-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VF2jFkwI0JC69z/P3u9zuk8Zf9BHx0i5lI2F5gZ9K+QEMGENfP5NUNEjgAsXrt/v 7b9wcGoCVHffwoPAiYBqdQ== 0000891618-97-001421.txt : 19970328 0000891618-97-001421.hdr.sgml : 19970328 ACCESSION NUMBER: 0000891618-97-001421 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OEC MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0000317814 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 942538512 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09983 FILM NUMBER: 97565530 BUSINESS ADDRESS: STREET 1: 384 WRIGHT BROTHERS DRIVE CITY: SALT LAKE CITY STATE: UT ZIP: 84116 BUSINESS PHONE: 8013289300 FORMER COMPANY: FORMER CONFORMED NAME: DIASONICS INC DATE OF NAME CHANGE: 19920703 10-K 1 FORM 10-K FOR PERIOD ENDING DECEMBER 31, 1996 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 1-9983 OEC MEDICAL SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-2538512 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 384 WRIGHT BROTHERS DRIVE 84116 SALT LAKE CITY, UTAH (Zip Code) (Address of principal executive offices) (801) 328-9300 (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: Listed on the New York Stock Exchange (NYSE) Common Stock, $.01 par value Securities registered pursuant to Section 12(g) of the Act: None 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 short period that the Registrant was required such reports and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of Common Stock held by non-affiliates (based on the closing sales price on the New York Stock Exchange) on February 20, 1997 was approximately $204,267,047. As of February 20, 1997, there were 12,379,821 shares of Common Stock with $.01 par value outstanding. Documents Incorporated by Reference: Form 10-K Part (1) Portions of Definitive Proxy Statement to be mailed to stockholders in connection with the Registrant's 1996 Annual Meeting of Stockholders I, III (2) Portions of the Annual Report to Shareholders for fiscal year ended December 31, 1996 II =============================================================================== 2 OEC MEDICAL SYSTEMS, INC. 1996 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I Item 1. Business 2 Item 2. Properties 6 Item 3. Legal Proceedings 6 Item 4. Submission of Matters to a Vote of Security Holders 6 Executive Officers of the Registrant 6 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 8. Financial Statements and Supplemental Data 8 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 8 PART III Item 10. Directors and Executive Officers of Registrant 8 Item 11. Executive Compensation 8 Item 12. Security Ownership of Certain Beneficial Owners and Management 8 Item 13. Certain Relationships and Related Transactions 9 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 10
3 OEC MEDICAL SYSTEMS, INC. 1996 FORM 10-K ANNUAL REPORT PART I Except for historical information, this discussion contains forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risk and uncertainties include: Product demand and market acceptance; the effect of general economic conditions and foreign currency fluctuations; the impact of competitive products and pricing; new product development and commercialization; the effect of the continuing shift in growth from domestic to international healthcare customers, and the impact of managed care initiatives in the United States and the ability to increase operating margins on higher sales. ITEM 1. BUSINESS General. OEC develops, manufactures, markets, and services computer-based X-ray and fluoroscopic imaging systems for use in hospitals, out-patient clinics, and surgi-centers for intraoperative and interventional procedures. OEC was originally established in Indiana in 1942. In response to surgeons' need for improved methods to monitor and guide the implantation of the various internal fixation devices, OEC entered the medical X-ray imaging market in 1972. OEC was acquired by Diasonics, Inc. in October 1983 as a separate operating subsidiary. The Company was merged into Diasonics in September of 1993 as part of the restructuring in which the other operating businesses of Diasonics were spun off to shareholders and the Diasonics, Inc. name was changed to OEC Medical Systems, Inc. . Today, OEC is recognized as the pioneer and continued United States market leader of intraoperative/ interventional X-ray imaging systems. These systems combine radiographic and fluoroscopic imaging with digital image processing capabilities. X-rays are passed through the body and either recorded on radiographic film or passed through an image intensifier system and displayed as a real-time fluoroscopic image on a video monitor. Digital image processing of the fluoroscopic image improves the image quality, lowers X-ray dosage and results in reduced costs for a number of applications. OEC seeks to provide cost-effective imaging systems directed towards medical specialties in which minimally invasive techniques are replacing expensive open surgical procedures. High quality digital fluoroscopy has become mandatory in today's modern operating room. Minimally invasive techniques are expanding into many areas of surgery (vascular, neurological, orthopedic, urologic, cardiac and general surgery). OEC's products are designed to meet the needs of these new procedures. Technical leadership, strong customer relationships, and a cost-effective product line have earned OEC the United States market share leadership position in the intraoperative and interventional X-ray imaging markets. OEC believes its international markets represent a significant growth opportunity and expects to expand its network of international distributors. Building on its leadership position in the U.S., OEC's focus is to become the worldwide leader for intraoperative and interventional fluoroscopy imaging. With this focus in mind, OEC has been investing in the future through research and development. The introduction of the Series 9600 Mobile Digital Imaging System in 1994, the Uroview 2600 urology table, the Mini 6600 and the Compact 7600 all introduced in 1995, are the results of these investments. OEC's expanding presence in international markets is another example of the Company's investment in the future, having strengthened its wholly-owned subsidiaries in France, Germany, Italy and Switzerland with new personnel and training, and by designing its new products to be more appealing and acceptable to international customers. OEC also strengthened its international network in new markets in 1994, 1995 and 1996 by establishing new distributors or contracting with existing distributors in South America and the Pacific Rim. OEC intends to continue to enhance and upgrade these areas during 1997. 2 4 OEC's Products. The products produced by OEC consist of mobile X-ray imaging systems as well as fixed-room urological X-ray imaging systems. C-arm Products. In March 1994, OEC introduced the Series 9600 Mobile Digital Imaging System. This mobile imaging device can be wheeled from operating room to operating room to provide high quality, real-time fluoroscopic imaging for a wide variety of surgical and interventional procedures that require X-ray control. The modular architecture of the system allows the Series 9600 to be tailored to meet the needs of the surgeon. For example, the 9600 can be equipped with an expanded surgical package for general surgery and orthopedics. When equipped with a vascular special procedures module, it can perform complex subtraction angiography in the operating room, emergency room, or in radiology. The most advanced version of the Series 9600 can perform many of the tasks of a sophisticated, fixed-room digital X-ray system costing several times more than the Series 9600. Prices of the Series 9600 Mobile Digital Imaging System range from $100,000 to $230,000. In response to the changes brought on by managed healthcare, OEC recently introduced two lower cost digital mobile X-ray machines - the Compact 7600 and Mini 6600. These smaller, lower cost machines are specifically designed to address the imaging requirements of outpatient surgery centers as well as other satellite surgery delivery sites. The move towards less invasive surgeries with accompanying shorter recovery times is driving the need for easy to operate, cost effective fluoroscopic guidance systems in all locations of the healthcare delivery. The Compact 7600 Digital Mobile C-Arm is a cost effective, simple to operate full-body imaging system that can be utilized for most routine, less complicated procedures. It's compact one-piece design (no separate monitor cart) allows for ease of transport, quick positioning and minimal storage requirements. Prices of the Compact 7600 range from $75,000 to $85,000. The Mini 6600 Digital Mobile C-Arm is a small, low-x-ray dose digital fluoroscopic imaging system that has been designed to provide high quality images of upper and lower extremities. Areas of use include hospital operating rooms and emergency rooms, outpatient surgery centers, specialty physician offices and veterinary clinics. Prices of the Mini 6600 range from $55,000 to $65,000. During 1996, 1995 and 1994 the OEC C-arm business represented 77%, 82% and 84% of total sales respectively. UroView 2600 Digital Imaging System. Urology is another surgical specialty requiring intraoperative imaging that is rapidly moving away from the use of static X-ray films to monitor and guide procedural progress. Diagnostic and interventional urological procedures are typically performed in a separate area of the operating room environment known as the Cysto Department. Until recently, these specialized rooms were equipped with a fixed (bolted down) urological-specific patient positioning table (motorized in movement) that also had static X-ray filming capability built into it. These films, once exposed, would need to be taken to a dark room to be developed prior to being brought back to the Cysto Department for evaluation by the urologist, resulting in long procedural delays. Additionally, real-time events could not be recorded since radiographic film produces a static image. Eventually, real-time fluoroscopic imaging capabilities began to be added to these systems. In 1987, OEC introduced the UroView product line. The UroView was the industry's first urological table with fully integrated digital fluoroscopy, resulting in significant image improvement, lower X-ray dosages, and reduced costs. Prices for the UroView system presently range from $210,000 to $230,000. During 1996, 1995 and 1994 the OEC urology business represented 23%, 18% and 16% of total sales, respectively. Quality. In June 1994 the Company's Quality Assurance System received the Certificate of Compliance with ISO 9001, the international standard for quality assurance in design, development, production, installation and servicing. Sales and Service. Domestic sales are made primarily through direct representatives and exclusive independent distributors with installation and service performed by OEC. 3 5 In Europe, OEC distributes its products primarily through wholly owned subsidiaries in Italy, France, Germany and Switzerland. For the remainder of Europe, the Far East and Latin America, distribution is done through independent dealers and distributors. OEC generally provides warranty for its products for a period of six to twelve months from the date of installation. OEC offers service contracts for products for which the warranty has expired. During 1996, 1995 and 1994, service revenue represented 13%, 15% and 13% of net sales respectively. Manufacturing. OEC's manufacturing operations are located in Salt Lake City, Utah, Warsaw, Indiana and as of January 1, 1997 Wendelstein, Germany. OEC owns sufficient property at its Salt Lake City site to expand its facilities if needed. OEC's products incorporate microprocessors for which proprietary software has been designed by OEC. OEC's Warsaw, Indiana facility manufacturers the sheet metal enclosures, the mechanical C-arm assembly and all major mechanical components for OEC's products. The electronics and imaging components are manufactured at OEC's Salt Lake City facility, which also performs final assembly and test of the finished devices. The