SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 1994
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 0-15160
ADVANCED TECHNOLOGY LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1353386
(State of incorporation) (IRS Employee Identification No.)
22100 Bothell-Everett Highway
Post Office Box 3003
Bothell, Washington 98041-3003
(Address of principal executive offices) (Zip Code)
(206) 487-7000
(Telephone number)
Common stock, $0.01 par value; 13,250,000 shares outstanding
as of October 28, 1994
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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ADVANCED TECHNOLOGY LABORATORIES, INC.
TABLE OF CONTENTS
PART I Financial Information: Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
(Unaudited) - September 30, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Operations
(Unaudited) - Three Months and Nine Months Ended
September 30, 1994 and October 1, 1993 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended September 30, 1994
and October 1, 1993 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II Other Information:
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security
Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
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PART I Financial Information
Item 1. Financial Statements
ADVANCED TECHNOLOGY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) 9/30/94 12/31/93
ASSETS
CURRENT ASSETS
Cash and short-term investments $34,327 $ 54,758
Receivables 95,581 102,811
Inventories 98,821 88,692
Prepaid expenses 4,392 2,180
Deferred income taxes 9,134 8,974
------- -------
242,255 257,415
MARKETABLE DEBT SECURITY 4,988 4,988
PROPERTY, PLANT AND EQUIPMENT, NET 56,198 59,811
OTHER ASSETS 7,661 7,183
-------- --------
$311,102 $329,397
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $1,516 $ 5,279
Current installments of long-term debt 1,842 470
Accounts payable and accrued expenses 61,816 60,928
Deferred revenue 32,671 30,711
Taxes on income 4,713 4,946
------- -------
102,558 102,334
DEFERRED INCOME TAXES 4,656 4,628
LONG-TERM DEBT 7,188 11,600
SHAREHOLDERS' EQUITY 196,700 210,835
-------- --------
$311,102 $329,397
======== ========
COMMON SHARES OUTSTANDING 13,251 13,101
See accompanying notes to condensed consolidated financial
statements.
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ADVANCED TECHNOLOGY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine Months ended
(In thousands, except per 9/30/94 10/1/93 9/30/94 10/1/93
share data)
REVENUES
Product sales $ 67,472 $ 60,966 $ 203,550 $ 208,755
Service 19,873 17,644 57,950 53,258
------ ------ ------- -------
87,345 78,610 261,500 262,013
COST OF SALES
Product sales 36,106 31,882 110,133 107,751
Service 11,746 10,481 35,742 34,235
------ ------ ------- -------
47,852 42,363 145,875 141,986
GROSS PROFIT 39,493 36,247 115,625 120,027
OPERATING EXPENSES
Selling, general and
administrative 28,529 26,493 81,329 82,258
Research and development 15,105 12,654 41,553 37,810
Merger and other costs -- -- 5,391 --
Restructuring charge -- 4,275 -- 4,275
Other expense, net 488 993 1,306 3,190
------ ------ ------- -------
44,122 44,415 129,579 127,533
INCOME (LOSS) FROM OPERATIONS (4,629) (8,168) (13,954) (7,506)
INTEREST, NET 258 220 590 1,066
-------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (4,371) (7,948) (13,364) (6,440)
INCOME TAX EXPENSE 387 577 1,039 1,232
-------- -------- --------- --------
NET INCOME (LOSS) $(4,758) $(8,525) $(14,403) $(7,672)
======== ======== ========= ========
NET INCOME (LOSS) PER SHARE $(0.36) $(0.63) $(1.10) $(0.56)
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS OUTSTANDING 13,215 13,436 13,151 13,690
See accompanying notes to condensed consolidated financial
statements.
