<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______ TO _______.
COMMISSION FILE NUMBER 0-20083
-----------------
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
SPACELABS MEDICAL, INC. INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
SPACELABS MEDICAL, INC.
15220 N.E. 40TH STREET
P.O. BOX 97013
REDMOND, WASHINGTON 98073-9713
Page 1 of 22 sequentially numbered pages
================================================================================
<PAGE> 2
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND
STOCK OWNERSHIP PLAN
Financial Statements and Schedules
December 31, 1996 and 1995
(With Independent Auditors' Thereon)
<PAGE> 3
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 1
Statements of Assets Available for Plan Benefits, December 31, 1996 and 1995 2
Statements of Changes in Assets Available for Plan Benefits, Years ended
December 31, 1996 and 1995 3
Notes to Financial Statements, December 31, 1996 and 1995 4-13
Schedule 1 -- Line 27(a) -- Schedule of Assets Held for Investment Purposes,
December 31, 1996 14
Schedule 2 -- Line 27(d) -- Schedule of Reportable Transactions,Year ended
December 31, 1996
15
</TABLE>
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Benefits Committee
Spacelabs Medical, Inc.
Incentive Savings and Stock Ownership Plan:
We have audited the accompanying statements of assets available for plan
benefits of Spacelabs Medical, Inc. Incentive Savings and Stock Ownership Plan
(Plan) as of December 31, 1996 and 1995 and the related statements of changes in
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for plan benefits of the Plan as of
December 31, 1996 and 1995, and the changes in assets available for plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary Schedules 1 and 2 are
presented for the purpose of additional analysis and are not a required part of
the basic financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Seattle, Washington
May 30, 1997
1
<PAGE> 5
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
===================================================================================================
1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at fair value (note 5):
Cash and cash equivalents $ 8,030 64,284
Mutual funds 18,175,603 13,483,141
Common stocks 4,470,799 5,806,324
Insurance contracts 769,160 3,953,247
----------------------------
Total investments 23,423,592 23,306,996
Receivables:
Employees' contributions 148,525 1,171
Employer's contributions 50,862 68,282
===================================================================================================
Assets available for plan benefits (note 4) $23,622,979 23,376,449
===================================================================================================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 6
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
=========================================================================================================
1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income:
Interest and dividends $ 1,301,518 898,775
Net appreciation in fair value of investments (note 5) 27,925 3,402,294
-------------------------------
Net investment income 1,329,443 4,301,069
-------------------------------
Contributions [note 1(c)]:
Employees 2,365,648 2,675,463
Employer 801,202 906,322
-------------------------------
Total contributions 3,166,850 3,581,785
-------------------------------
Total additions 4,496,293 7,882,854
Benefits paid to participants (4,249,763) (2,211,444)
-------------------------------
Increase in assets available for plan benefits 246,530 5,671,410
Assets available for plan benefits at beginning of year 23,376,449 17,705,039
-------------------------------
Assets available for plan benefits at end of year $ 23,622,979 23,376,449
=========================================================================================================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 7
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
================================================================================
(1) PLAN DESCRIPTION
The following description of the Spacelabs Medical, Inc. Incentive
Savings and Stock Ownership Plan (Plan) provides only general information
and does not serve as the basis for any rights or benefits under the
Plan. Participants should refer to the Plan document for a more complete
description of the Plan and benefit information.
(A) GENERAL
The Plan is a defined contribution plan covering all full-time, U.S.
resident employees of Spacelabs Medical, Inc. (Sponsor or Company)
who have one year of service and part-time employees who have
completed one year of service and have worked 1,000 hours. The Plan
is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
(B) ADMINISTRATION
The plan administrator is Spacelabs Medical, Inc., which appointed a
Benefits Committee to administer the Plan.
The Plan's investments are held in trust by Wachovia Employee
Benefit Trust Services (Trustee). Effective January 1, 1997, Plan
investments are held by U. S. Bank of Washington NA Trust and
Investment Management Division (Trustee).