Wendelstein, Germany facility manufactures the Compact 7600 and the Series 7600. Competition. The market for mobile X-ray and urology products is highly competitive. Many of OEC's existing and potential competitors have substantially greater financial, marketing and technological resources. In the market for products similar to OEC's Series 9600 Mobile C-arm, OEC competes with General Electric Corporation, Siemens Medical Systems, Inc., Philips Medical Systems, Inc. and Toshiba Medical Systems, Inc. Competitive companies offering products similar to the Mini 6600 include Fluoroscan Imaging Systems, Inc. Lunar Corporation, and XiTec, Inc. The Compact 7600 competes with a similar product from International Medical Systems, Inc. Competitive companies offering products similar to the UroView 2600 include Picker International, Inc., Dornier Medical Systems, Inc., and Liebel-Flarsheim Company. OEC competes on the basis of price, imaging quality, technological innovation, upgradeability, reliability, and quality of service and support. Backlog. At December 31, 1996, OEC's backlog was approximately $24.1 million, as compared with approximately $16.8 million at December 31, 1995. OEC includes in backlog only firm orders deliverable within 12 months. Backlog also includes service contract revenue which will be earned over the next twelve months. Research and Development. The medical imaging business involves rapid technological change and innovation. OEC believes the ability to use technological innovation to advance the clinical utility of diagnostic imaging has and will continue to be a significant factor in its success in competing in its marketplaces. OEC has continued to invest in research and development to identify solutions to the imaging requirements of the area of minimally invasive medical practices. This has led to a continuous release of both improvements in existing products and the introduction of the Series 9600 Mobile Digital Imaging System in 1994 along with the introduction in 1995 of the Uroview 2600, the Mini 6600 and the Compact 7600. During 1996, 1995, and 1994, OEC's research and development expenses totaled $8.9 million, $7.7 million and $8.4 million, respectively, representing 6.9%, 7.6% and 8.6% of net sales. Employees. On December 31, 1996, OEC had approximately 550 employees. None of OEC's employees are covered by collective bargaining agreements, and OEC considers its employee relations to be satisfactory. Acquisitions. During 1995, the Company purchased 19.8% ownership position in Barwig Medizinische Systeme GmbH (BMS), a German manufacturer of medical equipment. The Company was granted exclusive worldwide distribution rights for the 7600 C-Arm manufactured by BMS. On January 1, 1997 the Company purchased the remaining outstanding shares of BMS, making it a wholly owned subsidiary of the Company. Risk Factors. The Company's business involves risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: Product demand and market acceptance; the effect of general economic conditions and foreign currency fluctuations; the impact of competitive products and pricing; new product development and commercialization; the effect of the continuing shift in growth from domestic to international healthcare customers, and the impact of managed care initiatives in the United States and the ability to increase operating margins on higher sales. 4 6 Future operating results are dependent on the Company's' ability to develop, manufacture and market innovative products that meet customers' needs. Inherent in this process are a number of risks that the Company must successfully manage in order to achieve favorable operating results. The process of developing new high technology medical products is complex and uncertain and requires innovative designs that anticipate customer needs, technological trends and healthcare shifts. There can be no assurance that the Company will be able to develop and market new products on a cost-effective and timely basis, that such products will compete favorably with products developed by others or that technology will not be superseded by new discoveries or breakthroughs, for example, the delay in introduction of the Series 9600 in 1994 which negatively impacted revenue and earnings for the year. Because of the substantial length of time and expense associated with bringing new products through development and regulatory approval to the marketplace, the medical device industry places considerable importance on obtaining patent, trademark, copyright and trade secret protection for new technologies, products and processes. A loss of protection could have a material adverse effect on the Company's business. Major items that OEC currently purchases from others include video monitors, X-ray tubes, image intensifiers, CCD cameras and power supplies. Some of these parts and components are available from a limited number of single-source manufacturers or suppliers. While the Company believes any of these single-source items could be replaced over time, abrupt disruption in the supply of a part for a product could have a material adverse effect on the Company's production in cases where the existing inventory of the components is not adequate to meet the Company's demand for the component during such disruption and could have a material adverse effect on its financial condition and results of operations. The testing, marketing and sale of human healthcare products entails an inherent risk of product liability, and there can be no assurance that product liability claims will not be asserted against OEC. Although OEC has product liability insurance coverage, there can be no assurance that such coverage will provide adequate coverage against all potential claims. As a manufacturer of medical devices, OEC is subject to extensive and rigorous governmental regulation, principally by the FDA and corresponding state and foreign agencies. Failure to comply with FDA regulations could result in sanctions being imposed, including restrictions on the marketing of or recall of the affected products. OEC's facilities and manufacturing processes have been periodically inspected by the FDA and other agencies, but remain subject to audit from time to time. OEC continues to devote substantial human and financial resources to regulatory compliance and believes that it remains in substantial compliance with all applicable federal and state regulations. Nevertheless, there can be no assurance that the FDA or a state agency will agree with OEC's positions, or that its GMP compliance will not be challenged at some subsequent point in time. OEC has received approval from the FDA and foreign regulatory authorities in the past, when required, to market its products. In general, the length of time for all reviews and approvals, most particularly from the FDA, has been lengthening and the review or approval process for medical devices has become substantially more difficult and expensive. Moreover, regulatory approvals, when granted, may contain significant limitations on the standards due to unforeseen problems. To date, product reviews for medical imaging technologies have been obtained within three to twelve months. There can be no assurance that OEC will be able to obtain necessary regulatory approvals in the future, and delays in the receipt of or failure to receive such approvals, the loss of existing approvals or failure to comply with regulatory requirements could have a material adverse effect on the business, financial condition and results of operation of OEC. A portion of the Company's research and development activities, its corporate headquarters and other critical business operations are located near a major earthquake fault. The ultimate impact on the Company, significant suppliers and the general infrastructure is unknown, but operating results could be materially affected in the event of a major earthquake. Although OEC believes that it has the product offerings and resources needed for continuing success, future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its operations. Factors external to the Company can result in volatility of the Company's common stock price. 5 7 ITEM 2. PROPERTIES. OEC owns its corporate headquarters and manufacturing facility of 105,000 square feet in Salt Lake City, Utah, and leases another 80,000 square feet of manufacturing in Warsaw, Indiana. The lease expires on June 30, 2000. The Company leases 10,000 square feet of manufacturing in Wendelstein, Germany for the BMS operations. The lease expires in October 1998. ITEM 3. LEGAL PROCEEDINGS. Litigation was instituted against the Company by a terminated distributor in 1986. An unfavorable decision in the amount of $3.1 million was rendered by the trial court in 1992. As a result of that decision, the Company established a reserve for the judgment. The Company appealed the trial court decision on a number of grounds, and in November, 1993, the appellate court reversed the trial court and held for the Company on the ground that the distributor had released his claims against the Company in the settlement of other litigation and did not reach the other issues raised on appeal. The distributor filed a petition in the Indiana Supreme Court requesting that the court vacate the appellate court ruling and remand the case to the appellate court for consideration of the other issues raised on appeal. On December 31,1996, the Indiana Supreme Court reversed the ruling of the Indiana Circuit Court of Appeals and held that the trial court correctly determined that the release executed by the distributor did not release the Company. The case has been remanded back to the appellate court for consideration of the remaining issues raised on the appeal. While the Company believes that it will ultimately prevail, no determination can be made as to whether some or all of the reserve should be reversed. As of December 31, 1996, the reserve with accrued interest totaled approximately $4.1 million. All but one of the pending lawsuits relating to the former MRI Division have been favorably resolved by dismissals, summary judgment or directed verdicts in favor of the Company. With respect to the sole exception, an action filed by Lenox Hills Leasing Associates, Toshiba America Medical Systems, Inc. ("Toshiba") has agreed to defend and indemnify the Company. All of the pending actions, and any future actions related to the MRI Division, are the subject of an arbitration award in favor of the Company and against Toshiba. That arbitration award holds that, with certain limited exceptions not applicable to any of the pending actions, Toshiba is obligated to indemnify the Company for compensatory and punitive damages, if any, awarded against the Company in any action related to the former MRI Division and to reimburse the Company for its attorney's fees and expenses incurred in defending such actions, regardless of whether such actions allege intentional misconduct or fraud. This arbitration award was affirmed by a California trial court. Toshiba appealed, and the California Court of Appeals affirmed the ruling of the trial court in 1996. The California Supreme Court has declined to hear Toshiba's appeal of the favorable Court of Appeal's ruling. OEC is also a defendant in other ordinary commercial litigation. In light of available insurance and reserves, management believes that such litigation will not have a material effect on OEC's business or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the Company's Security Holders during the fourth quarter of fiscal year 1996. 6 8 EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position - ---- --- -------- Barry K. Hanover 42 Chief Technical Officer and Executive Vice President Larry E. Harrawood 49 Vice President, Marketing Gary N. Kilman 52 Vice President, Sales Ruediger Naumann-Etienne 50 President and Chief Executive Officer Randy W. Zundel 41 Chief Operating Officer, Chief Financial Officer & Executive Vice President