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ADVANCED TECHNOLOGY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
(In thousands) 9/30/94 10/1/93
OPERATING ACTIVITIES
Net income (loss) $(14,403) $(7,672)
Non-cash charges (credits) to income
(loss):
Depreciation and amortization 11,729 10,940
Gain on sale of property (105) --
Changes in:
Receivables 6,960 10,533
Inventories (6,677) (16,951)
Accounts payable and accrued expenses (3,216) (4,490)
Deferred revenue 1,640 (144)
Taxes on income (305) (114)
Other (1,027) 151
------- -------
Cash used in operating activities (5,404) (7,747)
INVESTING ACTIVITIES
Decrease in short-term investments 20 38,174
Investment in long-term marketable debt
security -- (4,988)
Investment in property, plant and equipment (9,001) (10,502)
Proceeds from sale of property 3,224 --
Other (389) (1,088)
------- -------
Cash provided by (used in) investing activities (6,146) 21,596
FINANCING ACTIVITIES
Decrease in short-term borrowings (5,013) (320)
Repayment of long-term debt (3,003) (348)
Repurchase of common shares (369) (10,719)
Exercise of stock options 361 287
------- --------
Cash used in financing activities (8,024) (11,100)
Effect of exchange rate changes (837) (6)
------- -------
Net increase (decrease) in cash and
cash equivalents (20,411) 2,743
Cash and cash equivalents, beginning of period 52,713 34,770
------- -------
Cash and cash equivalents, end of period $32,302 $37,513
======= =======
See accompanying notes to condensed consolidated financial
statements.
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Basis of Presentation
The accompanying condensed consolidated financial statements
include the accounts of Advanced Technology Laboratories,
Inc. and its wholly owned subsidiaries, collectively
referred to as the "Company." The Company develops,
manufactures, markets and services diagnostic medical
ultrasound systems worldwide. These systems are used
primarily in radiology, cardiology, obstetrics/gynecology,
and peripheral vascular applications.
The accompanying condensed consolidated financial statements
and related notes have been prepared pursuant to the
Securities and Exchange Commission rules and regulations for
Form 10-Q. Accordingly, certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. The accompanying condensed
consolidated financial statements and related notes should
be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1993
Form 10-K Annual Report to Shareholders.
The information furnished reflects, in the opinion of the
management, all adjustments necessary for a fair
presentation of the results for the interim periods
presented. Interim results are not necessarily indicative
of results for a full year.
Certain amounts reported in prior periods have been
reclassified to conform to the 1994 presentation.
2. Acquisition of Interspec, Inc.
On May 17, 1994, the Company completed its merger with
Interspec, Inc. ("Interspec"). Interspec develops,
manufactures, markets, and services diagnostic medical
ultrasound imaging systems and related supplies and
accessories for physicians' offices, clinics and hospitals.
To effect the merger, the Company issued approximately 2.6
million shares of common stock for all of the outstanding
common stock of Interspec, based on an exchange ratio of
0.413 share of ATL stock for each share of Interspec stock.
The merger has been accounted for as a pooling of interests
business combination; therefore, the Company's financial
statements and information as reported prior to the merger
have been restated to include Interspec as if the companies
had been combined for all periods presented.
Prior to the merger, Interspec reported its financial
statements based on a November 30 fiscal year end. In 1994,
the fiscal year end of the combined companies will end
December 31, consistent with ATL's year end. To conform the
financial reporting periods of the combined companies,
Interspec's results of operations for the one month period
ended March 31, 1994 have
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
2. Acquisition of Interspec, Inc. (continued)
been excluded from the consolidated statements of operations
and cash flows and accounted for as an adjustment to
retained earnings.
Interspec's results for the one month ended March 31, 1994
included $2.1 million of expenses related primarily to the
termination of dealer arrangements in countries outside the
United States. The Interspec March 1994 results are
summarized as follows:
Revenues $3,320
Net loss (4,180)
In the second quarter of 1994, the newly combined company
recorded a $5.4 million non-recurring charge with $3.9
million for merger related costs and expenses and $1.5
million associated with the bankruptcy of Interspec's former
distributor in Italy as accounts receivable were garnished
in the bankruptcy proceeding. Of the $3.9 million merger
expenses, $2.3 million was for legal, accounting, investment
advisory, printing and other professional services with the
remaining $1.6 million related primarily to facility and
personnel consolidations of Interspec operations into the
newly combined company. The $5.4 million total is reported
separately as "Merger and Other Costs" in the Consolidated
Statements of Operations.
3. Cash, Short-Term Investments, and Long-Term Marketable
Debt Security
The Company considers short-term investments with maturity
dates of three months or less at the date of purchase to be
cash equivalents for purposes of the statement of cash
flows. All investments are expected to be held to maturity
and are recorded at cost.
