SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
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 Employer Identification No.)
22100 Bothell Everett Highway
Post Office Box 3003 98041-3003
Bothell, Washington (Zip Code)
(Address of principal
executive offices)
(206) 487-7000
(Telephone number)
Common stock, $0.01 par value; 13,355,797 shares outstanding
as of April 28, 1995
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 -
March 31, 1995 (unaudited) and December 31, 1994 3
Condensed Consolidated Statements of Operations
(Unaudited) -Three Months Ended March 31, 1995
and April 1, 1994 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) Three Months ended March 31, 1995
and April 1, 1994 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 Items. 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
(In thousands) 3/31/95 12/31/94
(unaudited)
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 22,900 $ 22,901
Receivables 117,132 115,871
Inventories 98,357 96,065
Prepaid expenses 2,989 2,261
Deferred income taxes 8,577 8,577
------- -------
249,955 245,675
MARKETABLE DEBT SECURITY -- 4,988
PROPERTY, PLANT AND EQUIPMENT, NET 70,153 70,338
OTHER ASSETS, NET 10,064 10,520
-------- --------
$330,172 $331,521
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,443 $ 1,842
Current portion of long-term debt 1,976 1,976
Accounts payable and accrued expenses 67,522 75,704
Deferred revenue 40,169 36,309
Taxes on income 2,821 2,354
------- -------
113,931 118,185
LONG-TERM DEBT 17,610 17,688
DEFERRED INCOME TAXES 4,472 4,472
SHAREHOLDERS' EQUITY 194,159 191,176
-------- --------
$330,172 $331,521
======== ========
Common shares outstanding 13,355 13,330
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
(In thousands except per share data) 3/31/95 4/1/94
REVENUES
Product sales $74,200 $70,686
Service 20,162 18,670
------ ------
94,362 89,356
COST OF SALES
Cost of product sales 38,426 38,866
Cost of service 12,525 11,650
------ ------
50,951 50,516
GROSS PROFIT 43,411 38,840
OPERATING EXPENSES
Selling, general and administrative 28,607 25,256
Research and development 12,612 12,625
Restructuring charge 2,500 --
Other (income) expense, net (557) 430
------ ------
43,162 38,311
------ ------
INCOME FROM OPERATIONS 249 529
Investment income 363 623
Interest expense (538) (431)
------ ------
INCOME BEFORE INCOME TAXES 74 721
Income tax expense 348 420
------ ------
NET INCOME (LOSS) ($ 274) $ 301
======== ========
Net income (loss) per share ($0.02) $0.02
======= ======
Weighted average common shares
and equivalents outstanding 13,340 13,182
See accompanying notes to condensed consolidated financial statements.
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ADVANCED TECHNOLOGY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
(In thousands) 3/31/95 4/1/94
OPERATING ACTIVITIES
Net income (loss) $ (274) $ 301
Non-cash charges to income (loss):
Depreciation and amortization 4,126 3,641
Gain on sale of property -- (105)
Changes in:
Receivables 673 (1,198)
Inventories (761) 2,591
Accounts payable and accrued expenses (9,067) (8,220)
Deferred revenue 3,766 371
Taxes on income 491 (270)
Other (716) (93)
------- -------
Cash used by operations (1,762) (2,982)
INVESTING ACTIVITIES
Increase in short-term investments -- (3,953)
Investment in property, plant and equipment (3,063) (1,894)
Proceeds from sale of property -- 3,224
Other -- (306)
------ -------
Cash used by investing activities (3,063) (2,929)
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings (399) 794
Repayment of long-term debt (78) (117)
Repurchase of common shares -- (369)
Exercise of stock options 360 52
------- -------
Cash provided (used) by financing activities (117) 360
Effect of exchange rate changes (47) (247)
------- -------
Decrease in cash and cash equivalents (4,989) (5,798)
Cash and cash equivalents, beginning of period 22,901 52,713
------- -------
Cash and cash equivalents, end of period $17,912 $46,915
======== ========
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 ATL (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
imaging systems worldwide. These systems are used in radiology, cardiology,
obstetrics and gynecology, vascular, musculoskeletal and intraoperative
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 1994 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 the Company's stock for each share ofInterspec 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.
3. Restructuring Charge
On February 15, 1995, the Company announced a new corporate structure that
will consolidate the Interspec operations located in Ambler, Pennslyvania
with the Company's
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
3. Restructuring Charge (continued)
headquarters operations in Bothell, Washington. The Company reported a
restructuring charge of $2,500 in the first quarter of 1995 related to the
consolidation of the Ambler operations. The restructuring charge provides for
severance, outplacement, and employee retention incentives for employees not
relocating to Bothell. The Company estimates the consolidation of the Ambler
operations will result in a net reduction in full-time positions of
approximately 4% of the Company's workforce.
The Company also expects to incur approximately $2,500 of expenses during the
remainder of 1995 for employee relocation and asset moving costs. These
costs will be expensed as they are incurred. The Company expects to have
manufacturing and administrative functions transferred to Bothell by the
third quarter of 1995. Some research and development functions will continue
in Ambler until late 1995 or early 1996. The Company currently intends to
hold the land and building used for the Ambler operations.