(C) CONTRIBUTIONS
Participants may elect to contribute from 2% to 16% of compensation,
as defined, to the Plan subject to a pretax limit of $9,500 in 1996
and $9,240 in 1995. Contributions and earnings are credited to
separate accounts maintained for each participant. Employer matching
contributions are made by the Sponsor at 50% of before- and
after-tax contributions up to 6% of earnings. For purposes of the
Plan financial statements "employer's contributions" consist of the
employer matching contributions and "employees' contributions"
consist of before- and after-tax contributions and rollover
contributions.
All employer matching contributions are made directly in the
Company's common stock and invested in the Common Stock Fund for the
benefit of the participants unless the participants are 55 years of
age or older, at which time participants may elect to have employer
matching contributions allocated in the same manner as their
contributions. Employer stock contributions were valued at $722,377
and $855,003 in 1996 and 1995, respectively. Forfeitures of employer
matching contributions are used to reduce future employer
contributions.
(Continued)
4
<PAGE> 8
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
The Plan offers the following investment options: The Fixed Income
Fund, the Balanced Fund, the Diversified Equity Fund, the Global
Fund, the Aggressive Growth Fund; and common stock represented by
the Company Stock Fund and the ATL Stock Fund; however, the ATL
Stock Fund is not available for new contributions.
The Fixed Income Fund is a portfolio of Guaranteed Investment
Contracts plus the Invesco ITC Stable Value Fund and, in 1995, the
Dreyfus Stable Value Fund, which are collective investment funds
investing primarily in guaranteed investment contracts and other
similar instruments to achieve high current income and stability of
principal. The Balanced Fund invests in the Dodge & Cox Balanced
Fund (through September 1996, the Phoenix Balanced Fund) which holds
equity and fixed income securities seeking reasonable income,
long-term capital growth and conservation of capital. The
Diversified Equity Fund is a portfolio of large capitalization
common stock investments managed by the Vanguard Group and held in
the Windsor II Fund. The Global Fund invests primarily in equity
securities on a worldwide basis and seeks long-term capital growth
through the Scudder Global Fund. The Aggressive Growth Fund seeks
long-term capital appreciation through the Alger Defined
Contribution Small Cap Portfolio, by investing in equity securities
of companies with total market capitalization of less than $1
billion. The Company Stock Fund is a portfolio of common stock of
Spacelabs Medical, Inc., the Sponsor of the Plan. The ATL Stock Fund
is a portfolio of common stock of Advanced Technology Laboratories,
Inc.
(D) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions, the participant's share of the Company's
contributions, and an allocation of Plan earnings. Allocations are
based on participant earnings or account balances, as defined. The
benefit to which a participant is entitled is the vested balance of
the participant's account.
The current value of each participant's account is determined based
on the carrying values of the funds and is computed monthly.
(Continued)
5
<PAGE> 9
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
(E) PAYMENT OF BENEFITS
Participants are eligible to receive distributions, to the extent
vested, upon retirement, upon becoming disabled, upon termination of
employment, or upon request for withdrawal prior to termination
subject to certain restrictions. A participant's beneficiary is
eligible to receive a distribution of the balance of the
participant's account upon the death of the participant.
Distributions are made in cash or, if a participant elects, in the
form of Company and/or Advanced Technology Laboratories, Inc. common
shares plus cash for any fractional share.
(F) VESTING
Participants are fully vested at all times in their contributions
and earnings thereon. Participants vest in employer matching
contributions and earnings thereon as follows:
Percent
Years of service vested
---------------- --------
After one year 20%
After two years 40
After three years 60
After four years 80
After five years 100
Participants become immediately vested in employer matching
contributions upon termination of employment due to retirement,
death or total and permanent disability.
(G) TERMINATION
Although it has not expressed any intent to do so, the Sponsor has
the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA.
In the event of Plan termination, participants will become fully
vested.
(Continued)
6
<PAGE> 10
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the
accrual basis of accounting.
(B) VALUATION OF INVESTMENTS
Investments of the Plan with quoted market prices are stated at fair
value, as determined by closing market prices for securities. In
1996, the Plan adopted SOP 94-4, Reporting of Investment Contracts
Held by Health and Welfare Benefit Plans and Defined-Contribution
Pension Plans, which requires that contracts with insurance
companies be recorded at fair value unless they are benefit
responsive. The Plan's contracts with insurance companies are valued
at fair value, which approximates contract value, by discounting the
related cash flows based on current yields of similar instruments
with comparable durations. Purchases and sales are recorded on a
trade-date basis.
