<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 March 30, 1996 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 26,873,413 shares
------------------------------- -----------------------------
(Class) Outstanding at April 26, 1996
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________________________________________________________________________________
FORM 10-Q
ACUSON CORPORATION
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of
March 30, 1996 and December 31, 1995 1
Condensed Consolidated Statements of
Operations for the Three Months Ended March 30, 1996
and April 1, 1995 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 30, 1996
and April 1, 1995 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 6. EXHIBITS AND REPORTS ON FORM 8-K 8
Signature 9
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ACUSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
MARCH 30, DECEMBER 31,
1996 1995
(Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 35,604 $ 46,135
Short-term investments 5,997 10,000
-------- --------
Total cash and short-term investments 41,601 56,135
Accounts receivable, net 77,393 77,992
Inventories 58,920 50,484
Other current assets 38,965 36,655
-------- --------
Total current assets 216,879 221,266
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization of $109,804 and
$106,647 in 1996 and 1995, respectively 52,422 50,244
OTHER ASSETS, NET 27,683 24,343
-------- --------
Total Assets $296,984 $295,853
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,019 $ 16,295
Other accrued liabilities 82,604 83,561
-------- --------
Total current liabilities 107,623 99,856
-------- --------
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; 26,839 shares
and 27,275 shares in 1996 and 1995, respectively 80,912 79,702
Cumulative translation adjustment 134 206
Unrealized holding loss on investment securities 2 37
Retained earnings 108,313 116,052
-------- --------
Total stockholders' equity 189,361 195,997
-------- --------
Total Liabilities and Stockholders' Equity $296,984 $295,853
======== ========
</TABLE>
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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
-------------------------
MARCH 30, APRIL 1,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET SALES
Product $64,337 $68,645
Service 20,489 19,321
------- -------
Total net sales 84,826 87,966
------- -------
COST OF SALES
Product 30,950 31,846
Service 9,833 8,637
------- -------
Total cost of sales 40,783 40,483
------- -------
Gross profit 44,043 47,483
------- -------
OPERATING EXPENSES
Selling, general and administrative 26,767 27,262
Product development 16,372 18,059
------- -------
Total operating expenses 43,139 45,321
------- -------
Income from operations 904 2,162
INTEREST INCOME, NET 899 991
------- -------
Income before income taxes 1,803 3,153
PROVISION FOR INCOME TAXES 541 914
------- -------
Net income $ 1,262 $ 2,239
======= =======
EARNINGS PER SHARE $ 0.05 $ 0.08
======= ======
WEIGHTED AVERAGE COMMON AND COMMON 27,197 29,953
EQUIVALENT SHARES OUTSTANDING ====== ======
</TABLE>
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See accompanying notes to unaudited condensed consolidated financial statements.
2
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ACUSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 30, APRIL 1,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,262 $ 2,239
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 4,784 4,154
Changes in:
Accounts receivable 641 1,308
Leases receivable (6,524) (3,613)
Inventories (8,475) 1,578
Other current assets 338 1,923
Accounts payable 8,740 2,564
Other accrued liabilities (2,376) 2,743
-------- -------
Net cash (used in) provided (1,610) 12,896
by operating activities -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in short-term investments 3,948 4,929
Investment in property and equipment (7,098) (4,325)
Decrease (increase) in other assets 717 (87)
-------- -------
Net cash (used in) provided (2,433) 517
by investing activities -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (9,930) (5,091)
Issuance of common stock under stock
option and stock purchase plans 3,475 3,484
-------- -------
Net cash (used in) financing (6,455) (1,607)
activities -------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (33) 324
-------- -------
Net (decrease) increase in cash and (10,531) 12,130
cash equivalents
CASH AND CASH EQUIVALENTS, BEGINNING OF 46,135 28,671
PERIOD -------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 35,604 $40,801
======== =======
</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's") condensed consolidated financial position as of March 30, 1996 and
its condensed consolidated results of operations and cash flows for the periods
ended March 30, 1996 and April 1, 1995. The results of operations for the three
months ended March 30, 1996 are not necessarily indicative of the results to be
expected for the entire year ending December 31, 1996. Certain information
reported in the prior year has been reclassified to conform to the 1996
presentation.
The Company's principle accounting policies are set forth in the financial
statements for the year ended December 31, 1995 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 1997.
As of March 30, 1996, the securities' gross unrealized holding loss was
approximately $3,000. The unrealized holding loss of approximately $2,000, 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 three months ended
March 30, 1996, the Company did not sell any of its securities prior to
maturity.
NOTE 3 - INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 30, DEC. 31,
1996 1995
--------- ---------
<S> <C> <C>
Raw materials $30,882 $26,906
Work-in-process 8,984 5,981
Finished goods 19,054 17,597
------- -------
Total inventories $58,920 $50,484
======= =======
</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
4
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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.