Barry K. Hanover is the Chief Technical Officer and Executive Vice President, Engineering of the Company. He was appointed Chief Technical Officer in September 1996. He has been the Vice President, Engineering since December 1992. Previously, he was Director, Mechanical Engineering from October 1992 to December 1992. Prior to that, he was President of Hanover Engineering Services, an engineering consulting firm, from June 1992 to October 1992, and Vice President, Technical Development and member of the Board of Directors of Sarcos, Inc., a biomedical technology company from 1988 through 1992. Larry E. Harrawood has been Vice President, Marketing and Business Development of the Company since July 1987. Previously, he was Vice President, Business Development from October 1986 to July 1987, Vice President, Sales and Marketing from July 1985 to October 1986, and General Manager of X-ray operations from December 1972 to July 1985. Gary N. Kilman has been Vice President, Sales of the Company since February 1987. Previously, he was National Sales Manager for ADAC Laboratories, a medical imaging company. Prior to that, he held progressively titles of Sales Rep, Regional Sales Manager, and Area Sales Manager at that company. Prior to that he was Area Sales Manager, IBM, BioMedical Systems. Ruediger Naumann-Etienne was named CEO and President of OEC in February 1995. He has been a director of the Company since January 1989, and was named Chairman of the Board in September 1993. He has been Managing Director of Intertec since July 1990. He was President and Chief Operating Officer of the Company from December 1987 to July 1990 and Executive Vice President and Chief Financial Officer from April 1984 to September 1988. Randy W. Zundel is an Executive Vice President and the Chief Operating Officer and the Chief Financial Officer of the Company. He was appointed Chief Operating Officer in September 1996. He has been the Chief Financial Officer of the Company since October 1993. He was the Chief Operating Officer from February 1990 to September 1993. Prior to that he was Vice President, Operations from May 1987 to February 1990. Mr. Zundel has held various other positions with OEC since 1981. He is also a director of Orbtek, a start-up opthamalogy company. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is presently traded on the New York Stock Exchange under the trading symbol OXE. Prices shown are the range of high and low closing prices per share on the New York Stock Exchange -- Composite Transactions, as reported by the Wall Street Journal. On February 20, 1997 the number of holders of record of common stock was 2,133. 7 9
Prices Quarter Ended: High Low Close -------------- ---- --- ----- March 31, 1995......................................... 6 5/8 5 5/8 5 7/8 June 30, 1995.......................................... 8 5 5/8 7 3/4 September 30, 1995..................................... 8 7/8 7 1/8 8 1/8 December 31, 1995...................................... 10 3/8 7 7/8 9 3/4 March 31, 1996......................................... 13 3/4 9 1/2 11 3/4 June 30, 1996.......................................... 13 5/8 11 1/4 13 5/8 September 30, 1996..................................... 13 1/2 10 3/4 12 1/2 December 31, 1996...................................... 16 7/8 12 1/4 15
The Company has not paid any dividend on its common stock. The Company presently intends to retain all earnings for use in the business and, therefore, does not anticipate paying any cash dividends in the foreseeable future. ITEM 6. SELECTED FINANCIAL DATA. The table labeled "Five Year Summary" appearing as page 20 of Exhibit 13 is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The section labeled "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing as pages 21 through 24 of Exhibit 13 is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA. The Consolidated Financial Statements and Notes thereto appearing at pages 25 through 37 of Exhibit 13 is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT. Information concerning the directors of the Company is incorporated by reference to the sections titled "Information with Respect to Nominees" and in the definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders (the "1996 Proxy Statement"). Information regarding executive officers is set forth in Part I of this report. Pursuant to Section 16(b) of the Securities Act of 1934, the Company's directors, its executive (and certain other) officers, and any persons holding more than 10 percent of the Company's stock are required to report their ownership and any changes in beneficial ownership of the Company's stock to the Securities and Exchange Commission and to the New York Stock Exchange. Specific due dates for these reports have been established and the Company is required to report any failure to file by these dates. 8 10 ITEM 11. EXECUTIVE COMPENSATION Information concerning management compensation is incorporated by reference to the section titled "Cash Compensation of Executive Officers" in the 1996 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning the stock ownership of each person known to the Company to be a beneficial owner of five percent or more of the Company's Common Stock and management is incorporated by reference to the sections titled "Information with Respect to Nominees" and "Principal Stockholders" in the 1996 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning relationships and related transactions is incorporated by reference to the section titled "Transactions with Management and Others" in the 1996 Proxy Statement. 9 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Index to Financial Statements The following consolidated financial statements of the Company are included in Exhibit 13 of this Form 10-K:
Page in Exhibit 13 ---------- Consolidated statements of operations for each of the three years in the period ended December 31, 1996....................................................................... 25 Consolidated balance sheets at December 31, 1996 and 1995............................................. 26 Consolidated statements of stockholders' equity for each of the three years in the period ended December 31, 1996.................................................................. 27 Consolidated statements of cash flows for each of the three years in the period ended December 31, 1996...................................................................... 28 Notes to consolidated financial statements............................................................ 29 Independent Auditors' Report.......................................................................... 37
2. Index to Financial Statement Schedule All schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto. 10 12 3. Index to Exhibits The following exhibits (numbered in accordance with Item 601 of SEC Regulation S-K) are filed as part of this report or are incorporated by reference as indicated below:
Exhibit Number Description ------ ----------- 3.1 Certificate of Incorporation, as amended. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 3.2 By-Laws, as amended. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 4 Rights Agreement, dated as of June 20, 1988, between Diasonics, Inc. and Bank of America NT&SA. Incorporated by reference to Exhibit 4.3 of the Diasonics, Inc. Form 8-K, filed August 1, 1988 10.1 Diasonics, Inc. 1979 Stock Option Plan, amended and restated as of June 1, 1982. Incorporated by reference to Exhibit 10.6 of the Diasonics, Inc. Registration Statement on Form S-8, filed May 2, 1983. 10.4 Diasonics, Inc. 1990 Stock Option/Stock Purchase Plan. Incorporated by reference to Exhibit 10.79 of the Diasonics, Inc. Form S-8, filed on May 1, 1991. 10.5 Warrant for the Purchase of Common Shares issued to PaineWebber R&D Partners II, L.P., as amended. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed on March 30, 1994. 10.14 Form of Option Agreement used in connection with options having service vesting provisions. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 10.15 Form of Option Agreement used in connection with options having milestone provisions. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 10.16 Form of Option Agreement used in connection with automatic option grant program for non-employee directors. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 10.19 Note and Stock Pledge Agreement between Ruediger Naumann-Etienne and OEC Medical Systems, Inc., dated September 5, 1995. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed April 1, 1996. 10.20 Form of Warrant Agreement used in connection with Warrants given to independent contractors for the purchase of common shares. 10.21 Agreement, dated December 17, 1996, to acquire full ownership of Barwig Medizinische Systeme GmbH (BMS). 13 Portions of the 1996 Annual Report to Shareholders, including Five Year Summary, Management's Discussion & Analysis of Financial Condition and Results of Operations, and Consolidated Financial Statements and Notes thereto. 21 List of Subsidiaries.
11 13 23 Independent Auditors' Consent. 27 Financial Data Schedule (FDS) for Edgar Filing. (b) Reports on Form 8-K: Not applicable
12 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. OEC MEDICAL SYSTEMS, INC. By: /s/ Randy W. Zundel --------------------------------- Randy W. Zundel Executive Vice President & Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ruediger Naumann-Etienne and Allan W. May and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Report and form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Date: March 26, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. /s/ Ruediger Naumann-Etienne Chairman of the Board, President & March 26, 1997 - ----------------------------------------- Chief Executive Officer Ruediger Naumann-Etienne /s/ Gregory K. Hinckley Director March 26, 1997 - ----------------------------------------- Gregory K. Hinckley /s/ Benno P. Lotz Director March 26, 1997 - ----------------------------------------- Benno P. Lotz /s/ Allan W. May Director March 26, 1997 - ----------------------------------------- Allan W. May /s/ Chase N. Peterson Director March 26, 1997 - ----------------------------------------- Chase N. Peterson /s/ Randy W. Zundel Principal Financial & March 26, 1997 - ----------------------------------------- Accounting Officer Randy W. Zundel
13 15 EXHIBIT INDEX Exhibit No. Document 3.1 Certificate of Incorporation, as amended. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 3.2 By-Laws, as amended. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 4 Rights Agreement, dated as of June 20, 1988, between Diasonics, Inc. and Bank of America NT&SA. Incorporated by reference to Exhibit 4.3 of the Diasonics, Inc. Form 8-K, filed August 1, 1988 10.1 Diasonics, Inc. 1979 Stock Option Plan, amended and restated as of June 1, 1982. Incorporated by reference to Exhibit 10.6 of the Diasonics, Inc. Registration Statement on Form S-8, filed May 2, 1983. 10.4 Diasonics, Inc. 1990 Stock Option/Stock Purchase Plan. Incorporated by reference to Exhibit 10.79 of the Diasonics, Inc. Form S-8, filed on May 1, 1991. 10.5 Warrant for the Purchase of Common Shares issued to PaineWebber R&D Partners II, L.P., as amended. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed on March 30, 1994. 10.14 Form of Option Agreement used in connection with options having service vesting provisions. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 10.15 Form of Option Agreement used in connection with options having milestone provisions. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 10.16 Form of Option Agreement used in connection with automatic option grant program for non-employee directors. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed March 30, 1994. 10.19 Note and Stock Pledge Agreement between Ruediger Naumann-Etienne and OEC Medical Systems, Inc., dated September 5, 1995. Incorporated by reference to the OEC Medical Systems, Inc. Form 10-K, filed April 1, 1996. 10.20 Form of Warrant Agreement used in connection with Warrants given to independent contractors for the purchase of common shares. 10.21 Agreement, dated December 17, 1996, to acquire full ownership of Barwig Medizinische Systeme GmbH (BMS). 13 Portions of the 1996 Annual Report to Shareholders, including Five Year Summary, Management's Discussion & Analysis of Financial Condition and Results of Operations, and Consolidated Financial Statements and Notes thereto. 