------------------
(Class) Outstanding at November 4, 1995
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________________________________________________________________________________
FORM 10-Q
ACUSON CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 1
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 1995 and
October 1, 1994 and for the Nine Months Ended September 30,
1995 and October 1, 1994 2
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995 and
October 1, 1994 3
Notes to Unaudited Condensed Consolidated
Financial Statements 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 8
ITEM 6. Exhibits and Reports on Form 8-K 8
Signature 9
</TABLE>
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________________________________________________________________________________
ACUSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 37,130 $ 28,671
Short-term investments 24,670 38,421
-------- --------
Total cash and short-term investments 61,800 67,092
Accounts receivable, net 72,701 78,534
Inventories 51,413 49,926
Other current assets 42,418 39,637
-------- --------
Total current assets 228,332 235,189
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation
and amortization of $103,924 and $92,217 in 1995 and 1994, respectively 50,244 48,997
OTHER ASSETS, NET 24,040 20,452
-------- --------
Total Assets $302,616 $304,638
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 13,778 $ 16,295
Other accrued liabilities 86,850 80,558
-------- --------
Total current liabilities 100,628 96,853
-------- --------
Commitments and contingencies (Note 4)
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, 27,938 shares
and 28,904 shares in 1995 and 1994, respectively 81,300 79,183
Cumulative translation adjustment (105) (1,240)
Unrealized holding gain (loss) on investment securities 30 (370)
Retained earnings 120,763 130,212
-------- --------
Total stockholders' equity 201,988 207,785
-------- --------
Total Liabilities and Stockholders' Equity $302,616 $304,638
======== ========
</TABLE>
________________________________________________________________________________
See accompanying notes to unaudited condensed consolidated financial statements.
1
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_______________________________________________________________________________
ACUSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- ----------------------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES
Product $54,976 $67,410 $185,480 $211,666
Service 20,399 18,976 59,800 55,559
------- ------- -------- --------
Total net sales 75,375 86,386 245,280 267,225
------- ------- -------- --------
COST OF SALES
Product 26,236 27,786 86,599 88,638
Service 9,108 9,256 26,490 26,766
------- ------- -------- --------
Total cost of sales 35,344 37,042 113,089 115,404
------- ------- -------- --------
Gross profit 40,031 49,344 132,191 151,821
------- ------- -------- --------
OPERATING EXPENSES
Selling, general and administrative 22,460 26,977 76,971 79,167
Product development 15,823 18,486 50,836 54,302
------- ------- -------- --------
Total operating expenses 38,283 45,463 127,807 133,469
------- ------- -------- --------
Income from operations 1,748 3,881 4,384 18,352
INTEREST INCOME, NET 920 770 2,865 2,720
------- ------- -------- --------
Income before income taxes 2,668 4,651 7,249 21,072
PROVISION FOR INCOME TAXES 774 917 2,102 6,665
------- ------- -------- --------
Net income $ 1,894 $ 3,734 $ 5,147 $ 14,407
======= ======= ======== ========
EARNINGS PER SHARE $ 0.07 $ 0.13 $ 0.18 $ 0.49
======= ======= ======== ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 27,943 29,276 28,428 29,318
======= ======= ======== ========
</TABLE>
_______________________________________________________________________________
See accompanying notes to unaudited condensed consolidated financial statements.
2
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________________________________________________________________________________
ACUSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
September 30, October 1,
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,147 $ 14,407
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 13,626 15,725
Changes in:
Accounts receivable 6,648 (16,027)
Leases receivable (4,410) 17,547
Inventories (1,236) (8,414)
Other current assets (1,733) 4,139
Accounts payable (2,611) 7,721
Other accrued liabilities 5,519 (2,550)
-------- --------
Net cash provided by operating activities 20,950 32,548
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in short-term investments 13,751 8,559
Investment in property and equipment (14,447) (17,793)
Decrease (increase) in other assets 289 (1,003)
-------- --------
Net cash used in investing activities (407) (10,237)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (19,152) (2,610)
Issuance of common stock under stock option and
stock purchase plans 6,674 7,437
-------- --------
Net cash provided by (used in) financing activities (12,478) 4,827
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 394 575
-------- --------
Net increase in cash and cash equivalents 8,459 27,713
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,671 11,184
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,130 $ 38,897
======== ========
</TABLE>
________________________________________________________________________________
See accompanying notes to unaudited condensed consolidated financial statements.
