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 July 1, 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 SE
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; 13,165,273 shares outstanding
as of July 31, 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) - July 1, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Operations
(Unaudited) - Three Months and Six Months Ended
July 1, 1994 and July 2, 1993 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Six Months Ended July 1, 1994 and
July 2, 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 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
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PART I Financial Information
Item 1. Financial Statements
ADVANCED TECHNOLOGY LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) 7/1/94 12/31/93
ASSETS
CURRENT ASSETS
Cash and short-term investments $40,533 $ 54,758
Receivables 97,489 102,811
Inventories 91,906 88,692
Prepaid expenses 3,685 2,180
Deferred income taxes 9,153 8,974
------- -------
242,766 257,415
MARKETABLE DEBT SECURITY 4,988 4,988
PROPERTY, PLANT AND EQUIPMENT, NET 56,263 59,811
OTHER ASSETS 7,116 7,183
-------- ---------
$311,133 $ 329,397
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $890 $ 5,279
Current installments of long-term debt 1,840 470
Accounts payable and accrued expenses 62,044 60,928
Deferred revenue 29,676 30,711
Taxes on income 5,057 4,946
------ -------
99,507 102,334
DEFERRED INCOME TAXES 4,657 4,628
LONG-TERM DEBT 7,244 11,600
SHAREHOLDERS' EQUITY 199,725 210,835
-------- ---------
$311,133 $ 329,397
======== =========
COMMON SHARES OUTSTANDING 13,159 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 Six months
ended ended
(In thousands, except per 7/1/94 7/2/93 7/1/94 7/2/93
share data)
REVENUES
Product sales $ 65,392 $ 70,998 $ 136,078 $ 147,789
Service 19,407 18,170 38,077 35,614
------ ------ ------- -------
84,799 89,168 174,155 183,403
COST OF SALES
Product sales 35,161 35,901 74,027 75,869
Service 12,346 11,900 23,996 23,754
------ ------ ------ ------
47,507 47,801 98,023 99,623
GROSS PROFIT 37,292 41,367 76,132 83,780
OPERATING EXPENSES
Selling, general and
administrative 27,544 29,295 52,800 55,765
Research and development 13,823 13,097 26,448 25,156
Merger and other costs 5,391 -- 5,391 --
Other expense, net 388 639 818 2,197
------ ------ ------ ------
47,146 43,031 85,457 83,118
INCOME (LOSS) FROM OPERATIONS (9,854) (1,664) (9,325) 662
INTEREST, NET 140 347 332 846
------ ------ ------ -----
INCOME (LOSS) BEFORE INCOME TAXES (9,714) (1,317) (8,993) 1,508
INCOME TAX EXPENSE 232 315 652 655
-------- -------- -------- -----
NET INCOME (LOSS) $(9,946) $(1,632) $(9,645) $853
======== ======== ======== =====
NET INCOME (LOSS) PER SHARE $(0.76) $(0.12) $(0.74) $0.06
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS OUTSTANDING 13,134 13,655 13,118 13,822
See accompanying notes to condensed consolidated financial
statements.
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ADVANCED TECHNOLOGY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
(In thousands) 7/1/94 7/2/93
OPERATING ACTIVITIES
Net income (loss) $(9,645) $ 853
Non-cash charges (credits) to income:
Depreciation and amortization 7,571 7,209
Gain on sale of property (105) --
Changes in:
Receivables 4,076 1,792
Inventories (591) (8,579)
Accounts payable and accrued expenses (206) (2,731)
Deferred revenue (1,205) (885)
Taxes on income 57 (52)
Other (1,726) (100)
-------- -------
Cash used in operating activities (1,774) (2,493)
INVESTING ACTIVITIES
(Increase) decrease in short-term
investments (1,948) 33,219
Investment in long-term marketable debt
security -- (4,988)
Investment in property, plant and equipment (5,767) (7,606)
Proceeds from sale of property 3,224 --
Other (389) (756)
------- -------
Cash provided by (used in) investing
activities (4,880) 19,869
FINANCING ACTIVITIES
Decrease in short-term borrowings (5,639) (1,056)
Repayment of long-term debt (2,949) (233)
Repurchase of common shares (369) (8,045)
Exercise of stock options 150 189
------- -------
Cash used in financing activities (8,807) (9,145)
Effect of exchange rate changes (712) 527
------- ------
Net decrease in cash and cash equivalents (16,173) 8,758
Cash and cash equivalents, beginning of period 52,713 34,770
------- -------
Cash and cash equivalents, end of period $36,540 $43,528
======= =======
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.