The Plan presents in the statement of changes in assets, the net
appreciation in the fair value of its investments which consists of
the realized gains or losses and the unrealized appreciation
(depreciation) on those investments.
(C) CASH AND CASH EQUIVALENTS
The Plan considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
(D) EXPENSES
Administrative expenses of the Plan are paid by the Sponsor.
(E) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of changes in net assets during the reporting period.
Actual results could differ from those estimates.
(3) TAX STATUS
The Plan was notified in September 1995 by the Internal Revenue Service
(IRS) that it is qualified under section 401(a) of the Internal Revenue
Code (IRC). Subsequent to this notification, there was an amendment to
the Plan. The plan administrator believes the Plan is currently designed
and being operated in compliance with the applicable requirements of the
IRC and the related trust is tax exempt.
(Continued)
7
<PAGE> 11
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
(4) RECONCILIATION TO FORM 5500
Net assets reported in accordance with IRS Form 5500 differ from the
financial statements in that the Form 5500 includes a liability
attributable to terminated participants of $739,231 and $200,551 at
December 31, 1996 and 1995, respectively. Changes in net assets in the
Form 5500 differ from the financial statement by an amount equal to the
change in the liability for terminated participants from the beginning of
the year to the end. Such difference was an increase in the liability of
$538,680 in 1996 and $78,220 in 1995.
(5) INVESTMENTS
The following table presents the assets held for investment purposes at
December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
PRINCIPAL PRINCIPAL
AMOUNT OR AMOUNT OR
NUMBER INVEST- NUMBER INVEST-
OF SHARES MENT VALUE OF SHARES MENT VALUE
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Wachovia Bank DTF Short-Term Investment Fund 8,030 $ 8,030 64,284 $ 64,284
-------------------------------------------------------------
Mutual funds:
Alger Defined Contribution Small Cap Fund 141,098 2,584,907 106,680 1,863,691
Dodge & Cox Balanced Fund 9,761 583,932 -- --
Invesco ITC Stable Value Fund 5,017,564 5,017,564 1,645,411 1,645,411
Scudder Global Stock Fund 66,109 1,903,946 65,158 1,759,926
Vanguard Group Windsor II Fund 339,289 8,085,254 332,167 6,862,578
Dreyfus Stable Value Fund -- -- 858,562 858,562
Phoenix Balanced Fund -- -- 29,344 492,973
-------------------------------------------------------------
Total mutual funds 5,573,821 18,175,603 3,037,322 13,483,141
-------------------------------------------------------------
Common stock:
Spacelabs Medical, Inc. 177,570 3,640,185 175,073 5,033,349
Advanced Technology Laboratories, Inc. 26,794 830,614 31,550 772,975
-------------------------------------------------------------
Total common stock 204,364 4,470,799 206,623 5,806,324
-------------------------------------------------------------
</TABLE>
(Continued)
8
<PAGE> 12
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
1996 1995
--------------------------- --------------------------
PRINCIPAL PRINCIPAL
AMOUNT OR AMOUNT OR
NUMBER INVEST- NUMBER INVEST-
OF SHARES MENT VALUE OF SHARES MENT VALUE
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Insurance contracts:
Principal Mutual Life Insurance Company,
Guaranteed Investment Contract Policy No
4-7799, 4.85%, 1/2 due July 1, 1996 and
the remainder due January 1, 1997 769,160 $ 769,160 1,467,037 $1,467,037
Metropolitan Life Insurance Company,
Guaranteed Investment Contract Policy No
GA-13191, 6.80%, due March 31, 1996 -- -- 1,195,407 1,195,407
Provident Life and Accident Insurance Company,
Guaranteed Investment Contract, Policy No
627-05297, 7.39%, due July 1, 1996
-- -- 1,290,803 1,290,803
-------------------------------------------------------------
Total insurance contracts 769,160 769,160 3,953,247 3,953,247
=============================================================
Total investments $ 23,423,592 $ 23,306,996
=============================================================
</TABLE>
During the years ended December 31, 1996 and 1995, the Plan's investments