3
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________________________________________________________________________________
ACUSON CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - INTERIM STATEMENTS
In the opinion of management, the unaudited interim condensed consolidated
financial statements include all adjustments, which include only normal
recurring adjustments, necessary to summarize fairly Acuson Corporation's (the
"Company") condensed consolidated financial position as of September 30, 1995
and its condensed consolidated results of operations and cash flows for the
periods ended September 30, 1995 and October 1, 1994. The results of operations
for the three and nine months ended September 30, 1995 are not necessarily
indicative of the results to be expected for the entire year ending December 31,
1995. Certain information reported in the prior year has been reclassified to
conform to the 1995 presentation.
The Company's principle accounting policies are set forth in the financial
statements for the year ended December 31, 1994 and notes thereto, contained in
the Company's Annual Report filed with the Securities and Exchange Commission.
NOTE 2 - 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 September 30, 1995, the Securities' gross unrealized holding gain
was approximately $46,000. The unrealized holding gain of approximately $30,000,
net of the tax effect, was reported as a separate component of stockholders'
equity. During the nine months ended September 30, 1995, the Company sold
certain of its available-for-sale securities for approximately $1.7 million. The
Company sold these Securities for approximately original cost.
NOTE 3 - INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------------------------
<S> <C> <C>
Raw materials $26,896 $29,552
Work-in-process 6,263 3,783
Finished goods 18,254 16,591
------- -------
Total inventories $51,413 $49,926
======= =======
</TABLE>
NOTE 4 - 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 sought damages in an
unspecified amount, as well as equitable relief or injunctive relief and
attorneys' fees, experts' fees and costs. In September 1995, the parties agreed
in principal to settle
4
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the pending litigation, subject to the Court's approval. The proposed settlement
would 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 $2.5 million. The Company intends to defend this 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 5 - COMMON STOCK
The earnings per share were calculated using the modified treasury stock method.
________________________________________________________________________________
5
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________________________________________________________________________________
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 1995, were $75.4 million
compared to $86.4 million in the quarter ended October 1, 1994. For the first
nine months of 1995, net sales were $245.3 million, representing a decrease of
8.2% from $267.2 million in the first nine months of 1994. The decrease in
revenue in both periods was primarily a result of a decrease in domestic product
revenue. Worldwide service revenue increased 7.5% to $20.4 million from $19.0
million in the quarter ended October 1, 1994 and increased 7.6% to $59.8
million from $55.6 million for the first nine months of 1994. The increase was
primarily due to growing service contract revenue from a larger base of
installed systems. International revenue increased to $88.0 million during the
first nine months of 1995, totalling 35.9% of the Company's sales as compared to
$82.6 million or 30.9% in the comparable 1994 nine-month period.
The trends of health-care-provider consolidation, medical cost
containment, and intense competitive pressures which existed in 1994 are
continuing in 1995. The U.S. government is in the process of reforming Medicare.
The Company believes that future revenues may continue to be impacted by these
uncertainties, especially in the domestic ultrasound market. Although portions
of the international ultrasound markets are experiencing some economic growth,
it is uncertain whether this is temporary or permanent.
The gross profit for the third quarter of 1995 was 53.1% of net sales
compared to 57.1% in the third quarter of 1994. For the nine months ended
September 30, 1995, gross profit was 53.9% of net sales compared to 56.8% in the
first nine months of 1994. The percentage change was primarily a reflection of
reduced product prices and of lower production volume, partially offset by
improvement in service margins.
In anticipation of lower shipments in the third quarter of 1995, the
Company operated on a reduced work schedule of four days per week throughout the
quarter. The shortened schedule contributed to reduced expenses in the quarter,
as described below. The Company has returned to a full work week in the fourth
quarter.
Selling, general and administrative costs were $22.5 million or 29.8% of
net sales in the quarter ended September 30, 1995, as compared to $27.0 million
or 31.2% of net sales in the prior year's period. For the nine months ended
September 30, 1995, selling, general and administrative expenses were $77.0
million or 31.4% of net sales compared to $79.2 million or 29.6% of net sales in
the first nine months of 1994. The expense decrease in the third quarter was
primarily the result of the reduction of spending associated with the shutdown,
lower revenues, and seasonal factors partially offset by the higher
international expenses due to the relative weakness of the dollar. For the nine
month period, spending decreased primarily as a result of the decreases
discussed above offset by an increase in international spending associated with
the significant growth in international business.