21 List of Subsidiaries. 23 Independent Auditors' Consent. 27 Financial Data Schedule (FDS) for Edgar Filing. EX-10.21 2 AGREEMENT DATED DECEMBER 17, 1996 TO ACQUIRE BMS 1 EXHIBIT 10.21 SUMMARY TRANSLATION FROM THE GERMAN LANGUAGE DOCUMENTS OF AGREEMENT, DATED DECEMBER 17, 1996, BETWEEN OEC MEDICAL SYSTEMS, INC. AND BARWIG MEDIZINISCHE SYSTEME GMBH. The Agreement consists of three documents, all dated December 17, 1996. a) The "Uebernahmearkiaerung" or the exercise by OEC Medical Systems (Europa) AG ("OEC") of a subscription right to 33,000 shares of capital of Barwig Medizinische Systeme GmbH ("BMS"). b) The "Gesellschafterbeschluss" or shareholders resolution to make the capital increase of BMS effective January 1, 1997. c) The "Uebertragung von Geschaeftsanteilen" or purchase of the shares of BMS from Manfred Barwig and HTC High Tech Consulting AG ("HTC") by OEC effective January 1, 1997 a) UEBERNAHMEARKIAERUNG This notarized document dated December 17, 1996 is the exercise by OEC of its right to purchase an additional 33,000 shares of BMS at the par value of DM 33.000 plus an incremental amount of DM 923.700. The BMS manager, Mr. Barwig, confirms in the document that both amounts had been paid to the company by December 17, 1996. b) GESELLSCHAFTERBESCHLUSS This document dated December 17, 1996 is a resolution signed by the three shareholders of BMS - Manfred Barwig, HTC and OEC - making the DM 33.000 share capital increase of BMS effective January 1, 1997. c) UEBERTRAGUNG VON GESCHAEFTSANTEILEN This notarized document dated December 17, 1996 is the agreement by OEC to purchase 25,000 shares of BMS from Manfred Barwig and 15,100 shares of BMS from HTC. The purchase price paid for Mr. Barwig's shares is DM 200.000 and the granting of 18,000 options to purchase shares of OEC Medical Systems, Inc. The vesting of the shares is tied to shipments of the mobile C-arm system 7600. The consideration paid for the HTC shares is a grant 50,000 options to purchase shares of OEC Medical Systems, Inc. HTC and Mr. Hubert Anders agree to a two year non-compete clause for the development, manufacturing, marketing and sales of mobile C-arms. 2 URNr. K 2213/1996 Kr IK1296,Barwig Ubernahmeerklarung Heute, den 17. Dezember 1996 erschienen vor mir, Dr. Heinz K o l l m a r , Notar in Schwabach, in meinen Amtsraumen in 91126 Schwabach, Konigsplatz 23: 1. Herr Manfred B a r w i g, Elektroingenieur, geb. am 09.12.1961, wohnhaft Am Steinbruch 2 in 90530 Wendelstein, hier handelnd fur die Firma "Barwig Medizinische Systeme GmbH mit dem Sitz in Wendelstein -nachstehend "BMS" genannt- in seiner Eigenschaft als alleinvertretungsberechtigter Geschaftsfuhrer. Vertretungsbescheinigung erfolgt gesondert. 2. Herr Heinz G l o o r, geschaftsansassig: Kanalstrasse 31 in CH-8152 Glattbrugg hier handelnd fur die Firma "OEC Medical Systems (Europa) AG" mit dem Sitz in Glattbrugg/Schweiz 3 -2- -nachstehend "OEC" genannt- in seiner Eigenschaft als Vize-Prasident des Verwaltungsrates. Vertretungsbescheinigung erfolgt gesondert. Die Erschienenen sind personlich bekannt. Sie ersuchten mich um die Beurkundung folgender Erklarungen: 1. Gemass Urkunde vom 31.05.1995 des Notars Dr. Heinz Kollmar in Schwabach wurde das Stammkapital der Firma "Barwig Medizinische Systeme GmbH" mit dem Sitz in Wendelstein von DM 50.000,--um DM 33.000,--auf DM 83.000,-- erhoht. Hierzu wurde ein neuer Geschaftsanteil von DM 33.000,-- gebildet. Zur Ubernahme des neuen Geschaftsanteils von DM 33.000,-- wurde die Gesellschafterin "OEC" zugelassen. Nach dieser genannten Urkunde kann die Ubernahme nicht vor dem 01.06.1995 und nicht nach dem 31.12.1996 erklart werden. Sie kann ausschliesslich zur Erklarung gegenuber dem beurkundenden Notar erklart werden. 4 - 3 - Dies vorausgeschickt erklart hiermit die Firma "OEC Medical Systems (Europa) AG" mit dem Sitz in Glattbrugg/Schweiz die Ubernahme des neu gebildeten Geschaftsanteils in Hohe von DM 33.000,-- zu den in der Gesellschafterversammlung festgelegten Bedingungen. Die Firma "Barwig Medizinische Systeme GmbH" mit dem Sitz in Wendelstein, vertreten durch den Geschaftsfuhrer, Herrn Manfred Barwig, versichert, dass der Nennbetrag in Hohe von DM 33.000,-- in bar bei der Gesellschaft einbezahlt wurde. Ferner versichert die vorgenannte Firma "Barwig Medizinische Systeme GmbH" mit dem Sitz in Wendelstein, dass die Firma "OEC" zum heutigen Tage das in der Urkunde bezeichnete Agio in Hohe von DM 923.700,-- bar einbezahlt hat. 2. Die Kosten tragt die Firma "OEC". Begl. Abschriften erhalten: das Registergericht und die Firmen "Barwig Medizinische Systeme GmbH" 5 - 4 - "OEC Medical Systems (Europa) AG". Vorgelesen vom Notar von den Beteiligten genehmigt und eigenhandig unterschrieben /s/ Heinz Gloor /s/ Manfred Barwig /s/ Dr. Kollmar, Notar 6 Vorstehende mit der Urschrift ubereinstimmende Ausfertigung wird hiermit der Firma OEC Medical Systems (Europa) AG mit dem Sitz in Glattbrugg/Schwiez auf Ansuchen erteilt. Schwabach, den 19.12.1996 Dr. Kollmar, Notar /s/ Dr. Kollmar 7 Gesellschafterbeschluss Wir die Unterzeichneten samtlichen Gesellschafter der Barwig Medizinische Gerate GmbH sind daruber einig, dass die heute vor dem Notar Dr. Kolmar in Schwabach erklarte Ubernahme eines neuen Gesellschaftsanteils von nominal DM 33.000 sowohl im Verhaltnis zwischen den Gesellschaftern als auch im Verhaltnis zu der Gesellschaft zum 1. Januar 1997 eintritt. Wendelstein, den 17. Dezember 1996 /s/ Manfred Barwig /s/ Hubert Anders - ------------------------- ------------------------- Manfred Barwig HTC High Tech Consulting AG /s/ Heinz Gloor - ------------------------- OEC Medical Systems (Europa) AG 8 URNr. K 2216/1996 Kr IK1296,Barwig, U. Ubertragung von Geschaftsanteilen Heute, den 17. Dezember 1996 erschienen vor mir, Dr. Heinz K o l l m a r , Notar in Schwabach, in meinen Amtsraumen in 91126 Schwabach, Konigsplatz 23: 1. Herr Manfred B a r w i g, Elektroingenieur, geb. am 09.12.1951, wohnhaft Am Steinbruch 2 in 90530 Wendelstein, hier handelnd a) im eigenen Namen und b) fur die Firma "High Tech Consulting AG" mit dem Sitz in Dietikon/ Schweiz, -nachstehend "HTC" genannt- aufgrund der dieser Urkunde in Urschrift beigefugten Spezialvollmacht vom 11.12.1996. c) fur Herrn Hubert A n d e r s, Kaufmann, geschaftsansassig: P.O. Box 5522 in Carefree, AZ 85377 USA, aufgrund Vollmacht, die in Urschrift beigefugt ist. 9 - 2 - 2. Herr Heinz G l o o r, geschaftsansassig: Kanalstrasse 31 in CH-8152 Glattbrugg hier handelnd f(beta)r die Firma "OEC Medical Systems (Europa) AG"- mit dem Sitz in Glattbrugg/Schweiz -nachstehend "OEC" Genannt- in seiner Eigenschaft als Vize-Prasident des Verwaltungsrates. Vertretungsbescheinigung erfolgt gesondert. Herr Barwig und Herr Gloor sind mir, dem Notar, personlich bekannt. Auf Ansuchen der Erschienenen beurkunde ich folgendes: I. Am Stammkapital von DM 50.000,-- ( nach Vollzug einer beschlossenen aber noch nicht im Handelsregister eingetragenen Kapitalerhohung von DM 83.000,-- ) derFirma "Barwig Medizinische Systeme GmbH" mit dem Sitz in Wendelstein sind a) Herr Manfred Barwig mit einem Geschaftsanteil von DM 25.000,-- und 10 - 3 - b) die Firma "High Tech Consulting AG" mit dem Sitz in Dietikon / Schweiz mit einem Geschaftsanteil von DM 15.100,-- beteiligt. Diese Geschaftsanteile wurden mit Urkunde des Notars Dr. Heinz Kollmar in Schwabach vom 18.01.1995 URNR. K 70/95 erworben. Beide Inhaber dieser Geschaftsanteile versichern, dass die Geschaftsanteile voll einbezahlt, sie noch Inhaber der Anteile und diese weder gepfandet noch verpfandet sind. II. Herr Manfred Barwig und die Firma "High Tech Consulting AG" mit dem Sitz in Dietikon / Schweiz verkaufen und ubertragen mit dinglicher Wirkung die jeweiligen vorbezeichneten Geschaftsanteile a n die Firma "OEC Medical Systems (Europa) AG" mit dem Sitz in Glattbrugg/Schweiz. Die Ubertragung erfolgt mit Wirkung zum 01.01.1997 Uhr 00.00. 11 - 4 - Das Gewinnbezugsrecht geht somit ab 01.01.1997 auf den Kaufer uber, bis zum 31.12.1996 verbleibt es beim Verkaaufer. Der Erwerber nimmt die Ubertragungen an. III. Der Erwerber hat folgende Gegenleistungen zu erbringen: 1. An Herrn Manfred Barwig ist ein barer Geldbetrag in Hohe von DM 200.000,-- i.W. zweihunderttausend Deutsche Mark am 31.01.1997 zu zahlen. Der Geldbetrag ist bis dahin nicht zu verzinsen. Der Erwerber unterwirft sich wegen der Bezahlung dieses Geldbetrages der sofortigen Zwangsvollstreckung aus der Urkunde in sein gesamtes Vermogen. Der Notar wird ermachtigt, ohne jegliche Nachweise, vollstreckbare Ausfertigung zu erteilen. Eine Beweislastumkehr liegt darin nicht. 12 - 5 - 2. Der Erwerber ubertragt auf Herrn Manfred Barwig 18.000 Optionen fur den Kauf von Aktien der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City, Utah, USA. Die Berechtigung auf Ausubung der Optionen errechnet sich nach dem Schlussel von 48 Optionen fur jedes nach dem 31.12.1996 ausgeliefertem mobilen C-Bogen Roentgengerat "Compact 7600" oder "Series 7600" durch die Firma Barwig Medizinische Systeme GmbH in Wendelstein. Die Berechtigungsberechnung erfolgt jeweils zum Quartalsende. Unabhangig von dieser Regelung sind alle 18.000 Optionen am 31.12.2002 fallig und handelbar. Als Optionspreis gilt der Abschlusskurs fur die OEC Medical Systems Inc. in Salt Lake City am 1. Borsentag nach Wirksamwerden dieses Vertrages. 3. Der Erwerber ubertragt auf die Firma "HTC" Optionen fur den Kauf von 30.000 Aktien der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City. Die Berechtigung fur die Ausubung der Optionen beginnt ein Jahr nach Wirksamwerden dieses Vertrages und kann bis zum 31.12.2001 ausgeubt werden. Als Optionspreis gilt der Abschlusskurs der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City Aktien am 1. Borsentag nach Wirksamwerden dieses Vertrages. 13 - 6 - 4. Der Erwerber ubertragt auf Herrn Hubert Anders Optionen fur den Kauf von 20.000 Aktien der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City. Die Berechtigung fur die Ausubung der Optionen beginnt ein Jahr nach Wirksamwerden dieses Vertrages und kann bis zum 31.12.2001 ausgeubt werden. Als Optionspreis gilt der Abschlusskurs der OEC Medical Systems Inc. mit dem Sitz in Salt Lake City Aktien am 1. Borsentag nach Wirksamwerden dieses Vertrages. 5. Festgestellt wird, dass an die Firma "HTC" und an Herrn Hubert Anders ein bar zu zahlender Kaufpreis nicht geschuldet wird. IV. Soweit nach Satzung oder Gesetz Zustimmungen zu diesem Vertrag erforderlich sind, werden diese die Vertragsteiles selbst beibringen. 14 - 7 - V. Weiter ist vereinbart: Die Firma "HTC" verzichtet zum 31.12.1996 auf das Vertriebsrecht fur "OEC" und "BMS" (Barwig Medizinische Systeme GmbH) Produkte in Skandinavien. Die HTC und Herr Hubert Anders verpflichten sich, fur den Zeitraum von 2 Jahren ab Wirksamwerden dieses Vertrages nicht als Konkurrent in der Entwicklung, Fertigung, Vermarktung und Vertrieb von mobilen C-Bogen Roentgengeraten tatig zu werden. VI. Der Erwerber tragt die durch diese Urkunde veranlassten Kosten. Von dieser Urkunde erhalt das Registergericht eine beglaubigte Abschrift, ebenso das zustandige Zentralfinanzamt Nurnberg. Die Vertragsteile erhalten je eine Ausfertigung. Die Gesellschaft hat keinen Grundbesitz. VII. Es wird eine Gesellschafterversammlung der Firma "Barwig Medizinische Systeme GmbH" mit dem Sitz in Wendelstein abgehalten. 15 - 8 - Da das gesamte Stammkapital vertreten ist, wird auf alle Formen und Fristen verzichtet und einstimmig folgendes beschlossen: 1. Herr Manfred Barwig wird mit Wirkung zum 31.12.1996 als Geschaftsfuhrer abberufen. 2. Mit Wirkung zum 01.01.1997 wird zum Geschaftsfuhrer neu bestellt: Herr Ted Parrot, Kaufmann, in Salt Lake City, Utah, USA. Er vertritt die Gesellschaft einzeln, auch soweit andere Geschaftsfuhrer hinzutreten. Von den gesetzlichen Beschrankungen des Section 181 BGB ist er befreit. Vorgelesen vom Notar von den Beteiligten genehmigt und eigenhandig unterschrieben /s/ Heinz Gloor /s/ Manfred Barwig /s/ Dr. Kollmar, Notar EX-13.1 3 PORTIONS OF 1996 ANNUAL REPORT TO SHAREHOLDERS 1 FINANCIAL INFORMATION TABLE OF CONTENTS Five Year Financial Summary .................. Page 20 Management's Discussion & Analysis ........... Page 21 Consolidated Financial Statements ............ Page 25 Notes to Consolidated Financial Statements ... Page 29 Independent Auditors' Report ................. Page 37