4.Cash, Short-Term Investments, and 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. The Company holds a marketable debt security
issued by the U.S. government which matures in February 1996. The Company
intends to hold the investment until maturity and it is reported at cost.
Beginning in February 1995, the marketable debt security was classified as a
short-term investment.
3/31/95 12/31/94
-------- --------
Cash and cash equivalents $17,912 $22,901
Short-term investment 4,988 --
-------- --------
22,900 22,901
Long-term marketable debt security -- 4,988
-------- --------
$22,900 $27,889
======== ========
5.Inventories
3/31/95 12/31/94
-------- --------
Materials and work in process $32,167 $33,477
Finished products 16,167 15,561
Demonstration 30,054 29,190
Customer service 19,969 17,837
------- --------
$98,357 $96,065
======= ========
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ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
6.Share Repurchase Program
In February 1993, the Board of Directors authorized a plan to repurchase up
to 1,000,000 shares of the Company's common stock in the open market subject
to certain criteria to be used in servicing the Company's employee benefit
plans. In the first quarter of 1994, the Company repurchased 22,500
shares totaling $369 under this program. The Company has repurchased a total
of 816,500 shares under this program.
7.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 as presented
in the condensed consolidated Statements of Operations. 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
(In millions) 3/31/95 4/1/94 % Change
------- ------- --------
Revenues $94.4 $89.4 5.6%
Gross Profit $43.4 $38.8 11.8%
Operating Expenses; excluding
restructuring charge and
benefit for state tax audit $42.0 $38.3 9.5%
Restructuring Charge $2.5 -
Benefit related to state tax audit ($1.3) -
Net Income (Loss) ($0.3) $0.3
Net Income (Loss) per Share ($0.02) $0.02
The Company reported a net loss of $0.3 million or $0.02 per share in the
first quarter of 1995, compared with net income of $0.3 million or $0.02 per
share in the first quarter of 1994. The 1995 net loss included a $2.5
million restructuring charge related to the consolidation of the Company's
operations in Ambler, Pennsylvania to the Company's headquarters in Bothell,
Washington. The net loss also includes an operating expense benefit of $1.3
million resulting from a favorable Washington State tax audit.
The Company's revenues increased 5.6% to $94.4 million in the first quarter
of 1995 compared with $89.4 million in the first quarter of 1994. Product
sales increased by $3.5 million and service revenues were $1.5 million higher
than the prior year. Favorable changes in product mix from older to newer
product lines, including the HDI(TM) 3000, the Company's high performance,
premium priced system which was introduced in October 1994, and the mid-
ranged Apogee(R) products contributed to the growth in revenues. In addition,
the Company experienced changes in product configurations which benefited
product sales. The increase in revenue was due to growth in international
markets, partially the result of the weakening of the U.S. dollar compared
with early 1994. Revenues in the U.S. market decreased slightly, as the
U.S. medical equipment market continued to reflect constrained and
competitive market conditions.
Gross profit was $43.4 million in the first quarter of 1995, compared with
$38.8 million in the first quarter of 1994. As a percent of revenues, gross
margin increased to 46.0%, compared with 43.5% in the prior year. Gross
margins have improved sequentially each quarter since the first quarter of
1994. The improvement in gross profit primarily reflects the impact of the
increased product sales of the Company's higher margin product lines in the
HDI and Apogee product families. Improved manufacturing efficiencies and
costs also
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
contributed to the increase in product gross margins from 45.0% in the first
quarter of 1994 to 48.2% in the first quarter of 1995. Gross margin on
service revenues increased slightly over the first quarter of 1994 from 37.6%
to 37.9%.
Excluding the restructuring charge of $2.5 million and the $1.3 million
benefit related to a favorable Washington State tax audit, operating expenses
in the first quarter of 1995 increased 9.5% to $42.0 million from $38.3
million in the first quarter in 1994. Including the restructuring charge and
the operating expense benefit related to the state tax audit, operating
expenses were $43.2 million. Selling, general and administrative expenses
increased 13.3% to $28.6 million compared with $25.3 million in the prior
year, primarily due to the continued expansion of the Company's international
sales activities and corporate marketing functions. Research and development
expenses of $12.6 million were comparable to the 1994 first quarter levels.
As a percent of revenues, research and development expenses were 13.4%, down
from 14.1% in the prior year. Research and development expenses decreased
from the fourth quarter of 1994, following the fourth quarter 1994
introduction of the HDI 3000. In the first quarter of 1995, the Company
reported a $1.3 million benefit in operating expenses, primarily in other
(income) expense, net, related to the conclusion of a Washington State Business
& Occupation ("B&O tax") tax audit. B&O tax is a tax imposed on gross
receipts for products manufactured in the State of Washington and is not
considered an income tax.