appreciated (depreciated) in value as follows:
<TABLE>
<CAPTION>
1996 1995
-----------------------------
<S> <C> <C>
Mutual funds $ 1,303,852 $ 2,295,230
Common stock (1,275,927) 1,107,064
-----------------------------
$ 27,925 $ 3,402,294
=============================
</TABLE>
(Continued)
9
<PAGE> 13
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
(6) ASSETS BY FUND
Assets available for plan benefits at December 31, 1996 and 1995 are
allocated by fund as follows:
<TABLE>
<CAPTION>
FIXED DIVERSIFIED AGGRESSIVE COMPANY ATL
INCOME BALANCED EQUITY GLOBAL GROWTH STOCK STOCK
1996 FUND FUND FUND FUND FUND FUND FUND TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
Fair value:
Cash and cash equivalents $ 15 6 31 -- 6 7,931 41 8,030
Mutual funds 5,017,564 583,932 8,085,254 1,903,946 2,584,907 -- -- 18,175,603
Common stocks -- -- -- -- -- 3,640,185 830,614 4,470,799
Insurance contracts 769,160 -- -- -- -- -- -- 769,160
-----------------------------------------------------------------------------------------------
5,786,739 583,938 8,085,285 1,903,946 2,584,913 3,648,116 830,655 23,423,592
Receivables:
Employees' contribution 24,527 10,857 44,404 23,829 34,025 10,883 -- 148,525
Employer's contributions -- -- -- -- -- 50,862 -- 50,862
-----------------------------------------------------------------------------------------------
Assets available for
plan benefits $5,811,266 594,795 8,129,689 1,927,775 2,618,938 3,709,861 830,655 23,622,979
===============================================================================================
</TABLE>
(Continued)
10
<PAGE> 14
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
FIXED DIVERSIFIED AGGRESSIVE COMPANY ATL
INCOME BALANCED EQUITY GLOBAL GROWTH STOCK STOCK
1995 FUND FUND FUND FUND FUND FUND FUND TOTAL
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments:
Fair value:
Cash and cash equivalents $ 9,912 -- 24,590 12,733 1,418 13,216 2,415 64,284
Mutual funds 2,503,973 492,973 6,862,578 1,759,926 1,863,691 -- -- 13,483,141
Common stocks -- -- -- -- -- 5,033,349 772,975 5,806,324
Insurance contracts 3,953,247 -- -- -- -- -- -- 3,953,247
-------------------------------------------------------------------------------------------------
6,467,132 492,973 6,887,168 1,772,659 1,865,109 5,046,565 775,390 23,306,996
Receivables:
Employees' contribution 773 171 (250) (399) (450) 1,326 -- 1,171
Employer's contributions -- -- -- -- -- 68,282 -- 68,282
-------------------------------------------------------------------------------------------------
Assets available for
plan benefits $6,467,905 493,144 6,886,918 1,772,260 1,864,659 5,116,173 775,390 23,376,449
=================================================================================================
</TABLE>
(Continued)
11
<PAGE> 15
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
(7) CHANGES IN ASSETS ALLOCATED BY FUND
Assets available for plan benefits at December 31, 1996 and 1995 and the
changes in assets available for plan benefits for the years then ended
are allocated by fund as follows:
<TABLE>
<CAPTION>
FIXED DIVERSIFIED AGGRESSIVE COMPANY ATL
INCOME BALANCED EQUITY GLOBAL GROWTH STOCK STOCK
1996 FUND FUND FUND FUND FUND FUND FUND TOTAL
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions $ 466,967 172,380 779,160 375,000 540,872 832,471 -- 3,166,850
------------------------------------------------------------------------------------------------------
Investment income:
Interest and dividends $ 360,043 22,786 580,495 119,691 217,750 662 91 1,301,518
Net appreciation
(depreciation) in
fair value of
investments -- 38,577 1,065,457 118,695 81,122 (1,476,122) 200,196 27,925
------------------------------------------------------------------------------------------------------
Net investment
income (loss) 360,043 61,363 1,645,952 238,386 298,872 (1,475,460) 200,287 1,329,443
------------------------------------------------------------------------------------------------------
Net additions
(deductions) 827,010 233,743 2,425,112 613,386 839,744 (642,989) 200,287 4,496,293
Benefits paid to
participants (1,265,206) (68,638) (1,381,354) (417,261) (247,054) (737,112) (133,138) (4,249,763)
Interfund transfers (218,443) (63,454) 199,013 (40,610) 161,589 (26,211) (11,884) --