[GRAPHIC] REVENUE (IN MILLIONS) [LINE GRAPH] 1994 ....................... $ 98 1995 ....................... $102 1996 ....................... $128
19 2 FIVE YEAR SUMMARY
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992 (In thousands, except per share amounts) INCOME STATEMENT DATA NET SALES Product $ 111,383 $ 86,415 $ 85,206 $ 89,215 $ 88,225 Service 16,602 15,121 12,952 10,799 8,653 --------- --------- -------- --------- -------- Total net sales 127,985 101,536 98,158 100,014 96,878 --------- --------- -------- --------- -------- COST OF SALES Product 65,334 51,408 52,734 50,290 49,443 Service 11,372 8,922 7,942 8,278 5,023 --------- --------- -------- --------- -------- Total cost of sales 76,706 60,330 60,676 58,568 54,466 --------- --------- -------- --------- -------- Gross margin 51,279 41,206 37,482 41,446 42,412 --------- --------- -------- --------- -------- OPERATING EXPENSES Research and development 8,854 7,728 8,416 8,689 7,067 Marketing and sales 21,494 17,668 16,487 17,001 15,524 Administrative, general and other 7,260 5,498 5,776 8,149 5,337 Litigation judgment -- -- -- -- 3,100 --------- --------- -------- --------- -------- Total operating expenses 37,608 30,894 30,679 33,839 31,028 --------- --------- -------- --------- -------- Operating income 13,671 10,312 6,803 7,607 11,384 Interest income 786 676 346 529 743 Interest expense (9) (11) (257) (105) (19) --------- --------- -------- --------- -------- Income from continuing operations before income taxes 14,448 10,977 6,892 8,031 12,108 Income tax benefit (expense) (1,536) 856 1,816 1,776 (362) --------- --------- -------- --------- -------- Income from continuing operations 12,912 11,833 8,708 9,807 11,746 Loss from discontinued operations -- -- -- (13,060) (30,793) --------- --------- -------- --------- -------- Net income (loss) 12,912 $ 11,833 $ 8,708 $ (3,253) $(19,047) ========= ========= ======== ========= ======== Income (loss) per common and common equivalent share: Income from continuing operations $ 1.01 $ 0.94 $ 0.69 $ 0.80 $ 0.96 Loss from discontinued operations -- -- -- (1.06) (2.52) --------- --------- -------- --------- -------- Net income (loss) $ 1.01 $ 0.94 $ 0.69 $ (0.26) $ (1.56) --------- --------- -------- --------- -------- Common and common equivalent shares 12,797 12,585 12,552 12,281 12,182 ========= ========= ======== ========= ======== BALANCE SHEET DATA FOR CONTINUING OPERATIONS Cash and short term investments $ 17,103 $ 16,584 $ 7,608 $ 5,383 $ 1,924 Working capital 53,847 43,900 31,199 16,949 18,172 Total assets 111,946 91,462 81,555 77,134 64,214 Long-term debt -- -- -- -- 55 Stockholders' equity 82,174 69,070 58,913 43,298 40,680 --------- --------- -------- --------- --------
Note: The Company has never paid a dividend on its common stock. 20 3 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995. NET SALES Net sales for the year ended December 31,1996 were $128.0 million compared to $101.5 million in 1995. Product sales in 1996 were $111.4 million compared to $86.4 million in 1995, an increase of 28.9%. The increase was due to a broadened product line and increased market penetration of existing products. The company introduced two new products in 1996, the Mini 6600 and the Compact 7600, in addition, the company's urology product sales increased substantially over 1995. This increase in urology sales was due to an increase in market share and built up demand from prior years due in part to healthcare reform. International sales were up 22.2% as compared to 1995. Domestic bookings for all products in 1996 were approximately $92.0 million, compared to $75.1 million in 1995, an increase of 22.5%. International bookings increased approximately 44.4% from $16.8 million in 1995 to $24.4 million in 1996. The geographic difference in growth rates reflects expanding market penetration in the international markets. Worldwide, the Company's urology product bookings increased 18.2% from the prior year while mobile C-Arm bookings increased approximately 28.8%, due to the new C-arm product introductions and increases in international bookings. Total bookings increased 26.6% to approximately $116.4 million from $91.9 million the prior year. As a result, at December 31,1996, OEC's backlog had improved to approximately $24.1 million compared with $16.8 million at the prior year end. OEC includes in backlog only firm orders deliverable within 12 months. Backlog also includes service contract revenue which will be earned over the next twelve months. OEC service revenue increased 9.9%, from $15.1 million to $16.6 million in 1996. The percentage growth increase has slowed compared to prior years. The slower growth was the result of improved product reliability and increased competition from third party service organizations. The Company has adopted an aggressive service pricing strategy designed to regain market share through higher contract capture rates and is developing partnerships with third party groups in a proactive manner. The following table sets forth OEC's operating results as a percentage of net sales:
1996 1995 1994 Net sales Product 87.0% 85.1% 86.8% Service 13.0 14.9 13.2 ----- ----- ----- Total net sales 100.0 100.0 100.0 ----- ----- ----- Cost of sales Product 51.1 50.6 53.7 Service 8.9 8.8 8.1 ----- ----- ----- Total cost of sales 60.0 59.4 61.8 ----- ----- ----- Gross margin 40.0 40.6 38.2 ----- ----- ----- Operating expenses Research and development 6.9 7.6 8.6 Marketing and sales 16.8 17.4 16.8 Administrative, general and other 5.7 5.4 5.9 ----- ----- ----- Total operating expenses 29.4 30.4 31.3 ----- ----- ----- Operating income 10.6 10.2 6.9 Net income 10.0 11.7 8.9
21 4 MARGIN ANALYSIS The Company's gross margin decreased slightly in 1996 to 40.0% of sales compared with 40.6% in 1995. The main reason for the slight decline was due to increased pricing pressures world wide. The Company's continued focus in 1995 and 1996 on manufacturing costs and efficiencies helped offset most of these pricing effects. The Company's net service costs increased 27.5% or $2.5 million from 1995. Although actual service expense increased in line with revenues at 10.3%, warranty utilization credits declined significantly due to the increased reliability of the Company's products. R&D EXPENSE R & D expense increased 14.6% in 1996 to $8.9 million, versus $7.7 million in 1995. The increase reflects the costs associated with the development of two new products in 1996, along with the increase in continuing engineering expense associated with a broadened product offering. As a percent of net sales, R & D expense declined 0.7% from the prior year. The company anticipates that R & D expense will grow proportionally with increasing revenue. MARKETING & SALES EXPENSE Marketing and sales expense increased in 1996 by $3.8 million to $21.5 million, or 21.6% above 1995. The largest part of the increase in expense is due to the increase in commission expense in direct relation to the increase in revenue. The other factor is the continuing increase in investment in both U.S. and international sales and marketing for coverage due to the broadened product lines. As a percentage of net sales, marketing and sales expense declined 0.6% to 16.8%. ADMINISTRATIVE, GENERAL & OTHER EXPENSE Administrative, general and other expenses increased 32.1% in 1996 to $7.3 million, versus $5.5 million in 1995. But as a percentage of net sales, expenses were up 0.3%. Part of the increase resulted from costs associated with the implementation of a new companywide computer system that the company purchased in the second quarter of 1996 and the ongoing training involved with its conversion. The installation of this system is scheduled for completion by the middle of 1997. INCOME TAXES During 1996, the Company recorded current tax expense of $4.7 million. However, due to the recognition of the deferred benefit of $3.2 million, the net tax expense was $1.5 million for 1996 compared to a net tax benefit of $0.9 million in 1995. Included in the 1996 deferred benefit was the reversal of the remaining $4.3 million of valuation allowance which was completed by the end of the third quarter as the Company recognized the likelihood of fully utilizing the deferred tax assets. The Company also recorded $0.9 million of tax benefit directly to stockholder's equity for the benefit derived from stock options exercised. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994. NET SALES Net sales for the year ended December 31, 1995 were $101.5 million compared to $98.2 million in 1994. Product sales in 1995 were $86.4 million compared with $85.2 million in 1994, an increase of 1.4%. The increase was primarily due to a large increase in international sales. Domestic sales declined by 10.5%, a factor of backlog erosion in 1994. Total OEC bookings increased 14% to approximately $91.9 million from $80.5 the prior year. As a result, at December 31, 1995, OEC's backlog had improved to approximately $16.8 million, compared with $11.2 million 1994 year end. OEC service revenue increased 16.7%, from $13.0 million to $15.1 million in 1995. These results were attained from an increased contract capture rate despite very aggressive competition from third-party service organizations. 22 5 MARGIN ANALYSIS The Company's gross margin increased in 1995 to 40.6% of sales compared with 38.2% in 1994. Management's focus on manufacturing efficiencies starting in the latter part of 1994 and continuing through 1995 has enabled the Company to reduce its cost of sales. OEC's service costs increased approximately $1.0 million from 1994 or 12.3% while service revenue grew by 16.8%. R&D EXPENSE R&D expense declined 8.2% in 1995 to $7.7 million, versus $8.4 million in 1994. The decline reflects the completion of the Series 9600 project in mid-1994. MARKETING & SALES EXPENSE Marketing and sales expense increased in 1995 by $1.2 million to $17.7 million, or 7.2% above 1994. The increase reflects the continuing investment in international sales and the cost increase in the domestic market due to competitive pressures. ADMINISTRATIVE, GENERAL & OTHER EXPENSE Administrative, general and other expense was basically flat from 1994. As a percentage of net sales it was down .5%. INCOME TAXES During 1995, the reversal of reserves against deferred tax assets resulted in a deferred tax benefit of $1.6 million. This benefit was offset by $0.7 million of current tax provision for various state income taxes and federal alternative minimum tax. In addition, $1.0 million of tax benefit was recorded directly to stockholders' equity for the tax benefit derived from stock option exercises. GENERAL INFORMATION INFLATION To date, the Company has not experienced any significant effects from inflation. LIQUIDITY & CAPITAL RESOURCES Cash provided by operating activities from the Company's operations was $6.3 million in 1996 compared with $12.8 million in 1995 and $9.3 million in 1994. The reduction in 1996 is a reflection of the Company's decision to utilize its cash position to assist the sales force through extended credit terms and more demonstration equipment. The $8.3 million increase in accounts receivable reflects these extended credit terms and the Company's increased sales. The $5.8 million increase in inventory reflects the additions to demonstration equipment and finished goods. The Company's capital expenditures totalled $4.5 million in 1996 compared with $1.1 million in 1995 and $3.4 in 1994. The purchase and implementation of a new core computer system as well as investments in manufacturing equipment were the primary capital expenditures designed to position the Company to meet its growth expectations. At December 31, 1996, the Company had no significant commitments for capital expenditures. Cash and temporary cash investments increased to $17.1 million at December 31, 1996 from $16.6 million at December 31, 1995. A stock repurchase program of 750,000 shares of its outstanding common stock was announced in December 1994 and the authorized amount was increased to 1,250,000 shares in January 1996. As of December 31, 1996, 888,483 shares have been repurchased at a cost of $7,366,126, of which 87,983 shares were retired and 800,500 shares were recorded as treasury stock. OEC believes that it has sufficient liquidity and anticipated cash flow to meet its obligations in 1997. In addition, OEC continues to carry an unused $10 million line of credit. 