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, prior financial statements
and information 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 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.
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
2. Acquisition of Interspec, Inc. (continued)
Interspec's March 1994 results are summarized as follows:
Revenues $3,320
Net loss (4,180)
In the second quarter, the newly combined company incurred
$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 second quarter
total is reported separately as "Merger and Other Costs" in
the Consolidated Statements of Operations.
3. Reclassifications
Certain amounts reported in prior periods have been
reclassified to conform to the 1994 presentation.
4. 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.
7/1/94 12/31/93
Cash and cash equivalents $36,540 $52,713
Short-term investments 3,993 2,045
------- -------
40,533 54,758
Long-term marketable debt security 4,988 4,988
------- -------
$45,521 $59,746
======= =======
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
5. Inventories
7/1/94 12/31/93
Materials and work in process $31,141 $27,995
Finished products 17,232 17,497
Demonstration 25,109 23,354
Customer service 18,424 19,846
------- -------
$91,906 $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 Six months ended
(In millions except 7/1/94 7/2/93 % Change 7/1/94 7/2/93 % Change
per share data)
Revenues $84.8 $89.2 (5%) $174.2 $183.4 (5%)
Gross Profit $37.3 $41.4 (10%) $76.1 $83.8 (9%)
Operating Expenses * $47.1 $43.0 10% $85.5 $83.1 3%
Net Income (Loss) * $(9.9) $(1.6) $(9.6) $0.9
Net Income (Loss) per $(0.76) $(0.12) $(0.74) $0.06
Share *
* Includes non-recurring expenses of $5.4 million primarily
associated with the acquisition of Interspec during the
second quarter of 1994.
Including non-recurring charges of $5.4 million primarily
associated with the acquisition of Interspec completed in
May 1994, the Company reported a net loss of $9.9 million or
$0.76 per share in the second quarter of 1994. Excluding
the non-recurring charges, the Company would have reported a
net loss of $4.6 million or $0.35 per share compared with a
net loss of $1.6 million or $0.12 per share in the second
quarter of 1993. See Note 2 of the Notes to Condensed
Consolidated Financial Statements for further discussion
regarding the Interspec acquisition and the non-recurring
charges.
The Company's worldwide revenues decreased 5% to $84.8
million in the second quarter of 1994 compared with $89.2 in
the second quarter of 1993. A $5.6 million decrease in
product sales was partially offset by an increase in service
revenue of $1.2 million compared with the prior year. The
Company believes the decrease in product sales continues to
reflect the difficult U.S. market conditions caused by the
ongoing restructuring of the health care system, pending
federal health care reform legislation, and domestic and
international competitive market conditions. This
continuing uncertain market environment resulted in lower
overall shipment volumes and average realized prices during
the quarter compared with the prior year. The increase in
service revenue over the prior year reflects the growth in
the Company's installed base and associated service
maintenance contract revenue. For the first six months of
1994, total revenues decreased 5% to $174.2 million compared
with $183.4 million in the prior year.
Gross profit was $37.3 million in the second quarter of 1994
compared with $41.4 million in the same quarter of the prior
year. As a percent of total revenues, gross margin
decreased to 44.0% compared with 46.4% in the prior year.
The decline in gross profit and percent gross margin
primarily reflects the impact of lower product sales and
prices as discussed above partially offset by 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.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Total operating expenses for the second quarter of 1994 were
$47.1 million compared with $43.0 million in the second
quarter of 1993. The current quarter operating expenses
include non-recurring expenses of $5.4 million primarily
associated with the Company's acquisition of Interspec, as
discussed in Note 2 of the Notes to Condensed Consolidated
Financial Statements.