------------------------------------------------------------------------------------------------------
Increase (decrease)
in fund balances (656,639) 101,651 1,242,771 155,515 754,279 (1,406,312) 55,265 246,530
Assets available for
plan benefits at
beginning of year 6,467,905 493,144 6,886,918 1,772,260 1,864,659 5,116,173 775,390 23,376,449
------------------------------------------------------------------------------------------------------
Assets available for
plan benefits at
end of year $ 5,811,266 594,795 8,129,689 1,927,775 2,618,938 3,709,861 830,655 23,622,979
======================================================================================================
</TABLE>
(Continued)
12
<PAGE> 16
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
FIXED DIVERSIFIED AGGRESSIVE COMPANY ATL
INCOME BALANCED EQUITY GLOBAL GROWTH STOCK STOCK
1995 FUND FUND FUND FUND FUND FUND FUND TOTAL
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions $ 742,258 176,054 800,928 439,226 412,051 1,011,268 -- 3,581,785
-------------------------------------------------------------------------------------------------------
Investment income:
Interest and dividends $ 392,238 37,197 399,816 68,643 187 638 56 898,775
Net appreciation in
fair value of
investments -- 44,832 1,531,348 230,498 488,552 924,995 182,069 3,402,294
-------------------------------------------------------------------------------------------------------
Net investment
income 392,238 82,029 1,931,164 299,141 488,739 925,633 182,125 4,301,069
-------------------------------------------------------------------------------------------------------
Net additions 1,134,496 258,083 2,732,092 738,367 900,790 1,936,901 182,125 7,882,854
Benefits paid to
participants (643,480) (34,818) (677,868) (174,503) (193,578) (430,441) (56,756) (2,211,444)
Interfund transfers (132,819) (7,379) (101,321) (177,844) 488,864 (56,718) (12,783) --
-------------------------------------------------------------------------------------------------------
Increase in fund
balances 358,197 215,886 1,952,903 386,020 1,196,076 1,449,742 112,586 5,671,410
Assets available for
plan benefits at
beginning of year 6,109,708 277,258 4,934,015 1,386,240 668,583 3,666,431 662,804 17,705,039
-------------------------------------------------------------------------------------------------------
Assets available for
plan benefits at
end of year $ 6,467,905 493,144 6,886,918 1,772,260 1,864,659 5,116,173 775,390 23,376,449
=======================================================================================================
</TABLE>
13
<PAGE> 17
SCHEDULE 1
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
LINE 27(a)--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
<TABLE>
<CAPTION>
=====================================================================================================================
Description of investment, including
Identity of issue, borrower, maturity date, rate of interest, Current
lessor, or similar party collateral, par or maturity value Cost value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents -
* Wachovia Bank DTF Short-Term
Investment Fund Short-Term Investment Portfolio $ 8,030 8,030
Mutual funds:
Alger Defined Contribution Small Cap
Fund Small Capitalization Equity Fund 2,038,485 2,584,907
Dodge & Cox Balanced Fund Balanced Stock and Bond Fund 560,681 583,932
Invesco ITC Stable Value Fund Collective Investment Fund 5,017,564 5,017,564
Vanguard Group Windsor II Fund Diversified Equity Fund 5,691,393 8,085,254
Scudder Global Stock Fund Worldwide Equity Fund 1,682,409 1,903,946
Common stock:
* Spacelabs Medical, Inc. Common stock 3,915,872 3,640,185
Advanced Technology Laboratories,
Inc. Common stock 398,213 830,614
Insurance contracts:
Principal Mutual Life Insurance Guaranteed Investment Contract Policy
Company No. 4-7799, 4.85%, due January 1,
1997 769,160 769,160
=====================================================================================================================
</TABLE>
* Wachovia Employee Benefit Trust Services, the trustee of the Plan, and
Spacelabs Medical, Inc., the Plan Sponsor, are parties in interest, as
defined by section 3(14) of ERISA.