23 6 FACTORS THAT MAY AFFECT FUTURE RESULTS Except for historical information, this discussion contains forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: Product demand and market acceptance; the effect of general economic conditions and foreign currency fluctuations; the impact of competitive products and pricing; new product development and commercialization; the effect of the continuing shift in growth from domestic to international healthcare customers, and the impact of managed care initiatives in the United States and the ability to increase operating margins on higher sales. OEC's future operating results are dependent on its ability to develop, manufacture and market innovative products that meet customers' needs. The process of developing new high technology medical products is complex and uncertain and requires innovative designs that anticipate customer needs, technological trends and healthcare shifts. There can be no assurance that the Company will be able to develop and market new products on a cost-effective and timely basis, that such products will compete favorably with products developed by others or that existing technology will not be superseded by new discoveries or breakthroughs, for example, the delay in introduction of the Series 9600 in 1994 which negatively impacted revenue and earnings for the year. Because of the substantial length of time and expense associated with bringing new products through development and regulatory approval to the marketplace, the medical device industry places considerable importance on obtaining patent, trademark, copyright and trade secret protection for new technologies, products and processes. The loss of protection could have a material adverse effect on the Company's business. OEC depends on some significant and single-source vendors for certain important component parts for certain products. While the Company believes any of these single-source items could be replaced over time, abrupt disruption in the supply of a part for a product could have a material adverse effect on the Company's production and on its financial condition and results of operations in cases where the existing inventory of the components is not adequate to meet the Company's demand for the component during such disruption. The testing, marketing and sale of human healthcare products entails an inherent risk of product liability, and there can be no assurance that product liability claims will not be asserted against OEC. Although OEC has product liability insurance coverage, there can be no assurance that such coverage will provide adequate coverage against all potential claims. As a manufacturer of medical devices, OEC is subject to extensive and rigorous governmental regulation, principally by the FDA and corresponding state and foreign agencies. Failure to comply with FDA regulations could result in sanctions being imposed, including restrictions on the marketing of or recall of the affected products. OEC's facilities and manufacturing processes have been periodically inspected by the FDA and other agencies, but remain subject to further inspections from time to time. OEC continues to devote substantial human and financial resources to regulatory compliance and believes that it remains in substantial compliance with all applicable federal and state regulations. Nevertheless, there can be no assurance that the FDA or a state agency will agree with OEC's positions, or that its GMP or ISO compliance will not be challenged at some subsequent point in time. A portion of the Company's research and development activities, its corporate headquarters and other critical business operations are located near a major earthquake fault. The ultimate impact on the Company, significant suppliers and the general infrastructure is unknown, but operating results could be materially affected in the event of a major earthquake. Although OEC believes that it has the product offerings and resources needed for continuing success, future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its operations. Factors external to the Company can result in volatility of the Company's common stock price. 24 7 CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 1995 1994 (In thousands) NET SALES Product $ 111,383 $ 86,415 $ 85,206 Service 16,602 15,121 12,952 --------- --------- -------- Total net sales 127,985 101,536 98,158 --------- --------- -------- COST OF SALES Product 65,334 51,408 52,734 Service 11,372 8,922 7,942 --------- --------- -------- Total cost of sales 76,706 60,330 60,676 --------- --------- -------- Gross margin 51,279 41,206 37,482 --------- --------- -------- OPERATING EXPENSES Research and development 8,854 7,728 8,416 Marketing and sales 21,494 17,668 16,487 Administrative, general and other 7,260 5,498 5,776 --------- --------- -------- Total operating expenses 37,608 30,894 30,679 --------- --------- -------- Operating income 13,671 10,312 6,803 Interest income 786 676 346 Interest expense (9) (11) (257) --------- --------- -------- Income before income taxes 14,448 10,977 6,892 Income tax (expense) benefit (1,536) 856 1,816 --------- --------- -------- Net income $ 12,912 $ 11,833 $ 8,708 ========= ========= ======== Net income per common and common equivalent share $ 1.01 $ 0.94 $ 0.69 --------- --------- -------- Common and common equivalent shares 12,797 12,585 12,552 ========= ========= ========
See accompanying notes to consolidated financial statements. 25 8 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 1995 (In thousands) ASSETS Current assets: Cash and short-term cash investments $ 17,103 $ 16,584 Accounts and notes receivable, net of allowances of $853 and $577, respectively 33,191 24,982 Inventories 23,868 18,031 Prepaid expenses and other current assets 1,451 885 Deferred income taxes 8,006 5,810 --------- -------- Total current assets 83,619 66,292 Long-term receivables 1,627 1,002 Property and equipment, net 11,903 9,868 Cost in excess of net assets acquired, net of accumulated amortization of $8,183 and $7,542, respectively 10,213 10,854 Deferred income taxes 3,879 2,898 Other assets, net 705 548 --------- -------- Total $ 111,946 $ 91,462 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,358 $ 4,673 Accrued salaries and benefits 4,127 2,920 Accrued warranty and installation costs 1,748 1,259 Deferred income and customer deposits 5,462 5,511 Income taxes payable 509 412 Accrued legal fees and litigation settlements 4,062 3,793 Accrued distributor commissions 2,891 1,892 Other accrued liabilities 3,615 1,932 --------- -------- Total current liabilities 29,772 22,392 ========= ======== Stockholders' equity: Preferred stock, $.01 par value; Authorized -- 2,000 shares, including 1,100 shares of convertible preferred stock, none outstanding Common stock, $.01 par value; Authorized -- 30,000 shares Issued -- 13,158 and 12,789 shares, respectively 132 128 Capital in excess of par value 79,341 76,344 Stock subscription receivable -- (210) Retained earnings (accumulated deficit) 9,786 (3,126) Treasury stock, 801 and 560 shares at cost, respectively (6,850) (4,056) Foreign currency translation adjustment (235) (10) --------- -------- Total stockholders' equity 82,174 69,070 --------- -------- Total $ 111,946 $ 91,462 ========= ========
See accompanying notes to consolidated financial statements. 26 9 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CAPITAL RETAINED COMMON STOCK IN EXCESS EARNINGS/ TREASURY STOCK FOREIGN STOCK ------------ OF PAR ACCUMULATED -------------- CURRENCY SUBSCRIPTION SHARES AMOUNT VALUE DEFICIT SHARES AMOUNT TRANSLATION RECEIVABLE TOTAL ------ ----- -------- -------- ---- ------- ----- ----- -------- Balance, January 1, 1994 12,411 $ 124 $ 66,858 $(23,667) -- -- $ (17) -- $ 43,298 ------ ----- -------- -------- ---- ------- ----- ----- -------- Issuance of stock under employee/consultant benefit plans 71 1 359 -- -- -- -- -- 360 Tax benefit attributable to appreciation of common stock options exercised -- -- 2,091 -- -- -- -- -- 2,091 Cancellation of note payable originally issued in connection with the 1993 corporate restructuring -- -- 4,475 -- -- -- -- -- 4,475 Foreign currency translation -- -- -- -- -- -- (19) -- (19) Net income -- -- -- 8,708 -- -- -- -- 8,708 ------ ----- -------- -------- ---- ------- ----- ----- -------- Balance, December 31, 1994 12,482 125 73,783 (14,959) -- -- (36) -- 58,913 ------ ----- -------- -------- ---- ------- ----- ----- -------- Issuance of stock under employee/consultant benefit plans 355 4 1,919 -- -- -- -- -- 1,923 Tax benefit attributable to appreciation of common stock options exercised -- -- 950 -- -- -- -- -- 950 Purchase of treasury shares -- -- -- -- (648) $(4,575) -- -- (4,575) Retirement of treasury shares (88) (1) (518) -- 88 519 -- -- -- Issuance of stock subscription receivable 40 -- 210 -- -- -- -- $(210) -- Foreign currency translation -- -- -- -- -- -- 26 -- 26 Net income -- -- -- 11,833 -- -- -- -- 11,833 ------ ----- -------- -------- ---- ------- ----- ----- -------- Balance, December 31, 1995 12,789 128 76,344 (3,126) (560) (4,056) (10) (210) 69,070 ------ ----- -------- -------- ---- ------- ----- ----- -------- Issuance of stock under employee/consultant benefit plans 369 4 2,115 -- -- -- -- -- 2,119 Tax benefit attributable to appreciation of common stock options exercised -- -- 882 -- -- -- -- -- 882 Purchase of treasury shares -- -- -- -- (241) (2,794) -- -- (2,794) Receipt of stock subscription receivable -- -- -- -- -- -- -- 210 210 Foreign currency translation -- -- -- -- -- -- (225) -- (225) Net income -- -- -- 12,912 -- -- -- -- 12,912 ------ ----- -------- -------- ---- ------- ----- ----- -------- Balance, December 31, 1996 13,158 $ 132 $ 79,341 $ 9,786 (801) $(6,850) $(235) -- $ 82,174 ====== ===== ======== ======== ==== ======= ===== ===== ========
See accompanying notes to consolidated financial statements. 27 10 CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1996 1995 1994 (In thousands) OPERATING ACTIVITIES Net income $ 12,912 $ 11,833 $ 8,708 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,117 3,272 3,546 Bad debt expense 45 20 245 Legal settlement recorded as reduction of note payable to related party -- -- (750) Deferred income tax benefit (3,177) (1,611) (2,280) Current tax benefit attributable to stock options exercised 882 175 49 Changes in current assets and liabilities: Accounts and notes receivable, net (8,254) (713) 650 Inventories (5,837) 432 657 Prepaid expenses and other current assets (566) (50) 263 Other assets, net (157) (296) (252) Accounts payable 2,685 (485) 916 Accrued salaries and benefits 1,207 400 179 Accrued warranty and installation costs 489 144 (248) Deferred income and customer deposits (49) 283 412 Income taxes payable 97 (3) (401) Accrued legal fees and litigation settlements 269 (526) 244 Accrued restructuring costs -- -- (3,259) Accrued distributor commissions 999 (368) (162) Other accrued liabilities 1,683 305 825 -------- -------- ------- Net cash provided by operating activities 6,345 12,812 9,342 -------- -------- ------- INVESTING ACTIVITIES Reduction (increase) in long-term receivables (625) (99) 458 Additions to property and equipment (4,511) (1,111) (3,441) Other (225) 26 (19) -------- -------- ------- Net cash used in investing activities (5,361) (1,184) (3,002) -------- -------- ------- FINANCING ACTIVITIES Common stock issued under benefit plans 2,329 1,923 360 Purchases of treasury stock (2,794) (4,575) -- Payments on notes payable -- -- (4,475) -------- -------- ------- Net cash used in financing activities (465) (2,652) (4,115) -------- -------- ------- Net increase in cash and short-term cash investments 519 8,976 2,225 Cash and short-term cash investments at beginning of year 16,584 7,608 5,383 -------- -------- ------- Cash and short-term cash investments at end of year $ 17,103 $ 16,584 $ 7,608 ======== ======== ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest $ 9 $ 11 $ 257 Cash paid during the year for income taxes $ 3,734 $ 583 $ 357