________________________________________________________________________________
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 March 30, 1996, were $84.8 million compared
to $88.0 million in the quarter ended April 1, 1995. The change in revenue was
primarily because of a decrease in domestic product revenue. The Company's
average unit selling prices were lower in this quarter as a result of an
increase in sales of lower-priced configurations and intense competitive pricing
pressures. Worldwide service revenue increased 6.1% to $20.5 million from $19.3
million in the quarter ended April 1, 1995, primarily due to a larger base of
installed systems. Geographically, international revenue increased to $34.8
million, totalling 41.0% of the Company's sales as compared to 37.2% in the
comparable 1995 period.
The Company believes that the trends of health-care-provider consolidation,
medical cost containment and intense competitive pressures which existed in
1995, will continue into 1996. 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 recovery, it is uncertain whether this is
temporary or permanent.
The gross profit for the first quarter of 1996 was 51.9% of net sales,
compared to 54.0% in the first quarter of 1995. The percentage change was
primarily a reflection of reduced product prices, increased sales of lower-
priced product configurations and lower service margins. The lower service
margins are primarily due to pricing pressures as a result of medical cost
containment.
Selling, general and administrative costs were $26.8 million in the quarter
ended March 30, 1996, as compared to $27.3 million in the prior year's period.
As a percentage of sales, such expenses in the first three months in 1996
totalled 31.6% of net sales compared to 31.0% in 1995. Dollar spending
decreased primarily due to the decrease in domestic selling expenses.
Product development costs in the first quarter of 1996 totalled $16.4 million
or 19.3% of net sales, compared to $18.1 million or 20.5% of net sales in the
first quarter of 1995. The decrease in product development expense results from
a planned reduction in the level of product development.
The provision for income taxes was $0.5 million in the first quarter of 1996
versus $0.9 million in the first quarter of 1995. The effective tax rate for
the three months ended March 30, 1996 was 30% versus 29% in the same period in
the prior year.
On April 29, 1996 the Company introduced its new Sequoia 512 and Sequoia C256
ultrasound systems. The Company plans to begin shipments of the Sequoia products
in the third quarter of 1996. As a result of this new product introduction, the
Company expects to incur substantial additional selling expenses and
manufacturing costs. The introduction may also negatively impact revenues from
existing products. Currently, the Company expects the impact to be in the range
of $0.25 to $0.40 per share for the second quarter of 1996. Accordingly, the
Company expects to report a loss for the second quarter of 1996.
6
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________________________________________________________________________________
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments balance has decreased $14.5
million during the three months ended March 30, 1996 to $41.6 million. During
the quarter, the Company used $1.6 million in cash for operations, as compared
to the first quarter of 1995 when operations generated $12.9 million in cash.
Inventories increased $8.5 million during the quarter as a result of the planned
introduction of the new Sequoia product line. The increase in inventories
resulted in a similar increase in accounts payable which increased $8.7 million
during the quarter.
The Company's investing and financing activities for the three months ended
March 30, 1996 have used $8.9 million. The Company purchased $7.1 million of
equipment during the quarter, primarily related to the development and
manufacture of the new product line. Included in the financing activities for
the first quarter of 1996 is $3.5 million raised through employee participation
in the Company's stock option and stock purchase plans and $9.9 million used for
share repurchases. In the same period a year ago, employee participation in the
Company's stock plans also generated $3.5 million while share repurchases used
$5.1 million.
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 first quarter
the Company repurchased 750,000 shares, for a total repurchase of 3,464,800
shares to date toward the Board authorization. As of March 30, 1996, there were
26,839,225 shares of Acuson common stock outstanding.
At April 1, 1995, the Company's working capital totalled $109.3 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 quarter.
Based on its current operating plan, the Company believes that the liquidity
provided by its existing cash and short-term investments, the borrowing
arrangements described above, and cash generated from operations will be
sufficient to meet the Company's operating and capital requirements for fiscal
1996.
________________________________________________________________________________
7
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________________________________________________________________________________
PART II
ITEM 1
LEGAL PROCEEDINGS
Previously reported in Company's Form 10-K for the fiscal year ended
December 31, 1995.
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 a report on Form 8-K on April 29, 1996.
________________________________________________________________________________
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)
May 14, 1996 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>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> 35,604
<SECURITIES> 5,997
<RECEIVABLES> 80,317
<ALLOWANCES> 2,924
<INVENTORY> 58,920
<CURRENT-ASSETS> 216,879
<PP&E> 162,226
<DEPRECIATION> 109,804
<TOTAL-ASSETS> 296,984
<CURRENT-LIABILITIES> 107,623
<BONDS> 0
0
0
<COMMON> 80,912
<OTHER-SE> 108,449
<TOTAL-LIABILITY-AND-EQUITY> 296,984
<SALES> 64,337
<TOTAL-REVENUES> 84,826
<CGS> 30,950
<TOTAL-COSTS> 40,783
<OTHER-EXPENSES> 43,139
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (899)
<INCOME-PRETAX> 1,803
<INCOME-TAX> 541
<INCOME-CONTINUING> 1,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,262
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