Excluding the non-recurring charges, total operating exenses
in the second quarter of 1994 were $41.7 compared to $43.0
million in the prior year, a decrease of 3%. Reductions in
operating expenses as a result of a reduction in the
Company's work force following the restructuring in the
third quarter of 1993 were partially offset by the initial
marketing costs of launching the newly acquired Interspec
Apogee (R) product line and increased investment in the
Company's research and development programs. Research and
development expenses for the second half of 1994 are
expected to be above prior year's levels as the Company
continues its programs of new and sustaining product
development.
CAPITAL RESOURCES AND LIQUIDITY
(In millions) 7/1/94 12/31/93
Cash and investments:
Cash and short-term investments $40.5 $54.8
Marketable debt security 5.0 5.0
----- -----
Total $45.5 $59.8
Total Assets $311.1 $329.4
Shareholders' Equity $199.7 $210.8
The Company continues to finance operations primarily with
internal resources, including its cash and investment
balances. Cash and investments totalled $45.5 million at
July 1, 1994 compared with $59.8 million at December 31,
1993 and $57.8 million at the end of the first quarter. In
connection with the May 1994 merger with Interspec, the
Company utilized $12.2 million of cash to retire a portion
of Interspec's higher interest debt balances.
Operating activities, consisting of net income adjusted for
non-cash depreciation and amortization and net changes in
operating assets and liabilities, used $1.8 million of cash
during the first six months of 1994. Excluding the change
in short-term investments, cash used in investing activities
totaled $2.9 million during the first six months of 1994,
primarily for normal additions to property, plant and
equipment of $5.8 million partially offset by the sale in
the first quarter of the Company's former manufacturing
facility in Germany for $3.2 million.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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 that 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.
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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
(a) The Annual Meeting of shareholders of the Company was
held on May 16, 1994.
(c) At the Annual Meeting of shareholders, four matters
were submitted to a vote of the Company's security
holders. Proxies were solicited pursuant to Regulation
14 of the Securities and Exchange Act of 1934 and there
was no solicitation in opposition to management's
nominees as listed in the proxy statement. The voting
outcome of each proposal follows:
(1) The approval of the issuance of shares of ATL
Common Stock to shareholders of Interspec, Inc. in
connection with the Agreement and Plan of Merger.
For: 7,592,471 Opposed: 101,437
Abstained: 49,617 Broker Non-votes: 1,677,772
(2) Amendment to the 1992 Option, Stock Appreciation
Right, Restricted Stock, Stock Grant and
Performance Unit Plan - The Company proposed an
increase in the number of shares of ATL Common
Stock issuable under the Plan by 450,000 shares,
for a total of 2,150,000 shares, and to impose
certain limitations on option grants:
For: 7,182,253 Opposed: 2,129,790 Abstained: 109,254
(3) Election of Directors:
Kirby L. Cramer For: 9,368,728 Withheld: 52,569
Harvey Feigenbaum For: 9,368,057 Withheld: 53,240
Dennis C. Fill For: 9,368,527 Withheld: 52,770
Eugene A. Larsen For: 9,369,125 Withheld: 52,172
John R. Miller For: 9,360,937 Withheld: 60,360
David M. Perozek For: 9,369,834 Withheld: 51,463
Harry Woolf For: 9,365,305 Withheld: 55,992
(4) Ratification of Auditors - The Company proposed
the ratification of the appointment of KPMG Peat
Marwick as independent auditors for the Company for
1994:
For: 9,360,098 Opposed: 20,841 Abstained: 40,358
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PART II Other Information (continued)
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
The Company filed a report on Form 8-K, including financial
statements, on May 31, 1994 reporting the shareholder
approval and completion on May 17, 1994 of the merger
between the Company and Interspec.
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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: August 11, 1994 BY: _____________/s/ Harvey N.Gillis____________
Harvey N. Gillis
Senior Vice President
Finance and Administration
and Chief Financial Officer
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