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: During 1994, the remaining balance of the note payable to related party, in the amount of $4,475 was cancelled with the corresponding benefit credited to capital in excess of par value. During the years ended December 31, 1995 and 1994, the tax benefits in the amount of $775 and $2,042, respectively, attributable to the appreciation of common stock options exercised were credited directly to capital in excess of par value. During the year ended December 31, 1995, the Company sold 40 shares of its common stock in exchange for a note receivable in the amount of $210, which was repaid to the company during the year ended December 31, 1996. See accompanying notes to consolidated financial statements. 28 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include those of OEC Medical Systems, Inc. and its wholly-owned subsidiaries ("the Company"). All material intercompany balances and transactions have been eliminated in consolidation. OPERATIONS The Company designs, manufactures, markets and services computer-based medical instruments (primarily X-ray imaging systems) for use in hospitals, outpatient clinics, and private practice surgi-centers. The manufacturing facilities are located in Salt Lake City, Utah, Warsaw, Indiana and Wendelstein, Germany. The systems are marketed through direct sales forces of the Company and through independent distributors and dealers worldwide (see Note 7). USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION Sales are generally recognized at the time the products are shipped, as are provisions for estimated installation costs, warranty costs, agents' commissions and sales allowances. Amounts received upon the sale of service contracts are deferred and recognized as service revenue over the life of the contract. CASH AND SHORT-TERM INVESTMENTS AND LINE OF CREDIT Short-term cash investments are interest-bearing investments readily convertible to cash with original short-term maturities less than 90 days and are stated at cost, which approximates market. At December 31, 1996 and 1995, the Company had a line of credit for $10 million which expires May 1998. No borrowings had been made under this line as of December 31, 1996 and 1995. INVENTORIES Inventories are stated at the lower of cost (utilizing the first-in/first-out method) or market. Inventories consist of the following: DECEMBER 31, (In thousands) 1996 1995 Purchased parts and completed subassemblies $ 8,672 $ 8,190 Work-in-process 3,097 3,216 Finished goods 3,783 2,456 Demonstration equipment 8,203 2,691 Service and repair parts 4,475 4,171 -------- -------- Total 28,230 20,724 Reserves for excess and obsolete inventory (4,362) (2,693) -------- -------- Net $ 23,868 $ 18,031 ======== ========
LONG-LIVED ASSETS Impairment of long-lived assets is determined in accordance with Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-lived Assets and of Long-lived Assets to be Disposed Of," which was adopted on January 1, 1996. There were no impairments as of December 31, 1996. 29 12 PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation and amortization. The Company uses the straight-line method to depreciate and amortize the cost of assets over their estimated useful lives as follows:
DECEMBER 31, (In thousands) Estimated 1996 1995 Useful Lives ------------ Buildings and land 30 years $ 7,591 $ 6,586 Machinery and equipment 3 to 10 years 16,486 13,754 Leasehold improvements Life of lease (June, 2000) 886 700 Furniture and fixtures 2 to 5 years 204 164 -------- -------- Total $ 25,167 $ 21,204 Less accumulated depreciation and amortization (13,264) (11,336) -------- -------- Net $ 11,903 $ 9,868 ======== ========
COST IN EXCESS OF NET ASSETS ACQUIRED Cost in excess of net assets acquired include the following:
DECEMBER 31, (In thousands) 1996 1995 Cost in excess of net assets acquired $ 18,396 $ 18,396 Less accumulated amortization (8,183) (7,542) -------- -------- Net $ 10,213 $ 10,854 ======== ========
Cost in excess of net assets acquired is being amortized on a straight-line basis over approximately 30 years. Amortization amounted to $641,000 in each of the three years in the period ended December 31, 1996. OTHER ASSETS Other assets consist of the following:
DECEMBER 31, (In thousands) 1996 1995 Deposits $531 $345 Investment in affiliate, at cost (see Note 9) 174 203 ---- ---- Net $705 $548 ==== ====
ACCRUED WARRANTY AND INSTALLATION COSTS The Company provides currently for the estimated cost to repair or replace products under warranty provisions in effect at the time of sale. CONTINGENCIES As a manufacturer of medical products, the Company is subject to certain regulations of the United States Food and Drug Administration ("FDA") and various state agencies. These regulations require review or approval of the Company's products, facilities and manufacturing processes, including periodic inspections of manufacturing facilities for compliance with Good Manufacturing Practices as established by the FDA. The Company has devoted substantial human and financial resources to regulatory compliance, and believes that it is in substantial compliance with all applicable federal and state regulations. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Net Income per common and common equivalent share is computed using the weighted average number of the Company's common shares outstanding and dilutive common equivalent shares from stock options and warrants, as calculated using the treasury stock method. 30 13 FOREIGN CURRENCY TRANSLATION The financial statements of the Company's foreign subsidiaries are measured using local currencies as the functional currency. Assets and liabilities are translated into US dollars at year-end rates of exchange and results of operations are translated at average rates of exchange for the year, with the difference accumulated in a separate component of stockholders' equity until such time as the subsidiary's operations are discontinued, sold or substantially liquidated. 2. INCOME TAXES Income tax (expense) benefit consists of the following:
YEARS ENDED DECEMBER 31, (In thousands) 1996 1995 1994 Current Expense: State $ (719) $ (598) $ (351) ------- ------- ------- Federal (6,507) (3,771) (2,033) Less utilization of operating loss carryforwards and tax credits 2,513 3,614 1,920 ------- ------- ------- Net Federal (3,994) (157) (113) ------- ------- ------- Total Current (4,713) (755) (464) ------- ------- ------- Deferred Benefit: Reversal of valuation allowance 4,306 5,394 $ 5,125 Net operating loss utilized currently (2,513) (3,614) (1,920) Other deferred tax assets created (utilized) 1,384 (169) (925) ------- ------- ------- Total Deferred 3,177 1,611 2,280 ------- ------- ------- Net $(1,536) $ 856 $ 1,816 ======= ======= =======
Income tax (expense) benefit differs from the amount computed by applying the statutory federal tax rate to income from continuing operations for the following reasons:
YEARS ENDED DECEMBER 31, (In thousands) 1996 1995 1994 Computed federal income tax expense at statutory rate of 35% $(5,057) $(3,842) $(2,412) State income taxes (719) (598) (351) Effects of foreign subsidiaries on U.S. tax rates 58 16 (314) Change in valuation allowance for deferred tax assets 4,306 5,394 5,125 Permanent differences (124) (114) (232) ------- ------- ------- Income tax (expense) benefit $(1,536) $ 856 $ 1,816 ======= ======= =======
The Company has investment and research and experimental tax credit carryforwards of approximately $3,476,000 expiring in the period 1997 through 2009, plus alternative minimum tax credit carryforwards of approximately $2,236,000. The Company also has foreign net operating losses in Germany and France and various states in the U.S. which expire in the period from 2007 through 2011. Deferred income taxes reflect the net tax effects of: (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's deferred taxes are as follows: 31 14
DECEMBER 31, (In thousands) 1996 1995 DEFERRED TAX ASSETS: Reserves not currently deductible for tax purposes: Allowance for bad debt $ 570 $ 525 Inventory 1,546 1,277 Litigation 1,543 1,451 Warranty 598 449 Deferred income 392 396 Vacation accrual 452 389 Other 368 (161) Foreign & state net operating loss carryforwards 704 -- Tax credit carryforwards 5,712 8,688 ------- -------- Total deferred taxes 11,885 13,014 Valuation allowance -- (4,306) ------- -------- Net deferred taxes $11,885 $ 8,708 ======= ========
3. COMMITMENTS The Company leases certain of its manufacturing facilities and certain equipment under operating leases. Future minimum annual rental payments under the Company's operating leases are as follows:
YEARS ENDED DECEMBER 31, (In thousands) 1997 $ 831 1998 217 1999 158 2000 82 ------ Total $1,288 ======
Total rent expense in 1996, 1995, and 1994, was $1,296,000, $1,076,000, and $1,028,000, respectively. The Company sponsors a 401(k) savings plan in which most domestic salaried employees of the Company are eligible to participate. Contributions made to the plan by the Company are based on a percentage of employee contributions, and totaled $766,000, $690,000, and $436,000, in 1996, 1995, and 1994, respectively. 4. COMMON STOCK The Company's 1990 Stock Plan (which incorporates active options under predecessor plans) permits officers, directors, employees and independent contractors to acquire options or other rights to purchase Company common stock. The purchase price for the shares is their fair market value on the date the option or purchase right is granted. Options and purchase rights generally vest over a five-year period. During 1996, the stockholders approved an increase of 500,000 shares to the 1990 Stock Plan. The Company also maintains an Incentive Stock Acquisition Plan (ISAP) in which only employees may participate. Under the ISAP, the purchase price is 85 percent of the fair market value of the shares on the trading day before the six-month participation period begins or the last trading day of the participation period, whichever is less. During 1996, the stockholders approved an increase of 100,000 shares to the ISAP. 32 15 A summary of stock plan activities is as follows:
YEARS ENDED DECEMBER 31, 1996 1995 1994 (In thousands, except average prices) NUMBER WEIGHTED Number Weighted Number Weighted OF AVG. of Avg. of Avg. SHARES EXERCISE Shares Exercise Shares Exercise PRICE Price Price OPTIONS: Outstanding beginning of year 1,740 $ 6.02 1,952 $ 6.27 2,006 $ 6.30 Granted 579 11.84 714 5.87 85 5.45 Cancelled (8) 6.09 (600) 6.96 (95) 6.46 Exercised (311) 5.43 (326) 5.46 (44) 5.27 ----- ------ ----- ------ ----- ------ Outstanding end of year 2,000 $ 7.80 1,740 $ 6.02 1,952 $ 6.27 ----- ------ ----- ------ ----- ------ Weighted average fair market value of options granted during year $ 5.39 $ 2.31 Shares purchased under ISAP 58 69 27 Weighted average fair market value of shares purchased under ISAP $ 1.28 $ 0.90
The following table summarizes information about stock options outstanding at December 31, 1996 (in thousands, except price information).
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------------------------------------------ ------------------------ Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Number Contractual Exercise Number Exercise Prices Outstanding Life Price Exercisable Price $ 5.25 - 8.00 1,396 6.5 years $ 6.05 1,183 $ 6.04 8.01 - 12.00 486 9.6 years 11.48 37 11.14 12.01 - 14.38 118 7.5 years 13.40 28 12.26 - -------------- ----- --- --------- ----- --------- $ 5.25 - 14.38 2,000 7.5 years $ 7.80 1,248 $ 6.34 - -------------- ----- --- --------- ----- ---------
The Company accounts for stock options granted using Accounting Principles Board (APB) Opinion 25. Accordingly, no compensation cost has been recognized for its fixed stock option plans. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with Statement of Financial Accounting Standards (SFAS) No. 123, the Company's net income and net income per common and common equivalent share would have changed to the pro forma amounts indicated below.