On February 15, 1995, the Company announced a new corporate structure that
will consolidate the Interspec operations located in Ambler, Pennslyvania
with the Company's headquarters operations in Bothell, Washington. The
Company reported a restructuring charge of $2.5 million in the first quarter
of 1995 related to the consolidation of the Ambler operations. The
restructuring charge provides for severance, outplacement, and employee
retention incentives for employees not relocating to Bothell. The Company
estimates the consolidation of the Ambler operations will result in a net
reduction in full-time positions of approximately 4% of the Company's
workforce.
The Company also expects to incur approximately $2.5 million of expenses
during the remainder of 1995 for employee relocation and asset moving costs.
These costs will be expensed as they are incurred. The Company expects to
have manufacturing and administrative functions transferred to Bothell by the
fourth quarter of 1995. Some research and development functions will
continue in Ambler until late 1995 or early 1996. The Company currently
intends to hold the land and building used for the Ambler operations.
The Company incurred net interest expense during the quarter of $0.2 million,
compared with net interest income of $0.2 million in the first quarter of
1995. Net interest expense in the first quarter of 1995 includes interest
expense on the $11.5 million in long-term debt incurred in December
1994 to finance the purchase of land and a building adjacent to its corporate
headquarters.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Income tax expense for the first quarter of 1995 includes primarily foreign
and state income tax expense. U.S. federal income tax benefits were not
recognized under the provisions of Statement of Financial Account Standards
No.109, "Accounting for Income Taxes."
Excluding the $2.5 million restructuring charge and the $1.3 million
operating expense benefit related to the Washington State tax audit, the
Company would have reported net income of $0.9 million or $0.07 per share in
the first quarter of 1995.
CAPITAL RESOURCES AND LIQUIDITY
(In millions) 3/31/95 12/31/94
Cash and investments
Cash and short-term investments $22.9 $22.9
Long-term marketable debt security -- 5.0
------- --------
Total $22.9 $27.9
Total Assets $330.2 $331.5
Long-term Debt $17.6 $17.7
Shareholders' Equity $194.2 $191.2
Cash and investments totalled $22.9 million at March 31, 1995 compared with
$27.9 million at December 31, 1994. The marketable debt security which was
classified as a non-current asset at December 31, 1994 matures in February
1996 and is now classified with Cash and short-term investments.
As shown in the Statement of Cash Flows, the Company used $1.8 million for
operating activities during the first quarter of 1995. Accounts payable and
accrued expenses decreased $9.1 million during the quarter, reflecting the
seasonally high activity levels in the fourth quarter of 1994. Depreciation
and amortization was $4.1 million during the quarter. The Company invested
$3.1 million in normal additions to property, plant and equipment during the
first quarter of 1995.
In May 1995, subsequent to the end of the first quarter, the Company retired
$1.7 million of its 11% subordinated convertible debentures. The debentures
were retired at the face value with no gain or loss on the transaction.
In addition to its cash balances, the Company has available domestic
unsecured credit facilities of $25 million, including a committed line of
credit of $15 million. Barring any unforeseen circumstances or events,
management expects existing cash, available
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
credit lines and funds from operations should be sufficient to meet the
Company's operating requirements for 1995.
PART II Other Information
Item 1. Legal Proceedings - Not applicable.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - Not applicable.
Item 5. Other Items
On May 10, 1995 the shareholders of the Company approved the Articles of
Incorporation and Plan and Agreement of Merger (the "Plan") between the
Company and ATLI Washington Corporation (the "Surviving Corporation"), a
wholly owned subsidiary of the Company, for the purpose of changing the
corporate domicile from Delaware to Washington. Pursuant to the Plan, dated
May 10, 1995, the Company reincorporated in the State of Washington on
May 11, 1995, by way of a Merger with the Surviving Corporation which then
changed its name to Advanced Technology Laboratories, Inc.
Each outstanding certificate representing a share or shares of the Company
Common Stock continue to represent the same number of shares of the Surviving
Corporation and it will not be necessary for the shareholders of the Company
to exchange their existing certificates for shares of the Surviving
Corporation, Advanced Technology Laboratories, Inc. As the successor
registrant, the Surviving Corporation assumes the Section 13 reporting
obligations of the Company, under the Securities Act of 1934.
Item 6. Exhibits and Reports on Form 8-K - Not applicable.
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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: May 11, 1995 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 MARCH 31, 1995 AND THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 17,912
<SECURITIES> 4,988
<RECEIVABLES> 117,132
<ALLOWANCES> 0
<INVENTORY> 98,357
<CURRENT-ASSETS> 249,955
<PP&E> 70,153
<DEPRECIATION> 0
<TOTAL-ASSETS> 330,172
<CURRENT-LIABILITIES> 113,931
<BONDS> 17,610
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 330,172
<SALES> 74,200
<TOTAL-REVENUES> 94,362
<CGS> 38,426
<TOTAL-COSTS> 50,951
<OTHER-EXPENSES> 43,162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175
<INCOME-PRETAX> 74
<INCOME-TAX> 348
<INCOME-CONTINUING> (274)
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