ATL to buy competitor Interspec

Claims top spot in ultrasound

ATL made a dramatic bid to increase its presence in the cardiologyultrasound market by announcing last week its intention to acquirecardiac ultrasound firm Interspec. If approved by shareholders,the acquisition will give Bothell, WA-based ATL a solid lock asthe largest ultrasound vendor, leapfrogging competitor Acuson,according to Dennis Fill, ATL CEO and chairman.

ATL signed a merger agreement with Interspec last week in whichthe Ambler, PA, company would become a wholly owned subsidiaryof ATL, Fill said. The transaction would be accomplished througha stock swap of 0.3835 shares of ATL stock for each share of Interspecstock. The resulting company would have combined annual revenuesof $365 million and an installed base of over 20,000 systems.

Under the agreement, Interspec chairman, president and CEOEdward Ray would continue as president of Interspec, reportingto Fill. Interspec and ATL expect the transaction to close inthe second quarter of this year.

ATL's move will buy the company a position in the mid-rangecardiology market, a segment in which ATL has not been a majorplayer since the 1980s. ATL has stated its desire to reenter thecardiology niche. ATL introduced HDIcv, a cardiology configurationof its Ultramark 9 HDI premium scanner, at the European Societyof Cardiology meeting in August.

Interspec has also been active in the past year, bringing outApogee CX200, a new cardiology system, and Apogee RX400, a radiologyscanner.

The acquisition will greatly expand ATL's global ultrasoundposition. Fill estimated that ATL covers about 50% of the productsegments in the global ultrasound market. Adding Interspec's productsto the mix puts the combined company into 90% of the world's markets,he said.

In addition, the global mid-range cardiology market has experiencedstrong growth in the past year.

"If you take Europe and the rest of the internationalmarkets, the growth is in the mid-range, high-value product line,"Fill said. "(The market) tends to be flat in the premiumperformance segment, where (ATL's) HDI products are."

International sales of the Interspec product line will be aidedby ATL's strong global marketing and distribution network, accordingto Fill.

"We have an infrastructure worldwide that is able to takethe Interspec product line and move it, without much in the wayof additional expense," Fill said. "We've got the pipelineand their products are the oil. It is a very good fit."

The acquisition is a sign of the consolidation that must occurin the ultrasound industry due to declining revenue and income,according to John W. Cumming, president of WDI Capital Marketsin Hilton Head, SC.

"The bottom line is that something had to give in thisindustry," Cumming said. "As a stand-alone, Interspechad a tough row to hoe. To be able to take advantage of what alarger company like ATL can offer is a win for Interspec shareholders."

Because of the strength of the mid-range cardiology segment,Interspec's financial results for 1993 did not show the sharpdeclines in revenue and income that plagued other ultrasound vendors.While income declined slightly, Interspec was profitable lastyear and net sales increased.

For the year, Interspec's net sales were $61.4 million, comparedto $60.3 million last year. Net income for the year was $2 million,compared to $3.2 million in fiscal 1992. Net income includes utilizationof net operating loss carryforwards of $695,000 in 1993 and $1million in 1992.

Revenue for the fourth quarter (end-November) was $17.3 millioncompared to $16.8 million for the same period last year. Net incomefor the quarter was $879,000, compared to $1 million last year.Net income includes utilization of net operating loss tax carryforwardsof $386,000 for the fourth quarter of 1993 and $342,000 for thefourth quarter of 1992.

ATL reported declining revenues and income for both the fourthquarter and the year (end-December). ATL's fourth quarter revenuewas $82 million, compared to $92.6 million in the same periodin 1992. Net income was $3.5 million, compared to $5.1 millionthe year before.

For the year, ATL posted revenues of $304.5 million, comparedto $323.7 million in 1992, a 5.9% decrease. ATL reported a netloss for 1993 of $5.1 million, compared to net income of $7.4million in 1992. The 1993 results include a $4.3 million pre-taxcharge in the third quarter for a restructuring of the company'soperations (SCAN 9/8/93).

A combined ATL/Interspec would have annual revenues higherthan those of top competitors Toshiba and Acuson. ATL, however,surpasses U.S. rival Acuson without the addition of Interspec.ATL's net sales of $304.5 million are higher than the numbersposted by Acuson for last year.

Mountain View, CA-based Acuson's revenues were $295.3 millionfor 1993 (end-December), down from $342.8 million posted in 1992.Earnings for the year were $3.7 million, compared to net incomeof $36.8 million in 1992. The 1993 figures include a one-timeafter-tax charge of $12 million related to a restructuring lastJune (SCAN 6/16/93).

For the fourth quarter, Acuson's sales were $73.8 million,compared to $83.6 million in the same period last year. Net incometotaled $3.1 million, compared to $5.9 million in the same quarterlast year.