9/30/94 12/31/93
Cash and cash equivalents $32,302 $52,713
Short-term investments 2,025 2,045
------- -------
34,327 54,758
Long-term marketable debt
security 4,988 4,988
------- -------
$39,315 $59,746
======= =======
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
4. Inventories
9/30/94 12/31/93
Materials and work in process $33,392 $27,995
Finished products 19,616 17,497
Demonstration 27,406 23,354
Customer service 18,407 19,846
------- -------
$98,821 $88,692
======= =======
6. Per Share Data
Per share data is based on the weighted average number of
common shares and dilutive common share equivalents
outstanding during each period. Dilutive common share
equivalents are calculated under the treasury stock method
and consist of unexercised employee stock options.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Three months ended Nine months ended
(In millions except 9/30/94 10/1/93 % Change 9/30/94 10/1/93 % Change
per share data)
Revenues $87.3 $78.6 11% $261.5 $262.0 0%
Gross Profit $39.5 $36.2 9% $115.6 $120.0 (4%)
Operating Expenses * $44.1 $44.4 (1%) $129.6 $127.5 2%
Net Income (Loss) * $(4.8) $(8.5) $(14.4) $(7.7)
Net Income (Loss) per $(0.36) $(0.63) $(1.10) $(0.56)
Share *
* The 1994 nine month results include non-recurring expenses
of $5.4 million primarily associated with the acquisition
of Interspec during the second quarter. The 1993 third
quarter and nine month results include a one-time
restructuring charge of $4.3 million related to the August
1993 restructuring of operations which resulted in an 11%
reduction in the Company's workforce.
The Company reported a net loss of $4.8 million or $0.36 per
share in the third quarter of 1994 compared with a net loss
of $8.5 million or $0.63 per share in the third quarter of
1993. The third quarter of 1993 results include a charge of
$4.3 million related to the August 1993 restructuring of
operations which resulted in an 11% reduction in the
Company's workforce. For the first nine months, the Company
reported a net loss of $14.4 million in 1994 compared with a
net loss of $7.7 million in 1993. The 1994 results include
a non-recurring charge of $5.4 million primarily associated
with the acquisition of Interspec completed during the
second quarter. See Note 2 of the Notes to Condensed
Consolidated Financial Statements for further discussion
regarding the Interspec acquisition and the non-recurring
charge.
The Company's worldwide revenues increased 11% to $87.3
million in the third quarter of 1994 compared with $78.6
million in the third quarter of 1993. A shift of product
mix from older to newer product lines and higher service
revenues contributed to the increase in revenues. The
Company's U.S. business continued to reflect a constrained
U.S. market due to ongoing restructuring of health care
delivery systems, potential federal health care legislation,
and associated competitive pressures. International
revenues reflected the distribution synergies for Interspec
imaging products created by the second quarter merger and
the continued expansion of the Company's Asia/Pacific/Latin
America region with new direct operations in Argentina and
Singapore. For the first nine months, total revenues were
flat at $261.5 million compared with $262.0 million in the
prior year.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Gross profit was $39.5 million in the third quarter of 1994
compared with $36.2 million in the same quarter of the prior
year. As a percent of total revenues, gross margin
decreased to 45.2% compared with 46.1% in the prior year.
The decline in gross margin primarily reflects the impact of
competitive pressures in the U.S. as discussed above and
competitive pricing in Europe, partially offset by slightly
higher service margins and the continued shift in the
Company's product mix with sales of the Ultramark (r) 9 High
Definition (tm) Imaging (HDI(tm)) systems increasing as a percent
of total product sales. For the first nine months of 1994,
gross profit was $115.6 million compared to $120.0 million
for the same period of 1993. Year to date, gross margins
decreased to 44.2% from 45.8% in 1993, reflecting the impact
of the same factors discussed above.
On October 10, 1994, the Company announced the introduction
of the HDI 3000 system, the Company's fourth generation all-
digital ultrasound system. The Company believes this system
will provide improved diagnostic performance and increased
clinical productivity through a design which expands digital
processing power in a lighter, more mobile system. The
Company expects to begin customer shipments during the
fourth quarter.
Total operating expenses for the third quarter of 1994 were
$44.1 million compared with $40.1 million (excluding the
$4.3 million restructuring charge) in the third quarter of
1993. Selling, general and administrative expenses of $28.5
million increased 8% over the third quarter of 1993 but
declined as a percent of revenues to 32.7% from 33.7% in the
prior year. The dollar increase reflects primarily higher
costs in preparation for the HDI 3000 introduction,
marketing costs associated with the introduction of the
Interspec products subsequent to the merger, and expansion
of international distribution channels.