Product development costs in the third quarter of 1995 totalled $15.8
million or 21.0% of net sales, compared to $18.5 million or 21.4% of net sales
in the third quarter of 1994. For the nine months ended September 30, 1995,
product development costs were $50.8 million or 20.7% of net sales compared to
$54.3 million or 20.3% of net sales in the first nine months of 1994. Product
development spending declined as a result of planned reduction in research and
development programs, plus the impacts in the third quarter of the reduced work
schedule.
The provision for income taxes was $0.8 million in the third quarter of
1995 versus $0.9 million in the third quarter of 1994. For the nine months ended
September 30, 1995, the tax provision was $2.1 million versus $6.7 million in
1994 primarily due to the effects of the current mix of income between domestic
and international operations and generally lower income levels in the current
year. The effective tax rate for the nine months ended September 30, 1995
decreased to 29.0% from 31.6% in the same period of the prior year.
6
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________________________________________________________________________________
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments balance has decreased $5.3
million during the nine months ended September 30, 1995 to $61.8 million. During
the nine months ended September 30, 1995, the Company generated $21.0 million in
cash from operations, as compared to 1994 when operations generated $32.5
million in cash. However, included in the 1994 total was $21.6 million generated
from the sale of the Company's lease portfolio. The Company's investing and
financing activities for the nine months ended September 30, 1995 have used
$12.9 million, including the use of $19.2 million for share repurchases. Also,
included in the financing activities was $6.7 million raised through employee
participation in the Company's stock option and stock purchase plans, compared
to $7.4 million during the first nine months of 1994.
In 1993, the Board of Directors authorized the repurchase of 4,000,000
shares of common stock over an unspecified period of time. During the third
quarter 1995 the Company repurchased 268,200 shares. As of September 30, 1995,
the Company had repurchased a total of 1,961,700 shares toward the Board
authorization and there were 27,937,549 shares of Acuson common stock
outstanding.
At September 30, 1995, the Company's working capital totalled $127.7
million. The Company also has a revolving unsecured credit facility for $50
million which is in effect through March 1997. No compensating balances are
required and the full amount is available under this credit facility. There were
no draws on this line of credit during the third quarter.
Based on its current operating plan, the Company believes that the
liquidity provided by cash generated from operations, its existing cash and
short-term investments, and the borrowing arrangements described above, will be
sufficient to meet the Company's operating and capital requirements for fiscal
1995.
________________________________________________________________________________
7
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________________________________________________________________________________
PART II
ITEM 1
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 sought damages in an
unspecified amount, as well as equitable relief or injunctive relief and
attorneys' fees, experts' fees and costs. In September 1995, the parties agreed
in principal to settle the pending litigation, subject to the Court's approval.
The proposed settlement would 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 $2.5 million. The Company intends to defend this suit
vigorously. Management believes that the ultimate outcome of this matter will
not have a material adverse effect on the Company's financial condition.
________________________________________________________________________________
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
--------
27.1 Financial Data Schedule
b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the quarter ended
September 30, 1995.
________________________________________________________________________________
8
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________________________________________________________________________________
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACUSON CORPORATION
(Registrant)
November 14, 1995 By /s/ Stephen T. Johnson
--------------------------------------------
Stephen T. Johnson
Vice President, Chief Financial
Officer and Treasurer
(duly authorized Officer and Principal
Financial and Accounting Officer)
9
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 37,130
<SECURITIES> 24,670
<RECEIVABLES> 76,280
<ALLOWANCES> 3,579
<INVENTORY> 51,413
<CURRENT-ASSETS> 228,332
<PP&E> 154,168
<DEPRECIATION> 103,924
<TOTAL-ASSETS> 302,616
<CURRENT-LIABILITIES> 100,628
<BONDS> 0
<COMMON> 0
0
81,300
<OTHER-SE> 120,688
<TOTAL-LIABILITY-AND-EQUITY> 302,616
<SALES> 185,480
<TOTAL-REVENUES> 245,280
<CGS> 86,599
<TOTAL-COSTS> 113,089
<OTHER-EXPENSES> 127,807
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,865)
<INCOME-PRETAX> 7,249
<INCOME-TAX> 2,102
<INCOME-CONTINUING> 5,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,147
<EPS-PRIMARY> $0.18
<EPS-DILUTED> $0.18
</TABLE>