14
<PAGE> 18
SCHEDULE 2
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
LINE 27(d) -- SCHEDULE OF REPORTABLE TRANSACTIONS (1)
Year ended December 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Current
value of
assets on
Purchase Selling Cost of transaction Net gain
Identity of party involved Description of asset price price asset date (loss)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Invesco ITC Stable Value Fund Collective Investment Fund 2,088,663 - - 2,088,663 -
Metropolitan Life Insurance Guaranteed Investment Contract
Company Policy No. GA-13191, 6.80%,
due March 31, 1996 - 1,208,187 1,208,187 1,208,187 -
Provident Life & Accident Guaranteed Investment Contract
Insurance Company Policy Insurance Company
No. 627-05297, 7.39%, due
July 1, 1996 - 1,329,595 1,329,595 1,329,595 -
Wachovia Bank Short-Term Investment Fund 2,840,126 - 2,840,126 2,840,126 -
Wachovia Bank Short-Term Investment Fund - 2,906,965 2,906,965 2,906,965 -
Invesco ITC Stable Value Fund Collective Investment Fund 4,600,333 - 4,600,333 4,600,333 -
Invesco ITC Stable Value Fund Collective Investment Fund - 1,228,179 1,228,179 1,228,179 -
Spacelabs Medical, Inc. Common Stock 870,532 - 870,532 870,532 -
Spacelabs Medical, Inc. Common Stock - 787,574 771,170 787,574 16,404
Vanguard Group Windsor II Fund Diversified Equity Fund 1,317,723 - 1,317,723 1,317,723 -
Vanguard Group Windsor II Fund Diversified Equity Fund - 1,160,504 810,039 1,160,504 350,465
==============================================================================================================================
</TABLE>
(1) Reportable transactions as defined in the Department of Labor's reporting
regulations consist of (a) a single transaction in excess of 5% of the
current value of Plan assets, (b) a series of transactions with or in
conjunction with the same person, involving property other than securities,
which amount in the aggregate to more than 5% of the current value of Plan
assets, (c) a series of transactions with respect to securities of the same
issue which amount in the aggregate to more than 5% of the current value of
total Plan assets and (d) any transaction with respect to securities with
or in conjunction with a person if a prior or subsequent single transaction
has occurred with respect to securities with or in conjunction with that
same person in an amount in excess of 5% of the current value of Plan
assets. The current value of Plan assets, to apply the definition of
reportable transactions, is determined at the beginning of the Plan year.
15
<PAGE> 19
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange Act of
1934, the Benefits Committee have duly caused this annual report to be signed on
behalf by the undersigned hereunto duly authorized.
SPACELABS MEDICAL, INC.
INCENTIVE SAVINGS AND
STOCK OWNERSHIP PLAN
Date: June 26, 1997 By: /s/ James A. Richman
---------------------- ---------------------------------
James A. Richman
Vice President and
Corporate Controller
<PAGE> 20
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
23 Consent of KPMG Peat Marwick LLP
</TABLE>
<PAGE> 1
EXHIBIT NO. 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
SpaceLabs Medical, Inc.:
We consent to incorporation by reference in the registration statement (No.
333-15815) on Form S-8 of SpaceLabs Medical, Inc., of our report dated May 30,
1997, relating to the statements of assets available for plan benefits of
SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership Plan as of
December 31, 1996 and 1995, and the related statements of changes in assets
available for plan benefits for the years ended December 31, 1996 and 1995 and
the related supplementary schedules for the year ended December 31, 1996, which
report appears in the December 31, 1996 annual report on Form 11-K of SpaceLabs
Medical, Inc. Incentive Savings and Stock Ownership Plan.
KPMG Peat Marwick LLP
Seattle, Washington
June 26, 1997