Research and development expenses increased 19% to $15.1
million in the third quarter of 1994 compared with the same
quarter of 1993 reflecting increased investment in the
Company's new product development programs including the
recently introduced HDI 3000 system. This increased level
of spending for research and development is expected to
continue through the remainder of 1994 as the Company
continues its programs of new and sustaining product
development.
For the first nine months of 1994, operating expenses
(excluding the 1994 merger and other costs and 1993
restucturing charge) were $124.2 million compared with
$123.3 million for the same period of 1993. Increased
research and development expenses were partially offset by
reduced selling, general and administrative expenses and
other expenses (primarily foreign exchange losses) in 1994.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
CAPITAL RESOURCES AND LIQUIDITY
(In millions) 9/30/94 12/31/93
Cash and investments:
Cash and short-term investments $34.3 $54.8
Marketable debt security 5.0 5.0
----- -----
Total $39.3 $59.8
Total Assets $311.1 $329.4
Shareholders' Equity $196.7 $210.8
The Company continues to finance operations primarily with
internal resources, including its cash and investment
balances. Cash and investments totalled $39.3 million at
September 30, 1994 compared with $59.8 million at December
31, 1993 and $45.5 million at the end of the second quarter.
The change in the Company's cash and investments position
during the year reflects primarily ongoing investment in
equipment, the repayment of long-term debt previously held
by Interspec, increased inventory levels to support new
product introductions,and the nine month operating results.
Operating activities, consisting of the net loss adjusted
for non-cash depreciation and amortization and net changes
in operating assets and liabilities, used $5.4 million of
cash during the first nine months of 1994. Cash used in
investing activities totaled $6.1 million during the first
nine months of 1994, primarily for normal additions to
property, plant and equipment of $9.0 million offset by cash
proceeds of $3.2 million from the sale in the first quarter
of the Company's former manufacturing facility in Germany.
Financing activities used $8.0 million during the first nine
months of 1994 reflecting the payoff of long-term debt
previously held by Interspec and reductions in short-term
borrowings by Interspec and the Company's foreign
subsidiaries.
In addition to its cash and investment balances, the Company
has available domestic credit facilities of $25 million and
also utilizes various short-term working capital lines of
credit at foreign subsidiary locations to facilitate
intercompany cash flow. The Company expects its existing
capital resources, including cash and investment balances
and available credit facilities, together with funds
generated from operations should be sufficient to meet the
Company's foreseeable operating requirements.
On October 12, 1994, the Company announced it had signed a
letter of intent to purchase an 86,000 square foot office
building and associated 35 acres of property adjoining the
Company's corporate headquarters in Bothell, Washington.
The transaction and purchase price of $11.3 million are
subject to completion of due diligence, final inspections
and the approval of the Board of Directors. The Company
anticipates this transaction will close prior to the end of
the year and expects to finance the acquisition with a
mortgage loan.
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PART II Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Financial Data Schedule
(b) Reports on Form 8-K - None
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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.
ADVANCED TECHNOLOGY LABORATORIES, INC.
(Registrant)
DATE: November 10, 1994 BY: ____/s/__Harvey N. Gillis________
Harvey N. Gillis
Senior Vice President
Finance and Administration
and Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1994 AND THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994 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-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> SEP-30-1994
<CASH> 32,302
<SECURITIES> 2,025<F1>
<RECEIVABLES> 95,581
<ALLOWANCES> 0
<INVENTORY> 98,821
<CURRENT-ASSETS> 242,255
<PP&E> 56,198
<DEPRECIATION> 0
<TOTAL-ASSETS> 311,102
<CURRENT-LIABILITIES> 102,558
<BONDS> 7,188
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 311,102
<SALES> 203,550
<TOTAL-REVENUES> 261,500
<CGS> 110,133
<TOTAL-COSTS> 145,875
<OTHER-EXPENSES> 129,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (590)
<INCOME-PRETAX> (13,364)
<INCOME-TAX> 1,039
<INCOME-CONTINUING> (14,403)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,403)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
<FN>
<F1> THE COMPANY ALSO HOLDS A LONG TERM MARKETABLE DEBT SECURITY OF $4,988 WHICH
IS REPORTED AS A NON-CURRENT ASSET.
</FN>
</TABLE>