DECEMBER 31, (In thousands) 1996 1995 Net income As reported $ 12,912 $ 11,833 Pro forma $ 11,899 $ 10,824 Net income per common and common equivalent share: As reported $ 1.01 $ 0.94 Pro forma $ 0.93 $ 0.86
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995: dividend yield of 0.00%; expected volatility of 40.29%; risk-free interest rates ranging from 5.76% to 6.45%, and expected lives of 2.5 years subsequent to vesting date. 33 16 WARRANTS In connection with the signing of a product development agreement in 1990, the Company, through its predecessor, issued warrants to purchase 200,000 shares of its common stock. The warrants are exercisable at a price of $12.70 per share over the period August 31, 1994 through August 31, 1997. On January 26, 1997, the Company repurchased the warrants for $1.0 million. During 1996, the Company issued warrants to purchase 38,000 shares to independent distributors which are exercisable at a price of $11.75 per share during the period of October 1, 1999 to December 31, 1999. STOCK REPURCHASE A stock repurchase program of 750,000 shares of the Company's outstanding common stock was announced in December 1994 and an additional 500,000 shares in January 1996. The manner and timing of the repurchase will depend on market conditions and the company's cash reserves. As of December 31, 1996, 888,483 shares have been repurchased, of which 87,983 were retired and 800,500 are recorded as treasury stock. 5. LITIGATION Litigation was instituted against the Company by a terminated distributor in 1986. An unfavorable decision in the amount of $3.1 million was rendered by the trial court in 1992. As a result of that decision, the Company established a reserve for the judgment. The Company appealed the trial court decision on a number of grounds, and in November, 1993, the appellate court reversed the trial court and held for the Company on the ground that the distributor had released his claims against the Company in the settlement of other litigation, and did not reach the other issues raised on appeal. The distributor filed a petition in the Indiana Supreme Court requesting that the court vacate the appellate court ruling and remand the case to the appellate court for consideration of the other issues raised on appeal. On December 31,1996, the Indiana Supreme Court reversed the ruling of the appellate court and held that the trial court correctly determined that the release executed by the distributor did not release the Company. The case has been remanded back to the Indiana Circuit Court of Appeals for consideration of the remaining issues raised on the appeal. While the Company believes that it will ultimately prevail, no determination can be made as to whether some or all of the reserve should be reversed. As of December 31, 1996 and 1995, the reserve with accrued interest totaled approximately $4.1 million and $3.7 million, respectively. All but one of the pending lawsuits relating to the former MRI Division have been favorably resolved by dismissals, summary judgment or directed verdicts in favor of the Company. With respect to the sole exception, an action filed by Lenox Hills Leasing Associates, Toshiba America Medical Systems, Inc. ("Toshiba") has agreed to defend and indemnify the Company. All of the pending actions, and any future actions related to the MRI Division, are the subject of an arbitration award in favor of the Company and against Toshiba. That arbitration award holds that, with certain limited exceptions not applicable to any of the pending actions, Toshiba is obligated to indemnify the Company for compensatory and punitive damages, if any, awarded against the Company in any action related to the former MRI Division and to reimburse the Company for its attorney's fees and expenses incurred in defending such actions, regardless of whether such actions allege intentional misconduct or fraud. This arbitration award was affirmed by a California trial court. Toshiba appealed, and the California Court of Appeals affirmed the ruling of the trial court in 1996. The California Supreme Court has declined to hear Toshiba's appeal of the favorable Court of Appeal's ruling. The Company is also a defendant in other ordinary commercial litigation. In light of available insurance and reserves, management believes that such litigation will not have a material effect on its financial position or results of operations. 6. PREFERRED SHARE PURCHASE RIGHTS In July 1988, the Company through its predecessor, Diasonics Inc., declared a dividend distribution of one Preferred Share Purchase Right (a "Right") on each outstanding share of common stock. Prior to the acquisition by a person or group of beneficial ownership of 25% or more of the Company's common stock, the Rights are redeemable for two and one-half cents per Right at the option of the Board of Directors. 34 17 The Rights will trade together with the common stock until they become exercisable. The Rights will be exercisable only if a person or group acquires 25% or more of the Company's common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 25% or more of the common stock. Each right will entitle stockholders to buy five one-hundredths of a share of a new series of junior participating preferred stock at an exercise price of $10. At December 31, 1996 and 1995, the Company had 2,000,000 shares of such preferred stock authorized with none outstanding. The preferred stock generally carries rights equivalent to one hundred times those of common stock rights and is subject to certain non-dilutive and repurchase options. If the Company is acquired in a merger or engages in certain other acquisition transactions with a person or group that holds 25% or more of the Company's common stock, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of the acquiring company's common shares having a market value at the time of twice the Right's exercise price. In addition, if a person or group acquires 25% or more of the Company's outstanding common stock, each Right will entitle its holder (other than such person or members of such group) to purchase, at the Right's then-current exercise price, a number of the Company's common shares having a market value of twice the Right's exercise price. This ability to purchase common shares does not operate if the acquisition of 25% occurs pursuant to a cash tender offer for all shares in which such person or group increases its stake from below 25% to 80% or more of the outstanding shares of common stock. Following the acquisition by a person or group of beneficial ownership of 25% or more of the Company's common stock and prior to an acquisition of 50% or more of the common stock, the Board of Directors may exchange the Rights (other than Rights owned by such person or group), in whole or in part, at an exchange ratio of one share of common stock (or one-hundredth for a share of the new series of junior participating preferred stock) per Right. 7. FOREIGN SALES The Company markets its products internationally through subsidiaries in Switzerland, Germany, France and Italy as well as dealers and distributors in all other countries where applicable. The following table summarizes approximate foreign product sales:
1996 1995 1994 Europe $11,892 $ 8,770 $2,294 Other 8,689 8,078 5,201 ------- ------- ------ Total foreign sales $20,581 $16,848 $7,495 ======= ======= ======
8. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1996 and 1995 is as follows (in thousands, except per share data):
QUARTER FIRST SECOND THIRD FOURTH 1996 Net sales $26,183 $30,594 $34,027 $37,181 Gross margin 10,538 12,245 13,623 14,873 Net income 2,739 3,336 3,875 2,962 Income per share .22 .26 .30 .23 1995 Net sales $22,802 $26,129 $25,470 $27,135 Gross margin 9,221 10,695 10,426 10,864 Net income 2,492 2,762 3,141 3,438 Income per share .20 .22 .25 .27
35 18 9. RELATED PARTIES At December 31, 1993, the Company had a note payable to Diasonics Ultrasound, Inc., its former subsidiary for $9,700,000, due in two equal installments, plus interest at 3% per annum, on June 30, 1994 and December 31, 1994. The note was cancellable under certain conditions, including a merger, acquisition or other transaction resulting in a change in control of Diasonics Ultrasound, Inc. The note was offset by $750,000 in the second quarter of 1994, which was the Company's portion of a litigation settlement paid by Acuson, Inc., to Diasonics Ultrasound, Inc. This reduction of $750,000 has been reflected in the Company's accompanying consolidated statement of operations for the year ended December 31, 1994 as a reduction of administrative, general and other expenses. The first installment of principal in the amount of $4,475,000 was made in the third quarter of 1994. The second installment in the remaining amount of $4,475,000 was not required to be paid under the terms of the note, due to a change in control of Diasonics Ultrasound, Inc. Upon cancellation, the $4,475,000 was credited to capital in excess of par value. Sales to Diasonics, Ultrasound, Inc. were $5.2 million during 1994. During 1995, the Company purchased a 19.8% ownership position in Barwig Medizinische Systeme GmbH (BMS), a German manufacturer of medical equipment. The Company was granted exclusive worldwide distribution rights for a ten year period for the 7600 C-Arm manufactured by BMS. During 1995 and 1996, the Company provided long-term working capital loans to BMS of approximately $1.1 million. Effective January 1, 1997, the Company increased its ownership of BMS to 100% in exchange for cash payments of approximately $193,000, stock options valued at approximately $274,000, and cancellation of loans to BMS of approximately $615,000. The Company will account for the acquisition using the purchase method which will result in the recording of approximately $1.6 million of goodwill. 36 19 INDEPENDENT AUDITORS' REPORT THE BOARD OF DIRECTORS AND STOCKHOLDERS OF OEC MEDICAL SYSTEMS, INC.: We have audited the accompanying consolidated balance sheets of OEC Medical Systems, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company'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, such consolidated financial statements present fairly, in all material respects, the financial position of OEC Medical Systems, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP - ------------------------- DELOITTE & TOUCHE LLP Salt Lake City, Utah January 21, 1997 37 20 CORPORATE INFORMATION OFFICERS RUEDIGER NAUMANN-ETIENNE Chairman, President & Chief Executive Officer RANDY W. ZUNDEL Executive Vice President, Chief Operating & Chief Financial Officer HEINZ GLOOR Vice President, International GARY GLOWE Vice President, Manufacturing BARRY K. HANOVER Executive Vice President, Engineering & Chief Technical Officer LARRY E. HARRAWOOD Vice President, Marketing & Business Development GARY N. KILMAN Vice President, Sales ROY ORPHEY Vice President, Service TED PARROT Vice President, Regulatory Affairs & Quality Assurance CLARENCE VERHOEF Vice President, Finance & Treasurer DIRECTORS RUEDIGER NAUMANN-ETIENNE Chairman of the Board GREGORY K. HINCKLEY *+ Executive Vice President, Chief Operating Officer & Chief Financial Officer Mentor Graphics Corporation BENNO P. LOTZ * Former President & CEO OEC Medical Systems, retired ALLAN W. MAY *++ Secretary Vice Chairman & CEO, MAST Immuno Systems, Inc. CHASE N. PETERSON *+++ President Emeritus & Professor (Clinical) Departments of Internal Medicine and Family & Preventive Medicine University of Utah * Audit Committee + Compensation Committee ++ Nominations Committee INVESTOR INFORMATION Reports on sales, earnings and activities of the Company can be accessed through our News-On-Call service by calling 1-800-758-5804 Ext. 630450. A copy (without exhibits) of the Company's report to the Securities and Exchange Commission on Form 10-K may be obtained from the Company without charge. Other publications--news releases, 10-Qs, etc., are also available. Direct your written request to: INVESTOR RELATIONS Linda M. Etzel OEC Medical Systems, Inc. 384 Wright Brothers Drive Salt Lake City, Utah 84116 (801) 536-4806 e-mail address: investor@oecmed.com Home Page: http://www.oecmed.com INDEPENDENT AUDITORS Deloitte and Touche LLP Salt Lake City, Utah TRANSFER AGENT & REGISTRAR Chase Mellon Shareholder Services 50 California Street, 10th Floor San Francisco, CA 94111 ANNUAL MEETING Notice of the Annual Meeting of Shareholders of OEC Medical Systems, Inc., and proxy statements will be mailed to shareholders of record in advance of the meeting. STOCK PRICE
High Low Close ---- --- ----- March 31, 1996 13 3/4 9 1/2 11 3/4 June 30, 1996 13 5/8 11 1/4 13 5/8 September 30, 1996 13 1/2 10 3/4 12 1/2 December 31, 1996 16 7/8 12 1/4 15
38 EX-21 4 LIST OF SUBSIDIARIES 1 EXHIBIT 21 LIST OF SUBSIDIARIES OEC Europe, Ltd. (England) Frank Manufacturing Diasonics Export Sales Corp. (Disc) Chromosonics, Inc. Diasonics Foreign Sales Corp. (FSC) OEC Medical Systems (Europe) AG OEC Medical Systems SA OEC Medical Systems GmbH OEC Medical Systems S.R.L. OEC Medical International, Inc. (FSC) EX-23 5 INDEPENDENT AUDITORS' CONSENT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-69672, 33-37396, and 33-40280 of OEC Medical Systems, Inc. on Forms S-8 of our report dated January 21, 1997, appearing in and incorporated by reference in the Annual Report on Form 10-K of OEC Medical Systems, Inc. for the year ended December 31, 1996. /s/ DELOITTE & TOUCHE LLP - ------------------------------ DELOITTE & TOUCHE LLP Salt Lake City, Utah March 26, 1997 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S 1996 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS JAN-01-1996 DEC-31-1996 DEC-31-1996 17,103 0 34,044 853 23,868 83,619 25,167 13,264 111,946 29,772 0 0 0 132 82,042 111,946 111,383 127,985 65,334 76,706 37,608 0 9 14,448 1,536 12,912 0 0 0 12,912 1.01 1.01
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